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

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-20575Berndt 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.

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.

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-20575Berndt 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.

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

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

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

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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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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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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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.

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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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).

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

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).

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

Schneieders, Dr. Jurgen; 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 − ��) × ∆𝑆 (3)

Where 𝑉1 is the price of insulation material of the Passive House, �� 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.

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c. Solution to airtightness

The reasons for the substandard airtightness mainly lie in design stage and

construction stage. The air leakage points can be found by hands, candles or leak

detectors. The gaps between various wire boxes and component joints embedded

in the middle are repaired in time, and the cost is recorded as the incremental

cost of airtightness treatment. Cracked block walls and gaps at the joints of

components should be mended promptly. The cost spent in airtightness is

denoted as Cairtightness.

d. Use of renewable energy

The most commonly used renewable energy includes solar energy, wind energy

and geothermal energy. To use these energy, corresponding energy collectors

are needed. By installing solar panels on the roof, solar energy can be converted

to electricity. In the Passive House, this part of electricity is often used to provide

domestic hot water. In some regions with geothermal resources, ground source

heat pumps (GSHP) is buried underground and connected to household

appliance, which maintains the indoor temperature and provides hot water. The

technologies above are rarely used in conventional energy-saving buildings,

since they are supported by considerable labour and machinery costs, which is

the additional cost of renewable energy utilization in the Passive House, denoted

as Cutilization.

Above all, the additional costs of energy-saving strategies can be summarized as

following:

C31 = Cinsulation + Cthermalbridge + Cairtightness + Cutilization (4)

• Additional costs C32 in indoor environment

a. Ventilation

Ventilation plays an important role in the Passive House. Clean and fresh air

keeps the residents healthy and comfortable. The major target of ventilation in

the Passive House is to maintain the air quality as well as thermal comfort indoor,

which is supported by ventilation system with heat recovery. The price of

ventilation with and without heat recovery are shown in table 4. The additional

cost in ventilation including installation fee is denoted as Cventilation.

Table 4 Costs of ventilation system of the Passive House

Type of ventilation Average price (Yuan/m2) Price composition

Simple ventilation 60 Labour, installation

and machinery

costs are included Ventilation with heat

recovery 115

b. Noise protection

Gaps are most likely to be found in doors and windows, they can be resulted

from the quality of construction, the components being not tightly combined

during installation or natural erosion. The gaps not only cause heat loss, but also

reduce the noise protection of doors and windows. The Passive House standard

requires high quality of materials for doors and windows, especially windows.

18

Triple-glazed windows are hence installed in the Passive House, which prevent

the indoor from noise and heat loss. The additional cost compared to

conventional doors and windows is denoted as Cnoise, which mainly includes the

difference in the price of materials.

c. Shading

To minimize the energy required for cooling in the summer, appropriate shading

is needed in the Passive House. Automatic movable shading is usually installed

on south facing windows and change and adjusts according to the height of sun

and the indoor temperature. Automatic movable shading is rarely seen in

conventional energy-saving buildings, where stationary shading or manual

shading are more common. The price of two types of common movable shading

is shown in table 5. The additional cost in shading is Cshading, it is calculated by

multiplying the area of shading and its price.

Table 5 Price of common movable shading

Type of shading Average price

(Yuan/m2) Price composition

Aluminium alloy electric roller blind 800 Equipment and

installation costs Aluminium alloy electric blind 1,200

d. Indoor environment monitoring

In order to ensure that the indoor environment of the Passive House stay

comfortable, an intelligent monitoring system is adopted. When the temperature

is lower than 20 °C or higher than 26 °C, the monitoring system alarms, and the

host at the air inlet of the ventilation system is used to heat or cool the air. When

a gap in the insulation layer causes heat loss, the monitoring system can locate

the gap, and the gap can be handled as soon as possible. The increased cost of

this part is denoted as Cmonitoring.

Above all, the additional costs spent in improving the indoor environment can be

summarized as following:

C32 = Cventilation + Cnoise + Cshading + Cmonitoring (5)

• Additional costs C33 in construction management

The construction process of the Passive House is more complicated compared to

conventional energy-saving buildings, and many details need to be considered and

handled properly during construction. Also, the construction and management team

should be selected with a higher standard, in order to control the quality of

construction. So, the cost of construction management is higher than that of

conventional energy-saving buildings. The increased cost of construction

management of the Passive House is denoted as Cmanagement.

