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Does Passive House Cost The World?

Expert practitioner and educator Daniel Kress of Smart Plus Academy presents a special edition of Passive House Accelerator LIVE! featuring an entertaining dive into the incremental cost of Passive House compared to conventional construction in single-family homes. Daniel's presentation features pearls of wisdom from Daniel, as well as smart ways to communicate the value of Passive House to clients, developers, and the market. Get ready for a firehose of data and numbers as Daniel explores several economic contingencies and how they impact the costs of building to the Passive House standard. Read the transcript below!

Daniel Kress:
Big thank you to the whole team of Passive House Accelerator, but as well I want to say a big thank you to all my former students and everybody that helped me to put this together. The last months, I've spent my time on finding out what is actually happening. Why are everybody saying why Passive House is more expensive? And where we at actually, and this work that I put here together is over hundreds of hours of myself and other people out there. I see a lot of Australian fellows down there, they're looking from down up to you, change comes from bottom-up, that's what we are doing from Australia so that's what's happening here. Thank you for your feedback. Thank you for the information that you provided me and I've looked at so much data over the last month. I looked at Australian statistic, like cost developments over the last 20 years, of energy costs, then household expenditures.

What has happening over the last 20 plus years, and mortgage costs. I looked at all that stuff, and I tried to put it together. Then this big discussion started, like $2,500 per square meter. Few guys that are speaking in feet, that are still using body parts for measurements, just ditch one digit, so out of that 2,500, you make 250, then you have your feet cost. Yeah, that's how much the feet cost. 2,500 was this big discussion in the current market, it's not possible. But Simone, I don't know if she see it today. She has one project with 2,550 in the making right now, and one for 2,600. I got feedback of people that are doing their own house for $1,150 a square meter, so $115 a square foot. Yeah, for you guys in the US and I got so many other costs of 1,850. A few in them like three or four, and then a lot of square meter prices of $2,200 or lower.

2,500 is a really realistic figure, even in the current market if we're making the right design decisions and that's what we are discussing today. Then as well, we have to be super, super careful, not to mix up additional features with Passive House costs. Yeah, it's a big one that is done the whole time. We don't want to mix that up. A presentation together because I got always this information, Passive House is so expensive, but is it really that expensive? What if Passive House is not costing more? What if we can actually show that Passive House is not costing more, and what would we have to do that is not costing us more?

Like before I said, I'm Daniel Kress, and I want to present now my presentation on, Does Passive House Cost The World? As a little bit on introduction, what we're going through, first I gather a little introduction of me and my call company. Then we speak shortly about our current situation. Then we go into Passive House. What is Passive House shortly? Then the Passive House economics, the Passive House Project costs and then does Passive House limit the design, and then conclusions. Today, we can only really talk about the conclusions. I can't really give you the information of how I came to that information, because we have only half an hour and I want to show you how we can actually make the figures work instead of where the figures are coming from. Generally speaking, my data are normally seen as information overload, so it may feel like already said earlier, taking a drink from a fire hose.

For people that want to know more about it and want to get more details, there is an article coming out in BuildIT, page 20-21 next week. In that magazine, you have an article of this explained in words. As well, on the 13th of April, I'm doing a Passive House in Australia- Is It Too Expensive Webinar. Where I'm going into more details where the numbers come from. That's a little information, that little QR code there is the link. This slide comes at the end again, so if you think, "Oh, I want to know more." It's coming again, so good. Introduction. Like before I'm Daniel Kress. I started my career in Germany as a carpenter building eco-homes. Then I moved to Ireland, building eco... Realized that eco is not sustainable, and then I really looked into sustainable building solutions.

Soon I realized that sustainable is not necessarily healthy, and I really dive deep into the Passive House world. Then after all this, realizing already that sustainable is not necessarily healthy, I then went to study at Hochschule Karlsruhe school in Germany. Civil engineering, specializing in building physics and chemistry, and then a Master of engineering in Canada, where I went into the building science. Then I've done this EU-Project, comparing building standards to Passive House and conclusion, da da da da, Passive House is providing best results so it's nothing new, we know that. Smart Plus is our... Our Mission is making our world a better place.

