REPORT 2015:34. Individual metering and charging in existing buildings

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1 REPORT 2015:34 Individual metering and charging in existing buildings

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3 Individual metering and charging in existing buildings

4 Title: Individual metering and charging in existing buildings Report number: 2015:34 Publisher:, december, 2015 Edition: 1 Print: ISBN print: ISBN pdf: Keywords: individual metering, individual charging, cost-effectiveness, measuring system, multi-dwelling buildings, apartments, existing buildings, heat cost allocators, temperature metering, energy use, energy saving, heating, heat, cold, comfort cold, hot water Reference number: /2014 The report can be ordered from. Website: [email protected] Phone: Postal address:, Box 534, Karlskrona The report is available in PDF format on s website. It can also be produced in alternative format on request.

5 Foreword Article 9 of the Energy Efficiency Directive (2012/27/EU) requires member states to ensure that building contractors and property owners install individual meters so that each apartment s energy use for heating, cooling and domestic hot water can be measured. The aim of measuring each apartment individually is to increase households awareness of their energy use and give them the possibility of lowering their heating costs. Sweden has implemented the article through the Act on energy measurement in buildings (Lagen om energimätning i byggnader, 2014:267). This act includes requirements on building contractors and owners to make it possible to measure heating, cooling and domestic hot water individually in each apartment. However, the requirement only applies if the measure is cost-effective. Government bill 2013/14:174 stated that it should not be the individual building contractor or owner who assesses whether it is cost-effective to install individual meters; instead should make a general assessment. was therefore commissioned to examine whether individual metering and charging is a cost-effective investment, and to specify in which cases metering systems for heating, cooling and domestic hot water should be installed in buildings. completed the first part of this government commission in 2014, about individual metering and charging in new construction and reconstruction projects. The present report is s response to the commission s second part, about individual metering and charging in existing buildings. It was produced by Anders Carlsson, Cathrine Engström and Bertil Jönsson, with Joakim Iveroth as project manager. Karlskrona in september 2015 Janna Valik Director-General

6 Innehåll Foreword... 3 Summary... 6 Examination of radiator and temperature metering...6 Method of analysis...7 Individual metering and charging using heat cost allocators...8 Individual metering and charging using temperature metering Introduction s commission Delimitations, method and procedure Property owners and metering companies two different views Outline of the report Cost-effectiveness definition and additions Uncertainty of cost-effectiveness Individual metering and charging in Denmark Individual metering and charging in Sweden a follow-up Berndtsson s studies s follow-up of the studies Conclusions Swedish property owners experiences of individual metering Households with individual metering experiences and attitudes 33 Results of SKOP s telephone survey Heating of existing multi-dwelling buildings in Sweden Construction of the heating system Energy performance of heating in Swedish multi-dwelling buildings. 40 Heat transfer makes it harder to measure actual energy use for heating The results of part 1 are used in part Individual metering of heating using heat meters in multi-dwelling buildings Individual metering of domestic hot water in multi-dwelling buildings 50 Individual metering of heating and cooling in commercial spaces Individual metering and charging using heat cost allocators Dividing heating costs using heat cost allocators The benefits energy savings through lowered temperatures Installation and operating costs The calculation model Calculations, results and analysis Conclusions Individual metering and charging using temperature metering Charging on the basis of temperature The benefit side energy savings through lowered temperatures Installation and operating costs The calculation model Calculations, results and analysis Conclusions... 98

7 References Appendix 1 Sensitivity analyses Results of step 1 of the analysis using alternative district heating rates Results of step 2 of the analysis using alternative district heating rates Results with uniform probability distributions for the installation and operating costs Appendix 2 Energy performance in Swedish multi-dwelling buildings Energy performance for heating, by climate zone Energy performance by year of construction Appendix 3 District heating rates Variable energy prices and power charges, including VAT rates.114

8 6 Individual metering and charging in existing buildings Summary Under the Act on energy metering in buildings (Lagen om energimätning i byggnader, 2014:267), the owner of a building must ensure that the energy used for an apartment s indoor climate can be metered, if it is technically feasible and cost-effective to install a system for individual metering and charging. has therefore, on the government s instructions, examined in which cases it is technically feasible and costeffective to install metering systems for individual metering of heating, cooling and domestic hot water. The government commission (N2014/1317/E) is divided into two parts. In response to the first part, delivered the report Individual metering and charging in new construction and reconstruction projects. In it, recommended not making individual metering and charging of heating (with a heat meter), domestic hot water or cooling a requirement. This was because the results showed that a requirement would force most building contractors and property owners who were constructing or reconstructing buildings to make unprofitable investments. It is s assessment that this also applies for existing buildings. Part 2 of the commission concerns metering and charging in existing buildings. The present report, Individual metering and charging in existing buildings, is s response to the question about when individual metering would be cost-effective. The report looks particularly at metering with heat cost allocators and temperature metering. The results of our cost-effectiveness calculations show that an investment in individual metering and charging using heat cost allocators or temperature metering is generally not cost-effective in existing buildings. The investment also appears risky. All in all, s recommendation is that individual metering of heating, cooling or domestic hot water not be required in any existing building s case. For that reason, is not making any proposals for regulatory provisions. Examination of radiator and temperature metering This examination is limited to analysing individual metering of heating using a radiator meter and using temperature metering. The reason for this is that the result of Part 1 of the commission showed that individual

9 Individual metering and charging in existing buildings 7 metering and charging of heating using heat meters, of domestic hot water and of cooling, are not cost-effective in new and reconstructed buildings. Our assessment is that this is also the case in existing buildings. Method of analysis s commission was to examine in which existing buildings individual metering and charging would be cost-effective 1. Since the analysis equates cost-effectiveness with profitability, we responded to the question by comparing the benefits on the measure with its costs. If, over the lifetime of the investment, its benefits are greater than its costs, then the investment is profitable; otherwise it is unprofitable. The analysis was made at the building level, where factors such as energy performance and climate were varied in order to see to what extent they affected the result. To carry out the calculations we created calculation models for the investment in metering systems for individual metering. The standard building used in the calculations was modelled using different energy performance values, and was placed in four different locations Malmö, Stockholm, Sundsvall and Kiruna corresponding to three different climate zones. We estimated the energy savings that would theoretically result if the temperature was lowered by either one or two degrees in the standard building. This was the benefit side of the calculation. These energy savings were linked to different district heating rates and fed into the model along with cost data in order to calculate the economic outcome. If the present value of the benefits during the calculation period are greater than the present value of the costs, the investment in individual metering is cost-effective, or profitable, given that the temperature in the building is lowered. However, there are many uncertainties regarding benefits as well as costs of investments in individual metering and charging. In order to manage these uncertainties, the input data was given probability distributions, and then we made systematic scenario analyses (known as Monte Carlo simulations) in order to analyse whether individual metering of heating is cost-effective. Besides allowing for many calculations to be carried out in a systematic manner, the method also makes it possible to present the results in a diagram overview. The results of all the calculations are summarised in a 1 The analysis assumes that an investment which is cost-effective is also technically feasible.

10 8 Individual metering and charging in existing buildings histogram, and the expected present value, standard deviation (a measure of the investment s risk) and the likelihood of getting a positive outcome, i e profitability, are presented. Put simply, this data describes what a property owner, faced with the requirement to install individual metering and charging, can expect in terms of the outcome of the investment. For it provides a balanced picture of the profitability of the measure and of how profitability varies depending on the energy performance of geographical location of the building. Based on this, we can make an overall assessment whether, and if so in which buildings, individual metering and charging should be required. Individual metering and charging using heat cost allocators The analysis of heat cost allocators was divided into two steps: In the first step, it was assumed that the introduction of individual metering would bring a one-degree temperature reduction in the building, with absolute certainty. Installation and operating costs were varied on the basis of predefined probability distributions. In the second step, we let the temperature reduction in the model vary as well, with between 0, 1 and 2 C. These temperature reductions were given different probabilities. Table 1 presents the results for all standard buildings in two of four locations, Malmö and Kiruna, when the temperature reduction in the model is held constant at 1 C, at the building level (step 1).

11 Individual metering and charging in existing buildings 9 Table 1. Results of step 1 of cost-effectiveness calculations: 1 C temperature reduction in the building, installation and operating costs with triangular distributions prices, unchanged in real terms. Real interest rate of four per cent. 10-year calculation period calculations per standard building. Profit/loss Malmö, EON Värme Min (SEK) Mean (SEK) Max (SEK) Standard dev P of profit BBR % BBR % BBR % BBR % Kiruna, Tekniska verken BBR % BBR % BBR % BBR % In the table, Min refers to the lowest present value of calculations per standard building, Mean the expected present value and Max the highest present value of the calculations. Standard dev is the standard deviation, and a measure of the investment s risk. P of profit indicates the probability of a positive outcome, i e how many of the calculations produce a present value of SEK 0 or better. BBR in Table 1 refers to when energy use in the standard building is on a level with current BBR requirements ( s building regulations, BBR 21), while standard buildings BBR +25, BBR +50 and BBR +75 have increasingly higher energy use, i e increasingly worse energy performance in relation to current BBR requirements. As Table 1 shows, it is difficult to achieve profitability in multi-dwelling buildings with an energy use which is on a level with current BBR requirements or slightly worse. The expected present value (the mean value) is negative, i e unprofitable, and the probability of a positive outcome is low or very low. In order for the expected present value to be positive, the building s energy use must be substantially higher than BBR at the outset (i e an energy performance corresponding to the standard building BBR +75).

12 10 Individual metering and charging in existing buildings According to data from the register of energy performance reports, this comprehends a few hundred properties in climate zone I, a few thousand in climate zone II and properties in climate zone III. There are no guarantees, however, that an investment in individual metering and charging actually leads to a temperature reduction in the building. This is shown in SKOP s questionnaire survey of households that currently have individual metering and charging, and by experiences gained among property owners who have made the investment. Step 2 of the analysis, where we looked in particular at standard building BBR +75, was therefore to introduce uncertainty on the benefit side as well. This was done by having the temperature reduction vary in the model, between 0, 1 and 2 C at various probabilities. Table 2 shows the calculation results for analysis step 2 for two of four locations, Malmö and Kiruna. Table 2. Results of step 2 cost-effectiveness calculations: 0, 1 and 2 C temperature reduction in the building with various probabilities, installation and operating costs with triangular distributions prices, unchanged in real terms. Real interest rate of four per cent. 10-year calculation period calculations per standard building. Profit/loss P of 0 C Malmö, EON Värme Min (SEK) Mean (SEK) Max (SEK) Standard dev P of profit 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Kiruna, Tekniska verken 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % When it is no longer certain that the temperature in the building will be reduced by 1 C, the outcome worsens. The expected present value (the mean value) of the investment is reduced, the risk inherent in the

13 Individual metering and charging in existing buildings 11 investment (the standard deviation) increases sharply, and the number of calculations with a positive outcome drops. In Malmö, with a 20 per cent probability of a 0 C temperature reduction (and a 75 per cent probability of 1 C, and 5 per cent for 2 C), the expected present value becomes a profit of SEK The standard deviation is SEK It is an investment with a low expected present value but with a high level of risk. With a 30 per cent probability of unchanged temperature in the building (and 65 per cent for 1 C, and 5 per cent for 2 C), the present value comes to a loss of SEK The standard deviation comes to SEK Outcomes are somewhat better in Kiruna. With a 20 per cent probability of unchanged temperature in the building, the expected present value comes to a profit of SEK With a 30 per cent probability, it produces a profit of SEK The standard deviation for both of these outcome lands on SEK and SEK , respectively. The calculation results show that the expected outcome for a property owner who invests in individual metering and charging with heat cost allocators will be low or negative. The risk inherent in the investment furthermore looks very high. A requirement for individual metering of heating using heat cost allocators thus looks very likely to lead to unprofitable investments for the majority of property owners. On the basis of the calculation results, proposes that individual metering and charging of heating using heat cost allocators not be required for any existing buildings. Individual metering and charging using temperature metering The installation costs for temperature metering are higher than they are for radiator metering. We have assumed in our analysis that the temperature in the building is reduced by 1 C when temperature meters are installed. The expected present value of the installation is negative in the standard buildings we have looked at. The probability of the investment becoming profitable is very low. s conclusion from the calculations is that individual metering and charging using temperature metering is not cost-effective, and we propose that individual metering and charging using temperature metering not be required for existing buildings.

14 12 Individual metering and charging in existing buildings Introduction Sweden introduced the Act on energy metering in buildings (2014:267) in order to implement Article 9 of the EU Energy Efficiency Directive (2012/27/EU). The act includes requirements on building contractors and owners to make it possible to measure heating, cooling and domestic hot water individually in each apartment. This statutory requirement applies for new construction and for reconstruction of existing buildings, but only if the measure is cost-effective and, in reconstructions, technically feasible. The requirement also applies to existing buildings that are not being reconstructed if the measure is both cost-effective and technically feasible. The aim of the act is create incentives for residents to reduce their energy use, by dividing energy costs according to actual use. An early consideration by the government included in the government bill Implementation of the Energy Efficiency Directive was that legislation under which building contractors or owners themselves determined whether it was cost-effective to install individual meters would lead to a very variable application of the law. Instead, the government considered that cost-effectiveness and technical feasibility should be assessed generally, and therefore commissioned to examine which types of buildings should be subject to the installation of metering systems for heating, cooling and domestic hot water. 2 s commission The government commission consists of two parts. On 1 November 2014, submitted the report Individual metering and charging in new construction and reconstructions to the Government Offices, in response to the commission s part 1. The conclusion in that report was that it would not be profitable to apply individual metering of heating or cooling in new construction and reconstructions. For domestic hot water the assessment was that individual metering would be profitable under some circumstances, but that the likelihood of profitability overall was too low to impose a requirement. therefore did not propose any requirements for such metering. 3 The present report concerns part 2 of the commission, in which was instructed by the government to do the following: 2 Government bill 2013/14:174, Genomförande av energieffektiviseringsdirektivet. 3 (2014), Individuell mätning och debitering vid ny- och ombyggnad.

15 Individual metering and charging in existing buildings 13 Examine and specify in which cases existing buildings, not currently being reconstructed, should be subject to requirements that the energy used to generate apartments indoor climate, as well as their consumption of domestic hot water, be metered in each individual apartment. Base the examination on an analysis if technical feasibility and costeffectiveness. With respect to heating, principally examine the inflow metering method (heat meters). In those cases where individual metering using heat meters is not cost-effective or technically feasible, heating cost distributors (referred to hereafter as heat cost allocators) are to be examined. In those cases where heat cost allocators are not regarded as technically feasible or cost-effective, requirements for temperature metering or other metering methods are to be considered. Provide proposals for regulatory provisions needed in order to implement s conclusions, with the associated impact assessment. Obtain opinions from affected agencies, businesses and other actors. The report, including proposals, is to be delivered on 1 October Delimitations, method and procedure Three specific metering methods of heating are to be examined: heat meters, heat cost allocators and temperature metering. Individual metering and charging using heat meters were examined in part 1 of the commission, with the conclusion that they were not a cost-effective way of metering heating in new construction or reconstructions. s assessment is that they do not constitute a cost-effective method in existing building either. The same assessment is made for individual metering of domestic hot water and cooling, as well as for individual metering of commercial spaces. The reasoning behind these assessments is detailed in the section The results of part 1 are used in part 2. This report is thus limited to analysing the individual metering of heating using heat cost allocators and temperature metering. As mentioned earlier, s instructions are to base its analysis on costeffectiveness. As explained in the section Cost-effectiveness definition and additions, cost-effectiveness is equated with profitability. To calculate profitability, the benefits on the measure are compared with its costs. If, over the lifetime of the investment, its beneftis are greater than

16 14 Individual metering and charging in existing buildings its costs, then the investment is profitable; otherwise it is unprofitable. The analysis is made at the building level. The delimitations outlined above raise the following two questions for the examination: When is it profitable, in a business economics sense, to divide the cost of heating using heat cost allocators in existing multi-dwelling buildings? When is it profitable, in a business economics sense, to charge an apartment s heating costs on the basis of temperature (temperature metering) in existing multi-dwelling buildings? To answer these questions, we created calculation models for the investment and calculated cost-effectiveness, or profitability. The benefit side of the calculation were the energy and power savings that would theoretically result if the temperature were reduced in a specified standard building by 1 or 2 C. These energy savings were then linked to different district heating rates and fed into the model along with cost data in order to calculate the economic outcome. If total benefits during the calculation period are greater than total costs, the investment in individual metering is cost-effective, given that the residents reduce the temperature. However, both the cost and the benefit side of the calculation//equation are uncertain. The costs of individual metering varies, and it is unclear what the effect of metering will be. In order to manage these uncertainties in the commission, input data was given probability distributions. We then made systematic scenario analyses (known as Monte Carlo simulations) in order to analyse whether individual metering of heating using these methods is cost-effective. This involved using the computer to make thousands of calculations, and for each calculation randomly choosing a value from the predefined probability distributions. The end result of each individual calculation was either profitable or unprofitable. With such a large number of calculations, we also extracted the expected present value of the investment, its standard deviation which is a measure of the investment s risk and the probability of getting a positive outcome. This information satisfactorily describes what a property owner who is required to install individual metering and charging can expect in terms of the outcome of the investment. For it provides a balanced picture of the profitability of the measure and of how profitability varies depending on the energy performance of geographical location of the

17 Individual metering and charging in existing buildings 15 building. Based on this, we can respond to the report s questions and make an overall assessment of which existing buildings should be required to install individual metering and charging. As part of the examination we also carried out a questionnaire survey of households that already have individual metering and charging of heating. The purpose of this was to obtain a better picture of how Swedish households energy use behaviour changes when heating costs are metered and distributed by individual. The results of the questionnaire survey provide a basis for assessing the benefit side of the calculation//equation. We furthermore followed up apartments in which heating had been, or should have been, individually metered since The aim of this follow-up was to learn about Swedish property owners experiences and views of individual metering and charging, which formed further material to supplement the theoretical calculation result produced in this report. The results of the follow-up were also supplemented with what emerged in the course of s contacts with housing companies, metering companies and other stakeholders. These communication efforts are summarised in the section that follows. Property owners and metering companies two different views Hearing and consultation with stakeholders On a number of occasions and under various circumstances, met with stakeholders to discuss individual metering and charging. These included a hearing on 23 April 2015, at which about 50 representatives from trade organisations, metering companies and housing companies took part in a discussion about heat cost allocators and temperature metering. We also held the following consultation meetings: Consultation with Fastighetsägarna, SABO, Svenska Bostäder, Byggherrarna, Uppsalahem and Botkyrkabyggen, to learn about public housing sector s experiences of individual metering. Consultation with HSB Riksförbund, Riksbyggen, SBC and Bostadsrätterna, to learn about tenant-owner associations experiences of individual metering. Meeting with Otto Paulsen, from the Danish Technological Institute, and Brunata, to learn about a metering company s view of individual metering.