Above all, the additional costs in construction stage of the Passive House can be

summarized as following:

C3 = C31 + C32 + C33

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= Cinsulation + Cthermalbridge + Cairtightness + Cutilization

+ Cventilation + Cnoise + Cshading + Cmonitoring

+ Cmanagement (6)

4) Additional costs C4 in operation stage

During the life cycle of a building, operation accounts for the largest part of time.

Compared to various additional measures taken in the construction stage, the major

factor that increase the cost during the operation stage is the regular repair and

replacement of equipment, such as replacing the filter in the ventilation system timely

to avoid shortage or pollution of fresh air supply driven by blocked filter mesh.

• Additional cost in equipment repair

During the operation stage, the performance of equipment will inevitably decline

due to long-term wear and tear or other external effect. Therefore, regular check and

repair are necessary. For example, solar power generation devices require inspection

once a month, and the accumulator should be replaced every 1 to 2 years; the

ventilation system generally needs to be inspected once every 3 to 6 months to clean

the air inlet and filter; the maintenance of the envelope includes damage and erosion

on the insulation, and gaps in the doors and windows. The additional cost spent in

repair is Crepair.

• Additional cost in equipment replacement

When the equipment’s service life expires, it needs to be replaced in time. The

service life of solar power modules is about 20 years; the service life of the

ventilation system is generally about 15 years; the service life of the ground source

heat pump (GSHP) is 10 to 15 years, ranging according to the degree of maintenance.

The expenses of replacing the equipment in the Passive House consist the additional

cost Creplacement.

Above all, the additional cost in operation stage can be summarized as following:

C4 = Crepair + Creplacement (7)

In summary, the additional cost of the Passive House can be expressed as:

C = C1 + C2 + C3 + C4 (8)

5.1.3 Identification and calculation of life-cycle increment benefit of the Passive House

1） Composition of increment benefit

After decades of development and research, the benefits of the Passive House are

becoming increasingly obvious from the perspective of life cycle. The benefits can be

analysed from three aspects: economic benefits, environmental benefits, and social

benefits.

• Economic benefits

Compared to conventional energy-saving buildings, the economic benefits of the

Passive House are mainly reflected in the construction stage and operation stage.

Since the Passive House does not require traditional heating, cooling, humidification,

etc., the equipment and materials for those services are reduced during the

construction stage. During the operation stage, most of the primary energy use is

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replaced by renewable energy, which saves a lot of energy cost. From the

perspective of life cycle, energy savings bring great economic benefits. Meanwhile,

the government's subsidy can also offset part of the additional cost.

• Environmental benefits

The Passive House benefits the environment from two aspect: reduce greenhouse

gas emission, and less construction waste due to extension of life span. On one hand,

primary energy consumption is optimized in the Passive House, and it is expected

to be zero in the future. As a result, the greenhouse gas emission declines to a very

low extent. On the other hand, the quality requirements of the Passive House are

strict. The damage to the structure of the building during operation is smaller than

the life span of the building will be longer than that of conventional energy-saving

buildings, reducing the environmental pollution caused by the construction waste.

• Social benefits

Social benefits can be divided into macro and micro benefits. From a macro

perspective, the promotion and implementation of the Passive House raise people’s

consciousness of the importance of environment and energy, thus stimulating the

development of other energy-saving industries. The Passive House also changes the

life style, accelerating the goal of sustainable development of China. From a

microscopic perspective, the Passive House creates a more comfortable indoor

environment with constant temperature and humidity, which improves the quality

of life for people.

2） Calculation of increment benefit

• Economic benefits S1

a. Economic benefits of energy saving

When calculating the economic benefits of energy saving, it is assumed that

heating, cooling, lighting and other household appliances consume electricity.

Thereby the annual electricity consumption of conventional energy-saving

buildings can be calculated, as well as the annual energy consumption of the

Passive House. Then, the economic benefits of energy saving Senergy can be

computed using the following formula (Georges et al., 2012):

𝑆𝑒𝑠 = ∑ 𝑐𝑖𝑛𝑖=1 × (𝑄𝑖1 − 𝑄𝑖2) (9)

Where ci is the price of electricity in year i, Qi1 is the electricity consumption of

conventional energy-saving buildings in year i, and Qi2 is the electricity

consumption in year i.

b. Economic benefits of material saving

In comparison, the indoor climate is controlled by ventilation system in the

Passive House. As a result, the equipment and materials needed are reduced

during the construction stage, also the building area is increased due to the

reduction in cooling, humification and heating equipment, such as air

conditioning. The reduction in material and equipment is considered to be the

economic benefits in the construction stage, which is Sreduce.

