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DEGREE PROJECT

IN REAL ESTATE AND CONSTRUCTION MANAGEMENT MASTER OF SCIENCE, 30 CREDITS, SECOND LEVEL STOCKHOLM,

SWEDEN 2020

ROYAL INSTITUTE OF TECHNOLOGY

DEPARTMENT OF REAL ESTATE AND CONSTRUCTION MANAGEMENT

Evaluating the economic feasibility of the Passive House in China

Jiaying Chen

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Master of Science thesis

Title Author(s) Department

Master Thesis number Supervisor

Keywords

Evaluating the economic feasibility of the Passive House in China

Jiaying Chen

Real Estate and Construction Management TRITA-ABE-MBT-20575

Berndt Lundgren

Passive House, economic feasibility, cost benefit analysis

Abstract

The Passive House as a type of energy-efficient and cost-efficiency housing, has been implemented widely around the world, and made great contribution to energy saving and environment protection. Although the Passive House requires higher investment in early stage compared to conventional houses, it has many benefits including improving indoor climate and saving energy consumption. However, the development of Passive House in China has been slow due to the lack of information regarding the extra investment and benefits. To provide a clear insight on how the extra investment and benefits of the Passive House balance each other, this study establishes an evaluation model to identify and calculate the additional costs through the life cycle of the Passive House. With the cost and benefit calculated, we can also analysis the payback period to see how many years it takes to recover the extra investment. After the model is established, we evaluated a representative Passive House in Hebei, China. The result showed that the benefits of the extra investment outweigh the additional costs, and the payback period is approximately 12 years, which is acceptable for housing projects. The evaluation model not only provides the developers and consumers a tool to understand the costs and benefits, but also illustrate the economic feasibility of Passive House in China.

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Acknowledgement

Firstly, I would like to thank professor Berndt Lungren and Sviatlana Engerstam for supporting me through the degree project. They provided lots of helpful suggestions and always guide me with patience, which is an educational experience and broaden my horizon.

Secondly, I would like to thank my family and my friends for the support during the hard times. The courage they gave me helped me through the pain and pressure.

Thirdly, I would like to thank students who are the opponents for their patience and kindness in reading my thesis and giving advices.

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Examensarbete

Titel Författare Institution

Examensarbete Master nivå Handledare

Nyckelord

Utvärdera den ekonomiska genomförbarheten hos Passive House i Kina

Jiaying Chen

Fastigheter och Byggande TRITA-ABE-MBT-20575 Berndt Lundgren

Passivhus, ekonomisk genomförbarhet, kostnadsnyttoanalys

Sammanfattning

Passivhuset som en typ av energieffektiva och kostnadseffektiva bostäder har implementerats i hela världen och har bidragit stort till energibesparing och miljöskydd. Även om Passive House kräver högre investeringar i ett tidigt skede jämfört med konventionella hus, har det många fördelar inklusive att förbättra inomhusklimatet och spara energiförbrukning.

Utvecklingen av Passive House i Kina har dock varit långsam på grund av bristen på information om extra investeringar och fördelar. För att ge en tydlig insikt om hur de extra investeringarna och fördelarna med Passive House balanserar varandra skapar denna studie en utvärderingsmodell för att identifiera och beräkna extrakostnaderna genom passivhusets livscykel. Med beräknad kostnad och nytta kan vi också analysera återbetalningsperioden för att se hur många år det tar att återfå den extra investeringen. Efter att modellen har upprättats utvärderade vi ett representativt passivhus i Hebei, Kina. Resultatet visade att fördelarna med extrainvesteringar uppväger extrakostnaderna och återbetalningsperioden är cirka 12 år, vilket är acceptabelt för bostadsprojekt. Utvärderingsmodellen ger inte bara utvecklarna och konsumenterna ett verktyg för att förstå kostnaderna och fördelarna utan illustrerar också den ekonomiska genomförbarheten hos Passive House i Kina.

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Contents

1 Introduction ... 1

1.1 Background ... 1

1.2 Statement of the problem ... 3

1.3 Research question ... 4

1.4 Purpose of the study ... 4

1.5 Delimitation ... 4

2 Literature review ... 5

2.1 What is the Passive House? ... 5

2.2 Energy efficiency of the Passive House ... 6

2.3 Cost efficiency of the Passive House ... 7

2.4 The Passive House in China ... 9

2.5 Summary ... 9

3 Theory ... 10

3.1 Life cycle of a project ... 10

3.2 Life cycle cost (LCC) analysis ... 10

3.3 Increment benefit of the additional cost ... 11

4 Method ... 12

4.1 Research approach ... 12

4.1.1 Cost benefit analysis ... 12

4.1.2 Quantitative and qualitative combined approach ... 12

4.1.3 Comparative analysis ... 12

4.1.4 Case study ... 13

4.2 Validity and reliability ... 13

4.3 Research design ... 14

5 Results ... 14

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5.1 The additional cost and increment benefit identification and calculation ... 14

5.1.1 The principle of identifying increment benefit ... 14

5.1.2 Calculation of the life-cycle additional cost of the Passive House ... 15

5.1.3 Identification and calculation of life-cycle increment benefit of the Passive House 19 5.2 The model of increment benefit analysis ... 22

