The regulatory drive to accelerate the clean energy and circular economy transitions in the European building stock is currently failing to overcome systemic implementation barriers. These barriers include high initial investment costs, misaligned financial incentives among stakeholders, and the relatively low cost of less sustainable energy and materials. A Product-Service Systems (PSS) approach could successfully overcome many of these barriers by (1) outsourcing capital investment, as well as financial and technical risks, (2) providing shared economic incentives to collaborating stakeholders, and (3) retaining extended producer responsibility and ownership over materials and products. However, PSS is still not seen as a viable business model when compared to both a standard “ownership” contract and a “no-retrofit” scenario. This paper proposes a Total Value of Ownership (TVO) method to evaluate the financial performance of a building energy retrofit in terms of Net Present Value, comparing a matrix of scenarios. Results show that – when accounting for capital and opportunity costs tied to alternative investments, internalising externalities, and monetising soft values such as user productivity and property value – a PSS model can deliver the highest NPV. Furthermore, results show that a PSS alternative can act as a positive future-proofing strategy to safeguard the building owner’s position in the face of uncertain future market indicators and carbon taxation. Recommendations for policymakers, investors, financiers, building owners, and end-users are presented to identify the economic value of PSS contracts, leading to better-informed decisions which can accelerate deep energy retrofit of the building stock.

Building energy renovation quotas are not currently being met due to unfavorable conditions such as complex building regulations, limited investment incentives, historical preservation priorities, and technical limitations. The traditional strategy has been to incrementally lower the energy consumption of the building stock, instead of raising the efficiency of the energy supply through a broader use of renewable sources. This strategy requires an integral redefinition of the approach to energy building renovations. The joint project SWIVT elaborates on a district redevelopment strategy that combines a reduction in the energy demand of existing buildings and their physical interconnection within a local micro-grid and heating network. The district is equipped with energy generation and distribution technologies as well as hybrid thermal and electrical energy storage systems, steered by an optimizing energy management controller. This strategy is explored through three scenarios designed for an existing residential area in Darmstadt, Germany, and benchmarked against measured data. Presented findings show that a total primary energy balance at least 30% lower than that of a standard building renovation can be achieved by a cluster of buildings with different thermal qualities and connected energy generation, conversion, and storage systems, with only minimal physical intervention to existing buildings.