Energy system savings largely offset the costs of urban building energy efficiency improvements in China

Abstract

Improving building energy efficiency is critical for urban decarbonization, yet its system-level costs and benefits remain insufficiently quantified. Here we conduct a cost–benefit analysis of demand-side energy efficiency upgrades in China’s urban buildings from 2020 to 2050 by integrating building stock dynamics, energy simulation and power system planning models. Results indicate that energy system savings (for example, reduced capital and operating costs for the power grid as well as reduced fuel costs) largely offset the associated investment costs (for example, heating and cooling equipment and building envelope energy efficiency), even without accounting for additional social and environmental co-benefits. However, a key barrier to implementation lies in the misalignment between cost bearers and beneficiaries. Although system-wide savings reduce overall electricity supply costs and benefit ratepayers and society, the investment costs are borne primarily by developers and homeowners. This imbalance highlights the need for policy interventions, including financial incentives and reforms to district heating pricing, to enable large-scale adoption and accelerate urban building decarbonization. This study analyzes the costs and benefits of urban building energy efficiency improvements in China from 2020 to 2050. The results reveal strong cost-effectiveness as well as a mismatch between who pays and who benefits, highlighting the need for policy intervention.