5.2.1 Parameter setting ... 22

5.2.2 NPV analysis of additional cost and increment benefit ... 23

5.3 Case study ... 24

5.3.1 Project overview... 24

5.3.2 Calculation of the additional cost ... 24

5.3.3 Calculation of the increment benefit ... 27

5.3.4 Analysis of the increment benefit ... 28

6 Discussion ... 30

6.1 The potential costs saving in the future ... 30

6.2 Limitation of this study... 31

6.3 Payback period analysis ... 31

7 Conclusion ... 32

Reference ... 33

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List of Figures

Figure 1 Newly built Passive Houses in 2010-2019 (source: passivehouse-database.org) ... 2

Figure 2 Newly built Passive Houses in 2010-2019 by location (source: passivehouse- database.org) ... 3

Figure 3 Payback period of the project (i=8%) ... 30

Figure 4 Variation of payback period to discount rate (i=6%, 8% and 10%) ... 31

List of Tables Table 1 Different methods for dividing life cycle of a project ... 10

Table 2 The composition of Passive House LCC ... 11

Table 3 Costs of insulation materials for the Passive House ... 16

Table 4 Costs of ventilation system of the Passive House ... 17

Table 5 Price of common movable shading ... 18

Table 6 GHG coefficient of air pollutant ... 21

Table 7 Costs of air pollution treatment ... 21

Table 8 The additional costs in design stage ... 24

Table 9 Additional costs in energy-saving technologies ... 25

Table 10 Additional costs in indoor environment ... 25

Table 11 Additional costs in construction management ... 25

Table 12 The additional costs of the Passive House ... 26

Table 13 The increment benefit of the Passive House ... 27

Table 14 Present value of additional costs ... 28

Table 15 Present value of increment benefits ... 29

Table 16 Payback period analysis ... 29

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1 1 Introduction

1.1 Background

Greenhouse gas, represented by carbon dioxide, has been raising the temperature of the world for many years. Limiting the primary energy consumption and controlling the climate change have become the consensus of many countries (Anisimova, 2011). Under this consensus, the Passive House has developed rapidly across the world, especially in Europe, where it started.

The Passive House is a building standard that ensures comfortable indoor environment without traditional heating and cooling system (Passivhaus Institut, 2019). The passive House creatively reshapes the relationship among people, buildings and environment (Wall, 2006).

The passive house is an efficient way to reduce energy consumption throughout the building's life cycle, and minimize greenhouse gas emissions (Schnieders and Hermelink, 2006).

With the continuous growth of population and expanding of construction, China has now become one of the largest construction markets in the world. The rapid urbanization process has resulted in a booming housing and infrastructure construction market, but also caused a notable rise in building energy consumption. According to statistics, in China, building energy consumption accounts for about 20% of the total energy consumption (Huo et al., 2018). Facing the severe situation of energy shortage and environmental pollution, energy-efficient buildings are drawing more and more attention, of which the Passive House is considered seriously by both the government and developers.

Due to the vast territory of China, climate varies a lot from south to north. Buildings in the north generate heat from district heating or ground source heat pump (GSHP) to keep the indoor temperature at around 22℃. In southern China, the climate is warmer compared to the north.

Some area located in the south of the Tropic of Cancer is seldom below 10℃ even in winter.

So, there is merely demand for heating.

However, for southern cities along Yangtze River, the climate is characterized by humid and cold winter. From the perspective of meteorology, research indicates that apparent temperature (AT) is negatively correlated to humidity (Nguyen, Schwartz and Dockery, 2014). Take Shanghai as an example. The average winter temperature in Shanghai is 3℃ to 5℃, but the humidity is 40% higher than that of northern China. So, in fact, the apparent temperature that people actually feel in Shanghai is -1℃ to 1 °C. In the northern cities with the same temperature, district heating has been implemented.

In addition, there are great differences between the building structure in the north and south due to the climate. Walls in the north are generally thicker with better thermal insulation. In the south, walls are generally thin and windows are large because ventilation is valued. As a result, the indoor thermal comfort is hard to maintain in winter by insulation alone due to moisture and air flow, the most common solution is to use air conditioner (AC) to adjust the indoor temperature. Using AC for heating increases the consumption of primary energy as well as household’s expenses. Therefore, more and more people are calling for district heating in recent year. However, there is no infrastructure prepared for district heating in the south. If district

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2 heating is going to be implemented, the urban pipe network will need to be altered, and the existing building structure will need renovation as well, neither of which is easy.

Beside the feasibility of district heating in the south, the potential impact of district heating on the environment can be expected from the practice of northern China. According to the report Toward an Environmentally Sustainable Future: Country Environmental Analysis of the People's Republic of China, China accounts for seven of the world's top ten air-polluted cities, of which 6 cities including Beijing are located in the district heating area (Zhang and Crooks, 2012). According to statistics from the Beijing Municipal Bureau of Ecology and Environment, in 2012, Beijing had seven severe atmospheric pollution above level six, all of which occurred during the heating season (Beijing Municipal Bureau of Ecology and Environment, 2012). It is obvious that the emission of district heating could be one of the reasons behind the increased density of PM2.5 particle.

With the concern of both the individual comfort and environmental sustainability, the government has been exploring a way to energy-efficient buildings, among which the Passive House is drawing more attraction in recent year due to the successful implementation in Europe (Wu and Gong, 2014). In the past two decades, the passive house, as a type of energy-efficient building with low energy consumption and high comfort, has been widely developed around the world, especially in European countries (Schnieders and Hermelink, 2006; Miller, Buys and Bell, 2012; Ridley et al., 2013). China started with the Passive House a bit late, but through active international communication and cooperation, many world’s leading technologies and good experience have been learned (Zhang, 2015). There has been 46 Passive Houses built in China since 2010, when the Passive House is initially introduced in Shanghai Expo (Passive House Database, 2019). As shown in figure 1, Passive House projects has been increased up till now, over 70% of the Passive Houses are built in the past three years. Summarising all the Passive Houses by location, we found that about 65% of them are built in northern China (figure 2).