18 16 Individual metering and charging in existing buildings In the course of these meetings and discussions, two sides with completely different views of individual metering emerged. On one side are Swedish property owners, represented by trade organisations such as SABO, Fastighetsägarna and HSB Riksförbund. Their members have tested some form of individual metering in some of their properties. Their view is that individual metering and charging of heating bring considerable installation and operating costs, but that the measure does not produce any energy savings. On the other side are German and Danish metering companies, primarily represented by the Swedish association of metering energy consumption (SFFE, Svensk förening för förbrukningsmätning av energi), who claim that heating can be metered and charged individually at low costs and with considerable energy savings. Public housing companies currently metering individually primarily install systems for temperature metering, while the metering companies primarily install and maintain heat cost allocators. The fact that these two groups use different metering technologies does not explain why their views of individual metering and charging are at odds with each other. The purpose of the metering methods is the same, after all to provide residents with an incentive to save energy on heating. Obtaining an overall picture of tenant-owner associations view of the issue was difficult. According to SBC and Bostadsrätterna, both the trade organisations, the boards of the associations often lack sufficient knowledge about the technology and are often generally sceptical towards a technology they are not certain is fair. According to Riksbyggen, it is also fairness rather than energy savings which is the usual sales argument when the technology is being sold to tenant-owner associations. It was evident that an already difficult task had become more difficult, as the stakeholders had such fundamentally different views of what individual metering and charging cost, and what potential energy savings they offered. As shown in part 1 of the commission, there are very few evaluations within the energy sector that indicate the actual outcome of an energy measure. This is also true of individual metering and charging. In the course of carrying out part 1 we found no Swedish evaluation in which individual metering had been analysed as a separate measure and where installation and operating costs were compared to the value of energy, power and water savings. Faced with this lack of evaluations, we were obliged to investigate how individual metering had actually been dealt with among housing companies. For that reason, we contacted both property owners and metering companies in order to obtain as balanced a

19 Individual metering and charging in existing buildings 17 picture as possible of the costs and benefits of individual metering. The fact that their responses diverged so strongly was problematic. Outline of the report This report consists of eight sections: In the following section, Cost-effectiveness definition and additions, the term cost-effectiveness is defined. This section also describes the uncertainty connected with the investment and how this is dealt with in the calculation model devised for this report. The next section, Individual metering and charging in Denmark, summarises the results of s meeting with Otto Paulsen of the Danish Technological Institute, at which individual metering and charging in Denmark were discussed. The section Individual metering and charging a follow-up is a follow-up of Lennart Berndtsson s report from and aims to provide an updated picture of Swedish property owners view of individual metering and charging. It does this by investigating whether they still meter heating individually in the way they reported in The section Residents experiences and attitudes to individual metering aims to provide a more in-depth picture of Swedish households experiences of individual metering and charging, looking in particular at whether the effect of the measure is reduced energy use. This section summarises the questionnaire survey carried out by the polling company SKOP on s behalf, in which households with individual metering and charging were interviewed by telephone. The section after that, Heating of multi-dwelling buildings in Sweden, describes how Swedish multi-dwelling buildings are heated, and buildings average energy performance. The implications of heat transfer problems for individual metering are also explained. The section entitled The results of part 1 used in part 2 describes why the results of part 1 of the commission also apply for part 2, which means that this report only examines metering and charging of heating using heat cost allocators and temperature metering. 4 Berndtsson (2003), Individuell värmemätning i svenska flerbostadshus en lägesrapport.

20 18 Individual metering and charging in existing buildings The section Individual metering and charging using heat cost allocators examines individual metering and charging using heat cost allocators, describing the metering technology, the benefit side and the cost side, the calculation model and the calculation results, including an analysis and proposal. The section Individual metering and charging using temperature metering correspondingly examines temperature metering, describing the technology, the benefit side and the cost side, the calculation model and the calculation results, including an analysis and proposal.

21 Individual metering and charging in existing buildings 19 Cost-effectiveness definition and additions The commission is to examine and specify in which cases individual metering of energy use for heating, cooling and domestic hot water should be required for each apartment in existing buildings. The examination is to be based on an analysis of cost-effectiveness and technical feasibility. The report makes the assumption that it is not possible to make a costeffective investment which at the same time is technically unfeasible. It is therefore limited to analysing only the cost-effectiveness of the investment. No analysis of technical feasibility is carried out. In the analysis, cost-effectiveness is equated with profitability that benefits over the lifetime of the investment are greater than the costs. Benefits on the introduction of individual metering and charging are the value of the energy savings, the value of the power savings and, for domestic hot water, the value of the water as well. The costs are for installation and operation. The focus is on examining which cash flows positive (benefits) and negative (costs) are generated by the investment at the building level, and whether total benefits are greater than total costs. This examination does not include looking at how benefits and costs are divided between landlord and tenant. Uncertainty of cost-effectiveness As with all investments, those made in individual metering and charging are associated with uncertainty. Figure 1 below illustrates how uncertainty, or risk, associated with investments can be analysed and quantified. 5 5 The results were calculated using two normal distribution curves: mean value SEK , standard deviation SEK in one, and mean value SEK , standard deviation SEK in the other calculations were carried out.

22 20 Individual metering and charging in existing buildings Figure 1. The outcome of two investments with different risks. We are looking at two investments that both lead to an expected present value of SEK One way to measure risk in an investment is to calculate the standard deviation of the outcome. This is a statistical measure that shows the average deviation from the expected present value (the mean value). The risk, i e the standard deviation, differs in the two investments. In one the standard deviation is SEK and in the other it is SEK (see the summary to the right of the figure). The risk is thus higher in the investment with a large spread. The former is represented by the red bars in the figure, the former by the gray bars. As can be noted, the spread of the outcome is different for the two. Both have the same expected present value, SEK , but in the investment with a large standard deviation the outcome varies between SEK , at its lowest, and SEK at its highest. The corresponding spread for the investment with a small standard deviation is SEK at its lowest and SEK at its highest. The figure also shows that in 90 per cent of the calculations the outcome is between SEK and SEK for the investment with a large standard deviation. For the investment with a small standard deviation, 100 per cent of the calculations fall within this range. A property owner striving to minimise risk in their investment will, in the example above, choose the investment with a small standard deviation, since this option has the same expected present value, but a lower risk.

23 Individual metering and charging in existing buildings 21 There are a range of different energy efficiency measures that a property owner can undertake in their building in order to reduce energy use. The expected present value of each of these measures can be calculated, as can any risk associated with the measure. The measures can then be compared in terms of expected present value and risk, and the energy efficiency measure with the best outcome chosen. It is very important to have an idea of the risk inherent in an investment. And for investments in individual metering and charging of heating there are considerable uncertainties, both in terms of benefits and costs. It is not clear if, and if so by how much, temperatures are reduced in a building with individual metering. A temperature reduction is necessary in order to generate a benefit. Additionally, the cost information obtained is spread over quite a wide range. All of this means that very many calculations have to be done in order to obtain as good a basis for decisions as possible. However, these have to be done in a systematic way, otherwise the overall picture will be lost. The method used in the present report, in which the calculations were carried out systematically, is known as the Monte Carlo Method. The method is presented in detail in the section Individual metering and charging using heat cost allocators. When this method is used, the calculation results do not only show what a property owner who is going to invest in individual metering and charging can expect in terms of the outcome of the investment, but also provide a picture of the risk, or uncertainty, that the property owner will be faced with. All in all, the method provides a basis that allows us to answer the two questions posed in this report, and by extension to fulfil the commission.

24 22 Individual metering and charging in existing buildings Individual metering and charging in Denmark It is often mentioned in the discussions about individual metering that Denmark has requirements in place for individual metering and charging of electricity, gas, water, heating and cooling. For this reason, paid a visit to Otto Paulsen at the Danish Technological Institute in Taastrup outside Copenhagen, in April of Paulsen has extensive experience of issues surrounding individual metering of energy in Denmark. During the trip to Denmark also visited Brunata, one of the larger companies in Denmark that provide individual metering using heat cost allocators. The aim of visiting Paulsen was to learn whether any systematic studies had been carried out in Denmark involving calculations of cost-efficiency in individual metering and charging. We also wanted to find out if there were any studies that showed how apartment owners in Denmark changed their behaviour when individual metering and charging was introduced. We were furthermore interested in issues relating to technical feasibility and in learning how the regulatory system governing individual metering is structured in Denmark. According to Paulsen there are no systematic Danish studies of either cost-effectiveness or of how behaviour changes when individual metering is introduced. This, Paulsen said, was mainly due to the fact that individual metering is foremost a matter of fairness in Denmark, and not a matter of saving energy and money. Moreover, individual metering has a long history of popular support in the country. Denmark and Sweden have elected to implement the Energy Efficiency Directive in two different ways. In Sweden we have statutory requirements for individual metering of heating, cooling and domestic hot water, where these are cost-effective and technically feasible. Denmark instead has general requirements in the rules, but with a number of possible dispensations which are examined by municipalities. Some of these dispensations are connected with economy and technology. No studies of cost-effectiveness in Denmark According to Paulsen, few or no studies have been carried out in Denmark of how behaviour changes when individual metering is introduced. Neither are there any studies that have looked specifically at whether individual metering is cost-effective. The general view in Denmark is that

25 Individual metering and charging in existing buildings 23 individual metering and charging using heat cost allocators provide energy savings, and the normal thing is to assume that a 10 per cent saving on energy use is possible. In spite of this, individual metering and charging is not a big subject of discussion in Denmark. This, according to Paulsen, is because it is regarded as fair that everyone pays for their own consumption. Denmark also has a historical tradition of individual metering of heating. The first radiator meter was installed as early as in 1918, and by 1945 Denmark had installed heat cost allocators. Sweden chose to go down another route. Instead of individual energy metering, energy use was metered at the building level and the costs then divided among the residents based on living space. Rules of individual metering in Denmark New rules on metering of electricity, gas, water, heating and cooling came into effect in Denmark on 2 June 2014; the previous rules were from They concern requirements for meters in buildings containing several apartments, and apply for new construction as well as for existing buildings. Regarding metering of heating, the rules only apply to heat meters in new construction, while for existing buildings they apply to both heat meters and heat cost allocators. Temperature metering is not an alternative to individual metering under the Danish rules. According to Paulsen there are several reasons for not metering and charging on the basis of temperature. One issue is how many measuring points are needed in each room, but there are also problems related to how temperature can be affected by e g airing or heat generated by house guests. The Danish rules use correction factors to adjust the heating costs of apartments located in the outermost parts of the building. This is because these apartments require more energy for heating, and the purpose of the correction factors is to divide heating costs fairly. To deal with the fact that heat is transferred between apartments, the heating cost is not divided only on the basis of the meters a part is divided on the basis of living space. However, it is a requirement in Denmark that at least 40 per cent of a building s total heating costs be divided on the basis of the individual metering. There are several exceptions to the requirement for installing individual meters. These apply to care and nursing institutions, holiday homes, 6 BEK no 563 of 02/06/2014.

26 24 Individual metering and charging in existing buildings buildings in which technical problems mean that installation costs would be unreasonably high in relation to potential savings, buildings in which technical problems mean that a longer installation period is needed, and buildings in which the individual tenant does not stand to gain any economic advantage. Those wanting to be granted a dispensation on any of these grounds must send an application to the municipality, which will then examine the case to determine whether a dispensation can be granted. The municipality is also responsible for supervising compliance with the rules. In Denmark there are also rules about heat cost allocators and requirements regarding the installers of heat cost allocators. 7 7 BEK no 1166 of 03/11/2014 and BEK no 1167 of 03/11/2014, respectively.

27 Individual metering and charging in existing buildings 25 Individual metering and charging in Sweden a follow-up The question being investigated in this report is when it profitable, in a business economics sense, to meter and charge heating individually, in existing buildings. answers this question by making profitability calculations using a specially developed model. A complementary picture is provided by looking at how property owners who have already invested in individual metering and charging view the technology today. This section is a follow-up of the properties with individual metering and charging that were studied by Lennart Berndtsson at the beginning of the new millennium. The aim of the follow-up is to get a better picture of the possibilities of metering heating individually in multi-dwelling buildings in Sweden today, and whether this can be assumed to be a cost-effective, or profitable, investment. In summary, this section shows that: The public housing companies studied by Berndtsson now seem to be abandoning individual metering of heating using heat meters, while temperature metering is a technology that is still being used. Heat cost allocators are only rarely used within public housing today. Construction companies such as JM, Skanska, NCC and Peab have consistently negative experiences of installing systems for individual metering. The reasons they refer are that they have been expensive to install and that it has been difficult to get the technology to work. Few tenant-owner associations that use individual metering were contactable during the follow-up. However, a recent study shows that there is a strong resistance to individual metering among Swedish tenant-owner associations and that it is therefore rarely used. This resistance is attributed to a low level of knowledge about the technology and to the perception that individual metering is not cost-effective. Berndtsson s studies In two studies, published 1999 and 2003, Lennart Berndtsson described the use of individual metering and charging as it looked in Sweden during the first half of the 2000s. The studies were commissioned by the Swedish Energy Agency, with the aim of following up developments in the area of individual metering since the Heat metering report of A

28 26 Individual metering and charging in existing buildings further aim was to describe the conditions for individual metering and charging in Swedish multi-dwelling buildings. Berndtsson s work resulted in the reports Study of experiences of individual metering and charging of heating and hot water in Swedish multi-dwelling buildings and Individual heat metering in Swedish multi-dwelling buildings a progress report. 8 The latter provides a detailed picture of about 150 projects in which property owners have either installed heat meters, heat cost allocators or temperature metering. The report describes technology choices and the property owners reasoning behind their choice to install the technology. All in all, the study covered apartments in which metering and charging of heating and domestic hot water was being used, or in which there were well advanced plans to begin such metering between 2003 and s follow-up of the studies The apartments included in Berndtsson s report from 2003 can be seen as the total number of apartments which at that time metered (or were soon going to begin metering) and charged heating and domestic hot water individually in Sweden. Not counting those apartments that only metered and charged domestic hot water, that number was Table 3 below illustrates them, divided by type of housing and metering technology. Table 3. The number of apartments with individual metering in Berndtsson s report Individual metering of heating in Swedish multi-dwelling buildings, divided by metering technology and housing type. Heat meter Heat cost allocators Temperature metering Combined system** Unknown tech Total no Rented apartment Tenantowned Total * * Berndtsson included a total of apartments, of which 3759 with heat meters, 4035 med heat cost allocators, 3666 temperature metering and 2101 with combined or unknown technologies apartments in total. s compilation shows a different number, but that is not deemed to affect the result of this follow-up. ** Berndtsson reports that a small number of companies installed several metering technologies in order to achieve fairer measurements. 8 Berndtsson (1999), Utredning angående erfarenheter av individuell mätning och debitering av värme och varmvatten i svenska flerbostadshus and Berndtsson (2003), Individuell värmemätning i svenska flerbostadshus en lägesrapport.

