UBC Theses and Dissertations

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UBC Theses and Dissertations

Energy economics in office buildings Anderson, Lloyd Albert


The central hypothesis to be tested by this thesis can be stated as follows: A relative increase in the expense of energy consumed in a commercial office building has the effect of reducing the value of the office building. A second and parallel hypothesis in the policy area was also tested as follows: The price mechanism operating on the demand for energy in the commercial office building market serves the public interest in encouraging energy conservation. Commercial building energy usage, energy pricing and policy are explored in detail in Chapter I. The relative place energy holds in the expense of operating a commercial building as well as the place energy consumption holds in the commercial office sector is explored. These studies lead to the conclusion that energy expense and energy consumption are important respectively in these areas. It is also shown that it is in the national interest to reduce the consumption of non-renewable energy sources. Technical capabilities were then reviewed and it is established that it is feasible to reduce the consumption of energy in both existing and new commercial office buildings. Chapter II studies the importance of energy cost in determining value in a theoretical model. A hypothetical building is established and the parameters from this building are used is a net present value model. Using a set of technical forecasts converted to growth rates of energy expense, it is demonstrated that the internal rate of return, being an accepted scale of value, was not sensitive to changes in the cost of energy consumed. An empirical study of energy and market values was the subject of Chapter III. A model of commercial building value was established as follows: V = f (lot size per unit area, income per unit area, energy consumption per unit area, number of parking stalls per unit area, number of stories, type of construction, presence of air conditioning, quality, age, parking underground, presence of an elevator, sales date and location) Information on energy was obtained from B.C. Hydro computer files and all other data was obtained from the files of the B.C. Assessment Authority. The regression results from the empirical study are analyzed in Chapter IV to determine the significance of energy in determining market value. Indefinite results were achieved for the energy variable coefficient, but the regression model proved to be significant, 2 and the R show that the model is a good predictor of value. It is evident that a degree of multicollinearity is present in the data, and an additional regression is included using a model with highly correlated variables removed. The results of this regression indicate that the degree of multicollinearity was not responsible for the indefinitive results. It is concluded that the market value of a commercial office building is not affected to a significant extent, by an increase in the consumption of energy. The central hypothesis is therefore not supported by the empirical results. Energy policy is reviewed in Chapter V. This review includes a number of available policy tools available to government. The chapter concludes that pricing policy alone is likely inadequate to reduce energy consumption. In the concluding chapter, the central hypothesis is rejected. This conclusion is supported by both the theoretical and the empirical analyses. The second policy hypothesis is also rejected, and a number of possible policy measures are suggested.

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