Figure 1 Newly built Passive Houses in 2010-2019 (source: passivehouse-database.org)

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3 Figure 2 Newly built Passive Houses in 2010-2019 by location (source: passivehouse-database.org) 1.2 Statement of the problem

Though developing faster than before, the Passive House is still in experimental stage in China, little known by developers and consumers. There are several barriers on the path to widely developing the Passive House in China, one of which is the concern of high investment costs (Song, Yin and Yang, 2014). Compared conventional houses, the cost of the house is higher.

On one hand, due to the lack of Passive House materials in China, the required materials to meet the standard of the Passive House can only be acquired through imports. In addition, long- distance transportation adds to higher construction costs of the Passive House. On the other hand, the use of Passive House technology will also increase the costs. Passive House technology is mainly manifested in the use of high-performance building envelopes such as better thermal insulation and airtightness, which can resist the heat loss in winter and solar radiation in summer. Those advanced Passive House technology requires extra maintenance costs and professional workers. Generally, the cost of the passive house is 5% to 15% higher than conventional houses (Audenaert, De Cleyn and Vankerckhove, 2008).

However, both developers and consumers have lots of misunderstanding for the extra investment costs, which holds the development of the Passive House back. One misunderstanding is about how much exactly the extra investment is. Due to the lack of deep understanding of the Passive House, many people think that the investment of the Passive House is much higher than that of conventional houses, which makes the Passive House a

“luxury” in people’s imagination. The other misunderstanding is due to the unclear benefits in the long run. There are still doubts about whether the Passive House is reasonable, how much economic benefits it can bring to consumers, and how long the payback period will be. With these questions remained unsolved, developers and consumers are reluctant to the choice of Passive House.

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4 1.3 Research question

Therefore, the research questions can be summarized as follows:

1. How much is the benefit compared to the additional cost?

2. To what extent can the additional costs be recovered by the benefits?

3. Is the Passive House economically viable in China?

1.4 Purpose of the study

Although the extra investment cost of the Passive House seems uncompetitive, in the long run, the additional investment costs can be recovered in the foreseeable period by reducing energy expenses (Audenaert, De Boeck and Roelants, 2010). In addition to energy savings, there are many other benefits generated from the process of construction and operation of the Passive House.

Many researchers in Europe have analysed the economic performance of the Passive House using local projects. However, only few of them presented the detailed quantification results to show how much the extra investment costs and benefits are. On the other hand, since the Passive House is climate dependent, the data of other countries can not be used for evaluating the economic performance of the Passive House in China. However, research about economic feasibility is hardly found, quantification of extra investment costs and benefits still remain blank. This study will contribute to filling the gap on lack of quantitative evaluation for the economic feasibility of the Passive House.

In this paper, the balance between additional costs and economic benefits will be analysed to evaluate the economic viability of the Passive House in China. The factors that generate extra costs will be identified and the extra costs will be calculated in detail. Also, the benefits of the extra costs will be quantified to be compared with. The model of comparing extra costs and benefits can be applied to actual Passive House projects to evaluate their economic viability and profitability. By quantifying and comparing the benefits and extra costs, the advantages of the Passive House will be clearer for consumers. The results could also provide insight as well as suggestions for the housing market on developing and evaluating Passive Houses.

1.5 Delimitation

This research is limited in China. Despite the fact that the Passive House is climate dependent, all the calculation and analysis in this research is based on China’s market and regulation.

Different countries and regions have distinct climate and regulations, it’s hard to have a general evaluation standard for all Passive Houses. Therefore, the evaluation model as a result of this research is only suitable for China.

The Passive House is the target of analysis, which means many Passive-House specific factors were taken into account. The evaluation model in this research is not simply a common model for all houses. The Passive House distinguishes itself with conventional houses in heating, cooling and ventilation. The structure, materials, even household appliances used in Passive Houses are very different, so, the Passive House should not be evaluated with general standard.

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5 In the contrary, the model for evaluating the Passive House is not applicable for other type of houses.

The economic performance is the focus of this research. The economic viability of the Passive House is what we are trying to figure out, rather than technical feasibility. There have been many Passive House projects built successfully in China, which means that it shouldn’t be a problem for China to apply the technologies of the Passive House. However, there are still many cities don’t any experience in the Passive House. Some special geographical conditions and climate might need different design strategies. Therefore, even in China, the Passive House could vary from place to place. Thus, the technical consideration of the Passive House is not discussed in this research.

In previous studies, the researches regarding the economic performance of the Passive House usually divided the projects to two types, they are newly built Passive House and Passive House renovation. Since the Passive House has just started for ten years, the focus is still on newly built Passive Houses. Therefore, we only consider the case of newly built Passive House, renovation is not taken into account.

2 Literature review

2.1 What is the Passive House?

The concept of Passive House was proposed by Bo Adamson in Sweden and Feist in Germany in 1988. The Passive House is a type of building that maintains the high level of indoor thermal comfort with minimum energy consumption (Dorer, Haas and Feist, 2005). The purpose of the Passive House is to limit the utilization of conventional heating and cooling system so that the primary energy consumption as well as greenhouse gas emission would decrease (Audenaert, De Cleyn and Vankerckhove, 2008).