During the operation stage, the Passive House chooses high-quality, high-

performance materials and equipment, such as thermal insulation materials with

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high fire resistance, corrosion resistance, and sound absorption, and doors and

windows with good airtightness, durability, and sound insulation. In the long run,

the implementation of high-performance materials reduces the waste of

materials as well as the waste of energy due to the tear and wear of materials and

equipment. The economic benefit of using these high-performance materials is

denoted as Suse.

Therefore, the economic benefits of material saving are summarized as

following equation:

Sms = Sreduce + Suse (10）

c. Economic benefits of subsidies

With the increasing awareness of the importance of developing the Passive

House in recent years, the Chinese government is actively publishing various

incentive policies. In 2019, the State Council introduced a Passive House

incentive policy, which has been implemented in various places. In 2016, Hebei

Province introduced an incentive policy. For newly-built Passive House, the

reward is 10 yuan/m2, the Passive House renovation project is subsidized by 600

yuan/m2; at the same time, the reserve price of land sale enjoys a discount of

200,000 yuan per mu, as well as the priority for bidding. The benefits obtained

from the subsidies are denoted as Ssubsidies.

Above all, the economic benefits of the Passive House can be summarized as:

S1 = Ses + Sms + Ssubsidies (11)

• Environmental benefits S2

Electric energy is the main source of operation of buildings at present, and the

electricity is produced by burning fossil fuels. The largest fuel consumed in China

is coal. Large amount of greenhouse gas, dust and other pollutant gas are generated

by burning coal. The pollutant gases and their GHG coefficient are shown in table 6

(Zhang et al., 2019). Compared with conventional houses, the Passive House use

solar energy, ground source heat pumps, biomass fuels, etc. to maintain the

operation of the building, greatly limiting the consumption of primary energy,

thereby reducing the costs of air pollution treatment, which are shown in table 7.

The benefits of improving air quality is denoted as Simprove.

Table 6 GHG coefficient of air pollutant

Type of air pollutant GHG coefficient (t/tce)

CO2 2.620

SO2 0.0085

NO2 0.0074

Dust particles 0.0096

Table 7 Costs of air pollution treatment

Type of pollutant Costs (yuan/t)

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CO2 390

SO2 20000

NO2 632

Dust particles 275

For every unit (kW•h) of electricity produced, 0.0004 tons of coal are needed. So,

Simprove can be calculated as:

Simprove = ∆Q × 0.0004 × (2.620 × CCO2+ 0.0085 × CSO2

+ 0.0074 × CNO2+

0.0096 × CDust) (12)

Where ∆𝑄 is the annual electricity saved of the Passive House, 𝐶𝐶𝑂2, 𝐶𝑆𝑂2

, 𝐶𝑁𝑂2 and

𝐶𝐷𝑢𝑠𝑡 are treatment costs of CO2, SO2, NO2 and Dust particles namely.

• Social benefits S3

The construction and operation of a Passive House can benefit the society in many

aspects. For example, the widely use of the Passive House will stimulate the

development of energy-saving industries, which also accelerate the development of

new energy and the exploration and innovation of high-performance building

materials. The change in people’s life style and consciousness is also an impact of

the Passive House. However, the benefits of the impacts above is difficult to measure

quantitively. So, they are not considered in this research.

5.2 The model of increment benefit analysis

5.2.1 Parameter setting

• Life span for calculation (T)

When calculating the additional cost and increment benefit, the construction period

shall be based on the actual construction period of the project. In order to better

reflect the economic efficiency, the service life of conventional energy-saving

buildings is used as the operation period of the Passive House, that is, T = 50 years.

• Present value (PV)

Present value refers to the value of the future cash flow converted to a benchmark

point in time to reflect the potential value of the investment. The basis of the cost-

benefit analysis is that the time points at which the funds occur must be the same.

This research discounts the additional cost and increment benefit to the starting point

of life cycle, on which the comparison and analysis base.

• Discount rate (i)

To calculate the present value of future cash flow, the discount rate is necessary.