29 Individual metering and charging in existing buildings 27 A property owner faced with the choice of whether to implement an energy measure is likely to do so if the benefits are deemed to be greater than the costs. The same decision criterion applies in cases where individual metering is being installed in order to save energy. By investigating whether these property owners still meter and charge heating in the way they stated in that they did in 2003, we get a picture of the possibilities of metering heating individually in multi-dwelling buildings in Sweden, and of whether this can be assumed to be a cost-effective investment. Respondents and response rate The property owners were contacted by via , and in a few cases by telephone, and were asked to answer the question whether heating was still being metered and charged individually. It emerged that of the total of apartments, had been sold. It was not possible to obtain information as to whether heating was still being metered individually in these apartments. Further, the situation for apartments remained unknown as the property owner did not provide a response. Thus the respondents in this follow-up comprise property owners representing of the total of apartments. The distribution of these apartments by type of housing is shown in Table 4 below. Table 4. Respondents, i e property owners who responded to the question about whether they currently meter and charge heating individually, presented as the number of apartments divided by metering technology and housing type. Heat meter Heat cost allocators Temperature metering Combined system Unknown tech Total no Rented apartment Tenantowned Total The response rate for apartments with heat cost allocators is low, around 10 per cent. The number of respondents means that the follow-up result should be interpreted with caution. The sample is small for rented apartments with radiator metering, since a large number of the apartments have been sold (1 674 of a total of 2 090). In the case of tenant-owned apartments, the low response rate is due mainly to the fact that most tenant-owner associations in Berndtsson s report were not specified by name

30 28 Individual metering and charging in existing buildings (1 623 of a total of 1 945), and that it was therefore not possible to contact these. Even those associations that were identified by name proved difficult to get in touch with. The response rate was good for the remaining metering methods, which allows us to draw general conclusions from the result of the follow-up. Results Table 5 below shows the number, and the share, of apartments examined by Berndtsson that continue to meter and charge heating individually today this out of the sample presented in Table 4. Table 5. Number and share of apartments in which heating is metered and charged individually today, divided by metering technology and housing type. Heat meter Heat cost allocators Temperature metering Combined system Unknown tech Total no Rented apartment Total Heat meter Heat cost allocators Temperature metering Combined system Unknown tech Total no Rented apartment Tenantowned Tenantowned 17 % 57 % 78 % 0 % 0 % 41 % 22 % 100 % 0 % 0 % 0 % 29 % Total 19 % 68 % 78 % 0 % 0 % 39 % In those apartments where the property owner installed combined technologies, or where the choice of technology was not known at the time of Berndtsson s report, no individual metering of heating is done today. For the latter category, unknown technology, this suggests that the planned installation never happened. Below is a compilation of results for the remaining three metering technologies: heat meter, heat cost allocator and temperature metering. Results for heat meters Today 19 per cent of the apartments that were reported by Berndtsson as using heat meters continue to meter heating individually. For rented apartments (public housing) and tenant-owner associations respectively,

31 Individual metering and charging in existing buildings 29 the results are 17 and 22 per cent. In other words the majority of property owners have not continued to meter heating using this technology. In 1999 Uppsalahem stated that the introduction of individual metering and charging were intended to create individually adapted housing for tenants, but also to reduce energy costs. 9 Heat meters were installed in three out of a total of six properties examined by Berndtsson. Today they have largely discontinued all individual metering and charging of heating. 10 Svenska Bostäder stated in 1999 that they had a positive view of individual metering and charging, and that it was a further step in their ambition to transfer more responsibility to residents. They therefore introduced individual metering of heating, and of other consumption, in order to gain greater experience of the technology. 11 Heat meters were installed in four out of a total of eight properties examined by Berndtsson. Individual metering of heating was discontinued in 2006, with the justification that renewing the system was not cost-effective. 12 Bostads AB Poseidon in Gothenburg installed individual metering and charging in two buildings in order to gain knowledge and experience for future investments into housing with improved services for tenants. Heat meters were installed in one of the two buildings. Today all heat metering has been discontinued as it proved unmanageable from an administrative point of view. 13 AB Ängelholmshem phased out metering using heat meters and installed temperature metering instead. This was because the use of heating varied considerably between apartments, due to construction technology. 14 Most of the tenant-owner associations examined by Berndtsson have phased out metering with heat meters too. Brf Fågelsången, a tenantowner association in Stockholm, never managed to get the metering to work satisfactorily and phased it out as it could not be justified in economic terms. 15 Brf Ringblomman, also in Stockholm, discontinued its metering as the company that had supplied the system closed down a few 9 Berndtsson (1999), Utredning angående erfarenheter av individuell mätning och debitering av värme och varmvatten i svenska flerbostadshus, p Exchange with Thomas Nordquist, Uppsalahem, 9 Mar Berndtsson (1999), Utredning angående erfarenheter av individuell mätning och debitering av värme och varmvatten i svenska flerbostadshus, p exchange with Pia Hedenskog, Svenska Bostäder, 18 Feb (2008), Individuell mätning och debitering i flerbostadshus. 14 exchange with Jonas Hellberg, AB Ängelholmshem, 1 Apr exchange with Magnus Karperyd, brf Fågelsången, 26 Feb 2015.

32 30 Individual metering and charging in existing buildings years after the installation. 16 Brf Sjöstaden experienced serious deficiencies in the system, and after 10 years without getting the technology to work satisfactorily, the association chose to go back to including heating costs in its fees. 17 Results for heat cost allocators No general conclusions can be drawn from the results of the follow-up as the number of respondents is low. With regard to metering in tenantowner associations, 108 apartments in two associations answered yes to the question about whether they still meter today. One association said that they are pleased with how it works today, and that their heating costs are lower. 18 Results for temperature metering Temperature metering is a technology developed and used by some public housing companies. Helsingborgshem AB, for example, developed a system known as komfortavvägningssytemet (KAS). 19 Of the property owners who had this technology installed and were examined by Berndtsson, 78 per cent state that they continue to meter using this technology in this group, Helsingborgshem represents the majority of the apartments. Some companies still meter temperature in order to obtain maximum efficiency, but do not charge residents on that basis. One company stated that difficulties in delivering the right temperature made them stop using temperature metering. Conclusions Swedish property owners experiences of individual metering Berndtsson writes that there are three types of property owners who install individual metering and charging: Housing companies that install meters in new and existing buildings. Building contractors building in areas such as Bo O1 or Hammarby Sjöstad. Exisiting tenant-owner associations. 16 exchange with Jan Wiberg, brf Ringblomman, 20 Feb 2015, and brf Ringblomman s annual report annual report for brf Sjöstaden. 18 exchange with Joacim Lundberg, brf Glädjen, 10 Mar Berndtsson (2003), Individuell värmemätning i svenska flerbostadshus en lägesrapport, p 55.

33 Individual metering and charging in existing buildings 31 The first category can be described as public housing companies that have, for various reasons, decided to introduce some form of individual metering. About 80 per cent of the projects involving apartments for rent that Berndtsson looked at were in public housing companies. The results of the follow-up indicate that this category of owner tends to abandon individual metering of heating using heat meters, while temperature metering is a technology that continues to be used. The majority of the apartments for rent with heat cost allocators have been sold. The follow-up results paint a similar picture to the one described by Swedish property owners and researchers. The public housing companies that met with said that it was very difficult to make individual metering profitable. Most public housing companies that use temperature metering claim that the technology has no effect on indoor temperatures. 20 Siggelsten (2010) argues that there are indications that it is difficult to make heat metering profitable, while the possibilities are greater for water metering. 21 It is harder, on the basis of the results of the follow-up, to conclude anything about the second category of property owners building contractors building in areas such as Bo 01 and Hammarby Sjöstad. Several of the rental apartments built by these companies have since been converted into tenant-owned apartments, which make them difficult to follow up. This applies to Familjebostäder in Stockholm, for instance. The follow-up shows that heating is no longer metered individually in their remaining rental apartments. The association-owned properties in Hammarby Sjöstad included in Berndtsson s study no longer have apartments with individual metering of heating. Berndtsson writes the construction companies such as JM, Skanska, NCC and Peab, with projects in Västra Hamnen and Hammarby Sjöstad, have consistently negative experiences of metering system installations. The reasons are that they have been expensive to install and that it has been difficult to get the technology to work. 22 Existing tenant-owner associations, the third and final category of property owners, have been difficult to get in touch with, as described earlier, because most of then were not identified by name in Berndtsson s report. A better picture of their experiences can be gleaned from Siggelsten 20 This was shown in a questionnaire survey carried out by SABO among member companies, within the framework of s commission. 21 Siggelsten (2010), Incentives for individual metering and charging. 22 Berndtsson (1999), Utredning angående erfarenheter av individuell mätning och debitering av värme och varmvatten i svenska flerbostadshus.

34 32 Individual metering and charging in existing buildings (2013), whose investigates, among other things, the attitude to individual metering among tenant-owner associations. According to Siggelsten there is a strong opposition to the technology, and it is therefore unusual to see systems for individual metering in Swedish tenant-owner associations. This opposition can be explained by a low level of knowledge about the technology, and the perception that it is not cost-effective. Only 21 of the 100 associations interviewed in Siggelsten s study believed that individual metering of heating and water were cost-effective, and only one association had installed such technology. The author s view is that this may indicate that the technology is not cost-effective, but also that it can be difficult for an association to install the technology since it requires changes to the way heating costs are divided between the apartments. 23 The results of the follow-up, and other research, show that many property owners who in the past have metered and charged heating individually no longer do so. There is moreover a general scepticism towards the technology. This is an indication that individual metering is not a costeffective, or profitable, investment. 23 Siggelsten (2013), Individual metering and charging of heat and hot water in Swedish housing cooperatives.

35 Individual metering and charging in existing buildings 33 Households with individual metering experiences and attitudes The aim of individual metering is to give residents an incentive to reduce temperatures in their apartments, and thus to use less energy for heating. The value of the energy and power savings are the benefit side in the cost-effectiveness calculations made in the present report. hired SKOP, a polling firm, to carry out a questionnaire survey of households in buildings with individual metering and charging. The aim was to reach households whose heating is metered and charged individually, in order to get a more balanced picture of how household act when heating costs are metered and divided individually. SKOP interviewed households with individual metering and charging of heating between 7 and 29 April The interviewees lived in rented or tenant-owned apartments, and heating costs were divided using either heat meters or heat cost allocators, or by means of temperature metering. The majority of households interviewed had systems for radiator or temperature metering. SKOP s full report is in Appendix 4. Below is a summary of the most important questions and their response results. In brief, the survey shows the following: The majority of the households are satisfied with individual metering and charging. For most of these 41 per cent the reason for this is the fairness aspect, i e that each household pays for its actual energy use. Just over two in five households (45 per cent) actively try to use less energy for heating, while 47 per cent do not. 38 per cent of those that do choose a lower indoor temperature than before. About half of the households read the information about their actual energy use for heating before paying the bill. Meters are often installed without the measure having gained the support of the residents. There is also insufficient information to residents about how they can reduce their energy use. Most households with individual metering continue airing the apartment in the way they did before.

36 34 Individual metering and charging in existing buildings Results of SKOP s telephone survey 24 One of the more general questions asked was whether the interviewee though it was good or bad that individual meters had been installed. Just over 60 per cent of the interviewees thought it was a good thing. People living in tenant-owned apartments were more likely to find it very good than those living in rented apartments. The diagram in Figure 2 below illustrates the distribution of replies. Those who replied that they thought individual metering was good (quite good or very good) were then asked to choose one of five explanations for why they thought so. Figure 3 below illustrates their replies. Figure 2. Question/table 11 in SKOP s survey.. What do you think? Is it good or bad that individual energy measurement for heat was introduced in the apartments?. 24 The SKOP survey is found in Appendix 4 in the Swedish version of the report,

37 Individual metering and charging in existing buildings 35 Figure 3. Question/table 12 in SKOP s survey. IF VERY OR QUITE GOOD: What is the most important reason why individual energy measurement is good? Just over two in five (41 per cent) cited fairness, i e that each household pays for what they actually use, as the main reason they think individual metering is a good thing. Older interviewees had this view to a greater extent than younger interviewees. One in five (19 per cent) cite the possibility of saving money as the main reason an interesting result considering that the purpose of the Energy Efficiency Directive is precisely to give households this possibility. The principal aim of the questionnaire survey was to obtain more knowledge about the choices households with individual metering make in terms of energy use. A central question in the survey was therefore whether households actively try to use less energy for heating, in order to lower their heating costs. Over two in five (45 per cent) replied that their household actively tries to use less energy for heating. A similar proportion of interviewees (47 per cent) do not actively try to achieve this. Interviewees who found individual metering a very good thing were more likely to be in the first group. The replies are illustrated in Figure 4 below.

38 36 Individual metering and charging in existing buildings Figure 4. Question/table 13 in SKOP s survey. Has the individual energy measurement for heat, and the opportunity to reduce your heating costs, made your household actively trying to use less energy for heating? Of those who actively try to use less energy for heating, 38 per cent stated that they now keep the temperature lower indoors. 50 per cent replied that they have the same indoor temperature, and 9 per cent that they now keep a higher temperature. This is illustrated in Figure 5 below. Those who replied that they now keep a lower temperature were asked about the reason for this. Why had they lowered the temperature? The majority replied that it was in order to save money, but it also emerged that for some the reduction in temperature had not been voluntary. In some cases they were unable to get the temperature up to the desired level, and in some cases this is controlled by the property owner. Others said that they felt more comfortable in lower temperatures, and others again that they could not afford higher temperatures. Siggelsten (2010) obtained similar results when he examined tenants attitudes to individual metering. One in three tenants actively lowered their indoor temperature in order to save energy, which in Siggelsten s view could indicate that the compensation for doing so is too low Siggelsten (2010), Individual heat metering and charging of multi-dwelling residential housing.

39 Individual metering and charging in existing buildings 37 Figure 5. Question/table 14 in SKOP s survey. IF ACTIVELY TRYING TO USE LESS ENERGY FOR HEATING: With individual energy measurement, will you have colder or warmer in the apartment than it would be otherwise? The purpose of individual metering is to give residents information about their actual energy use, which will enable them to change their behaviour. Under the directive, such information is to be provided two to four times a year. 26 The bill itself, in specifying the amount that the household has to pay, also serves as a source of information in this context. To the question about whether the household read the information about actual energy use in the bill, or just paid it. 52 per cent replied that they read the information, and 42 per cent that they paid it without reading. In order for individual metering and charging to work, the users the residents have to understand and accept the technology. Those households in which the technology was installed while the current residents were living there were asked if they had taken part in the decision to install the metering equipment. 75 per cent replied that they had not. All the households were asked if they had received any information about how they could reduce their energy use for heating. Just under half of those interviewed, 45 per cent, replied that they had received such information, while 52 per cent replied that they had not. These replies are illustrated in Figures 6 and 7 below. This result suggests that, in many cases, the decision to install the technology has been taken without first establishing the support of the residents, which probably reduces the likelihood that the technology and its possibilities will be accepted. Siggelsten (2010) ob- 26 The Energy Efficiency Directive, 2012/27/EU, annex VII.

40 38 Individual metering and charging in existing buildings tained a similar result. One conclusion in his thesis is that tenants have a negative attitude towards individual metering and charging, and that this can be explained in part by their lack of knowledge and understanding of the technology. In order for individual metering to have an effect, Siggelsten argues, residents must be informed about how the technology works and why it has been installed. 27 Figure 6. Question/table 3 in SKOP s survey. IF INSTALLED LATER: Could you and the other residents influence the decision on how energy consumption for heating should be measured in the house? 27 Siggelsten (2010), Individual heat metering and charging of multi-dwelling residential housing, p 213.

41 Individual metering and charging in existing buildings 39 Figure 7. Question/table 4 SKOP s survey. Have you received any information about what you can do to reduce the energy used by the household for heating? Airing an apartment less can be another way to reduce energy use, besides lowering the temperature. Asked whether their apartment is aired less because heating costs are charged individually, the majority (71 per cent) of interviewees replied no. Figure 8. Question/table 17 in SKOP s survey. Is there less airing because of the individual energy measurement?

42 40 Individual metering and charging in existing buildings Heating of existing multi-dwelling buildings in Sweden This section describes the Swedish stock of district-heated multi-dwelling buildings in terms of heating and energy performance. The problems related to heat transfer, in the context of individual metering and charging in Swedish buildings, is described in particular detail. In brief, the main points covered in this section are: Statistics from the register of energy performance reports show that older buildings in general perform more poorly than newer ones. In each age category there are buildings with a low use of energy and building with a high use of energy for heating. All three climate zones have a mix of buildings with different energy performance figures for heating. It is not possible, with current technology, to divide heating costs using heat cost allocators in a way that lets the apartment owner/tenant pay for the actual room temperature of their apartment. This is due to heat transfer between apartments, i e that heat moves more readily between apartments than through the building envelope. Construction of the heating system Heating technology for apartments in Swedish multi-dwelling buildings has long been dominated by shared heating systems that use water as a medium. This remains the basis of new heating systems in multi-dwelling buildings. 95 per cent of all multi-dwelling buildings and 98 per cent of all apartments are heated via piping systems. 99 per cent of these piping systems have radiators as heaters. 28 Metering heating using heat cost allocators is thus possible in virtually every multi-dwelling building in Sweden. Energy performance of heating in Swedish multidwelling buildings Betsi s data tells us that there are about multi-dwelling buildings in Sweden. About of these have been energy audited, and of 28 This was shown in a point estimate from s database, Betsi (a Swedish acronym for buildings energy use, technological status and indoor environment ). Betsi is a statistical sample survey.

43 Individual metering and charging in existing buildings 41 these about are heated with district heating alone. 29 With the aim of obtaining a better picture of the energy performance of Swedish multidwelling buildings on the basis of geography and age, these buildings have been divided according to their climate zone and age category as defined in Betsi (one category for buildings constructed up to the end of 2005; another for buildings constructed from the beginning of 2006). Climate zones as defined in BBR Figure 9 shows Sweden s division into climate zones as defined in s building regulations (BBR 21), and Figure 10 shows energy performance for heating only (kwh/m2 Atemp per year) in Climate zone III. 30 The corresponding figures for Climate zones I and II are in Appendix 2. Figure 9. Climate zones in BBR All buildings in which district heating is combined with e g fuel wood, electricity, gas or oil have been excluded from the Additionally, all buildings where the energy auditor has specified that there are 0, 1 or 2 residential apartments have been excluded. 30 Energy performance for heating is a building s energy performance according to BBR, not including energy for domestic hot water, cooling and property energy.