The Passive House is not only a type of house, but also a design strategy. As the Passive House Institute defined, a Passive House should have the following characteristic (Schnieders and Hermelink, 2006):

- Space heating demand: < 15 kWh/(m2yr) - Heating load: < 10 W/m2

- Air change rate: < 0.6 h-1 @50 Pa

- Total primary energy demand for domestic hot water and appliance: < 120 kWh/(m2a) To achieve these targets, several typical energy-efficient measures are implemented in the Passive House. Since heating accounts for the largest part of energy consumption, increasing heating efficiency is the major goal. Improved insulation and airtightness of envelope, elimination of thermal bridges and triple glazing window well protect the heat from leakage.

Proper orientation ensures the house can be heated by sun in winter and protected from sun in summer. Heat recovery ventilation provide indoor climate with fresh air without letting the heat out (Feist et al., 2005).

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6 2.2 Energy efficiency of the Passive House

The considerable energy saving of the Passive House can be largely credited to thermal insulation. Aksoy (2012) analysed the relation between energy saving and thickness of wall.

He found that energy saving can range from 18% to 78% for different thickness. It’s obvious that increasing thickness would result in higher costs. So, the payback period of insulation ranges from 1.69 years to 2.89 years.

The energy efficiency has been studied by comparison between the Passive House and conventional houses. Liang et al. (2017) compared a conventional house with a Passive House in UK. They found that the Passive House can maintain a warmer indoor temperature by consuming only about one third of the primary energy used by the conventional house. To reveal the energy efficiency of the Passive House further, the authors implemented the Passive- House renovation on the conventional house by simulation. The results showed that energy consumption was reduced significantly.

A research in Sweden showed that the operation phase accounts for the largest part of primary energy use of a house, no matter if it is a conventional house or a passive house. With the material remained the same, the passive house cuts the green house gas (GHG) emission of the conventional house by 51%, with slightly increased GHG emission in production phase of 4%

(Dodoo et al., 2019).

In the report Passive Houses in Sweden: From Design to Evaluation of Four Demonstration Projects, four passive house projects are analysed, three of which are apartment buildings. Data of the project in Alingsås showed that the energy use was decreased by 60% after being renovated to passive house standard. The rent of passive houses is higher than conventional houses, but the improved service and indoor comfort made the price acceptable, as many tenants said when being interviewed (Janson, 2010).

Passive Houses are climate-dependent, they have different performances under distinct climate.

Some researchers ran a simulation to analysed how the Passive House works in the cold weather in Norway. They found that the Passive House depends strongly on the local climate. The distinct space heating load between different locations can be 2.5 times. The lowest annual space heating load in this research occurred in Oslo, which is even 3 times higher than the value of Zurich. It is obvious climate has great impact on the Passive House (Dokka and Andresen, 2006).

In a research paper, the Passive House and the conventional house are compared regarding life- cycle performance. The data showed that there is a major decrease in energy demand for space heating of 68%, which accounts for the largest part of energy saving in the Passive House. The results indicated that the difference between the heating system of the Passive House and the conventional house which takes the credit for the energy efficiency of the Passive House (Dahlstrøm et al., 2012).

In Romania, the Passive House saves even 84% more heating energy, more than 50% primary energy demand, than local energy efficient design. The investment in the Passive house is about 27% higher than in conventional energy efficient houses in Romania. The authors also found that the life cycle costs depend on energy price (D Dan et al., 2016).

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7 A research done by Dodoo et al. (2010) showed that a renovation to Passive House standard increases the primary energy use in construction phase, but the extra energy consumption would be recovered within four years after the house is operating. The authors also found that the primary energy saving is larger when the original house adopted electric heating.

2.3 Cost efficiency of the Passive House

Hyland and his colleagues (2013) confirmed that there is price premium in energy efficient properties, which means consumers value the energy efficiency of properties. In addition, buyers of properties are willing to pay more than tenants are. In this research, the costs of technical input or renovation investment are not taken into account. The authors addressed that energy efficiency would not only save energy costs but also raise the value of properties.

Banfi and his team (Banfi et al., 2008) also studied the extent to which consumers would be attracted by benefit of energy-saving houses and purchase them. The authors concluded that house owners or tenants tend to accept the higher price for houses with energy-efficient measures. Meanwhile, the costs of improving energy efficiency is lower than the value that people are willing to pay. Although the researchers may overestimate consumers’ willing to pay, it is still economically viable to develop or purchase energy-efficient houses.

Many researcher concluded that to achieve the energy-saving goals, there are two main factors in Passive-House design, they are insulation and airtightness, which generally refer to thickness, materials of walls and types of windows (Persson, Roos and Wall, 2006; Citherlet and Defaux, 2007; Koroneos and Kottas, 2007; Utama and Gheewala, 2008). So, when comparing the costs of Passive Houses and conventional houses, the parameters of walls and windows should be considered.

Kiss investigated the transaction costs in Passive House renovation, he founds that transaction costs of Passive-House renovation is higher than that of conventional renovation, which is because people are not familiar the concept and technologies (Kiss, 2016).

Badescu found different optimal economical space heating solution for different operation period, depending on how long the system is going to be used (Badescu, 2007). This indicates that when building a new Passive House or making Passive-House renovation, the operation time should be considered.

