A cost-benefit analysis of a traditional Glasgow tenement net zero retrofit

Citation

Higney A & Gibb K (2022) A cost-benefit analysis of a traditional Glasgow tenement net zero retrofit. Scottish Funding Council. UK Collaborative Centre for Housing Evidence. https://housingevidence.ac.uk/publications/a-cost-benefit-analysis-of-a-traditional-glasgow-tenement-net-zero-retrofit/

Abstract
The UK Collaborative Centre for Housing Evidence (CaCHE) has led a multi-stage and holistic evaluation, of a deep traditional tenement retrofit, as part of a Scottish Funding Council Climate Emergency research competition award. The authors of this paper, as part of that evaluation, have undertaken a social cost-benefit analysis of a high-quality green (EnerPHit) retrofit compared to two plausible counterfactuals (demolition and new build and a retrofit to EESSH2 standards). The project was a partnership with construction funding from Glasgow City Council, Scottish Government and borrowing by Southside housing association (the property owner), The partnership also involved John Gilbert architects and CCG construction. The evaluation was led by the Collaborative Centre for Housing Evidence working with Tim Sharpe, University of Strathclyde. The project was launched in 2020 just before the Covid-19 lockdown, which considerably delayed the work so that, ultimately, the EnerPHit retrofit was only completed in 2022. The purpose of the project was, for the first time in a traditional tenement, to complete the retrofit work to this very demanding net zero standard (achieved in large part by airtight internal insulation, mechanical ventilation and a series of other complementary refurbishments). As a demonstration project that would provide learning to help the city assess how to retrofit the 73,000 traditional tenement units in Glasgow, the project was enhanced by the Scottish Funding Council evaluation which helps to shed learning and lessons about replicability and scalability. The evaluation is ongoing and this paper presents one of the first outputs from the work. The approach to assessing the net economic contribution of the project was to follow an orthodox environmental social cost benefit analysis, adopting Treasury Green Book principles. The idea is to capture all of the costs and the benefits associated with the retrofit and to measure these over 30 years creating a cumulative summary estimate known as a discounted cash flow or net present value. The fundamental idea is that net benefits/costs received further in the future are worth somewhat less now (in a similar way to how you will value something received now more than the promise of getting something in the future). The nominal costs and benefits are therefore discounted by a social discount rate which has a larger impact the further in the future the cost or benefit happens. The basic model has to identify all of the relevant costs and benefits including some less obvious, unmeasured or intangible elements (which is where controversy can arise). This work had the additional complication of seeking to capture the benefits of reduced carbon emissions, including those of embodied carbon i.e. any form of construction work, producing supplies, undertaking demolition, etc. which will generate carbon emissions. It is not, therefore, just about the forms of heat energy or the ultimate airtightness of buildings, important as that also is to the analysis. Cost benefit analysis then proceeds by comparing the object of study to likely similar counterfactuals of different choices so that we do not just measure the net benefit of the preferred outcome, but look at it relative to other likely choices – in this case, demolition and new build or the ‘official’ aspiration to do a level of retrofit for Scottish social housing known as EESSH2. The analysis then proceeds by setting up central baseline estimates. Indicative assumptions have been made by which we try to generate the most useful and accurate comparisons, before applying sensitivity analysis where we analyse the impact of changing key assumptions.