Fennell, P; Ruyssevelt, P and Smith, A Z P (2016) Financial viability of school retrofit projects for clients and ESCOs. Building Research & Information, 44(8), pp. 889-11. ISSN 0961-3218
Abstract
The energy performance contracting market is potentially substantial but very little work has been undertaken to understand the characteristics of successful projects. This study uses a probabilistic analysis of four hypothetical projects in the UK schools sector under the 2014 policy regime, combined with qualitative interviews with practitioners, to explore the conditions for a viable project. It finds that the proposed approach has the potential to allow more detailed exploration of project structures and scope for creating greater understanding of likely returns and the factors affecting them. Evidence is found that the use of deterministic risk screening techniques such as simple payback results in viable opportunities being overlooked. The risk profiles for clients and contractors (energy service companies - ESCOs) are not symmetrical and they will each find different projects more attractive. The results suggest that greater consideration needs to be given to the precise risk allocation between client and contractor to ensure that likely returns are properly understood. This study demonstrates a method for exploring project characteristics that can be used to understand their impacts on the financial returns for clients and contractors.; The energy performance contracting market is potentially substantial but very little work has been undertaken to understand the characteristics of successful projects. This study uses a probabilistic analysis of four hypothetical projects in the UK schools sector under the 2014 policy regime, combined with qualitative interviews with practitioners, to explore the conditions for a viable project. It finds that the proposed approach has the potential to allow more detailed exploration of project structures and scope for creating greater understanding of likely returns and the factors affecting them. Evidence is found that the use of deterministic risk screening techniques such as simple payback results in viable opportunities being overlooked. The risk profiles for clients and contractors (energy service companies - ESCOs) are not symmetrical and they will each find different projects more attractive. The results suggest that greater consideration needs to be given to the precise risk allocation between client and contractor to ensure that likely returns are properly understood. This study demonstrates a method for exploring project characteristics that can be used to understand their impacts on the financial returns for clients and contractors.;
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | risk management; energy contracts; retrofit; outsourcing; financial viability; energy performance; non-domestic buildings; energy service companies; energy efficiency; school buildings; retrofitting |
| Index terms: | evidence, risk management, payback, risk allocation, practitioner, school building, exploration, energy contract, retrofitting, energy service company, energy performance, outsourcing, interview, energy efficiency, non-domestic building, screening, financial viability |
| Subjects: | management, renovation and retrofit, financial risk, evaluation and assessment methods, data collection methods, risk assessment, construction type, contract type, business, practitioner, environmental resource management, sustainability and energy, business management, energy systems, economic analysis |
| Topics: | Human Resources, Engineering Principles, Research Practice, Business Strategy, Cost Management, Sustainability, Construction Technology, Procurement, Risk Management, Roles and Professions |
| Descriptive scope: | 4 PCEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here