Saari and colleagues tried to find alternative design for a detach house in Finland to see how its energy efficiency can be improved and how the life-cycle costs can be minimized. They found that the payback period varied with the change of real interest rate and energy price growth rate (Saari et al., 2012).

Tokarik and Richman analysed an as-built Toronto house to find out how the life cycle costs could have been optimized (Tokarik and Richman, 2016). They found that investment in passive energy efficiency improvement is attractive only when the discount rate is low and fuel price faces major increase.

Galvin took a different perspective when studying economic viability of passive house. Rather than model-based approach, he used reality-based and subjectivist approach to investigate if the Passive House is a good idea for investors. He offered a decision-making process where

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8 investors choose the figure for parameters, like their best guess about fuel price and expected discount rate (Galvin, 2014).

Audenaert and his colleagues compared three different building types, which are standard house, the low-energy house and the passive house. They analysed the energy costs and cash flow to see their profitability. They suggested that government should aid with subsidies to make passive house more attractive to investors (Audenaert, De Cleyn and Vankerckhove, 2008).

Ekström and his colleagues (2018) compare cost efficiency of renovating an old single-family house to three different level, including the Passive House level. The results indicate that for different reference houses, the Passive-House renovation reduces the energy use by about 65%

and bought energy by 90%, which is especially beneficial when energy price is growing potentially. The authors also evaluated the energy costs when applying different heating systems, the annual energy costs of Passive-House renovation is about 33% to 46% less than that of renovating the original house to building regulation level. However, the high investment cost is also an inevitable problem in Passive-House renovation.

Schnieders and Hermelink (2006) analysed over 100 dwellings and proved that the Passive House is sustainable and viable both ecologically and economically. In their research, the costs of energy saved are calculated. Compared to the costs of conventional dwellings, Passive Houses save 6.2 Cent/kWh in heating. This saving would be even more attractive under the situation where energy price is increasing. Also, the authors expected the investment costs of the passive house will decrease in the future with scale production.

Polish researchers used life cycle costs (LCC) method to analysed different energy saving installation alternatives. They found that although traditional installation has very low investment costs, it generates highest operation costs in the long run compared to other installation alternatives. The life cycle costs are lowest when the heat is generated from solar panel and the rainwater is collected for non-potable uses. This passive house design reduced energy and water consumption as well as GHG emission (Stec et al., 2017).

The extra investment costs of the Passive House include improving insulation in the wall, ground and roof, windows, ventilation system, heating distribution system, etc. The triple glazing windows in the Passive house cost 48% more than typical windows in the conventional house, but the costs will decrease if the scale production comes to realize. The heating distribution system in the Passive house costs 75% less than in the conventional house, which is due to the considerable reduction in peak heating load and the amount of radiator in the house (Feist et al., 2005).

The extra costs of the Passive House also include the test for air tightness, which is unnecessary for the conventional house. The average total construction cost is approximately 980 Euro/m2. The extra costs of the Passive House in this research vary from 6808 Euro to 10258 Euro, depending on the house type, which account for about 12.6% of the pure construction costs. If the house was constructed according to the Passive House standard only, the proportion would be around 8.5%. The extra costs in this project are higher because the solar thermal system is installed, which is not included in the Passive House standard (Feist et al., 2005).

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9 Adrian et al. (2014) performed a life-cycle analysis on a specific project in Romania. They use the data to create an economic model of the houses. They concluded that the additional investment of energy-efficient measures compared to standard houses can be recovered within 16 to 33 years, depending on different economic scenarios. With the best expectation of economic conditions, the payback period would be the shortest among all scenarios.

Researchers in Belgium compared passive house with standard house to find out the difference in economic viability. They found that investments in insulation is profitable through the life cycle and it can be recovered within 10 years (Audenaert, De Boeck and Roelants, 2010).

Another group of Belgian researchers study specifically about the economic performance of heating system in passive houses by using cost-benefit analysis. They concluded that the Passive House is efficient both economically and environmentally under the scenarios with low discount rate and increasing energy price (Georges et al., 2012)

2.4 The Passive House in China

Schnieders et al. (Schnieders, Feist and Rongen, 2015) simulated different Passive Houses in distinct location across the world and concluded that the Passive House can be implemented in almost everywhere in the world without limiting the design, but the details should be altered corresponding to local climate and other specific condition. Shanghai is also discussed in this research; the humidity is considered to be a major concern in design. The heating demand of Shanghai is the lowest among four reference cities that need heating in winter, and the cooling demand is moderate in all six cities. However, the dehumidification demand is the second highest, which means dehumidification should be the focus of Passive House design. The overall energy saving compared to conventional house in Shanghai is about 87%.

2.5 Summary

According to existing studies, the Passive House has proved its efficiency in saving energy.

Compared to conventional houses, the energy demand and greenhouse gas emission is reduced considerably, and the indoor temperature is well maintained at the same time. Among all the energy savings, space heating accounts for the largest part. One of the reasons behind the low energy consumption of the Passive House is its climate dependency. The design and performance of the Passive House vary with the change of location and climate. Though saving energy during operation stage, the Passive House increases the energy uses in construction. But the extra energy consumption can be offset by the energy saving in operation.