The discount rate used in this research is the social discount rate (SDR). The social

discount rate is the society’s estimate of the time value of capital, and is the standard

for the rate of return on capital investment required from the perspective of national

economy. In the national economic evaluation of projects, the social discount rate is

mainly used as the discount rate when calculating the net present value (Armitage,

2017).

As the discount rate between different time-values of project cost benefits, the social

discount rate reflects the time preference for social cost-effectiveness. To a certain

23

extent, this preference is affected by social and economic growth, but it is not

entirely determined by economic growth (Moore and Vining, 2019).

Choosing an appropriate social discount rate is essential in cost-benefits analysis. In

this study, we take the recommended value of social discount rate for housing

projects from Construction Project Evaluation Methods and Parameters, which is a

manual published by government to guide the project appraisal in China. The

recommended value of social discount rate is 8%.

• Payback period

Payback period is a useful tool in project budgeting, it measures the time required

for investment to be recovered (Mahlia, Razak and Nursahida, 2011). There are two

types of payback period, discounted and undiscounted. Since the life span of housing

projects are long, the time value of money must be taken into consideration. Thus,

we used discounted payback period when evaluating the economic feasibility of the

Passive House.

5.2.2 NPV analysis of additional cost and increment benefit

• NPV analysis of additional costs

Since it is difficult to determine the specific time when the expenses occur in each

stage in the calculation of the present value, we assume that all expenses occur at

the end of the year, thereby simplifying the calculation. Additional costs can be

divided into one-time additional cost and annual additional cost according to the

frequency of occurrence. Their present value is calculated as followed (Brueggeman

and Fisher, 2018):

i. One-time additional cost

PVCP1= CCP1

×1

(1+i)n (13)

Where 𝑃𝑉𝐶𝑃1 is the present value of a certain stage’s additional cost,

𝐶𝐶𝑃1 is the one-time additional cost in the certain stage, i is the discount

rate, and n is the calculation period.

ii. Annual additional cost

PVCP2= CCP2

×(1+i)n1−1

i(1+i)n1×

1

(1+i)n2 (14)

Where 𝑃𝑉𝐶𝑃2 is the present value of a certain stage’s additional cost, 𝐶𝐶𝑃2

is the annual additional cost in the certain stage, i is the discount rate, n1

is the time period when the annual additional cost occurs, and n2 is the

time between the beginning of occurrence of the annual additional cost

and the beginning of life cycle.

• NPV analysis of increment benefits

The calculation of present value of increment benefits follow the same formula as

additional costs:

PVSP1= CSP1

×1

(1+i)n (15)

24

Where 𝑃𝑉𝑆𝑃1 is the present value of a certain stage’s increment benefits, 𝐶𝑆𝑃1

is the

one-time increment benefits in the certain stage.

PVSP2= CSP2

×(1+i)n1−1

i(1+i)n1×

1

(1+i)n2 (16)

Where 𝑃𝑉𝑆𝑃2 is the present value of a certain stage’s increment benefits, 𝐶𝑆𝑃2

is the

annual increment benefits in the certain stage.

5.3 Case study

5.3.1 Project overview

This research chooses a Passive House project in Hebei to conduct a case study. This project is

located in Songlindian, Zhuozhou City, Hebei Province, and location belongs to cold area where

the average temperature in coldest month ranges from -10 ℃ to 0 ℃. The total construction

area of the project is 5796.92 m2, of which the office building and the apartment building

accounts for 3934.88 m2 and 1862.04 m2 each. The structure is the steel frame, using reinforced

concrete as load bearing structure, and filled with aerated concrete blocks. Construction started

in August 2013, completed and put into use in March 2015.

5.3.2 Calculation of the additional cost

After collecting the relevant data, the additional cost and increment benefit of the project are

measured in accordance with national standards and policy requirements. The reference object

to compare with the Passive House is the conventional energy-saving buildings built in similar

period in the area.

• Additional costs in planning stage

By comparing the additional cost of the planning stage from the two aspects of the

preliminary survey and consultation costs, it is found that the preliminary survey cost

of the project does not increase compared with the conventional energy-saving buildings.

While the consultation cost 80,000 yuan more. The additional cost of the planning stage

is:

C1 = Csurvey + Cconsulting = 80,000

• Additional costs in design stage

The design of the Passive House is the key to the energy efficiency of the building.

