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About Aidan Parkinson
PhD Candidate researching investment decisions in the energy performance of the built environmentStudent
Contemporary perceptions of energy consumption and carbon emissions could present significant, long-term risks to the energy performance of real estate. Therefore, there is a need for asset managers and professionals to be able to evaluate the expected performance of property to all plausible expectations arising from them.
Through my doctoral studies I have developed a quantitative framework for decision-making that achieves just this. It employs the use of exploratory scenarios to test the plausible constraints of a 3-dimensional axis of uncertainty across two systems: the UK energy system; and the local climate. The responses of all market assets to the scenario descriptions can then be deduced through dynamic building simulation. Actual monthly consumption for each asset is then compared to the simulation findings. By using arbitrage pricing theory it is possible to develop a risk premium for each assets energy performance. This is achieved by evaluating the sum of: the product of the markets responses to the scenario descriptions as systematic factors and the assets specific correlated sensitivity to them; a comparison between actual and expected consumption as an idiosyncratic factor; and subtraction of the current risk free rate from all factors.
By employing such a framework, asset managers and professionals can be provided with appropriate quantitative signals as to the financial benefits of decision making to manage property energy performance.
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