We want to empower people to make a difference, that's what we really stand for. What we do is we are on a mission to decarbonize the building industry. It's not just Passive House, we are thinking bigger. How we do it, we inspire and lead this passion in love, that's what we do. Our vision, what we are able to do already is building shelters, structurally sound and protecting us from the elements. That's what we are doing right now. But what we really need to address is a healthy indoor air that's Passive House, comfortable indoor environment (Passive House), sustainable buildings (Passive House) and economical.

This is what Passive House is bringing together, and this is why Passive House is the first step. This is not the final end game, this is just the first step. In my opinion, Passive House standard is the lowest standard we should be building to. We can't build worse than that, everything else is not acceptable. Next one, we have to go into energy producer, energy storage, zero energy buildings and then real zero energy buildings. From the beginning, from cradle to grave, really that point of view, then we want to have smart buildings plus energy buildings so that they're becoming the power stations of the future.

Then we're coming to the Smart Plus Buildings. Yeah, that's where we want to go. Current situation. I think people are going to the petrol station this days, or gas station for you in the US are thinking what the hell is happening here? You may want to consider a few things. Who would like to own a car that needs 10 times less petrol this days, put a one into the chart if you would like to have a car that needs a tenth of the energy. Just put into the chart one, and then we know you would like to have that, so that's a nice way of interacting with each other.

Instead of 10 liters, it's one liter on hundred kilometers, and who would be willing to spend instead of $30,000, $33,000? Who will be willing to do that? Put a two into the chart for that one. Would you still be willing to spend just $3,000 if it's instead of ten liters, five liters? Please put in a three into the chart. You spend still, if it's just cutting your pet costs by half, an additional 30,000 in your upfront investment? This is exactly what Passive House is offering you. Passive House reduces the conditioning costs by 90%, so it ditches a digit, and that is all for an additional investment of 10%. $3,000 or 30,000 is 10%, that's what Passive House is giving us.

If you look to the whole domestic fuel consumption, it cuts it through half, and that's that five liters to ten liters, that ten liters to five liters, so this is what Passive House is giving us. Cars are the second biggest investment of our lifetime. The biggest investment of our lifetime is normally our home, so buying a building or a house is a major financial investment. It's the biggest one of investment of a lifetime for our clients. It's the biggest ongoing costs, for the mortgage fixed, for the running costs highly fluctuating. But we painfully have to realize these days on the petrol station and as well with our heating and cooling bill, in the UK, the heating bills went up by 500%, just as a little information in the background.

This is the reason why we really have to look to the budget and the value of the investment that we are actually putting together. Passive House, the reason I'm putting Passive House in there is, a lot of people don't know that a lot of people always argue Passive House is not economical, this far too expensive. But when we look to the history of Passive House, we actually know that Passive House comes from an economical side. Wolfgang Feist wasn't the rich guy. He didn't have that money to spend. He really had to find that money, and he looked at the situation that we had in the '80s, and he realized that one-third of the non-renewable energy consumed is from conditioning our houses. One-third of the energy consumed was non-renewable energy and that's conditioning, so we can address that.

This is the reason why he built his first Passive House with four units in 1991, and the additional investment if you translate it was $67,000 for each unit. These three families he had, no... He didn't know people. It wasn't a friendship, it was people that said, "Yeah, we are taking that risk. We are believing in your craziness that this actually works." It needed to be affordable from day one, and the idea of affordability has been in the Passive House standard from day one. Back in the day, there were no triple glazings out there. They didn't know if the thermal insulation works, and heat recovery ventilation systems as we have them to today we're not existing either.

If you want to read a little bit more about it and how he was already giving us information, or like already saying that with Russia how dangerous it is, here the Passive House block with a link to that interview where I'm referring to. Then next one, Efficiency first. How much tea lights would we need for a 15 square meter room? Put it into the chat. How many tea lights? 15 square meters is 150 square foot, so a 15 square meter bedroom, how many tea lights? Put it into the chart how many tea lights you think it is? 1, 10, 100, 1000, 2, 10? Yeah, 1, 5, 15.0, 1 and half? It's five tea lights.

It's not three tea lights per square meter, so that's good to know. Every three tea lights per square meter, so 10 square foot is three tea light, so one tea light, every three and a half square foot, something like that. The most sustainable energy is the one not used, keep that in mind and that's what we are doing. It's well important, is to remember despite the location or climate, Passive House is defined for the consumption of the building and this is not climate dependent. In any climate, if you're building in Alaska or you're building in a Texas, it's the same energy consumption. Yeah, you're designing the building to it. Let us be a bit smarter than NASA. NASA had this climate Mars Climate Orbiter, and they had this problem that they did this little mistake of metric to imperial and he lost 328 million US dollars back in the day.