44 42 Individual metering and charging in existing buildings Figure 10. Climate zone III, energy performance for heating (kwh/m2 and year) multi-dwelling buildings with district heating as the only source of heating. Mean energy performance for heating in Climate zone III is about 110 kwh/m2 and year, but the spread is quite large. It can be noted that all climate zones have a mix of buildings with different energy performance figures for heating. Age categories of buildings With respect to the division into different age categories, all age categories except the 2006 and later category are the same ones as those used in Betsi. Table 6 displays mean energy performance and spread for heating of multi-dwelling buildings, divided by building age. Table 6. Energy performance for heating (kwh/m2 and year) divided by age categories for buildings, as applied in Betsi until 2005 inclusive, thereafter one age category from Energy performance for heating (kwh/m2 and year) Age category, year of construction 5 % mean 95 %

45 Individual metering and charging in existing buildings 43 Table 6 shows that the energy performance of older buildings is generally worse than that of newer ones. What is notable in the table is how the new requirements in building regulations, from 1 July 2006, have brought a sharp reduction in energy use for heating (i e improved energy performance). Figure 11 illustrates the energy performance for heating of multi-dwelling buildings in the age category. Corresponding figures for the other age categories are in Appendix 3. Figure 11. Energy performance for heating, kwh/m2 and year multidwelling buildings with district heating as their only source of heating. Age category Mean energy performance for heating of buildings in this age category is about 115 kwh/m2 and year. The profile of the graph is the same for all age categories in each one there are buildings with low energy use. One reason for this is that many buildings have been renovated over the years. A typical renovation measure on buildings, irrespective of their age, is to replace existing windows with ones that have a low U-value, or heat transmission coefficient. Heat transfer makes it harder to measure actual energy use for heating Buildings in Sweden are essentially built like thermos flasks. Let us now imagine that the thermos flask can be divided into two parts, with coffee

46 44 Individual metering and charging in existing buildings in one, at a higher temperature, and milk in the other, at a lower temperature and that these two parts are separated only by a waterproof metal partition. The milk will be warmed by the coffee, and the coffee will be cooled by the milk, until both liquids have the same temperature. Very little of the warmth will escape the thermos flask, since its exterior walls are built to maintain the warmth inside. A building is constructed in the same way. Our exterior walls are designed to keep the warmth inside the building. Walls, floors and ceilings between the apartments are designed to prevent fire spreading between apartments and so that we won t disturb our neighbours. Wall, floors and ceilings between the apartments are not designed, however, to minimise heat transfer between apartments. Heat transfer between apartments is due partly to temperature differences between the apartments and how much space there is between them, and partly on temperature differences between apartments and outside. Around half of all multi-dwelling buildings have exterior walls with a U- value 31 of 0.25 W/(m2 K) or less. This value can be compared with an intermediate floor or ceiling between two apartments, which has a U-value of about 2.5 W/(m2 K). This means that, per square metre, heat effectively passes 10 times more easily through the floor/ceiling than through the exterior wall. Concrete walls between apartments have a U-value of about W/(m2 K). Heat transfer between apartments makes it impossible for two adjacent apartments to have very different temperatures. Heat insulation in apartment-partitioning structures is very rare in Swedish buildings, which means that apartments, to varying degrees, get their heating from neighbouring apartments or transfer their heat to them. 32 This problem has been well described in a number of studies, from which an excerpt is presented in the following section. Studies of heat transfer A compilation of some earlier studies is included in Svensson , a report commissioned by BeBo, the Swedish Energy Agency s client group for housing. The results show that heat transfer between apartments 31 U-value: Ui = heat transmission coefficient for building part and Um = average heat transmission coefficient are defined in s building regulations, BBR, BFS 2011:6. 32 The better the building envelope, the more heat is transferred between apartments. 33 Svensson (2012), Problem och möjligheter med individuell mätning och debitering av värme i flerbostadshus.

47 Individual metering and charging in existing buildings 45 has a considerable significance for how much energy the radiators in each apartment emit. Jagemark and Bergsten (2003) carried out extensive simulations in order to investigate the effects of a series of factors on the energy use of a simulated apartment. 34 The factors were room temperature, outside climate, airing patterns, construction year ( ), the apartment s location in the building and household electricity (internal heating). The results show that room temperature, outside climate and airing patterns have the greatest influence on radiator heat, which seem self-evident. The construction year of the building and the apartment s location in it were less significant for how much heat energy that the apartment transferred to or received from the neighbouring apartments. The study further shows that the heat transfer between apartments can reach about the same magnitude as radiator heat. The simulated cases are very varied in terms of heating needs. The apartments with the greatest heating needs are those which are aired a lot. There is a very strong link between the apartment s room temperature and the heat transfer to or from neighbouring apartments. It is difficult to achieve 18 C when the neighbouring apartments have a temperature of C. Jagemark and Bergsten further note, after carrying out energy simulations on a Million Homes programme in Gothenburg, that an apartment in the middle of the building can emit a quarter (12 kwh) of its diurnal heat energy to the neighbouring apartments during the course of a February day and night. The middle apartment was assumed to have a temperature of 22 C and the neighbouring apartments a temperature of 20 C. A theoretical calculation involving 94 apartments in Helsingborg (Nilsson and Wargman 1982) found that a middle apartment without heating could not reach a temperature below 17 C if the neighbouring apartments had a temperature of 20 C and the outside temperature was 0 C. In his doctoral thesis, Simon Siggelsten analyses a building with its own district heating meter, and whose 16 apartments have heat cost allocators on the radiators and meters for hot and cold water. The building s structural details and U-values for the envelope as well as interior partitions are known, which means that the extent of heat transfer can be measured Jagemark & Bergsten (2003), Individuell värmemätning i flerbostadshus. 35 Siggelsten (2013), Reallocation of heating costs due to heat transfer between adjacent apartments.

48 46 Individual metering and charging in existing buildings Siggelsten had access to all the apartments bills for The bills specify how many radiator units (Ru) each apartment has used. Apartment temperatures were computed, and the thesis gives details of how this was done. Figure 12 illustrates the locations of the 16 apartments and their use of radiator units (Ru). Figure 12. Location of the 16 apartments and their use of radiator units (Ru). Source: Siggelsten / Energy and Buildings 75 (2014), p 262. Taking all known values into account, Siggelsten shows that seven of the apartments are not paying enough, since they receive extra heat from surrounding apartments, while nine apartment are paying too much. If each apartment s radiators would have been the only source of heating, the invoiced radiator units show that this would have led to one apartment having a temperature of only 6.2 C instead of 19.3 C. In terms of radiator units, this means that the invoiced figure of 271 (Ru) is compared with the calculated Ru value for 19.3 C, which is 4372 (Ru). In energy terms, it means that the radiator units that the apartment is paying for are 6 per cent of what they should be. For the nine apartments that are paying too much for heating, it means that they are paying for 9 36 per cent more radiator units than they would have paid for if they had been charged according to their actual (computed) indoor temperature. Instead, the other seven apartments have had their bills partly paid by the heat which has been transferred from the apartments paying too much. The seven apartments have paid for per cent fewer radiator units than they should have. This is illustrated in Table 7.

49 Individual metering and charging in existing buildings 47 Table 7. The effect of heat transfer on an apartment s use for heating. No Measured Ru T U ( C) T M ( C) Ru for T U Plus Minus % % % % % % % % % % % % % % % % Measured Ru: The number of radiator units (Ru) from all the radiators in the apartment included on the bills. T U, Temperatur without heat transfer : The room temperature produced by the measured Ru if no heat transfer occurred between the apartments. T U, Temperatur with heat transfer: The room temperature the apartment has due to heat transfer between the apartments. Ru need for room temperature: The number of Ru the apartment would need, without heat transfer, to heat it to the temperature it has. Plus: Paid too much for energy used in relation to need Minus: Paid too little for energy used in relation to need The reports show that, as heat transfer between apartments is so significant, it is currently not possible to divide heating costs using heat cost allocators in a way that makes apartment owners pay for the actual heat their apartment receives. In countries such as Denmark and Germany, where heat cost allocators have been in use for a long time, the method for dealing with this problem is for each building administration to agree that a part of the building s total heating costs be paid as a fixed fee based on the living area of each apartment. In Germany this fixed fee may not cover more than 30 per cent of a building s heating costs. For the build-

50 48 Individual metering and charging in existing buildings ing illustrated in Figure 12, this would not amount to any difference in the relationship between the apartments and their heating use. The only effect would be that the heating costs divided on the basis of heat cost allocators were somewhat reduced.

51 Individual metering and charging in existing buildings 49 The results of part 1 are used in part 2 submitted part 1 of its report on individual metering and charging in buildings in the autumn of The results showed that individual metering and charging of heating using heat meters was not costeffective in new construction or building conversions. For this reason did not propose any requirement for such metering. Neither did it propose any requirement for individual metering and charging of domestic hot water, as the assessment was that this would force many property owners to make unprofitable investments. Individual metering of heating and cooling in commercial spaces were also examined, and the conclusion was that this was technically difficult and not cost-effective. These results can be applied to existing buildings, meaning that: Individual metering and charging of heating using heat meters is not cost-effective in existing buildings. The likelihood that individual metering and charging of domestic hot water will be cost-effective in existing buildings is low, and would force many property owners to make unprofitable investments. Individual metering and charging of heating and cooling in existing commercial spaces is technically difficult and not cost-effective. s recommendation is therefore that individual metering and charging of heating using heat meters, and of cooling or domestic hot water, not be required in any existing building. It follows from this that is not proposing any regulation provisions. The reasoning behind these conclusions is detailed below. For the purposes of the present report, this means that only individual metering and charging of heating using heat cost allocators and temperature metering remain to be examined. Individual metering of heating using heat meters in multi-dwelling buildings Part 1 of the report notes that Swedish multi-dwelling buildings do not use comfort cooling, and this area was consequently not examined. With respect to heating, the report was limited to heat meters as specified in Article 9 of the directive. The calculations were made on the assumption

52 50 Individual metering and charging in existing buildings that one heat meter were required per apartment. The results showed that individual metering of heating using heat meters is not cost-effective in new construction or conversion projects. It is s assessment that this result not cost-effective also applies for individual metering of heating using heat meters in existing buildings. What would seem to suggest that the calculation results indicate profitability for existing multi-dwelling buildings is that a temperature reduction of one or two degrees in an older building, which as a rule has lower energy performance figures, would provide greater energy savings. s assessment is that these greater benefits are not only uncertain, but also relatively insignificant compared to the costs of installing heat meters in an existing building. About 80 per cent of Swedish multi-dwelling buildings have heating pipes placed in the exterior wall, which requires the installation of more heat meters per apartment for individual metering and charging. This sharply increases installation costs. The installation furthermore requires interventions in the heating pipes, which means additional costs as well as increased risks compared with an installation in new construction or in connection with a conversion. 36 All of the stakeholders and experts that has been in contact with during the work on the report take the view that individual metering using heat meters is only appropriate in those cases where the apartment s heating is supplied via a single mains. This view is supported by the literature. Berndtsson, for example, argues that installing heat meters is only appropriate in new construction and in buildings with one heating mains per apartment. 37 Individual metering of domestic hot water in multidwelling buildings The calculations (Monte Carlo simulations) carried out in part 1 of the report showed that the probability of an investment in individual metering and charging of domestic hot water becoming profitable was too low to prompt the recommendation of a general requirement for such investments. s assessment is that the same result and conclusion apply for existing buildings. The assumption in part 1 of the report was that initial domestic hot water consumption in new and converted buildings was the same, Read more about this in (2014), Individuell mätning och debitering vid nyoch ombyggnad. 37 Berndtsson (1999), Utredning angående erfarenheter av individuell mätning och debitering av värme och varmvatten i svenska flerbostadshus, pp 7-8.

53 Individual metering and charging in existing buildings 51 m3 per year for the average building. A sensitivity analysis was also carried out, in which initial domestic hot water use was assumed to be higher, m3 per year for the average building. This corresponds to a domestic hot water consumption of m3 per person and year, which matches the average consumption in existing multi-dwelling buildings. 38 The calculations that were made on the basis if this assumption had the following results: Table 8. The outcome of Monte Carlo simulations for conversion, part 1 of the report. Share of simulations that are profitable. Total hot water consumption before IMC, m3 per year. Reduction after IMC, 0 30 per cent prices, unchanged in real terms. Stockholm Malmö Sundsvall Kiruna Installation cost (SEK/apt) Fortum Trygg EON Värme EON Värme Kraftringen Sundsvall Energi Öviks Energi Tekniska verken 1 meter (SFFE) 70.7 % 72.9 % 65.6 % 71.4 % 76.9 % 81.4 % 78.6 % (SP) 64.4 % 66.7 % 58.7 % 65.3 % 71.6 % 77.5 % 73.8 % (SABO) 45.2 % 48.2 % 38.3 % 46.4 % 54.7 % 63.2 % 58.0 % (SABO) 23.6 % 26.9 % 17.2 % 24.5 % 32.8 % 43.1 % 36.3 % (Wikells) 10.1 % 12.5 % 6.2 % 10.8 % 16.4 % 25.2 % 19.0 % 2 meters (SP) 54.3 % 57.0 % 47.2 % 54.9 % 62.6 % 70.3 % 65.5 % (Wikells) 1.5 % 2.0 % 0.3 % 1.2 % 2.8 % 6.1 % 3.7 % (Wikells) 0.1 % 0.2 % 0.0 % 0.1 % 0.2 % 1.1 % 0.4 % The results in the table thus show the probability of an investment in individual metering and charging of domestic hot water becoming profitable in an existing multi-dwelling building. Since more than one water meter is required in existing buildings in most cases, the installation cost is SEK or more. Just as in part 1 of the report, s conclusion from the calculation results is that the probability of profitability is too low for a requirement to be imposed. 38 Swedish Energy Agency (2012), Vattenanvändningen i hushåll, report 2012:03. See part 1 of the report for a detailed description and results of cost-effectiveness calculations for domestic hot water.

54 52 Individual metering and charging in existing buildings Individual metering of heating and cooling in commercial spaces It was noted in part 1 of the report that individual metering of cooling and heating (using heat meters) is both technically complicated and not costeffective in offices. 39 s general assessment is that it is even more technically complicated to install individual meters in existing offices, and that such installations would not be cost-effective either, for heat meters or cold meters. For a comprehensive description of the possibilities of metering heating and cooling in offices, the reader may refer to Appendix 8 in part 1 of the report. With respect to individual metering and charging using heat cost allocators in offices, this is likely to be technically difficult. Radiator metering requires the installation of the meter on the heat emitting surface itself, i e on the radiator. Considering the fact that offices today have integrated climate systems, it is rare that heating can be metered with heat meters alone. s assessment is therefore that individual metering of heating using heat meters is not cost-effective in commercial spaces. 39 In part 1 of the report, commercial spaces applies only to offices.

55 Individual metering and charging in existing buildings 53 Individual metering and charging using heat cost allocators This section answers the report s first question: when is it profitable, in a business economics sense, to divide the cost of heating using heat cost allocators in existing multi-dwelling buildings? It explains, in brief, how the technology of measuring heat with a radiator meter works, and how data collection and charging is usually done. It then describes the benefits and costs of individual metering of heating using heat cost allocators, and s calculation model. In conclusion, it presents the results of the cost-effectiveness calculations, s analysis of and conclusions from them, and proposals. This section shows that: The range of the cost data collected is very wide. Installation costs vary between SEK 1500 and 2750 per apartment. Operating costs vary between SEK 190 and 500 per apartment and year. It is not clear whether, and if so by how much, temperatures are reduced in buildings that introduce individual metering and charging. A temperature reduction is necessary in order to generate benefits. s overall assessment of the calculation results is that individual metering and charging using heat cost allocators are not a costeffective, or profitable, investment. This is because the expected present value is negative or low. The investment also appears risky. Since a requirement for individual metering of heating using heat cost allocators would imply unprofitable investments for the majority of property owners, proposes that such requirements for individual metering and charging of heating using heat cost allocators not be imposed on existing buildings. It follows from this that is not making any proposals for regulation provisions. Dividing heating costs using heat cost allocators A radiator meter does not measure the amount of energy delivered to the radiator, but is used only to divide the building s total costs for heating between the residents. The technique assumes that the building has an approved heat meter that can determine the building s total energy use for heating. The property owner then charges each apartment for its share of

56 54 Individual metering and charging in existing buildings the total heating cost, based measurement data from the heat cost allocators. 40 The technique requires that each radiator in the building has a radiator meter mounted on it. These are mounted by means of two copper rods being spot-welded to the radiator, and a mounting plate being attached to the rods. The meter can then be mounted on the plate using a quickrelease mechanism. The meter must be mounted at the right height on the radiator, and be adapted on installation to the specific radiator s power. Individual metering of heating using heat cost allocators is often combined with collective metering, in which a part of the building s heating cost is divided by m² of living space. This is done in order to consider heating costs that residents cannot influence, e g heating of common areas and heat transfer between apartments. A typical procedure is for per cent of heating costs to be divided according to the consumption share registered by the heat cost allocators, and for the remaining per cent to be divided according to living space. Experiences in Denmark are that energy use varies greatly between apartments, with some using five times as much as the average for a particular building. This has led some to maintain that for an acceptable result at least 50 per cent of the heating costs should be divided on the basis of living space. 41 Siggelsten (2014) shows in his thesis that the accuracy of individual heating metering is very questionable. Energy use for heating is influenced by, among other things, heat generated by people and by where in the building the apartment is located. The conclusion he draws is that it is difficult to measure the actual heating used by an individual apartment, which hinders the correct and fair distribution of heating costs between individual residents. Dividing 50 per cent of heating costs on the basis of living space (apartment area) is a way to make individual metering less inaccurate, but the question is how this affects the residents incentive to save energy. 42 Berndtsson (1999) argues that if only a part of heating costs are going to be divided on the basis of individual metering, it is questionable whether it is worth investing in metering equipment Source: Leverantörsföreningen för individuell mätning och debitering (LIMD). Each apartment s share is calculated using the formula BF/SBF*FF, where BF is the number of consumption units for the apartment, SBF is total number of consumption units for the building and FF is the building s total energy use for heating. 41 This according to Otto Paulsen, DTI, in a meeting on 30 Mar Siggelsten (2014), Analysis of the accuracy of individual heat metering and charging. 43 Berndtsson (1999), Utredning angående erfarenheter av individuell mätning och debitering av värme och varmvatten i svenska flerbostadshus.

