Capturing the Multiple Benefits of Energy Efficiency Investments

Sammanfattning: The building sector has the second largest untapped and cost-effective potential for energy savings after the energy sector itself. Energy efficiency improvements have therefore a fundamental role in achieving the potential energy savings in this sector. Yet, energy efficiency improvements in the residential sector face numerous challenges that hamper the development of this sector. The main barriers facing homeowners have been the access to capital and high interest expenses. There are also no appropriate financing mechanisms that promote the initiative of making the residential sector more energy efficient. The aim of this thesis is hence to analyze the difficulties and the potential benefits related to financing energy efficiency measures in one- and two-dwelling buildings. The objective is to provide useful knowledge for the bank about the nature of energy efficiency investments in order to better assess the risks and construct suitable financing models for these measures.This has been done by conducting a case study at Swedbank in Sundbyberg, Sweden. The research design consisted of both a quantitative and qualitative data collection methods. The qualitative method was used to understand the process of setting the interest rate of a loan and to understand how energy efficiency measures affect the value of a house. The quantitative method was used to identify the most recommended measures for one- and two-dwelling buildings in order to calculate the viability of the energy efficiency measures in terms of economic and environmental aspects. The results indicate that energy efficiency investments have unique characteristics that differ from other unsecured loans, such as cost savings, increase the value of a house and reduce the environmental risks. These characteristics should be integrated into the current interest rate pricing model in order to promote the implementation of energy efficiency measures. The results also indicate that most of the measures provided low or negative net cash flow in the first few years. This makes it difficult for households to see the economic viability of energy efficiency investments in the short term. Banks can promote investments in energy efficiency measures by adjusting the current funding model to better suit the characteristics of these types of investments.