The energy efficiency of the Passive House requires extra investment, since it is achieved by superior performance of thermal insulation, windows, ventilation with heat recovery, etc. Some researchers have investigated the payback period and benefit of the extra investment. The payback period could change with the variation of interest rate and energy price. Most of the researchers agree that the Passive House is more attractive when the interest rate is low and energy price is increasing. The extra investment will result in higher price or rent, but it was found that the performance of the Passive House is satisfying for consumers and the price premium will be acceptable. The extra investment was estimated to be recovered within 30 years. The Passive House is economically viable according to many successful experiences in as-built projects in Europe. However, studies regarding the Passive House are scarcely found in China, not to mention researches about economic feasibility. Also, the exact benefits and

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10 extra investment of the Passive House are not well sorted and located in the life cycle of a house, which makes the Passive House “abstract” for developers and consumers.

3 Theory

3.1 Life cycle of a project

The life cycle theory was first used in product manufacturing, and has been widely applied in many fields, such as politics, economy, and society. Just like the process “from cradle to grave", a product has its own life cycle from being produced to sold. At the beginning, materials are obtained, through the process of manufacturing and assembling, the target product is made and then transported, sold. Finally, the product is retired as it wears out (Hertwich, 2005).

By introducing the life cycle theory into the construction industry, buildings are regarded as unique products. The costs and benefits are analysed comprehensively from the aspect of life cycle. Relevance and coordination between things are valued in order to optimize the plan as well as benefits. Currently, the standard of dividing life cycle in construction industry of China varies according to different purposes, which is presented in table 1.

Table 1 Different methods for dividing life cycle of a project Dividing standard Work involved

Three-stages Planning, design and construction stage

Four-stages Planning, design, construction and operation stage

Five-stages Planning, design, construction, operation and disposal stage Six-stages (for

quantity survey and cost measurement)

Investment estimation, preliminary design budgeting, construction drawing budgeting, bidding, construction, completion settlement and account stage

This research aims to explore the extra costs and cost benefits of a Passive House, where detailed identification and classification of different costs are necessary. Therefore, the five- stages dividing standard is used to divide the entire life cycle of a Passive House into planning stage, design stage, construction stage, operation stage and disposal stage.

3.2 Life cycle cost (LCC) analysis

The definition of LCC was first given by the US Department of Defense: LCC is the discounted costs generated within a certain period when a single building or construction project was owned, operated, maintained (Sherif and Kolarik, 1981). Subsequently, many researchers gave different definitions according to different research objects. Fabrycky and Blanchard (1991) believes that LCC occurs from project planning to the end when the project is scrapped, and different costs are generated at different stages. Alting (1993) divides the LCC into company cost, users cost and society cost according to different participants. The time they appear is different, and the content involved is also distinct. Dimtri et al. (2005) proposed that LCC is the cumulative discounted value of the costs incurred during planning, design, construction and renovation of a project.

According to previous research of LCC and the characteristic of the Passive House, the composition of LCC of the Passive House is summarized, as shown in Table 2.

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11 Table 2 The composition of Passive House LCC

Stage Company cost Users costs Society cost

Planning Market research, feasibility study

Design and preparation

Survey, design, bidding, land, qualification application, upfront costs, etc.

Construction

Equipment, construction, installation, management, labour, financial expenses, etc.

Municipal administration, environment Operation and

maintenance Maintenance costs

Energy consumption, appliance

depreciation and replacement

Municipal administration, environment Disposal and

demolition Recycling, scrapping

Municipal administration, environment 3.3 Increment benefit of the additional cost

The increment benefit of the Passive House is generated in comparison. Under the same laws, regulations, building codes and production level, the extra investment, which occurs at all stages of the life cycle compared to the reference house, is what we refer to as the additional cost of the Passive House. When analysing the additional cost of the Passive House, the general energy- saving building is introduced as the reference building. It refers to the building with normal residential functions, the energy consumption of which is reduced by using some eco-friendly materials. In contrast, the Passive House adopts passive technologies and high-performance materials to meet the requirement of energy saving and indoor comfort. The part of cost that is higher than the general construction cost is considered to be the additional cost of the Passive House, which mainly includes the design, consulting and certification costs in early stage, technical cost and management cost in construction, and various expenses incurred during the operation and maintenance phase.

The increment benefit in this research is the benefit generated from extra investment on the Passive House. When the extra technologies, materials and services are invested, the cost benefit will change. The difference between the cost benefit of the Passive House and the reference house is the increment benefit. The increment benefit of the Passive House can be divided into two parts: direct and indirect benefit. Direct benefit mainly refers to the economic benefit of the Passive House, which is reflected in energy, water, material and land saving. The actual value of the direct benefit can be determined by calculating the corresponding parameters.

On the other hand, indirect benefit mainly includes social benefit and environmental benefit, they the positive impact on people and environment from the Passive House. The indirect benefit is generally difficult to measure in quantitative way, so it needs to be analysed through the combination of qualitative and quantitative method. By combining the direct benefit and the indirect benefit, the life-cycle comprehensive increment benefit of the Passive House is obtained.

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12 4 Method

4.1 Research approach 4.1.1 Cost benefit analysis

The model of CBA (cost-benefit analysis) will be used as the main theory in this study, accompanied by life-cycle costs analysis. The concept of CBA was firstly put out by Jules Dupuit in 1848, and was formalized later by Alfred Marshall (Pearce, 1998). Jules Dupuit initially used this method by calculating the "social rate of return for projects such as road or bridge construction". CBA has been used to measure the social benefits in many infrastructure projects ever since. After second World War, the topic of "improving government efficiency"

was under lot of pressure, and people were looking for ways to ensure that public funds were effectively utilized for major public investments. This led to the start of a fusion of new welfare economics, which is actually cost-benefit analysis. The development of CBA has been through much fluctuation since the 1960s, but it has become the major method to evaluate public projects in nowadays.

