Renting vs. Buying
Comparison of heat pump financing models
Currently, rising interest rates and soaring construction costs have led to a decline in investment in new construction and renovation measures. This also applies to the replacement of heating systems. Renting a heat pump instead of buying one can facilitate the thermal transition of an existing building. In a master's thesis, the cost-effectiveness of such a model was investigated using the example of an air-to-water heat pump based on the dynamic annuity method of VDI 2067.
最后，购买热泵更便宜。 图 : guteksk7/stock.adobe.com
February 29, 2024, 08:55 am
The product-as-a-service (PaaS) business model can make the financing of technical building systems more attractive in the future. The core idea of a PaaS service is to rent a product for a defined period of time and charge a recurring usage fee of /1/. Therefore, a distinction is made between three types of financing options:
- Product-Oriented Business Execution: The focus is on the product. When a customer buys a heat pump, he becomes the owner of the product/2/. The service is only related to maintenance and has a full maintenance contract.
- Usage-oriented business: The product (i.e., the heat pump) remains the property of the PaaS provider, who is also responsible for its maintenance /3/. The customer pays a regular rental fee for the product. The service provider ensures the operation and warranty of the system.
- Results-oriented business execution: The focus is on the provision of services/2/. In the case of space heating, warmth or comfort is the goal. How the results are achieved is secondary to the customer. He pays for the performance he achieves, not the product. Here, too, the service provider takes full responsibility for the operation of the plant.
PaaS is often compared to energy and asset contracting. Both are usage- and result-oriented business models/4/.
Economic conditions
In order to fully compare rents through PaaS and purchases, it must be based on the total cost of both models over the same time period. This means that, in addition to the fixed price of the heat pump, the cost of a complete maintenance contract must also be taken into account at the time of purchase.
To this end, in January 2023, an inquiry was sent to an established air-to-water heat pump service provider or manufacturer in the market, which offers financing for two models, based on the simplified technical design criteria (design location Cologne, 40/45 °C for heating, 7/12 °C for cooling). The quotes obtained were for three different service categories.
At the time of purchase, the customer becomes the owner of the heat pump and can also take advantage of government subsidies. The installation of heat pumps in the new building is subsidized by the German Federal Ministry for Economic Affairs and Climate Action with a 25% subsidy of investment costs, benefiting the customer/5/. In the PaaS model, the service provider bears the cost of the investment and is therefore also subsidized (see also Table 1).
图片来源： HUSS-MEDIEN GmbH
Example: Static cost comparison calculation with a nominal power of ≈ 200 kW
With the help of a quote, the total cost for 5 years can be determined with a simplified static addition. While the investment in renting and buying a house varies widely, especially at the beginning (t = 0), there is a break-even point after 3.8 years. By far, renting a house has been more cost-effective than buying a heat pump. However, over the entire analysis period, the monthly cost of the rental model increased dramatically, outpacing the cost of the purchase plus the full maintenance costs. At the end of the five-year period, the difference totalled 16 per cent (figure 1). 2).
2 - Static Cost Comparison: PaaS vs. Purchase + Full Maintenance of Power Class ~ 200 kW Heat Pumps Photo: Zeppenfeld/Bartels/Pfeifer
Dynamic annuity method in accordance with VDI 2067
The dynamic annuity method according to VDI 2067 can be used to account for the temporal impact of periodic payments over the entire consideration period compared to static cost comparison calculations /6/. For this purpose, a calculated interest rate of 6 per cent and a price change factor of 2 per cent are applied to general construction price increases. With the help of these percentages, this results in an annuity factor of 0.237 and a price dynamic present value factor of 4.374. These two factors form the basis of individual annuity derivation.
Capital-linked cost-linked annuities (AN, K) refer specifically to the purchase model. To do this, it is necessary to determine the annuity factor, the cost of the investment, and the residual value. In order to maintain the residual value, the heat pump is depreciated in a straight line over the five-year period under consideration and depreciated in accordance with the 2067 years of calculated useful life specified in VDI 18, as it can still be resold for a profit after five years.
In addition, the operating costs of annuities (AN, B) should be considered differently for the two business models. At the time of purchase, all operating and maintenance costs are included in the full maintenance contract. With the PaaS model, all the necessary measures are paid in the monthly rent. However, PaaS costs are much higher compared to the purchase model because they include not only operating costs but also usage fees or proportional investment costs for heat generators.
On the other hand, cost-based annuities based on needs (AN, V = 0) are not taken into account in the overall assessment. This includes the annual energy cost of the heat pump and is the same for both models. Annuities for other expenses (AN, S = 0) are excluded from the calculation. For example, these are taxes or annual insurance amounts that are difficult to estimate (Table 2).
图片来源： HUSS-MEDIEN GmbH
Results & Discussion
Both static and dynamic analyses show that the difference in total annuity between the two business models decreases with the increase of performance grades. The higher the notional output of the heat pump or the more capital required by the system, the smaller the deviation in the total cost at the end of the term, and the more favorable the profitability threshold is for PaaS long-term leases (Figure 1). 3).
