Energy retrofit of residential building envelopes in Israel: A cost-benefit analysis

It is often taken for granted that thermal renovation of building envelopes not only conserves operational energy and reduces the environmental impact of generating electricity, but is also economically beneficial to the individual homeowner. While this may be true in cold climates, it may not necessarily be true in the case of Israel, most of which has a relatively mild Mediterranean climate but parts of which are hot and arid. This study, which sought to address this question, comprised two stages: a) Analysis of the direct economic benefits to the individual homeowner of different strategies for refurbishing the envelope of an existing building; and b) Examination of other (external) benefits to society arising from electricity conservation resulting from such retrofit. The analysis demonstrates that in Israel, given current electricity prices and building construction costs, insulating the roof is a cost-effective strategy – but the payback period is 15–30 years, making it unattractive to most homeowners. Insulating the external walls of a typical apartment results in electricity savings comparable to only one third of the retrofit cost, and is thus not economically viable. Accounting for the external benefits to society does make some marginal retrofits more attractive, but not sufficiently to justify most envelope retrofit options. This highlights the importance of adopting stringent standards for new construction, since the marginal cost of additional thermal insulation in new buildings is far lower than the cost of renovating them.