57 Individual metering and charging in existing buildings 55 The benefits energy savings through lowered temperatures Individual metering of energy for heating in apartments is intended to give residents an incentive to reduce their energy use, and by extension their heating costs. The possibility of saving energy lies above all in lowered temperatures, but less airing also saves energy. However, the airing habits of residents are difficult to assess and include in an energy calculation, and are therefore not considered in this report. 44 SKOP s survey shows that airing habits remained unchanged in over 70 per cent of households after the introduction of individual metering. In part 1 of the report Projektengagemang AB carried out energy calculations to determine the potential energy savings when temperatures are lowered in a multi-dwelling building. A detailed description of the standard buildings, the method and results of the energy calculations can be found in part 1 of s report. 45 Below is a summary. Method The energy calculations were made on a low-rise building with six apartments per floor, three entrances with stairwells, four floors and an area of m2 A temp. 46 The standard building was placed in four locations Malmö, Stockholm, Sundsvall and Kiruna representing three climate zones. In the calculations, the temperatures for the standard building were assumed to be reduced, as a result of individual metering, from 23 to 22 C and from 22 to 21 C. The energy savings from the temperature reduction were calculated for seven buildings with different specific energy usage (energy performance). Four of these represent the existing stock, with energy performance figures either in line with BBR s minimum requirement for energy economy 47 or 25, 50 or 75 per cent worse than BBR s requirement. These standard buildings will be referred the below as BBR, BBR +25, BBR +50 and BBR +75. The specific energy usage of the standard buildings are in the range of kwh/m2 and year (A temp ), and their U-values range from 0.44 to 0.87 W/m2 K. Figure 3 illustrates specific energy usage and energy needs 44 Over-temperatures and poor air circulation affect airing, and problems with these have to be addressed first. Read more in Appendix 7, part 1 of the report. 45 (2014), Individuell mätning och debitering vid ny- och ombyggnad. 46 The number of floors, stairwells and overall area of the building were modelled on mean values of statistics in s register of energy performance reports. 47 According to BBR 21, i e 90 kwh/m2/year in climate zone I, 110 kwh/m2/year in climate zone II and 130 kwh/m2/year in climate zone III.

58 56 Individual metering and charging in existing buildings for heating for each temperature, for the standard building with the worst performance figures (BBR +75). Figure 13. Specific energy usage (energy performance) and energy needs for heating (kwh/m2 and year) for the standard building BBR +75, by temperature and location. Results of energy calculations Table 9 shows the results of the energy calculations divided by standard building and location. Calculations are for the four standard buildings BBR, BBR +25, BBR +50 and BBR +75. Table 9. Energy savings, kwh/m2 and year (Atemp), as a result of the standard building s temperature being reduced by 1 and 2 C, respectively. Stockholm Malmö Sundsvall Kiruna 1 C 2 C 1 C 2 C 1 C 2 C 1 C 2 C BBR BBR BBR BBR The results of the energy calculations presented in Table 9 indicate energy savings of kwh/m2 and year. Energy savings vary depending on the standard building s energy performance, geographical location and temperature reduction. For the BBR +75 standard building, located in Malmö, for example, a 1 C temperature reduction means a reduction in

59 Individual metering and charging in existing buildings 57 energy use of 11.1 kwh/m2 and year. If the temperature is reduced by 2 C instead, energy use for heating is reduced by 21,5 kwh/m2 and year. The results also show, unsurprisingly, that the greatest energy savings are in buildings with worse energy performance figures and which are located in the colder parts of the country. Installation and operating costs The cost items fed into the calculation model are for installation and operation (per year). The installation cost includes the material and work costs for installing the necessary equipment for measurement and data collection. The operating costs are for administering the data collection and billing system, i e collecting and converting measurement data in a file the property owner will use to divide the building s heating costs between the apartments. Cost information on completed installations and operating contracts for heat cost allocators are not easy to obtain. The technology is unusual in public housing companies, and the few tenant-owner associations that use it have been hard to reach. Information on installation costs is not always available for the administrators of tenant-owner associations, either. However, metering companies were able to provide average installation and operating costs that they charge their customers. For a fuller picture, a consultant also compiled installation and operating costs on behalf of. These costs are described in the following section. Installation costs The installation costs that underlie the cost-effectiveness calculation are presented in Table 10 below. All costs include VAT.

60 58 Individual metering and charging in existing buildings Table 10. Installation costs of five heat cost allocators, per apartment and including VAT. Source Installation cost incl. VAT (SEK/apt) Comment Consultant s report, Appendix 6 Consultant s report, Appendix 5 SFFE 48 LIMD 49 Brunata 50 Minol 51 Håbohus 52 Herrljungabostäder 53 Botkyrkabyggen Five meters with data ports for remote reading, including a share of the cost for a central unit for the building, if remote reading is selected. Without remote reading, meters can be read with a handheld device Includes cost of five heat cost allocators, installation and programming and 10 years battery time, one collection unit (1 per 3-5 floors) and its installation Average cost for the association s members of five heat cost allocators, including installation (excl. collection unit) Average cost for a apartment with five heat cost allocators, including installation. For heat cost allocators using the Meter-Bus standard (M-Bus) Average cost of a standard package of five heat cost allocators, including one collection unit per entrance, DKK Assumes that all radiators in the building can be adapted without supply interruptions. Equivalent to SEK 2620 (Aug 2015) Normal installation cost is SEK 100 per radiator. The initial starting cost is normally SEK per radiator. For five radiators the total cost comes to SEK Håbohus paid about SEK 2280 per apartment when the association had heat cost allocators installed Herrljungabostäder paid SEK 1500 per apartment, on average, for installation of heat cost allocators. Add to that one collection unit per property (30-40 apartments), for which the association pays SEK 750 per year Total cost of installation and initial starting. A display and repeater in each apartment. As can be seen, installation costs vary. With exception of the more expensive Botkyrkabyggen, installation costs range from SEK 1500 to 2750 per apartment. This is for installation of five heat cost allocators, which is reportedly the average requirement per apartment. Besides the number of 48 SFFE stands for Svensk förening för förbrukningsmätning av energi (Swedish association for consumption metering of energy). Information from meeting on 23 Jan 2014 and SFFE s report Installationsexempel Individuell mätning och debitering i Sverige. 49 LIMD stands for Leverantörsföreningen för individuell mätning och debitering (Association of suppliers of individual metering and charging). Information from Tord Kjellin, 4 Sep Meeting with Brunata, Copenhagen, 30 Mar Exchange with Stefan Skog, Minol, 2 Jun Telephone contact with Mattias Dahlberg, Håbohus, 3 Sep exchange with Christer Johansson, Herrljungabostäder, 4 Jun 2015.

61 Individual metering and charging in existing buildings 59 meters per apartment, installation costs depend on what service contract is selected. If remote reading is selected, this requires communication equipment in the building to allow for automatic data transmission to a data centre. This implies higher installation costs but lower operating costs. If the housing company wants readings done a few times per year, mobile reading is usually chosen, where a meter technician carries out readings using a handheld device. This increases the operating costs, since each reading involves a cost, but does not require communication equipment to be installed in the building. 54 Consultant Bo Frank reports installation costs in the range of SEK for an apartment of 70 m2 with 3 rooms and kitchen in a typical building with 50 apartments. This includes material costs for five heat cost allocators (SEK ), a share of the cost of a central unit for the building (SEK ), as well as installation and initial starting (SEK ). 55 The other cost information in the table, which include standard costs from metering companies, consultants calculations and actual cost data from tenant-owner associations, is all within this range. Botkyrkabyggen quotes a higher installation cost, SEK 4600 per apartment. Botkyrkabyggen installed heat cost allocators in eight buildings as part of their involvement in a project financed by the EU. Each apartment received a device with which to read their energy use for heating, domestic hot water and electricity, and to lower the temperature. Each apartment also needed a signal amplifier (a repeater) in order for data collection to work. This explains the higher cost. s assessment is that an installation cost in the range of SEK per apartment is appropriate to use as input data in the costeffectiveness calculations for radiator metering. Operating costs The metering companies 56 specialised in individual metering and charging typically provide a standard service package that includes reading the meters and delivering a consumption profile to the property owner. The property owner then uses the file to divide the heating costs between the 54 Consultant s report Technical description of radiator and temperature metering, Appendix Consultant s report Technical description of radiator and temperature metering, Appendix Metering companies here refers primarily to Techem, Minol, ISTA and Brunata, who are major actors in the German and Danish markets.

62 60 Individual metering and charging in existing buildings residents. 57 The standard package usually also includes information to the residents about their energy consumption. This information is provided in various ways, on one or several occasions per year. The technique for collecting the meter readings is essentially the same for all metering companies. They either install equipment to allow the metering data to be read and sent automatically to the metering company s data centre, which is known as remote reading and can be done daily, or else they use mobile reading, which involves a technician going to the property and reading the meters with a handheld computer, standing outside the building or in the entrance. This type of reading is done once or a few times a year. In Germany it is common for meters to be read in each apartment. Our information is that meters requiring this type of reading are not installed in Swedish apartments. The operating costs that underlie the cost-effectiveness calculations are presented in Table 11 below. All costs include VAT. Table 11. Annual operating costs for radiator metering, per apartment and including VAT. Source Cost including VAT (SEK/apt/yr) Comment Consultant s report, Appendix 6 Brf Atle 58 Brf Glädjen 59 Herrljungabostäder 60 Håbohus Price of one meter reading, with distribution calculations presented in a file. Applies settlement when there are few settlements per year. 250 Service fee for tenant-owner association Atle. The price includes an annual settlement file for the rent charging system and an annual notification to each household about the division of costs. 240 Service fee for tenant-owner association Glädjen. SEK 15/apt/month for meter reading and delivery of the settlement file, and SEK 5/apt/month for processing the file. 500 Service fee for Herrljungabostäder. The price includes an annual settlement file for the property administration system and the cost of managing settlements for residents who move. 380 Service fee for Håbohus. The approximate price is for electricity, domestic hot water and heating, and includes an annual settlement file and annual information. The housing company needs to put in an additional week of work in order to manage settlement manually. 57 Residents normally pay a standard charge over the year. The consumption file is then used to settle the difference for each resident, in which they pay or receive money depending on whether the standard charge was too low or too high. 58 exchange with Stefan Skoog, Minol, 2 Jun exchange with Joacim Lundberg, brf Glädjen, 16 Jun exchange with Christer Johansson, Herrljungabostäder, 4 Jun Telephone contact with Mattias Dahlberg, Håbohus, 3 Sep 2015.

63 Individual metering and charging in existing buildings 61 Source Cost including VAT (SEK/apt/yr) Comment Danish Technological Institute, Otto Paulsen Techem Paulsen states that operating costs normally fall in the range of DKK per apartment and year. This corresponds to SEK , or SEK 435 on average Average price for Techem s Swedish customers. The price depends on the type of meter and how the customer wants the results delivered. The price includes monthly readings (remote reading) or quarterly readings or settlement (mobile reading). Brunata 250 Brunata quotes an average service fee for their customers of DKK 200, which corresponds to about SEK 250. The requirement under the directive is that residents be billed for their actual heating costs at least once a year, and that the information should be made available every quarter if this is requested, otherwise twice a year. 63 In order to fulfil the requirement, meters should thus be read at least twice a year. The costs quoted above vary between SEK 190 and 500, which in many cases includes one reading per year. Should more readings be required, operating costs can be assumed to increase, at least for customers who have mobile reading. According to consultant Bo Frank, the cost per meter reading is SEK , where the final product is a computer file with distribution calculations. 64 Techem offers a service in which the customer, at a cost of SEK per apartment, gets up to four readings a year and this cost is about the same, irrespective of whether the reading is remote or mobile. The price they are able to offer a customer depends on factors including whether the building is in a densely built-up area or not. The Atle and Glädjen tenant-owner associations, Håbohus and Herrljungabostäder cite actual operating costs of SEK in order to receive one settlement annually. To sum up, operating costs in the SEK range, per apartment and year and including VAT, are deemed appropriate for use in the costeffectiveness calculations. These costs are conservative as they do not include costs of e g dealing with complaints or providing information. 62 exchange with Joakim Pålsson, SFFE/Techem, 20 Aug The Energy Efficiency Directive 2012/27/EU, Appendix VII. 64 Consultant s report Technical description of radiator and temperature metering, Appendix 6.

64 62 Individual metering and charging in existing buildings The calculation model The calculation model for establishing the cost-effectiveness of dividing a building s heating costs using heat cost allocators is an investment calculation created in Excel with the following components: Calculation period 10 years. Energy use for heating is divided on a monthly basis. Four locations are included: Malmö, Stockholm, Sundsvall and Kiruna. Two district heating rates for Malmö. Stockholm and Sundsvall, and one rate for Kiruna. Real rate of interest, four per cent in the principal alternative. Installation costs and annual operating costs for the standard building. Calculations use 2014 prices. Prices include VAT. The analysis is at the building level. To carry out the calculations, data on the total energy use for heating at 23, 22 and 21 C is input for each standard building in the four locations. The model outputs: NV (benefits), which are present-value calculations of the benefits (the value of the energy savings and the value of the power savings). NV (costs), which are present-value calculations of the costs (installation and operation). NV (benefits) NV (costs) > 0 means that the investment is costeffective. Description of Monte Carlo simulations The traditional way of carrying out economic calculations is to put individual values on input data in the created model, which are called point estimates. These estimates represent the most likely values for each input data item. The output data from the model will then be one value, and one value alone. Using sensitivity analyses it is then possible to analyse effects on output data by varying input data values, one at a time, to see how sensitive the end result is with alternative assumptions. The calcula-

65 Individual metering and charging in existing buildings 63 tion rate of interest can be changed, for example, and its effect on the end result studied. Scenario analyses are another alternative. In these, the values of two or more items of input data are varied at the same time. For example, one scenario can describe an optimistic case, a second the most likely case and a third a pessimistic case. Each scenario represents different combinations of input data values. Each scenario produces an output data value. Among the shortcomings of sensitivity and scenario analyses is the circumstance that the choice of input data values to change, and by how much, can be arbitrary. In scenario analyses there is no setting of probabilities for how likely each individual scenario is. For example, an optimistic scenario means that input data is chosen and best case scenario is obtained. The probability that the chosen input data values occur at the same time is low, however, and the scenario may be questioned on these grounds. Also, if many sensitivity and scenario analyses are carried out this leads to many calculations, making it difficult to get an overall view of the result as a whole. The analysis in the present report uses a method that makes it possible to make systematic scenario calculations. This is known as the Monte Carlo Method. The uncertainty of input data is addressed by specifying probability distributions. These distributions can have different characteristics, depending on the access to data. Using computers we can make thousands of calculations, with each calculation using randomly selected values from pre-defined probability distributions in order to see if the calculation is cost-effective or not. This means that the output data is also a distribution (a range) of values, and the sensitivity analysis is thus built into the model from the outset. The method allows us not only to make a large number of calculations in a systematic manner, but also to present the results synoptically in graph form. The results of all the calculations are summarised in a histogram, which can show the expected present value, the minimum and maximum present values, the standard deviation 65 (a measure of the investment s risk), and how many of the calculations produce a positive present value. This is exemplified in Figure Standard deviation is a measure of the spread of the obtained values, showing the average deviation from the mean value.

66 64 Individual metering and charging in existing buildings Figure 14. Profit/loss in Malmö with the standard building BBR +75, using radiator metering and with 1 C temperature reduction in the building. EON s 2014 district heating rate prices, unchanged in real terms. Four per cent real interest. Calculation period 10 years. Figure 14 shows results from Malmö of standard building BBR +75 using radiator metering and 1 C temperature reduction. On the right of figure is a summary of the information in the analysis calculations were carried out. Minimum is the lowest present value among the calculations; Maximum the highest. Mean is the expected present value, or the mean value and SD is the standard deviation. The latter is a measure of the spread of results, and can be interpreted as the investment s rate of risk. The same information is also represented in the histogram. The expected present value (mean value) is a profit of SEK , the minimum present value is a loss of SEK and the maximum present value a profit of SEK The standard deviation is SEK The figure also shows the results one standard deviation above and below the mean value (+1 SD and -1 SD, respectively). The top row in the histogram shows the probability of a positive present value, which in this case is 94.3 per cent. This percentage indicates what proportion of the calculations produced a present value of SEK 0 or more. The analysis will be presented in graphs similar to the one in Figure 14, as well as in tables grouping the outcomes of the calculations carried out. All in all this will provide a balanced picture of the profitability of indi-

67 Individual metering and charging in existing buildings 65 vidual metering and charging using heat cost allocators, and of how profitability varies depending on the energy performance figures for the building and its geographical location. On this basis we can respond to the commission, i e make a general assessment whether, and if so in which buildings, individual metering and charging should be required. Calculations, results and analysis The analysis of radiator metering will be presented in two steps. In the first step, the introduction of individual metering and charging using heat cost allocators is assumed to lead to a temperature reduction of 1 C in the building. The implication of this assumption is that the benefit side of the calculation is held constant, while the cost side is allowed to vary in accordance with the specified probability distributions. In the second step we allow the benefit side to vary as well. We will look at three different outcomes for the temperature change in the building as a result of the introduction of individual metering. no change 1 C reduction 2 C reduction Thus, in step two, probability distributions will be set for the benefit side as well as the cost side. Step 1. Temperature reduction of 1 C The benefit side A one-degree reduction in temperature in a building, either from 23 C to 22 C or from 22 C to 21 C, will lead to different energy savings depending on the building s initial energy consumption and where in the country it is located. This is shown in Table 12 for two of four locations, Malmö and Kiruna.