Therefore, the design cost of the Passive House is higher. Compared with the

conventional energy-saving buildings, the increased design cost of this project is 2.5

yuan/m2. Consulting the relevant professional, the simulation expense is 2 yuan/m2. The

certification cost of the Passive House includes three parts: the registration fee is 1,000

yuan, the icon design fee is 90,000 yuan, and the operation icon fee is 200,000 yuan, for

a total cost of 300,000 yuan. The additional costs in design stage are summarized in

table 8.

Table 8 The additional costs in design stage

Additional cost per

m2 (yuan/m2)

Area (m2) Additional cost

(yuan)

Design cost 2.5 5796.92 14,492

25

Simulation cost 2 5796.92 11,594

Certification cost - - 300,000

C2 326,086

• Additional costs in construction stage

The additional cost incurred during the construction stage includes additional cost of

energy-saving technology, indoor environment and construction management. The

detailed data shown in following tables:

Table 9 Additional costs in energy-saving technologies

Technology/materia

l Price Benchmark Amount

Additional

cost

Insulation

200 mm, 350 mm

and 450 mm XPS

insulation

392

yuan/m2

220

yuan/m2 5796.92m2 997,070

Thermal

bridge

prevention

Infrared thermal

imager, glass fibre

10

yuan/m2 0 5,796.92m2 57,969

Airtightness

improvement

High viscosity

sealing material

1.2

yuan/m2 0 5,796.92m2 6,956

Utilization of

renewable

energy

Solar energy

conversion device

42,000

yuan/set 0 2 84,000

Ground source heat

pump (GSHP)

700

yuan/m2

400

yuan/m2 6,436 m2 1,930,800

Total 3,076,796

Table 10 Additional costs in indoor environment

Technology/material Price Benchmark Amount

Additional

cost

(yuan)

Ventilation

system

Centralized and

household-wise

115

yuan/m2 0 6,678 m2 767,970

Shading Adjustable blind 1,200

yuan/m2

400

yuan/m2 466.3 m2 373,040

Windows Triple glazed

windows

333

yuan/m2

178

yuan/m2

5,796.92

m2 898,522

Monitoring

system

CO2, temperature

and humidity sensor

38,000

yuan/set 0 23 874,000

Total 2,913,533

Table 11 Additional costs in construction management

Technology/material Price Benchmark Amount

Additional

cost

(yuan)

Construction

management

Detailed

management

129

yuan/m2

106

yuan/m2

5,796.92

m2 133,329

26

C3 = C31 + C32 + C33

= Cinsulation + Cthermalbridge + Cairtightness + Cutilization

+ Cventilation + Cnoise + Cshading + Cmonitoring

+ Cmanagement

= 6,123,658 yuan

• Additional costs in operation stage

The additional cost of the project during the operation stage is generated by equipment

repair and replacement, and system operating costs. The ground source heat pump needs

to be replaced 3-4 times during the life cycle, and maintained once a year, the annual

maintenance and replacement cost is 27,000 yuan; the filters of ventilation system needs

to be regularly cleaned and replaced, and the host needs to be replaced about 3 times,

and the annual maintenance cost is 3,800 yuan; the solar accumulator is replaced every

2 years, and the maintenance cost is 4300 yuan per year. Therefore, the additional cost

of the project during the operation stage is:

C4 = Crepair + Creplacement

= 27,000 + 3,800 +4,300 =35,100 (yuan/year)

The additional costs of the project are summarized and analysed in table 12:

Table 12 The additional costs of the Passive House

Classification Type of cost Additional cost

(yuan) Percentage (%)

Planning Consultation 80,000 0.97

Design

Design 14,492 0.17

Simulation 11,594 0.14

Certification 300,000 3.62

Insulation 997,070 12.04

Energy saving

Thermal bridge 57,969 0.7

Airtightness 6,956 0.08

Solar energy

conversion 84,000 1.01

Ground source heat

pump 1,930,800 23.31

Indoor environment

Ventilation system 767,970 9.27

Shading 373,040 4.5

Triple glazed

window 898,522 10.85

Monitoring system 874,000 10.55

Construction

management

Construction

management 133,329 1.61

Operation and

maintenance

Equipment repair

and replacement 1,755,000 21.18

Total 8,284,742 100

27

5.3.3 Calculation of the increment benefit

• Economic benefits

a. Increment benefits of energy saving

This project decreases the annual energy consumption by 92% compared to the

conventional energy-saving buildings. Therefore, 127.25 kWh/m2a of electricity is

saved in this project, the price of electricity is 0.8 yuan/kWh. The increment benefit

of energy saving is:

