Monte Carlo simulation approach to understand the cost variance for energy retrofit projects: comparative study of Finland and the United States

Energy-efficient building is often characterized with higher construction costs. There is a large variance in energy-efficient building construction costs, especially in retrofit projects. A lack of understanding of cost variance and ambiguity of cost-optimal practices has impeded the adoption of energy retrofit practices globally. To respond to such a knowledge gap, a comparative study was conducted on energy retrofit projects on residential buildings in Finland and the United States. A Monte Carlo simulation was used to determine the coefficient of variation for construction costs and the potential reasons behind the variations. The specific aims of this study are (a) to gain a deeper understanding of construction cost variances in energy retrofit projects, (b) to identify the most influential cost items, and (c) to understand the correlations among different cost items. For this analysis, a database including 10 Finnish buildings and 7 US buildings was created, and actual construction cost data was collected. The results showed the following: (1) US projects had a larger total construction cost variance with highly skewed distribution, and Finnish energy retrofit projects had a cost distribution similar to conventional retrofit projects; (2) the two most significant construction cost factors for both countries were non-energy related cost items and the building envelope, rather than the mechanical system (heating and ventilation) as commonly perceived; and (3) the larger construction cost variance in the United States may be associated with the unfamiliarity of energy-efficient technologies and varied construction methods in different regions. The insights and suggestions derived from those findings are discussed in the conclusion.