68 66 Individual metering and charging in existing buildings Table 12. Energy use for room heating in two different standard buildings in Malmö and Kiruna at 23, 22 and 21 C. Malmö Energy use for heating Kiruna Energy use for heating kwh kwh/m2 % kwh kwh/m2 % BBR 23 C C % % 21 C % % BBR C C % % 21 C % % The BBR standard building in Malmö uses kwh per year (42.8 kwh/m2) for room heating at a temperature of 23 C. If the temperature is reduced by 1 C to 22 C, energy use will decrease by kwh (to 38.0 kwh/m2), or 11.3 per cent. If the temperature is decreased by 1 C from 22 C, consumption will decrease by kwh per year (to 33.6 kwh/m2), or 11.4 per cent. In Kiruna, the BBR standard building uses kwh (86.8 kwh/m2) at 23 C. A reduction to 22 C means that use decreases by kwh (to 81.4 kwh/m2), or 6.2 per cent. A reduction of one degree, from 22 C to 21 C will reduce use by kwh (to 76.4 kwh/m2), or 6.2 per cent. When the standard building in the four studied locations uses more energy at the outset, a temperature reduction of 1 C leads to a greater reduction in use, in absolute terms. In percentage terms, however, the reduction is lower. In Malmö, one of the four locations, energy use is kwh per year (117.2 kwh/m2) in the BBR +75 standard building at 23 C. A reduction in temperature by 1 C leads to a reduction in energy use by kwh per year (to kwh/m2), or 9.4 per cent. If the temperature is reduced by 1 C from 22 C, consumption decreases by kwh per year (to 95.8 kwh/m2), or 9.8 per cent. And finally, the BBR +75 in Kiruna uses kwh per year (213.5 kwh/m2) at 23 C. At 22 C, use is reduced by kwh (to kwh/m2), or 5.5 per cent. A re-

69 Individual metering and charging in existing buildings 67 duction by 1 C from 22 C reduces energy use by kwh (to kwh/m2), or 5.7 per cent. The above results do not only show energy use for heating, and the potential savings from reduced temperatures, vary widely across the country; they also point to the difficulty in specifying percentage savings as an effect of individual metering and charging. A 10 per cent reduction in energy use can be achieved in Malmö with a one-degree temperature reduction. In Kiruna the temperature reduction has to be greater in order to lead to a corresponding percentage reduction in energy use. To put a value on the reduction in energy use resulting from a one-degree temperature reduction in the building, district heating rates for each location are used. These rates, seven different ones in all, are presented in Appendix 7. The cost side As shown in the costs presentation, installation and operating costs of individual metering and charging vary. The lowest installation cost is SEK 1500 and the highest is SEK 2750 per apartment. 66 For out standard building with 24 apartments, the total installation cost thus varies between SEK and SEK We assume a triangular distribution of the total installation cost The cost overview also includes an installation cost of SEK 4600 per apartment, or SEK in our standard building. We have not included this figure in the analysis. 67 There are various types of probability distribution that could be used, e g a normal distribution, a Weibull distribution, a log-normal distribution, a beta distribution or a uniform distribution. The decisive factor in choosing which one to use is the availability of relevant data. A triangular distribution is often used because it is easy to understand and because only three values are required to create the distribution, of which one is the most likely value.

70 68 Individual metering and charging in existing buildings Figure 15. Triangular distribution of the installation cost of heat cost allocators in the standard building (SEK). A triangular distribution has to have three values: one minimum value, one most likely value and one maximum value. Here the minimum value is set at SEK We apply the most likely value SEK and the maximum value of SEK The figure also shows the installation cost one standard deviation above and below the mean value. With these values, the installation cost will be in the range of SEK in 50 per cent of the cases. It follows that the installation cost will be in the range of SEK in 50 per cent of the cases. The data collected on operating costs varies between SEK 190 and 500 per apartment and year. The annual operating cost for the standard building with 24 apartments varies between SEK 4560 and SEK Figure 16 shows how the operating cost is represented in the model.

71 Individual metering and charging in existing buildings 69 Figure 16. Triangular distribution of the annual operating cost when using radiator metering in the standard building (SEK). For the annual operating cost, we have applied a triangular distribution with a minimum value of SEK 4560, a most likely value of SEK 8280 and a maximum value of SEK In 50 per cent of the calculations, the annual operating cost will be in the range of SEK , and in 50 per cent of them it will be in the range of SEK Results of Monte Carlo simulations calculations are made using the computer, and for each calculation values are randomly selected from the triangular distribution of the installation costs and the operating costs. The benefit side is made up of the value of the energy savings of reducing the building s temperature by 1 C. The final result how many of the calculations are profitable and how many are not is summarised in a graph. The outcome for the BBR standard building in Malmö, with EON s district heating rate, is presented below. 68 The figure shows that in 5 per cent of cases, values between SEK 4560 and 5736 are produced, and in 5 per cent of the cases values between SEK and Appendix 2 contains a full analysis of when uniform probability distributions are applied for installation and operating costs.

72 70 Individual metering and charging in existing buildings Figure 17. Profit/loss in Malmö for BBR standard building with radiator metering and a temperature reduction of 1 C in the building. EON s district heating rate prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. The graph shows that none of the calculations yields a positive outcome. The benefits produced by a temperature reduction of 1 C at the building level (the value of energy and power savings over 10 years) are not large enough in any of the cases. The expected present value is a loss of SEK The best value outcome obtained is a loss of SEK calculations for the BBR +75 standard building in Malmö produces outcomes as shown in Figure 18 below. Figure 18. Profit/loss in Malmö for BBR +75 standard building with radiator metering and a temperature reduction of 1 C in the building. EON s district heating rate prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years.

73 Individual metering and charging in existing buildings 71 The interpretation of the histogram above is as follows. A property owner is going to invest in individual metering and charging and opts for radiator metering. The property owner knows with certainty that the temperature reduction in the building will be 1 C. However, installation as well as operating costs are uncertain. Installation costs can vary randomly between SEK and , and annual operating costs can vary between SEK 4560 and Both of these costs can be assumed to have a triangular probability distribution. Under these conditions the expected outcome of the investment is a profit of SEK The worst possible outcome is a loss of SEK and the best a profit of SEK One way of gauging the risk of an investment is to measure the standard deviation. Here it comes to SEK Of the outcomes, 66.5 per cent will be +/- one standard deviation from the mean value. 70 The graph also indicates that the probability of a positive outcome (SEK 0 or more) is 94.3 per cent. Table 13 lists results for the four standard buildings under evaluation, placed in four different locations. Appendix 2 lists corresponding results with the alternative district heating rates used. 70 The expected outcome and standard deviation of individual metering and charging can be compared with the expected outcome and standard deviation of other energy efficiency measures, allowing the measure with the best outcome to be chosen. See the presentation in the section entitled Cost-effectiveness definition and additions.

74 72 Individual metering and charging in existing buildings Table 13. Profit/loss in four locations for different standard buildings with radiator metering. Temperature reduction of 1 C in the building. District heating rates from companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. Malmö, EON Värme Profit/loss Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev P of profit BBR % BBR % BBR % BBR % Stockholm, Fortum Trygg Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev P of profit BBR % BBR % BBR % BBR % Sundsvall, Sundsvall Energi Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev P of profit BBR % BBR % BBR % BBR % Kiruna, Tekniska verken Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev P of profit BBR % BBR % BBR % BBR % In the table Min refers to the lowest present value, Mean the expected present value and Max the highest present value of the calcula-

75 Individual metering and charging in existing buildings 73 tions. Standard dev specifies the standard deviation and is a measure of the risk in the investment. P of profit shows the probability of a positive outcome, i e what proportion of the calculations yield a present value of SEK 0 or more. When existing buildings have an energy consumption which is in line with current BBR requirements or just short of them, the calculations show that it is hard to make an investment in radiator metering, with a 1 C temperature reduction in the building, profitable. The expected present value (the mean value) is negative, and the probability of a positive outcome is low or very low. It is only when the building s energy use is considerably higher than current BBR requirements that the expected present value becomes positive, and the probability of profit is high. The BBR +75 standard building in Kiruna is the one which in analyses produces the best result at a temperature reduction of 1 C. Here the expected present value (the mean value) is a profit of SEK , with a minimum value of SEK 3741 and a maximum value of SEK profit. The standard deviation is SEK per cent of the outcomes are +/- one standard deviation from the mean value. Since the outcome of all the calculations is positive, the probability of profit is 100 per cent. What are the costs for residents? In order to get an idea of what the costs are for individual residents, we assume that the entire outcome (profit or loss) falls to them. 71 The results are presented in Table 14 below, which shows the outcome for the BBR +75 standard building in Malmö and Kiruna. 71 The total outcome is divided into an annual outcome via an annuity with 4 per cent interest and economic lifetime of 10 years for the investment. The annual outcome is then divided into a monthly sum per apartment.

76 74 Individual metering and charging in existing buildings Table 14. Profit/loss in Malmö and Kiruna for standard building BBR +75 with radiator metering. Monthly outcome per apartment prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. Total outcome Monthly outcome per apt Malmö (EON Värme) Min (SEK) Mean (SEK) Max (SEK) Probability of profit 94.30% - Kiruna (Tekniska verken) Min (SEK) Mean (SEK) Max (SEK) Probability of profit % - The table shows that if the outcome is divided into an average monthly sum per apartment, this will vary between a cost increase of just over SEK 8 and a savings of just under SEK 27 in Malmö. The expected value is a monthly saving of SEK 9.5 per apartment. The corresponding sum for Kiruna is an average monthly saving of SEK For residents, in other words, a temperature reduction of one degree leads to fairly moderate average monthly savings. How many buildings would this involve? As shown in Table 13, the expected outcome for the BBR +75 standard building is positive in all four locations studied. The average outcome varies between a profit of SEK in Stockholm and of SEK in Kiruna. The section Heating of existing multi-dwelling buildings in Sweden details the energy performance for heating in three climate zones. To get an idea of how many buildings this would in fact involve, the following calculation was made. We will limit ourselves to the BBR +75 standard building since this is the only one that gives an expected positive outcome in all three climate zones with a temperature reduction of 1 C. We will further apply the specific energy use of heating the building to 23 and 21 C, respectively (according to Figure 13). The standard building in Kiruna will represent climate zone I, the standard building in Sundsvall climate zone II and the

77 Individual metering and charging in existing buildings 75 standard building in Malmö climate zone III. Using these assumptions, we get the following estimated number of buildings: Table 15. A rough estimate of the number of buildings encompassed by the calculations. Energy use at 23 C Energy use at 21 C No of buildings if 23 C No of buildings if 21 C Climate zone Standard building kwh/m2 kwh/m2 I Kiruna BBR II Sundsvall BBR III Malmö BBR Total As the table illustrates, the estimate depends on what limit is set for the specific energy use of the affected buildings. With the limit at 23 C, the estimated number of buildings is just over , whereas if the limit is at 21 C the estimated number reaches just under Summary of the calculations The results of the calculations thus far indicate the following. Assuming, as we have, that the temperature reduction in the building is of 1 C, individual metering and charging is not cost-effective in buildings with good energy performance figures. Most of the country s housing stock consists of that type of building. The analysis further shows that although the probability of profit can be high in buildings whose baseline energy use is considerably above BBR, average monthly savings are small. The question is whether the assumed one-degree temperature reduction will come about in the first place, and if it does, whether it will last. There are several things that suggest this will not happen: According to SKOP s survey, far from all residents change their behaviour in terms of energy use as a result of individual metering. Among other things, the survey shows that only 45 per cent of residents with individual metering have actively tried to use less energy. Of these, 38 per cent keep indoor temperatures lower.

78 76 Individual metering and charging in existing buildings Swedish property owners experience of individual metering and charging is that energy savings are small or non-existent. The Act on energy measurement does not require that all heating costs be divided individually, but the division must be based on measured consumption. In Denmark, per cent of costs are typically divided according to a fixed rate (living space). The economic incentive for residents to reduce their energy use probably shrinks proportionally to the size of the fixed cost. In Step 2 we will go further in our analysis of the BBR +75 standard building by introducing uncertainty to model s benefit side as well. Step 2. Three different outcomes for the temperature change In the first step, the analysis was made on the assumption that the introduction of individual metering would lead to a certain temperature reduction of 1 C in the building. In this second step of the analysis, we are letting the benefit side be variable as well. The benefit side Temperature changes in the building following the installation of individual metering are open to a variety of possibilities. If we set a limit in the model for a temperature reduction of between 0 C and 2 C, it should be possible for essentially any value within this range to arise. For example, a temperature reduction of 0.15 C, of 0.83 C or of 1.37 C. The most obvious approach would therefore be to have the temperature reduction in the model consist of a continuous probability function. Examples of continuous probability functions are given in Figures 15 and 16, for installation costs and operating costs respectively. However, calculations of energy use in the standard building have only been done for a temperature reduction of 0, 1 and 2 C. As a result, the outcome of individual metering on the model s benefit side can only assume three different values: no temperature change and reductions of 1 and 2 C respectively. This is included in the model using a discrete probability distribution (see Figure 20 below). 72 The decision situation facing a property owner can then be illustrated with the following decision tree. 72 A discrete probability distribution means that the random variable can only assume a given number of values. In this case, 0, 1 or 2.

79 Individual metering and charging in existing buildings 77 Figure 19. Decision tree with three different outcomes on the benefit side. p1 Zero degree reduction Invest in IMC? investigate p2 1 degree reduction refrain 1-p1-p2 2 degrees reduction A property owner can chose either to look at the cost-effectiveness of investing in individual metering, or not to. Should he or she choose to do so, the property owner does not know beforehand which of the three alternatives will become a reality. The outcome can either be no temperature reduction with the probability p1, a temperature reduction of 1 C with the probability p2, or a 2 C temperature reduction with the probability (1 p1 p2). The sum of the probabilities must add up to 100 per cent. In part 1 of the commission we argued that a two-degree reduction in temperature at the building level is unlikely as an effect of individual metering and charging. This is because the savings in SEK terms are small, and because residents perceive temperature differently, i e everyone does not act in the same way, from which it follows that everyone does not lower the temperature by 2 C. We further stated that property owners who had tried individual metering had not seen a temperature reduction of 2 C. Despite these statements, we are allowing for the possibility of a reduction by 2 C in this analysis, albeit giving it a low probability. As there is considerable uncertainty about the different probabilities, the economic outcome will be analysed at the following values.

80 78 Individual metering and charging in existing buildings Table 16. Probability assumptions for three different temperature reduction outcomes. Temperature reduction due to IMD 0 C 1 C 2 C Total 20 % 75 % 5 % 100 % 30 % 65 % 5 % 100 % 40 % 55 % 5 % 100 % 50 % 45 % 5 % 100 % Probabilities of 0 and 1 C reduction in temperature are given different values, while the less likely 2 C reduction is given a 5-per cent probability in all the alternatives. In the first alternative in the table, the discrete probability distribution in the model is as follows. Figure 20. Discrete probability distribution on the benefit side of the model. 0 C: 20 per cent, 1 C: 75 per cent, 2 C: 5 per cent. No temperature reduction (0 C) will be chosen in 20 per cent of the calculations, a 1 C temperature reduction will be chosen in 75 per cent of the calculations, and a 2 C reduction will be chosen in 5 per cent of the calculations.

81 Individual metering and charging in existing buildings 79 The cost side Installation and operating costs are assigned the same triangular probability distributions as in step 1 of the analysis. Results of Monte Carlo simulations The total number of calculations is , and for each calculation the computer randomly selects one of the values 0, 1 or 2 C temperature reduction, as well as values from the triangular distributions of installation and operating costs. Since the benefit side can now assume three discrete values while installation and operating costs are represented by continuous probability functions, the outcome will have the following characteristics. Figure 21. Profit/loss in Malmö for the BBR +75 standard building using radiator metering. 0 C: 20 %, 1 C: 75 %, 2 C: 5 %. EON s 2014 district heating rates prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. The histogram represents the situation in the BBR +75 standard building in Malmö. In 20 per cent of the calculations (or 6000) the outcome will be 0 C; in 75 per cent of the calculations (or ) the outcome will be a temperature reduction of 1 C; and in 5 per cent of the calculations (or 1500) the outcome will be 2 C reduction. The left-hand cluster of bars illustrate the spread of the outcome at 0 C. Since the value of the benefits is SEK zero (0), the outcome will consist of costs only. The bars in the middle of the histogram represent the outcome variation when the temperature reduction is 1 C, and the right-hand bars the outcome variation when the reduction is 2 C.

82 80 Individual metering and charging in existing buildings When the model chooses 0 C, each calculation yields a loss of SEK or more, and this reduces the expected present value of the outcome, which is SEK The standard deviation is SEK per cent of the outcomes fall within +/- one standard deviation of the mean value. The probability of a positive outcome is 75.8 per cent, and represents the number of all calculations with an outcome of SEK 0 or more. The effect of also including uncertainty on the benefit side of the model is to worsen the outcome. The expected present value (the mean value) decreases sharply in Malmö from SEK to 1155 and the risk of the investment (the standard deviation) increases sharply in Malmö from SEK to and the number of calculations with a positive outcome drops in Malmö from 94.3 to 75.8 per cent. The table below compiles the results of all the calculations for the BBR +75 standard building The corresponding results with other district heating rates can be found in Appendix 2.