𝑆𝑒𝑠 = ∑ 𝑐𝑖

𝑛

𝑖=1

× (𝑄𝑖1 − 𝑄𝑖2) = 127.25 × 5,796.92 × 0.8

= 590,126.456 (yuan/year)

b. Increment benefits of material saving

The benefit of materials saving is reflected in the reduction of heating,

humidification and dust removal equipment during the construction stage, the

reduction of a small amount of decorative materials, and reduced waste of materials.

Since this part of the increment benefit calculation is complex, according to

experience, the cost of materials accounts for 40% to 80% of the total investment,

and the economic benefit of material saving is generally 4.5% of the material cost.

It is known that the total investment cost of the project is 48 million yuan. Therefore,

the comprehensive economic benefits of material saving are:

Sms = 48,000,000 × 0.6 × 0.045 =1,296,000 yuan

• Environmental benefits

The reduction of CO2 emission is the most direct benefit that the Passive House brings

to the environment. According to the evaluation by professional, compared to the

conventional energy-saving buildings, the coal consumption per square meter is reduced

by 34.8kg/m2, the building area is 5796.92 m2. The environmental benefits can be

calculated with previous formula:

𝑆𝑖𝑚𝑝𝑟𝑜𝑣𝑒 = 34.8 × 5,796.92 ÷ 1,000 × (2.620 × 𝐶𝐶𝑂2+ 0.0085 × 𝐶𝑆𝑂2

+

0.0074 × 𝐶𝑁𝑂2+ 0.0096 × 𝐶𝐷𝑢𝑠𝑡)

= 201.733 × (1,021.8 + 170 + 4.6768 + 2.64)

= 262,313 (𝑦𝑢𝑎𝑛)

The overall increment benefits of this project are summarized in table 13:

Table 13 The increment benefit of the Passive House

Classification Type of benefit Increment benefits

(yuan/year) Percentage (%)

Economic benefits Energy saving 590,126 62.33

Material saving 25,920 2.74

Environmental

benefits

Air quality

improvement 262,313 27.71

Total 946,752 100

28

5.3.4 Analysis of the increment benefit

• Calculating the present value of additional costs

The social discount rate of 8% is an annual discount rate, to be able to calculate the

monthly costs and benefit, we need to convert it into a monthly rate. The monthly

discount rate is calculated as followed (Mishkin, 2012):

𝑖0 = 8% ÷ 12 = 0.67%

a. Present value of additional costs in planning stage

The additional cost occurred in planning stage is one-time cost, the period is 3

months. Then, the present value can be calculated as:

𝑃𝑉𝐶𝑃𝑝𝑙𝑎𝑛𝑛𝑖𝑛𝑔= 𝐶𝐶𝑃𝑝𝑙𝑎𝑛𝑛𝑖𝑛𝑔

×1

(1 + 𝑖0)𝑛= 80,000 ×

1

(1 + 0.67%)3

= 78,413 𝑦𝑢𝑎𝑛

b. Present value of additional costs in design stage

The additional cost occurred in design stage is one-time cost, with a period of 6

months, so the calculation period is 9 months.

𝑃𝑉𝐶𝑃𝑑𝑒𝑠𝑖𝑔𝑛= 𝐶𝐶𝑃𝑑𝑒𝑠𝑖𝑔𝑛

×1

(1 + 𝑖)𝑛= 326,086 ×

1

(1 + 0.67%)9= 307,066 𝑦𝑢𝑎𝑛

c. Present value of additional costs in construction stage

The construction period is 18 months, so the calculation period is 27 months. With

the previously discussed formula, the present value can be calculated:

𝑃𝑉𝐶𝑃𝑐𝑜𝑛𝑠𝑡𝑟𝑢𝑐𝑡𝑖𝑜𝑛= 𝐶𝐶𝑃𝑐𝑜𝑛𝑠𝑡𝑟𝑢𝑐𝑡𝑖𝑜𝑛

×1

(1 + 𝑖)𝑛= 6,123,658 ×

1

(1 + 0.67%)27

= 5,113,392 𝑦𝑢𝑎𝑛

d. Present value of additional costs in operation stage

The time period for operation is 50 years with annual additional costs of 35100 yuan.