Mission failure because of not translating the numbers properly, so let us look at that a little bit. One square meter like I said already is about 10 square foot. We just need to multiply by 10 square foot, sounds for me more like a condition than a measurement. But it's what you are using, so you need to multiply by 10 from a square meter. When we speak about dollars per square meter, if you want to know per square foot, you need to divide by 10. This science will come up again and again, so this is a square meter, $10. Now when we look at a square meter and how many foot are in there, there's 10 square foot in there and every foot is $1.

I try to make it visual for you guys to understand this relation between foot and... Like metric and Imperial, and we've mainly talk about only square meterage and dollars, and that's the reason why this numbers work at way. Here Passive House is from tiny to a high rise. We can build Passive Houses from 30 square meters, to 18,426 square meters, no problem. Now you need to multiply it by 10, so it's 184,000 square foot, and that is where Passive House is possible. Passive House is about possible for cities. We have this in Heidelberg, in Germany, but as well, China. This massive, massive offices. China, 1.2 million square meter, so that's 12,000,000 square foot, and in Germany it's more than a 100,000 square meter. Good. Passive House is comfort with clear conscience. Passive Houses are normal buildings just built better. The addition cost is $250 to $750 per square meter, so that will be $25 to $75 per square foot to give you that idea. This is equivalent to an additional cost of 5% to 20% in residential. In commercial, it is often as little as 1%.

That was just a little introduction to the whole thing, so let us start with the economics. Passive House is economical, so the additional investment is zero to 20% in low quality buildings, it's rather 20% in high-end buildings. Rather 1%, usually $200 to $750 per square meter like we just said already. That put into figures if you're having a square meter rate of $250 on my project that I will look at later. It's $384 per square meter, it's 15%, medium quality 5000, 8% high quality, 5%. The additional cost will stay the same for the same building, but the finishes are different.

The detailing is different and that is not additional Passive House cost, and that's the reason why the percentage goes down, but dollars per square meters stays the same. Passive House is the lowest hanging fruit with the small green premium. It's even a negative in the long run, because we're getting a return of investment, that means it's negative green premium. This is the project that we are looking at. It's 125 square meter building, so 1,250 square foot, three bedrooms, 23 square meter windows. The additional investment for the Passive House is $48,000, that's 21 for the design part, 24,000 for the thermal envelope and 6,000 for the building services. The windows were less than $10,000, less than $10,000 for the whole building glazed. Four years ago, I wouldn't even got a gasket or a double slider window for that. Now I'm getting the whole building glaze for that, so that pricing is going down, down, down, down, down.

This comes through a square meter rate of $384 in this project. Passive House Savings, so what do we save? We save energy of $1,396 in the first year, and then we are expecting a cost rise of our energy costs by 4.7%. That's the same that we had from 2003 to 2016. The newest data is not available after 2016, so that should come out end of this year. Then Passive House additional cost is $48,000, obviously that's an additional investment, so a loan is required, a $48,000 and we are expecting a interest rate of 5%. Currently the interest rate is between 2% and 5%, so I'm going against, so I'm saying it's expensive to loan money, the highest expenses. Then to be clear, we are comparing here a poorly conditioned house, this a temperature swing from 10 degrees to 32 degrees, to a Passive House that is always between 20 and 25 degrees. This is important to know that we are comparing it to that. We are applying no real interest rate, so we are applying the actual interest rate. In other words, this 4.7 With the inflation we are having right now of 3.25% in Australia, it would be always a real interest rate of 1.45% upfront.

Let us now come to what are the findings. If you're comparing a Passive House to a conventional house, and you are only looking at the running cost, we are saving $266,000 over 50 years. This is like comparing a Passive House to a conventional house. In the building cost, obviously Passive House is clearly winning here. If you're looking toward the building cost, the Passive House costs $48,000 more. However that $48,000 to the $266,000, we can't compare them directly. We need to put them into a relation, like $266,000 today, is not $266,000 in 50 years. Having money in your pocket or know you're getting paid in the future something different, right? If you're, if you're having money in your pocket, you can pay for your food. But if you run out of money before the months is over, you can't pay for your food. That's the reason why we can't really compare them. Let us put them into the equation like we learned in the Passive House designer course. The 4.7% of energy price increase, the yellow line is just the energy costs of a Passive House. The green line is including the green columns, is including the loan for 30 years. This is the reason why having this massive jump in the 31st year, from 30 to 31st there's this massive jump because the loan is paid off.