83 Individual metering and charging in existing buildings 81 Malmö, EON Värme Table 17. Profit/loss in four locations for the BBR +75 standard building with radiator metering. 0, 1 or 2 C temperature reduction in the building, with different probabilities. District heating rates of companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. Profit/loss P of 0 C Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Stockholm, Fortum Trygg P of 0 C Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Sundsvall, Sundsvall Energi P of 0 C Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Kiruna, Tekniska verken P of 0 C Standard building Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR %

84 82 Individual metering and charging in existing buildings The table shows the probability (in percentage terms) of 0 C as well as the results for the four locations. In Malmö, for example, with a 20 per cent probability of 0 C (and a 75 per cent probability of 1 C, and a 5 per cent probability of 2 C), the outcome is the same as that represented in Figure 21. The expected present value (mean value) is a profit of SEK 1155, and the probability of a positive outcome (SEK 0 or more) is 75.8 per cent. With a higher probability of 0 C, the outcome worsens. In Malmö, with a 50 per cent probability of 0 C (and consequently a 45 per cent probability of 1 C, and 5 per cent of 2 C), the expected outcome is a loss of SEK The probability of a positive outcome is 47.6 per cent. The figure below is a visual representation of this result. Figure 22. Profit/loss in Malmö for standard building (BBR +75) and radiator metering. 0 C: 50 %, 1 C: 45 %, 2 C: 5 %. EON s 2014 district heating rates prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. 0 C is assigned a probability of 50 per cent, meaning that of calculations carried out receive that value. The left-hand side of the bar therefore contains most values. A temperature reduction of one degree has a probability of 45 per cent, and of calculations fall within the central cluster of bars calculations are assigned a temperature reduction of 2 C. The expected present value of the outcome is a loss of SEK , the standard deviation is SEK , and the probability of a positive outcome 47.6 per cent.

85 Individual metering and charging in existing buildings 83 The tendency in Malmö, for a worse expected outcome and a higher risk when the probability of 0 C is higher, can also be seen in the other locations, as shown in Table 17. In Kiruna, for example, with a 20 per cent probability of 0 C, the expected present value of the outcome is a profit of SEK The standard deviation is SEK And the probability of a positive outcome is 80 per cent. With a 50 per cent probability of 0 C, the expected outcome is a loss of SEK , the standard deviation is SEK , and the probability of a positive outcome 50 per cent. Since we have also modelled a temperature reduction of 2 C and assigned it a low probability of 5 per cent, the maximum values in the table will be determined by this. In Kiruna, for example, the maximum outcome is approximately SEK If this less likely outcome were to occur in reality, and we assumed that the entire sum fell to the residents, that would mean an average monthly saving of SEK 104 per apartment. Sensitivity analysis In the results presented above (the principal alternative), the variable energy price is assumed to be unchanged in real terms, i e that it increases at the rate of inflation. Further, property owners requirement on returns, the real rate of interest, is assumed to be 4 per cent annually. If we let the variable energy price increase in real terms by 2 per cent annually (instead of 0 per cent), everything else being equal, this leads to improved results. In Malmö, at a 20 per cent probability of 0 degrees (and a 75 per cent probability of 1 degree, and 5 per cent of 2 degrees), the expected present value lands on SEK 8 746, the standard deviation on SEK , and the probability of profit 79.4 per cent. The corresponding figures for the principal alternative, with the energy price unchanged in real terms, are SEK 1155, SEK and 75.8 per cent, respectively. Improvements are also obtained for the other standard buildings and the other locations. If property owners requirement on returns is assumed to be 6 per cent instead of 4, as in the principal alternative, we obtain worse results. In Malmö, at a 20 per cent probability of 0 degrees, the expected present value is a loss of SEK 3675, the standard deviation SEK and the probability of profit 70.8 per cent. The corresponding figures for the principal alternative, with a 4 per cent real rate of calculation interest, are SEK 1155, SEK and 75.8 per cent, respectively. Worse results are also obtained for the other standard buildings and the other locations.

86 84 Individual metering and charging in existing buildings Conclusions As with all investments, those in individual metering and charging are associated with uncertainty. There is considerable uncertainty on the benefit as well as the cost side. It is unclear whether the temperature in a building is reduced with individual metering, and if so by how much. A temperature reduction is necessary to generate benefits. Furthermore, the cost data obtained shows a considerable spread. The question being answered in the report is this: when is profitable, in the business economics sense, to divide the cost of heating using heat cost allocators in existing multi-dwelling buildings? For the sake of clarity, the analysis has been divided into two steps. In the first step it is assumed that the introduction of individual metering leads to a certain temperature reduction by one degree in the building. Installation and operating costs vary on the basis of predefined probability distributions. In the second step, the temperature reduction is also allowed to vary in the model, between 0, 1, and 2 C with different probabilities. When the temperature reduction in the model is held constant at 1 C, at the building level, the analysis shows that it is hard to get a return on an investment in radiator metering in existing buildings when their energy use is in line with current BBR requirements or slightly higher. The expected value (the mean value) is negative, i e unprofitable, and the probability of a positive outcome is low or very low. In order for the expected value of the outcome to be positive, i e profitable, the building s energy use at the outset must be considerably above BBR. According to information from the register of energy performance reports, this would encompass a few hundred properties in climate zone I, a few thousand in climate zone II and properties in climate zone III. There are, however, no guarantees that an investment in individual metering and charging actually leads to a temperature reduction in the building. This is shown by s follow-up, by SKOP s survey and by the experiences gained by property owners who made the investment. It is therefore necessary to take this uncertainty, or risk, into account in the analysis. This is done in the second step by introducing different probabilities into the model for a temperature reduction of 0, 1 and 2 C. The effect of including uncertainty to the benefit side in the model as well is to worsen the outcome. The expected present value (the mean value) drops, the investment s risk (the standard deviation) rises sharply, and the number of calculations with a positive outcome decreases. The calculation result shows that the most likely outcome for a property owner who

87 Individual metering and charging in existing buildings 85 invests in individual metering and charging using heat cost allocators is that it will not be a profitable investment. The calculation result moreover shows that such an investment is risky. The variation in the cost data obtained and used in the calculation is considerable. Our assumption when calculating costs has been that the installation and operation will be trouble-free, but there are experiences of problematic installations and perhaps especially of operation problems. We have not included further costs for complaints etc instead the operating cost only includes those associated with the service contract. Neither have we used the most expensive installation cost data from SABO. The follow-up of Berndtsson s 2003 report shows that implementing a system like this is often fraught with difficulties, and that it can take years to get it to work satisfactorily. All of these factors can imply higher costs than those applied in the calculation. If we turn away from calculations and look to reality we can see that many property owners who once installed individual metering of heating have abandoned it. This has been either because the temperature reduction in the building did not turn out as big as expected, or because the cost became too high or a combination of both. Siggelsten (2013) is of the view that there is a strong resistance to individual metering of heating in tenant-owner associations. This is explained by a low level of knowledge about the technology and the perception that individual metering is not cost-effective. Tenant-owner associations often have difficulties assessing the energy savings potential and profitability. In many respects, experiences of individual metering and charging in Sweden point to the same conclusions as the calculation results presented in this report. s overall assessment is that an investment in individual metering and charging using heat cost allocators will not be cost-effective, and that the investment appears risky. Since a requirement for individual metering and charging of heating using heat cost allocators in all likelihood would mean unprofitable investments for the majority of property owners, proposes that no such requirement be imposed on existing buildings. It follows from this that is not making any proposals for regulatory provisions.

88 86 Individual metering and charging in existing buildings Individual metering and charging using temperature metering s general assessment of individual metering and charging using heat cost allocators is that it is not a cost-effective method. The government commission states that in that case is to consider whether requirements should instead be imposed for temperature metering or for other alternative metering methods. is not aware of any other alternative metering methods than temperature metering. We have therefore examined temperature metering only. The question being answered in this section is: when is it profitable, in a business economics sense, to charge an apartment for its heating cost on the basis of measured temperatures (temperature metering) in existing multi-dwelling buildings? The section explains, in brief, how temperature metering works and how charging is normally done. It then describes the benefit side and the cost side of metering and charging heating using temperature metering, and s calculation model. The final section presents the results of the cost-effectiveness calculations, s analysis of and conclusions from these, and proposals. This section shows that: The variation in the cost data obtained is considerable. Installation costs vary between SEK 3640 and 7250 per apartment. Operating costs vary between SEK 220 and 400 per apartment and year. It is unclear whether, and if so by how much, temperatures are reduced in buildings with temperature metering. The experience of public housing companies of temperature metering is that the temperature remains the same or increases somewhat. A temperature reduction is necessary to create benefits. s assessment of the calculation results is that individual metering and charging using temperature metering is not a cost-effective, or profitable, investment. This is because the expected present value is negative in all the calculations. Since a requirement for individual metering of heating using temperature metering would imply unprofitable investments for many property owners, proposes that individual metering and charging of

89 Individual metering and charging in existing buildings 87 heating using temperature metering not be required in existing buildings. For that reason, is not making any proposals for regulatory provisions. Charging on the basis of temperature Those public housing companies that use temperature metering in their housing stock apply more or less the same method for measuring temperature and charging on that basis. The rent usually includes a temperature of 21 C, but residents can often choose a temperature between 18 and 23 C, depending on the comfort level they desire. For every degree that the temperature is lowered or raised, the resident receives or has to pay a corresponding sum of money. For example, residents in Lunds kommuns fastighets AB (LKF) receive SEK 5 per m2 and degree. If the temperature is reduced from 21 to 20 C in an apartment of 70 m2, the household receives SEK 350 back per year. As the temperature is only measured during the heating period, which is seven months of the year, that makes SEK 50 a month. 74 Other public housing companies with temperature metering, e g Helsingsborgshem, Örebrobostäder and Kalmarhem AB, use similar methods for charging. The weakness in temperature metering is that an apartment s temperature can be raised by other sources than the heating system, e g heat generated by people, heat from cooking or sun exposure. The temperature can also be reduced by having windows open. Housing companies use different techniques to deal with this, e g by disregarding extreme overtemperatures or punishing those tenants who air their apartments to an unusual extent in order to lower room temperatures. Article 9 of the Energy Efficiency Directive includes individual metering that shows the final user s actual energy use and provides information about actual usage time. Appendix VII of the directive, which describes the minimum requirements for billing and billing information, states that the billing information must include current actual prices and actual energy use, as well as the possibility to compare the final user s current energy use with their use during the same period in the preceding year. Temperature metering means that indoor temperature, not energy use, is measured in the apartment. The metering method thus provides no information about actual energy use for each apartment, meaning that residents cannot be informed of this. It is therefore doubtful whether the method is comprehended by the Energy Efficiency Directive. Irrespective 74 Consultation with LKF on 24 Mar 2014.

90 88 Individual metering and charging in existing buildings of this, the same type of cost-effectiveness calculations will be made for temperature metering as for radiator metering. The benefit side energy savings through lowered temperatures In order to analyse whether temperature metering is cost-effective, additional energy calculations were carried out on the assumption that the temperature the standard building is lowered from 21 to 20 C when the metering method is introduced. This gives us the theoretical energy savings of a reduction in temperature by 1 C. Projektengagemang AB carried out the additional energy calculations to highlight the potential energy savings. See Appendix 5 for a full report of their work. Below is a brief summary of the method and the calculation results. Method for energy calculations The calculations were made for the same standard buildings as those used in part 1 of the report and in the analysis of heat cost allocators: a lowrise building with six apartments per floor, three entrances with stairwells, four floors and an area of m2 A temp. 75 The standard building was placed in four locations Malmö, Stockholm, Sundsvall and Kiruna representing three climate zones. In the calculations it was assumed that the overall temperature of the standard building would be reduced as a result of individual metering, from 21 to 20 C. The energy savings of this reduction in temperature were calculated for four standard buildings with different specific energy use (energy performance), intended to represent the existing housing stock. The energy performance figures of the four buildings corresponded to BBR s minimum requirement for energy economy 76, and to 25, 50 and 75 per cent worse energy performance figures than BBR s requirement, which is equivalent to a specific energy use in the range of kwh/m2. These standard buildings will be referred the below as BBR, BBR +25, BBR +50 and BBR +75. Results of energy calculations The energy calculations show energy savings of 3,8 11,0 kwh/m2 and year in the four standard buildings. Energy savings vary depending on the 75 The number of floors, stairwells and overall area of the building were modelled on mean values of statistics in s register of energy performance reports. 76 According to BBR 21, i e 90 kwh/m2/year in climate zone I, 110 kwh/m2/year in climate zone II and 130 kwh/m2/year in climate zone III.

91 Individual metering and charging in existing buildings 89 building s energy performance and geographical location. Table 18 shows the results of the simulations for each standard building. Table 18. Energy savings in kwh/m2 and year (Atemp) as a result of a temperature reduction for the building as a whole, from 21 to 20 C. Reduced energy use for heating at 1 C temperature reduction (kwh/m2/year) Standard building Stockholm Malmö Sundsvall Kiruna BBR BBR BBR BBR Installation and operating costs The cost items used in the calculation are for the installation of the meters and the annual operating cost. Installation costs include the cost of material as well as work to install the equipment required for metering. The operating cost here is for administering the data collection and billing system. Temperature metering is a technology developed and used by public housing companies in Sweden. Cost data has also been obtained from them. In order to learn about their experiences, SABO carried out a questionnaire survey on s behalf among members who meter heating individually using this technology. also met with public housing companies that meter heating individually using temperature metering, including Lunds kommuns fatsighets AB and Uppsalahem. Installation costs Below is a presentation of installation costs for temperature metering. The information is from public housing companies and consultant Bo Frank, who compiled installation and operating costs for. All costs include VAT.

92 90 Individual metering and charging in existing buildings Table 19. Installation costs for temperature metering, per apartment and including VAT. Source Installation cost, SEK/apt incl VAT Comment Consultant s report, Appendix Price includes three sensors, a share in a central unit, installation costs, initial starting and programming. Uppsalahem Price includes installation and initial starting, installation instructions and documentation from supplier, wiring, piping and installation of material provided. One collection unit per apartment. LKF Average price of installation. Bostads AB Mimer One meter per apartment on average, 24 meters in total, no collection units, wired. Marks Bostads AB SEK 1000/meter for the meter and installation (estimated cost). Wireless. All new material. Appendix 6 includes a technical description plus detailed cost information on the installation of temperature metering. Consultant Bo Frank, who compiled the information, specifies an installation cost in the range of SEK , which includes the cost of the necessary equipment, temperature meters and a share of the building s central collection unit, as well as installation and initial starting. With the exception of Marks Bostads AB, the public housing companies quote installation costs in the range of SEK per apartment. In most cases this includes the cost of meters, a central collection unit, installation and initial starting. Uppsalahem also includes the cost of piping and wiring. Uppsalahem, as it happens, has a slightly higher cost probably due to the fact that the system requires one collection unit per apartment. 77 s assessment is that an installation cost in the range of SEK per apartment is reasonable to use as input data in the costeffectiveness calculations for temperature metering. 77 Information from SABO s survey of member companies with temperature metering, consultation meeting with Fastighetsägarna, SABO, Uppsalahem and others on 13 Apr 2015, meeting with LKF on 24 Mar 2014.

93 Individual metering and charging in existing buildings 91 Operating cost The operating cost of temperature metering depends partly on whether the company maintains the system or whether this is done by an external contractor. If the housing company maintains it, which is common among the large public companies, it is hard to assess the operating cost. Helsingborgshem and Kalmarhem, for example, were unable to state a specific operating cost per apartment since much of the work is done by the company s employees. Uppsalahem reported paying about SEK 360 per apartment and year for operation, which includes measurement data collection, charging files, responsibility for the system, a web-based presentation system and fault reporting. 78 Additionally, the company devotes a couple of hours a month to dealing with complaints and other maintenance of the building in question, e g replacement of faulty meters and collection units. A representative of Uppsalahem, who is responsible for the company s temperature metering, said that the actual operating cost is at least SEK 500 per apartment and year, and probably more than that. 79 Lunds kommuns fastighets AB (LKF) quotes an operating cost for their temperature metering system of about SEK 320 per apartment and year. 80 Flen Bosatd AB quotes a somewhat higher operating cost SEK 400 per apartment and year for the reading service. In addition to this, the company has had costs for information efforts (SEK ), dealing with complaints, information to new tenants etc. 81 s assessment is that operating costs of heat meters and domestic hot water meters are similar to those of temperature metering. In each case it is a matter of collecting and processing measurement data. Previously obtained information about operating costs of domestic hot water and heat meters can therefore complement the above information on costs. Hyresbostäder Norrköping quotes an operating cost of SEK 220 per apartment and year for its heating (heat meters) and domestic hot water operations. Bostads AB Mimer pays its energy company SEK 375 per apartment and year for operations and billing Questionnaire survey by SABO of member companies using temperature metering. 79 Consultation meeting with Fastighetsägarna, SABO, Uppsalahem and others on 13 Apr Meeting with LKF on 24 Mar SEK 300 for the service contract plus SEK in total administrative costs per year, which makes about SEK 20 per apartment as 2719 apartments have temperature metering installed. 81 Questionnaire survey by SABO of member companies using temperature metering. 82 (2014), Individuell mätning och debitering vid ny- och ombyggnad.

