Valuation of Investments in Building Energy Improvements under Uncertainties

Georgia Tech Research Corporation, Atlanta GA

Investigators

Abstract

The objective of this research is to create an investment valuation model to assess building energy-saving projects under uncertainty that takes into account the future of energy prices and the cost and performance of energy-saving technologies. This investment valuation model will determine the optimal time of investment for the building energy-saving project. The proposed model is based on a real options formulation. An alternative method will be developed to estimate the volatility of the investment that captures the impact of the uncertainty on the value of the energy-saving project. The proposed investment valuation model will be used to examine how uncertainty potentially influences the behavior of decision makers when dealing with energy-saving projects and in this way provide some theoretical insights. Actual energy-saving projects will be utilized to refine and validate the developed model. If successful, this project will provide the research community with a well-founded investment valuation model that will be tailored for energy-saving investments. This research will assist investors to make hard energy-saving decisions that increase the likelihood of achieving ambitious national energy reduction goals over the long-term. By holding workshops, the research outcomes will be communicated to building energy professionals. This research engages a large number of underrepresented, economically disadvantaged students from the joint program between the Georgia Tech Center for Education Integrating Science, Mathematics and Computing (CEISMC) and the Rockdale High School (a high needs Title I school) that focuses in science, technology, engineering, and mathematics (STEM) learning activities. This activity is intended to raise awareness about energy efficiency of high school students. High school students and their teachers will be hosted in the Georgia Tech Economics of Sustainable Built Environment Lab for a four-week research boot camp in energy-efficient buildings.