However, the possible impact of difficult-to-calculate influencing variables on the overall outcome must be critically questioned. On the one hand, other costs, such as annual insurance premiums or tax aspects, are not taken into account in the calculation.
In particular, the cost of insurance can adversely affect purchasing patterns. In the rental model, the warranty for the operation of the system is fully covered by the service provider, so the customer does not have to purchase any insurance.
3 - Calculation of the overall result of dynamic annuities according to VDI 2067 Photo: Zeppenfeld/Bartels/Pfeifer
Another argument in favor of the PaaS model may be that the rental costs incurred can be claimed as operating expenses on the annual balance sheet /7/, resulting in tax savings or tax refunds, improving the overall outcome.
In addition, when calculating the cost of capital constraints, the residual value is determined in a straight line. Taking into account the period under consideration and the service life calculated according to VDI 2067, the heat pump loses value evenly and retains a higher residual value after five years. On the other hand, a more realistic situation is the geometric decreasing depreciation of heat pumps. This means that the heat generator depreciates more at the beginning of its useful life than at the end of /8/. This means that the cost of surplus value or capital binding is lower in the purchase model.
Comparison of Operating Costs: Full Maintenance Contract vs. VDI 2067
A detailed comparison of operating costs provides another notable insight. According to VDI 2067, operating costs are made up of operating and maintenance costs. Since the annual cost of a full maintenance contract represents the sum of the operating costs in the annuity calculation process, these costs can also be mathematically derived from the VDI guidelines with the help of two formulas.
For this, the example of the power class of ≈ 200 kW is again studied: here, the operating costs are negligible, 5 working hours per year (VDI 2067 indication) is 485 euros, and the assumed salary of a customer service technician is 97 euros / hour. In contrast, there is a significant difference in the determination of maintenance costs. VDI 2067 specifies two workload factors for maintenance + inspection (fW+Insp= 1.5 %) and repair (fW = 1%) for heat pumps, which can be used to determine maintenance costs in proportion to the investment price of 62,000 euros. Since in this case, only the material value of the heat pump is decisive, subsidies are not taken into account. This means a maintenance cost of €1,550.
According to VDI's calculation methodology, the total annual operating costs are €2,035/year, while the offer for a 200 kW full maintenance contract ≈ €6,200/year. However, there are other important influencing factors that must be considered when making equivalent cost comparisons.
For example, a service provider's five-year full maintenance contract includes not only material and labor costs, but also certain cost risk and profit factors that are not considered in the VDI algorithm. Since this factor is difficult to calculate, assumptions must be made, so the contract period is calculated proportionally to the calculated service life of the heat pump. However, in this case, instead of using the specified VDI 2067 18-year service life, a more realistic 12-year service life is used. The contract period is 5 years, the new service life is 12 years, and the theoretical risk sharing is 42%. Subtracting this share from the issue price of €6,200/year gives a new maintenance price of €3,617/year. This amount only includes the cost of materials and wages, and does not include the venture risk and profit component. In order to take inflation into account during the five-year maintenance period, an annual price increase rate of 2% is included in addition to the operating costs of 2,035 euros calculated according to VDI.
Overall, the absolute and relative difference after five years is €7,493 or 41%, despite a whopping 42% profit and risk exposure. This means that the complete maintenance service is still significantly higher than the operating costs calculated according to VDI 2067. For this reason, the coefficient of maintenance, inspection and repair must be added to today's calculations in order to approximate the cost of a complete maintenance contract (Table 3).
图片来源： HUSS-MEDIEN GmbH
Conclusions and prospects
Profitability studies show that in today's economic conditions, buying a heat pump is still considered a more economically viable option for financing heat pumps compared to leasing models. PaaS service providers often design their rental prices to cover the risk based on inflation and capital risk analysis, which results in higher costs for consumers throughout the period. The advantage of the rental model is that the service provider is responsible for the normal operation of the system during the rental period, including the cost of repairs or maintenance. The consumer pays a surcharge, but this protects him from any unforeseen costs of using the system.
In addition, it can be seen that the effort factor specified in VDI 2067 to determine the annual operating costs of heat pumps no longer corresponds to today's practical standards. The last revision of the directive took place more than a decade ago, in September 2012. In order to obtain a reasonable result in evaluating the cost-effectiveness of MEP components, the percentage specified should be based on the application of critical scrutiny, adjusted in VDI 2067.
For future economic feasibility studies, it should be noted that due to climate policy objectives, heat pumps will be considered the new standard for heat generators for the foreseeable future and therefore can no longer be subsidized by the state. This will make the purchase model more expensive. The PaaS model not only provides tax benefits graded according to performance levels, but it also has a beneficial impact on building certification. This, in turn, can lead to higher rental income for the building. Against this background, the German Sustainable Building Association (DGNB) is actively evaluating new business models in the circular economy that support the responsible use of resources and products for reuse in accordance with the Cradle to Cradle (C2C) (C2C) concept /9/. As a result, the PaaS model may not be profitable at the moment, but it has the potential to be sustainable and innovative in future construction projects.