So, the present value can be calculated using the formula for annual additional costs:

𝑃𝑉𝐶𝑃𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛= 𝐶𝐶𝑃𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛

×(1 + 𝑖)𝑛1 − 1

𝑖(1 + 𝑖)𝑛1×

1

(1 + 𝑖)𝑛2

= 35,100 ×(1 + 8%)50 − 1

8% × (1 + 8%)50×

1

(1 + 0.67%)27

= 358,555 𝑦𝑢𝑎𝑛

The present value of additional costs over the life cycle of this project is summarized in

table 14:

Table 14 Present value of additional costs

Stage Additional cost

Present value of

the additional cost

(yuan)

Percentage (%)

Planning 80,000 yuan 78,413 1.34

Design 326,086 yuan 307,066 5.24

Construction 6,123,658 yuan 5,113,392 87.30

Operation 35,100 yuan/year 358,555 6.12

Total 5,857,426 100

29

• Calculating the present value of increment benefits

a. Present value of increment benefits in construction stage

The expenses saved in material are one-time increment benefits, the present value

can be calculated as:

𝑃𝑉𝑆𝑃𝑐𝑜𝑛𝑠𝑡𝑟𝑢𝑐𝑡𝑖𝑜𝑛= 𝐶𝐶𝑃𝑐𝑜𝑛𝑠𝑡𝑟𝑢𝑐𝑡𝑖𝑜𝑛

×1

(1 + 𝑖)𝑛= 1,296,000 ×

1

(1 + 0.67%)27

= 1,082,189 𝑦𝑢𝑎𝑛

b. Present value of increment benefits in operation stage

The economic, environmental and social benefits are generated during operation

stage, which lasts for 50 years. So, the present value is computed as:

𝑃𝑉𝑆𝑃𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛= 𝐶𝑆𝑃𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛

×(1 + 𝑖)𝑛1 − 1

𝑖(1 + 𝑖)𝑛1×

1

(1 + 𝑖)𝑛2

= 920,832 ×(1 + 8%)50 − 1

8% × (1 + 8%)50×

1

(1 + 0.67%)27

= 9,406,512 yuan

The present value of increment benefits over the life cycle of this project is summarized

in table 15:

Table 15 Present value of increment benefits

Stage Increment benefits

Present value of

the additional cost

(yuan)

Percentage (%)

Construction 1,296,000 yuan 1,082,189 10.06

Operation 946,752 yuan/year 9,406,512 89.94

Total 10,488,701 100

• Payback period analysis

Through all the calculation above, we know that the present value of additional costs

and increment benefits is 5,857,426 and 10,488,701 yuan namely. Apparently, the

increment benefit is larger than the additional cost. However, the payback period should

not be too long, otherwise it would not be considered as efficient.

Since the additional costs mostly occur in construction period, we regarded them as a

one-time investment in the beginning by discounting all the additional costs. Assuming

that the benefits generated from construction period happen at the end of construction,

which is also the start of operation, we started to discount the increment benefits from

Year 2.4. The increment benefits analysis is summarized in table 16.

Table 16 Payback period analysis

Year Additional cost/Annual increment benefit Balance of additional costs

0 -¥5,857,426.00 -¥5,857,426.00

2.4 ¥1,082,189.08 -¥4,775,236.92

3.4 ¥709,704.78 -¥4,065,532.14

4.4 ¥655,053.70 -¥3,410,478.44

5.4 ¥604,611.05 -¥2,805,867.39

6.4 ¥558,052.76 -¥2,247,814.63

7.4 ¥515,079.70 -¥1,732,734.93

30

8.4 ¥475,415.80 -¥1,257,319.13

9.4 ¥438,806.23 -¥818,512.90

10.4 ¥405,015.80 -¥413,497.10

11.4 ¥373,827.41 -¥39,669.70

12.4 ¥345,040.69 ¥305,371.00

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

At the end of Year 12.4, the balance of additional costs turns to positive, which means

the extra investment will be recovered by then. By calculating the time when the balance

is 0, we know that the payback period is approximated 11.5 year, which is 9 years after

the Passive House start operating. The payback period is shorter than most cases in

previous literature. Therefore, this project can be considered as cost efficient and

economically viable.