94 92 Individual metering and charging in existing buildings To sum up, operating costs in the range of SEK , per apartment and year and including VAT, are deemed appropriate for use in the costeffectiveness calculations. These costs are conservative as they do not include costs of e g dealing with complaints, providing information and maintaining the metering system. The calculation model The model for calculating the cost-effectiveness of temperature metering is an investment calculation created in Excel with the following components: Calculation period 10 years. Energy use for heating is divided on a monthly basis. Four locations are included: Malmö, Stockholm, Sundsvall and Kiruna. Two district heating rates for Malmö. Stockholm and Sundsvall, and one rate for Kiruna. Real rate of interest, four per cent in the principal alternative. Installation costs and annual operating costs for the standard building. Calculations use 2014 prices. Prices include VAT. The analysis is at the building level. To carry out the calculations, data on the total energy use for heating at 21 and 20 C is input for each standard building in the four locations. The model outputs: NV (benefits), which are present-value calculations of the benefits (the value of the energy savings and the value of the power savings). NV (costs), which are present-value calculations of the costs (installation and operation). NV (benefits) NV (costs) > 0 means that the investment is costeffective.

95 Individual metering and charging in existing buildings 93 Calculations, results and analysis The benefit side The analysis for temperature metering assumes that 21 C is included in the rent. The introduction of temperature metering is assumed to lead to a 1 C temperature reduction in the building, to 20 C. The benefit side of the calculation is held constant, while the cost side is allowed to vary in accordance with the probability distributions specified. Table 20 below presents the energy reduction that a lowering of the temperature from 21 to 20 C leads to in two standard buildings, BBR and BBR +75, in two of a total of four locations, Malmö and Kiruna. Table 20. Energy use for heating in two different standard buildings in Malmö and Kiruna, at 21 and 20 C, and the change in percentage terms. Malmö Energy use for heating Kiruna Energy use for heating kwh kwh/m2 % kwh kwh/m2 % BBR 21 C C % % BBR C C % % The BBR standard building in Malmö uses kwh a year for heating (33.6 kwh/m2) at a temperature of 21 C. If the temperature is lowered by 1 C to 20 C, energy use is reduced by 9253 kwh (to 29,6 kwh/m2), or 11.9 per cent. In Kiruna the BBR standard building uses kwh (76.4 kwh/m2) annually, at 21 C. A lowering of the temperature to 20 C leads to energy use being reduced by kwh (to 71.6 kwh/m2), or 6.3 per cent. When the standard building uses more energy from the outset, a lowering of the temperature by 1 C leads to a greater reduction in energy use, in absolute terms. In percentage terms, however, the reduction is smaller. In Malmö energy use is kwh per year (95.8 kwh/m2) in the BBR +75 standard building at 21 C. A lowering of the temperature to 20 C leads to energy use being reduced by kwh per year (to 85,9 kwh/m2), or 10.3 per cent. Finally, the BBR +75 standard building in Ki-

96 94 Individual metering and charging in existing buildings runa uses kwh per year (190.4 kwh/m2) at 21 C. At 20 C, use is reduced by kwh (to kwh/m2), or 5.8 per cent. In order to put a value on the reduction in energy use that a one-degree lowering of the building s temperature leads to, we use district heating rates for each location. 83 The cost side As described in the presentation of installation costs, s assessment is that installation costs in the range of SEK per apartment are reasonable to use in the calculations. Thus, for the standard buildings with 24 apartments, installation costs vary between SEK and SEK Assuming a triangular distribution of the cost, this can be represented as follows. Figure 23. Triangular distribution of the installation cost of temperature metering in the standard building (SEK). The minimum value is set at SEK , the most likely value at SEK and the maximum value at SEK The mean value is the midway point in that range, and coincides with the most likely value. In half of the simulations the installation cost will be in the range of SEK , while it will be in the range of SEK in the other half. 83 See Appendix 7 for district heating rates.

97 Individual metering and charging in existing buildings 95 The operating cost is in the range of SEK per apartment and year. For the entire building of 24 apartments, the range is SEK per year. Here, too, we assume a triangular probability distribution, which gives us a distribution as shown in Figure 24. Figure 24. Triangular distribution of annual operating cost with temperature metering in the standard building (SEK). The minimum value is set at SEK 5280, the most likely value at SEK 7440 and the maximum value at SEK The mean value is the midway point in that range, and coincides with the most likely value. In half of the simulations the installation cost will be in the range of SEK , while it will be in the range of SEK in the other half. Results of Monte Carlo simulations The benefit side of the model consists of the savings in energy and power obtained during the lifetime of the investment when the temperature in the building is reduced from 21 to 20 C. This is held constant in all calculations calculations are carried out, and in each one value are randomly chosen from the probability distributions for the installation and operating costs. The final result how many of the calculations are profitable and how many are unprofitable cam be summarised in a graph. The figure below is a graph of the outcome for the BBR standard building in Malmö, with EON s district heating rates.

98 96 Individual metering and charging in existing buildings Figure 25. Profit/loss in Malmö of the BBR standard building with temperature metering. EON s 2014 district heating rates prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. The BBR standard building in Malmö reduces its energy use by 9253 kwh per year when the temperature is reduced from 21 to 20 C. The present value of the energy and power savings is SEK As can be seen in the figure, this return is not sufficient to obtain a positive outcome. None of the simulations yields a profit. The expected present value is a loss of SEK The best result is a loss of SEK Table 21 presents the results for all four locations.

99 Individual metering and charging in existing buildings 97 Table 21. Profit/loss in four locations with different standard buildings using temperature metering. District heating rates of companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. Malmö, EON Värme Profit/loss Standard building Min (SEK) Mean (SEK) Max (SEK) P of profit BBR % BBR % BBR % BBR % Stockholm, Fortum Trygg Standard building Min (SEK) Mean (SEK) Max (SEK) P of profit BBR % BBR % BBR % BBR % Sundsvall, Sundsvall Energi Standard building Min (SEK) Mean (SEK) Max (SEK) P of profit BBR % BBR % BBR % BBR % Kiruna, Tekniska verken Standard building Min (SEK) Mean (SEK) Max (SEK) P of profit BBR % BBR % BBR % BBR % The calculation results show that, given the assumptions about cost and energy savings, it is not cost-effective to use temperature metering in the

100 98 Individual metering and charging in existing buildings standard buildings. The expected present value (the mean value) is negative in every case, and the likelihood of a positive outcome is very low. Conclusions Installation costs are higher for temperature metering than for radiator metering. The analysis assumes that the temperature in the building will be reduced by 1 C when temperature metering is installed. The expected present value of the installation is negative in all of the standard buildings looked at. The probability that the investment will be profitable is very low. s conclusion from the calculations is that individual metering and charging using temperature metering is not cost-effective. Since a requirement for temperature metering would imply unprofitable investments for many property owners, proposes that individual metering and charging of heating using temperature metering not be required in existing buildings. For that reason, is not making any proposals for regulatory provisions. The unambiguous result, and its implication that temperature metering is not cost-effective, were reached under the assumption that the temperature would drop by 1 C in the building following installation. The experience of public housing companies, however, is that the temperature does not drop when temperature metering is installed. Almost without exception, the housing companies with temperature metering that responded to SABO s survey about their experiences of temperature metering reported unchanged indoor temperatures in buildings with temperature metering. Some companies even reported seeing temperatures slightly above the 21 C that is usually included with the rent in buildings that use temperature metering.

101 Individual metering and charging in existing buildings 99 References (2008). Individuell mätning och debitering i flerbostadshus. Karlskrona: ISBN: (2010). Energi i bebyggelsen tekniska egenskaper och beräkningar resultat från projektet BETSI. Karlskrona:. ISBN: (2011). Teknisk status i den svenska bebyggelsen resultat från projektet BETSI. Karlskrona:. ISBN: (2014). Individuell mätning och debitering vid ny- och ombyggnad, rapport 2014:29. Karlskrona: : ISBN: Energimyndigheten (1999). Utredning angående erfarenheter av individuell mätning av värme och varmvatten i svenska flerbostadshus, (Utredare Lennart Berndtsson) Energimyndigheten, ER 24:1999, Eskilstuna Energimyndigheten (2003). Individuell värmemätning i svenska flerbostadshus En lägesrapport. (Utredare Lennart Berndtsson) Energimyndigheten, projektnummer P , Eskilstuna Energimyndigheten (2012). Vattenanvändningen i hushåll, rapport 2012:03. Eskilstuna: Energimyndigheten. ISSN Jagemark & Bergsten (2003). Individuell värmemätning i flerbostadshus, rapport 2003:02. ISBN: Proposition 2013/14:174. Genomförande av energieffektiviseringsdirektivet. Stockholm: Näringsdepartementet Promemoria N2013/2873/E. Förslag till genomförande av energieffektiviseringsdirektivet i Sverige. Stockholm: Näringsdepartementet Siggelsten, Simon & Hansson, Bengt (2010). Incentives for individual metering and charging, Journal of Facilities Management, vol. 8, nr. 4, pp Siggelsten, Simon & Olander, Stefan (2013). Individual metering and charging of heat and hot water in Swedish housing cooperatives, Energy Policy 61, pp

102 100 Individual metering and charging in existing buildings Siggelsten, Simon & Olander, Stefan (2010). Individual heat metering and charging of multi-dwelling residential housing, Structural Survey, vol. 28, nr. 3, pp Siggelsten Simon (2013). Reallocation of heating costs due to heat transfer between adjacent apartments, Energy and Buildings 75, pp Siggelsten, Simon et al (2014). Analysis of the accuracy of individual heat metering and charging, Open house international, vol. 39, nr. 2 Svensson (2012). Problem och möjligheter med individuell mätning och debitering av värme i flerbostadshus, Legal texts Bekendtgørelse om individuel måling af el, gas, vand, varme og køling, BEK nr 563 af 02/06/2014. Bekendtgørelse om varmefordelingsmålere, der anvendes som grundlag for fordeling af varmeudgifter, BEK nr 1166 af 03/11/2014 Bekendtgørelse om krav til målerinstallatører, som monterer, skalerer og servicerer varmefordelingsmålere, BEK nr 1167 af 03/11/2014.

103 Individual metering and charging in existing buildings 101 Appendix 1 Sensitivity analyses Results of step 1 of the analysis using alternative district heating rates Table 22 presents the results of step 1 of the analysis (1 C temperature reduction) with alternative district heating companies for Malmö, Stockholm and Sundsvall. Table 22. Profit/loss in four locations for different standard buildings with radiator metering. Temperature reduction of 1 C. District heating rates from alternative companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Profit/loss Malmö Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Kraftringen BBR % BBR % BBR % BBR % Stockholm Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit EON Bro BBR % BBR % BBR % BBR % Sundsvall Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Öviks Energi BBR % BBR % BBR % BBR %

104 102 Individual metering and charging in existing buildings Results of step 2 of the analysis using alternative district heating rates Table 23 presents the results of step 2 of the analysis (temperature reductions of 0, 1 and 2 C) for the BBR +75 standard building located in Malmö, Stockholm and Sundsvall, with alternative district heating companies. Table 23. Profit/loss in four locations for different standard buildings with radiator metering. District heating rates from alternative companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Profit/loss P för 0 C Malmö Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Kraftringen 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Stockholm Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit EON Bro 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Sundsvall Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Öviks Energi 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR %

105 Individual metering and charging in existing buildings 103 Results with uniform probability distributions for the installation and operating costs Figure 26. Uniform distribution of installation costs of radiator metering, per apartment and including VAT. Figure 27. Uniform distribution of annual operating costs of radiator metering, per apartment and including VAT.

106 104 Individual metering and charging in existing buildings Results of step 1 of the analysis using uniform probability distribution Table 24 presents the results of step 1 of the analysis (1 C temperature reduction) using a uniform distribution of installation and operating costs. Table 24. Profit/loss in four locations for different standard buildings with radiator metering. Temperature reduction of 1 C in the building. District heating rates from companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Profit/loss Malmö Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit EON Värme BBR % BBR % BBR % BBR % Stockholm Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Fortum Trygg BBR % BBR % BBR % BBR % Sundsvall Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Sundsvall Energi BBR % BBR % BBR % BBR % Kiruna Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Tekniska verken BBR % BBR % BBR %

107 Individual metering and charging in existing buildings 105 Profit/loss BBR % Results of step 1 of the analysis using uniform probability distribution and alternative district heating rates Table 25 presents the results of step 1 of the analysis (1 C temperature reduction) using a uniform distribution of installation and operating costs with alternative district heating companies in Malmö, Stockholm and Sundsvall. Table 25. Profit/loss in four locations for different standard buildings with radiator metering. Temperature reduction of 1 C in the building. District heating rates from companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Profit/loss Malmö Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Kraftringen BBR % BBR % BBR % BBR % Stockholm Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit EON Bro BBR % BBR % BBR % BBR % Sundsvall Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Öviks Energi BBR % BBR % BBR % BBR %

108 106 Individual metering and charging in existing buildings Results of step 2 of the analysis using uniform probability distribution Table 26 presents the results of step 2 of the analysis (temperature reductions of 0, 1 and 2 C) for the BBR +75 standard building located in Malmö, Stockholm and Sundsvall, using a uniform distribution of installation and operating costs. Table 26. Profit/loss in four different locations for the BBR +75 standard building using radiator metering. 0, 1 or 2 C temperature reduction in the building, with different probabilities. District heating rates from companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. Profit/loss P of 0 C Malmö Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit EON Värme 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Stockholm Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Fortum Trygg 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Sundsvall Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Sundsvall Energi 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Kiruna Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit

109 Individual metering and charging in existing buildings 107 Tekniska verken Profit/loss 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Results of step 2 of the analysis using uniform probability distribution and alternative district heating rates Table 27 presents the results of step 2 of the analysis (temperature reductions of 0, 1 and 2 C) for the BBR +75 standard building located in Malmö, Stockholm and Sundsvall, with alternative district heating companies and using a uniform distribution of installation and operating costs.

110 108 Individual metering and charging in existing buildings Table 27. Profit/loss in four different locations for the BBR +75 standard building using radiator metering. 0, 1 or 2 C temperature reduction in the building, with different probabilities. District heating rates from companies in each location prices, unchanged in real terms. Real interest rate of four per cent. Calculation period 10 years. Profit/loss P of 0 C Malmö Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Kraftringen 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Stockholm Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit EON Bro 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Sundsvall Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Öviks Energi 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR % Kiruna Min (SEK) Mean (SEK) Max (SEK) Standard dev (SEK) P of profit Tekniska verken 20 % BBR % 30 % BBR % 40 % BBR % 50 % BBR %

111 Individual metering and charging in existing buildings 109 Appendix 2 Energy performance in Swedish multi-dwelling buildings This appendix presents energy performance figures for Swedish multidwelling buildings, divided by climate zone and year of construction. The figures were sourced from s register of energy performance reports. The graphs below only include buildings that use district heating exclusively. Of approximately original energy performance reports for multi-dwelling buildings, just under formed the basis for the graphs. There are three graphs which illustrate the energy performance for heating in multi-dwelling buildings by climate zone as specified in BBR 21, and six graphs in which energy performance for heating is illustrated by age category. Each graph includes both buildings with low energy performance figures for heating and buildings with high energy performance figures for heating. Energy performance for heating, by climate zone Figure 28. Climate zone I, energy performance for heating multi-dwelling buildings using only district heating.

112 110 Individual metering and charging in existing buildings Figure 29. Climate zone II, energy performance for heating multi-dwelling buildings using only district heating. Figure 30. Climate zone III, energy performance for heating multi-dwelling buildings using only district heating.

113 Individual metering and charging in existing buildings 111 Energy performance by year of construction Figure 31. Energy performance for heating multi-dwelling buildings using only district heating. Year of construction before Figure 32. Energy performance for heating multi-dwelling buildings using only district heating. Year of construction

114 112 Individual metering and charging in existing buildings Figure 33. Energy performance for heating multi-dwelling buildings using only district heating. Year of construction Figure 34. Energy performance for heating multi-dwelling buildings using only district heating. Year of construction

115 Individual metering and charging in existing buildings 113 Figure 35. Energy performance for heating multi-dwelling buildings using only district heating. Year of construction Figure 36. Energy performance for heating multi-dwelling buildings using only district heating. Year of construction 2006

116 114 Individual metering and charging in existing buildings Appendix 3 District heating rates Variable energy prices and power charges, including VAT rates. Table 28. Variable energy prices (öre/kwh) and power charges (SEK/kW and year) for Fortum Trygg and EON Värme, Stockholm. Variable energy prices, Stockholm (öre/kwh) Month Fortum Trygg EON Värme (Bro) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Variable power charges, Stockholm Fortum Trygg EON Värme (Bro) SEK/kW and year SEK/kW and year

117 Individual metering and charging in existing buildings 115 Table 29. Variable energy prices (öre/kwh) and power charges (SEK/kW and year/month) for EON Värme and Kraftringen Lund, Malmö. Variable energy prices, Malmö (öre/kwh) Month EON Värme Kraftringen, Lund Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Variable power charges, Malmö EON Värme Kraftringen, Lund SEK/kW and month SEK/kW and year

118 116 Individual metering and charging in existing buildings Table 30. Variable energy prices (öre/kwh) and power charges (SEK/kW and year) for Sundsvall Energi and Öviks Energi, Sundsvall. Variable energy prices, Sundsvall (öre/kwh) Month Sundsvall Energi Öviks Energi Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Variable power charges, Sundsvall Sundsvall Energi Öviks Energi SEK/kW and year SEK/kW and year

119 Individual metering and charging in existing buildings 117 Table 31. Variable energy prices (öre/kwh) and power charges (SEK/kW and year) for Tekniska Verken, Kiruna. Variable energy prices, Kiruna (öre/kwh) Month Tekniska Verken Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Variable power charges, Kiruna Tekniska Verken SEK/kW and year Sources: Fortum EON Värme (Bro) 0Stockholm%20prislista% pdf EON Värme (Malmö) Kraftringen, Lund Sundsvall Energi

120 118 Individual metering and charging in existing buildings Öviks Energi /Prislista-fjv-foretag-ovik-2013+Ver.1.pdf Kiruna Tekniska verken v%c3%a4rmetaxa% pdf?epslanguage=sv

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