Pearce and his colleagues (2006) link the sustainability with CBA for the first time in their publication, which is very suitable for this research. Therefore, the improved theory of CBA will guild the analysis of economic feasibility of passive house. This book highlights that it is not efficient to make sustainability a goal of macroeconomic development. Since CBA is capable of managing project portfolios, which might end up in a meaningless situation where the negative effect on the environment of a project is compensated by the positive effect of another one. Instead, the approach of “weak sustainability” is put forward to solve the problem.

It focuses on assets check for individual project, therefore compensates for the weakness of traditional CBA, which is that too little wealth is left for next generation (Pearce, Atkinson and Mourato, 2006). The concept of sustainable CBA method is in line with environmental problems, the core of which is to create a sustainable world for future generations.

4.1.2 Quantitative and qualitative combined approach

The application of the combination of qualitative and quantitative approaches avoids the excessively subjective conclusions caused by purely qualitative analysis or quantitative analysis, and ensures the reliability and validity of the research results. This paper determines the influence factors of additional costs and its efficiency of the Passive House through qualitative analysis approach, and quantitatively analyses the cost-effectiveness by calculating the distinction between additional costs and savings.

4.1.3 Comparative analysis

The comparative analysis approach is widely used. It is an analysis approach by comparing a certain parameter with its corresponding evaluation standard, or comparing the distinct parts between the same type of things. This research compares the cost efficiency and energy efficiency incurred in the life cycle of the Passive House and general energy-saving buildings, so as to evaluate the extra costs and savings of the Passive house and if the savings worth the additional investment.

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13 4.1.4 Case study

Case study is a research approach to improve the understanding of a phenomenon in real-life context, the analysis of which is carried out on the basis of theory developed prior to the case study. The purpose of case study is to develop or test the theory. Case plays a distinctive role in evaluation research, the most important application is to explain the rationale behind the observed phenomenon (Yin, 2009).

According to Yin’s theory about case study, a single-case study is not as unreliable as some critics said. The generalization of single-case study is analytic-based, rather than statistical- based. Many researchers have tried to cover broader theories from single-case studies. There are five rationales for single-case design, one of which is a representative or typical case. For example, Robert and Helen Lynd studied a small town in America as a “average town” to demonstrate an important development in the history of America (Yin, 2009).

The Passive House has been proved to be economically viable according to many researches.

In this thesis, this phenomenon is observed and studied in the real-life context of China. Theory to evaluate the economic feasibility of the Passive House is developed before the case study.

According to Yin’s theory about designing single-case study, the third rationale for single case is a representative case (Yin, 2009). Thus, a Passive House project in Hebei was chosen as the typical Passive House in China to test the evaluation theory, in order to find out the extent of economic viability. The Passive House project selected in the case study located in the province with most Passive House in China, the type is residential building, it can be considered as a representative Passive House for this study. The result of evaluation should explain the average performance of Passive House in China.

By using the process in this research to calculate the additional costs and savings of the selected as-built project over the entire life cycle, the cost-effectiveness and economic viability of the project will be analysed and discussed. This process also can be used to verify whether the approach of evaluating the cost efficiency of the Passive Buildings based on life-cycle costs is feasible.

4.2 Validity and reliability

Cost-benefit analysis has been implemented in public projects since 1960s, it is considered as an efficient tool to evaluate a project and make good investment choice (Kirkpatrick and Weiss, 1996). In China, cost-benefit analysis is widely used in power grid planning, infrastructure projects, housing projects, etc. Cost-benefit analysis as an appraisal approach has been proved to be suitable for public projects, especially for those newly introduced and lack of experience, like Passive House. Evaluating the Passive House projects with cost benefit analysis ensures the consistency with other energy-efficient housing projects in China, which makes it easy to be compared with.

Case study in this thesis is used to test the model proposed for evaluation. A representative Passive House project is selected to be evaluated. The single-case study is carried out because, currently China is still lack of experience in Passive House, the total number of built Passive House projects is only 46, most of which are residential buildings. The selected project locates in the province where accounts for the largest part of the as-built Passive House. It is also a

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14 sample project supported by government. Therefore, we consider the project as representative, and informative enough to reflect the average level of Passive House in China. Thus, the cost benefit analysis and case study used in this thesis is valid and reliable.

4.3 Research design

In the context of the development of China's construction industry, this research bases on life- cycle costs analysis and identifies the additional costs and increment benefit of the Passive House at different phases. The research is divided into the following four parts:

• Theoretical research on cost-effectiveness of the Passive House. In this part, the key concept and main technologies of the Passive House as well as LCC and cost efficiency theory are further studied, the composition of life-cycle cost is identified. This research is carried out on the basis of these theories.

• Identification and calculation of additional cost and increment benefit factors. The life cycle of the Passive House is divided into four stages: planning, design, construction and operation. The additional cost and increment benefit are identified in every stage, a process is created to estimate the life cycle increment benefit.

• Research on cost-benefit analysis model of the Passive House. According to the principles of engineering economics, the additional costs and increment incurred during the entire life cycle are discounted to the initial stage of the project and the corresponding net present value (NPV) is obtained. A cost-benefit analysis model is established to quantitatively analyse the incremental costs and its cost benefits of the Passive House the relation between.