6 Discussion

6.1 The potential costs saving in the future

In the analysis of additional costs, it is found that the construction stage accounts for about 87%

of the extra investment, among which the costs of insulation, ground source heat pump,

equipment maintenance are the most expensive. The high expenses of Passive House materials

and technologies are basically due to the underdeveloped market. China has just started to

explore the way to developing the Passive House in recent year, so some of the technologies

and materials are still dependent on importing, which resulted in the high costs of construction.

But the price can be expected to decrease if the Passive House is widely implemented in China

in the future.

The project selected for the case study is located in north of China, where the climate is cold in

winter and hot in summer. So, the energy demand is higher in this project. If the Passive House

is built in southern area, like along Yangtze River, where the winter is not very cold but need

heating, in this case, the costs of ground source heating may be saved, while the costs of

dehumidification would rise. The design strategies of the Passive House should change with

different climate. Therefore, more real Passive House project in different location needs to be

investigated to create a broader understanding of the viability of the Passive House.

31

6.2 Limitation of this study

In this research, many assumptions are made. Some are due to the small impact on the result,

some are due to the difficulty to measure. The life cycle of the Passive House is divided to four

stages, without the end-of-life stage. On one hand, this stage accounts small part in life cycle,

having relatively small impact on results. On the other hand, the Passive House just developed

for a few years in China, the as-built projects are still in operation stage. The additional costs

and increment benefits can only be determined through estimation. This is an inevitable

limitation in this study of life cycle of the Passive House.

When analysing the social benefits of the Passive House, the value of benefits is not considered

because they are complicated and difficult to measure. However, without counting the social

benefits in the total increment benefits, the increment benefits of life cycle are still much greater

than the additional costs. Therefore, the potential of the Passive House is underestimated in this

research. With the government’s support, the costs of Passive House are expected to decrease

further.

From conventional buildings to Passive House, it will be a great transformation to residential

housing market, which will also have profound influence on other relevant industries, people’s

life style, and even the whole country. The social benefits of the Passive House are of value to

study, but it is difficult to quantify them, maybe future researches can investigate it in a

qualitative way.

6.3 Payback period analysis

The NPV and payback period analysis is directly affected by discount rate, which reflects the

interest rate, inflation, etc. Since housing projects are long-term projects, the uncertainty in

society and economy is the major cause of volatility in discount rate, which could result in

different relation between additional costs and increment benefits. The variation of payback

period to the change of discount rate is demonstrated in figure 4. As is shown in figure 4, if the

discount rate decreased, the payback period will be shorter. On the contrary, if the discount rate

is larger than 8%, the payback period will be longer. According to historical data, the social

discount rate of China was 12% in 2004, and it has been decreasing year by year, and stabilised

at 8% in recent years. In conclusion, the Passive House will be more attractive when the

discount rate is lower.

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

32

On the other hand, energy price also has great impact on the economic viability because energy

saving accounts for the largest part of the benefits of the Passive House. As previous studies

indicated, the Passive House is more attractive when the interest rate is low and energy price is

increasing (Badea et al., 2014; D. Dan et al., 2016). To further understand how the volatility in

energy price and discount rate affect the economic feasibility, sensitivity analysis is needed

regarding the cost efficiency of the Passive House.

7 Conclusion

This research bases on the life cycle theory, dividing the life cycle of a Passive House to four

stages. The additional costs and increment benefits are identified in detail through the life cycle.

In case study, the costs and benefits were estimated according to China’s regulations, standards

and policies. On the basis of the calculation, the corresponding evaluation indicators and model

are established, which can be used to evaluate the economic feasibility in a comprehensive and

reliable way.

After all the theoretical discussions, the evaluation model is implemented on an as-built Passive

House project. The increment benefits are about twice of the additional costs, which means the

benefits generated from operation is larger than extra investment. The payback period is about

12 years, which is shorter than payback periods indicated in other researches. The NPV and

payback period analysis clearly shows that the Passive House not only improve the quality of

life, but also has positive impact on economy, environment and society. The most important is,

the Passive House is economically feasible from the perspective of investment. The evaluation

model proposed in this thesis could be a useful tool for developers and consumers to understand

the benefit of the Passive House.

Through the analysis, it’s clear that the Passive House requires large investment in early stage

compared to conventional building. It starts to generate extra benefits from the beginning of

operation stage. Not only can the extra investment costs be recovered, also additional benefits

are generated from many aspects.

33

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