Government subsidy strategy for public-private-partnership retrofit buildings in China

To reduce energy consumption, governments have introduced public-private partnerships in energy efficient retrofits (PPP-EER) of existing public buildings. However, this initiative has received a mixed response from private investors. Government investment subsidies effectively attract private investors, but the current literature does not specify how to choose an appropriate subsidy strategy. To address this gap, this study aims to develop a new and reasonable subsidy strategy for promoting immediate investment and sustainable implementation of PPP-EER projects from a government perspective. Real option theory was adopted to simulate and evaluate the subsidy strategy in PPP-EER projects. The results of the simulation show that the deferred option has a significant impact on the project value and helps attract immediate private investment. Subsidies should be implemented according to certain retrofit measures. This research is the first attempt to calculate the project deferred option value in a subsidised PPP-EER project and improves knowledge of government subsidy strategies. (c) 2021 Elsevier B.V. All rights reserved.