The Techno-Economic Layer Karl Steininger, Gabriel Bachner Wegener Center for Climate and Global Change, University of Graz March 4 th, 2016 WIFO, Vienna ClimTrans2050

The techno-economic dimension What economic costs come along with a transition to a low carbon economy for a given level of functionality? Objective:  Description of the provision of functionalities in economic terms  Comparison across different technologies  different technologies may be employed to serve the same functionality  to be analyzed in particular: which “breakthrough” technologies may substitute current technologies and at what costs?

Stock and flow relations To provide a functionality, two types of costs arise:  Investment costs / expenses for durable consumption goods  spent to build up capital stock over time  long term  Operating costs  denote Flows (which depict also energy use  emissions)  do not imply additions to capital stock  short term Investment costs and operating costs are not independent.

Deepened structural modeling The sGAIN approach Investments for replacement, expansion, recycling, regeneration of resources Functionalities shelter, nutrition mobility, communication Stock of Resources Natural resources: renewable, exhaustible, soil, air, water Man-made resources: reproducible, human, social Stock of Resources Natural resources: renewable, exhaustible, soil, air, water Man-made resources: reproducible, human, social Flow of Reproducibles goods and services for functionalities via consumption and for resources via investments Flow of Reproducibles goods and services for functionalities via consumption and for resources via investments Final consumption for functionalities Intermediate consumption for functionalities Environmental impact

Stock and flow relations  The quality of the emerging capital stock determines annual operating costs and therefore energy flows and emissions Examples:  Zero or plus-energy buildings: high quality of buildings with low costs for heating  High efficiency / electric engines in vehicles: high quality vehicles with low costs per person-km  In many cases: net environmental gains in transformation to a high quality capital stock

Stock and flow relations Use technology B instead of A at lower annual operating costs, keeping the provision of functionality at a “sufficient” level Technology B Technology A

Different economic perspectives User  Capture costs arising only to the beneficiary of functionality  user costs = annual investment costs (annuity) + operating costs p.a. Society  Include externalities (e.g. social costs of carbon, particulate matter, noise, etc.)  social costs = annual social investment costs (annuity) + social operating costs p.a.

Example: Shelter Example: functionality ‘shelter’  Define functionality and respective proxy (for shelter: 1 m 2 of residential area kept at constant temperature)  Identify technologies serving these functionalities in the current state (for shelter: current stock with a certain heating energy demand in kWh/m 2 )  Identify new technologies with potential for substituting current technologies (including the extent of possible substitution) (for shelter: refurbishment; energy heating demand reductions per m 2 )  Derive cost of changing the technology (for shelter: costs per m 2 for improving heating energy intensity per m 2 )  Compare energetic and economic effects across technologies (for shelter: compare energy and cost savings with investment requirements, relative to a system with no improvement)

Tier2 - Shelter Source: Müller, 2015

Tier2 – Shelter - Refurbishment  Change quality of stock in terms of reducing necessary kWh/m2.a (heating energy demand): refurbishment  associated annual user costs per m2?  energy and user costs saving?  environmental impact?  Tier 1

Tier2 – Shelter - Refurbishment Change of quality of stock Source: own calculations based on Müller, 2015

Tier2 – Shelter - Refurbishment Parameters – to be set by web interface user: (example for single/double family houses; <1945) Connection to Tier 3

Tier2 – Shelter - Refurbishment Assumptions:  Diffusion of refurbishment: Depends on age of current stock  Current average refurbishment rate in Austria: ~2% p.a.  Currently buildings <1945 – 1980 are beeing refurbished  They make up about 50% of current stock  4% refurbishment rate in the cohorts <1945 – 1980 in 2015  calibrate diffusion function

Tier2 – Shelter - Refurbishment (example for single/double family houses; <1945)

Tier2 – Shelter - Refurbishment (example for single/double family houses; <1945)

Tier2 – Shelter - Refurbishment (example for single/double family houses; <1945) Savings in 2050: GWh p.a. (54% of current annual demand) Transfering from 172 kWh/m2.a To 77 kWh/m2.a

Tier2 – Shelter - Refurbishment (example for single/double family houses; <1945)

Tier2 – Shelter - Refurbishment (example for multi-family houses >10 dwellings; <1945)

Connection to Tier 3 – institutional setting  Aim  provide functionalities at specified (“sufficient”) level  depends on factors like demographics, life-styles, institutions, spatial planning etc.  criteria  Environmental impact  Overall costs (user costs, social costs)  Define appropriate institutional setting

Karl Steininger Gabriel Bachner

Tier2 - Shelter Source: Müller, 2015