• Real project case study. A specific Passive House project is selected as the research object. By applying the analysis model proposed in this research to the project, the economic benefits of the project are analysed, and the rationality and validity of the model is in turn verified.

5 Results

5.1 The additional cost and increment benefit identification and calculation 5.1.1 The principle of identifying increment benefit

1) Life cycle principle

The increment cost benefit analysis of the Passive House aims at reliable and valid results to promote the development of the Passive House in China. The costs and benefits should be investigated based on life cycle theory. Comprehensive analysis of all costs and benefits generated from different stages from planning to disposal should be performed, and then studied at a certain point in time.

2) With and without comparison principle

The identification of additional costs and increment benefits should not be aimless and arbitrary, a specific reference house is necessary. The reference house in this research is the general energy-saving building. By analysing the technology, material and service in the life cycle of Passive House which are different from in the reference house, the

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15 actual effects under scenarios with and without these differences are compared and quantified.

3) Relevance effect principle

When analysing increment benefits, not only the direct and internal benefits should be considered, such as the economic benefits of energy saving and material saving, but also the indirect and invisible benefits, which refers to social benefits and environmental benefits that improve people’s life and environment.

5.1.2 Calculation of the life-cycle additional cost of the Passive House 1) Additional costs C1 in planning stage

The main work involved in planning phase is to conduct feasibility studies on the project to evaluate the viability of different plans from the aspects of technology, economy and policy. Compared to general energy-saving buildings, the Passive House are closely related to the local climate and environment (Schnieders, Feist and Rongen, 2015).

Therefore, in order to maximize the energy efficiency of the Passive House, detailed investigation and analysis on climate and environment is needed. At the same time, experts must be invited to demonstrate the construction plan from technical and economic aspects. Therefore, the additional costs of the passive building in the planning stage is mainly consist of the environmental survey fee Csurvey and consulting fee Cconsulting. The formula is expressed as:

C1 = Csurvey + Cconsulting (1) 2) Additional costs C2 in design stage

The design stage is the core stage that determines the performance of the final product of the construction. With the cooperation of the professional design team, the building is displayed and simulated through drawings or models. At this stage, the cost of the Passive House increases mainly in three aspects: the increase in design costs, the cost of assistant software simulation and the cost of obtaining the Passive House certification.

Since the Passive House is greatly dependent on the environment, it’s important to suit the Passive House design to the local climate. Special design is hence needed to meet the requirements of the Passive House standards, which makes the participation of professional teams essential. This part of the increased design cost is referred to as additional design cost of the Passive House Cdesign.

The design stage also involves optimization of the scheme to ensure that the building meets the certification standards for the Passive House. Software like designPH are necessary to simulate the building environment and calculate the energy consumption.

By building models in software, the light, wind and thermal environment around the building are simulated and the performance of the building is tested so as to optimize the design and construction plan. The additional cost of the simulation and software use is denoted as Csimulation.

The most authoritative Passive House certification is the PHI certification, now a PHI certification center has also been established in China. According to the requirements of the Passive House certification, the cost is mainly composed of three parts:

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16 registration fee, operation icon fee and icon design fee (Bastian, Zeno; Arnautu, Dragos;

Schneieders, Dr. Jürgen; KaufmannDr. Berthold; Mikeska, Tomas; Peper, Søren;

Radeva, 2018). The overall expenses on certification is denoted as Ccertification.

To sum up, the additional costs of the Passive House in design stage can be express as:

C2 = Cdesign + Csimulation + Ccertification (2) 3) Additional costs C3 in construction stage

An important factor that effect the choice to buy a house or not is the selling price.

Compared with general energy-saving buildings, the Passive House have always been considered as expensive houses that ordinary people cannot afford. The increase in construction costs has actually led to higher house prices, and results in reluctant behaviour of consumers. This part analyses the reasons behind the higher costs from three aspects: energy-saving technology, indoor environment and construction management.

• Additional costs C31 in energy-saving technology a. Envelope insulation

The Passive House has quite a high standard for insulation, which is implemented on the roof, exterior walls and basement, etc. By conducting the market survey, the price of several insulation materials is shown in Table 3. The reference to compare with is the price of the most commonly used polystyrene board with the same thickness. By calculate the actual amount of insulation, and the difference between the cost of insulation material for the Passive House and for the conventional house, the additional costs of insulation can be determined.

Cinsulation can be calculated with formula 3:

𝐶𝑖𝑛𝑠𝑢𝑙𝑎𝑡𝑖𝑜𝑛 = (𝑉1− 𝑉̅) × ∆𝑆 (3)

Where 𝑉1 is the price of insulation material of the Passive House, 𝑉̅ is the price of insulation material of conventional energy-saving buildings, and ∆𝑆 is the total area covered by insulation.

Table 3 Costs of insulation materials for the Passive House Type of insulation materials Average price

(Yuan/m2) Price composition

Rockwool (200 mm) 300 Labour, materials

and machinery costs are included

Polyethylene foam (200 mm) 420

Extruded polystyrene (200 mm) 550 b. Solution to thermal bridge

The thermal bridge should generally be eliminated in the design stage, because it would be more difficult to deal with during construction. The main reasons for the thermal bridge during the construction stage are insulation penetration caused by component installation and insulation dislocation resulted from mistakes in construction. To handle the thermal bridge problem, infrared imaging will be used to find energy weak points, and detailed measures will be taken according to specific condition. So, the additional cost spent in handling thermal bridge is given by Cthermalbridge.

References

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