This is what it shows us in the first. At the beginning, Passive House is costing us more. Then we are coming to the equilibrium at the year 19, and then after 30 years, loan is paid off and now it drops down, and now we see this big, big savings of Passive House already. When we put that now into a little bit of figures, in the first year we spend $1725 more in a year in a Passive House. In the 19th year, the financial burden becomes a financial freedom. In the year 31, we are having already $5,538 more in our pocket, and in the year 50, it's $30,000 more in our pocket.

Cash versus Profit. Do you rather have cash or profit guys? One for cash, two for profit. Who here is running a profitable business, but still has a problem with cash flow? Only cash can be spent. We can have a profitable business, but if you don't have the cash, then it doesn't work, so it is the reason we will look more at the cash later on than at the profit. But if you look at the profit side of a Passive House, in this example, the profit is in that year 31. That's the first time when we really have everything paid off, and we have a return of investment in 31. Before we don't have a return of investment, so that's important through. In this example, it's 30 years comparing a conventional house to a Passive House with the same sales value. If you're selling the Passive House and the conventional house, and they're both for sale, you're getting exactly the same money for that project.

Yeah, again totally against Passive House. But then obviously after that 50 years, we are already having a massive bonus, even if you're looking at the cumulative result. If you're looking at cash basis, that's the financial burden that you experience in the year one, in the year two and year three. Then we are coming to this. In the first year, the additional daily financial burden is a coffee a day, $4.73. It's $2.70 in the 10th years, in the 19th year, we come to the financial freedom and in the year 31, we are having a free lunch every single day so this is the cost. If you are having an annual energy cost increase of 4.7%, but you may not say you have 4.7%, what is happening when the energy increases more? Now it's less, like if we have less energy increase so against Passive House, then we are coming to this.

It's still a coffee a day in the first year, and in the 10th year, it's $3.67, so it's now not as good any longer. Instead of $15, we are only having $8.51 in the 31st year. But the highest financial burden is still a coffee a day. The same is happening if the energy prices are going up, more extreme then they're going up. Right now it's still a coffee a day in the first year, but now we're having $26 in the 31st year, and if it's even going more up, then we're having $34 more in the pocket in the year 31, good. The additional investment for Passive House is a coffee a day like I just said already. For reduction of a coffee a day, you get a healthy building that is sustainable and gives you financial freedom.

Now I want to show you another side of the curve, another perspective, impact of incentives. The reason I'm doing that, I hope we have already politicians in this webinar, because intense incentives really matter. We are having here Bank Australia, they're giving us a discounted interest rate of 0.2% if you are building Passive House. What happens if you're doing this? If you're having instead of a 5% interest rate, or a 4.8% interest rate and comparing that now to each other, now we are coming to that situation that in the first financial year, the $4.73 becomes a $3.46 as a financial burden. In the year 10, the $2.77 is only a $1.50 per day, and then in the year 31, when it is already profitable, it's still the $15, it hasn't changed. If now the government is instead of giving out a first buyer's loan for nothing, giving first buyer loan incentives in a percentage of interest rates out of a 0.3%.

Yeah, 2% by the bank... A 0.2% by the bank, 0.3% by the government, and we still talk about the 42,500 square meter rate, then it goes down to $1.59 in the first year. In the second year, it goes 37 cents. Then in the 15th year, it's still $15 more. In the case we are not spending $2,500 on the square meter, we're spending $4,000 on the square meter, so high quality buildings or like higher quality buildings. Now we are coming to a plus already in the first year. The Passive House is already creating a return of investment from the year one, just because of an incentive by the government of 0.3%. If you're now looking at a 10th year, it's $2.25, and in the 31st year, it's still that $15. In other words, this is incentive. With this government incentive, we could really help people to make that move and making life easier through the loan period. Because otherwise, it anyway pays.

Now, Does Passive House limit design? Who knows that building? Design limitation by Passive House? Nope. That's nope. The design limitation because of Passive House. Passive House does not limit the design. I'm claiming that I can build Sagrada Familia as a Passive House, maybe not in my lifetime but doubt we didn't do that either. It's always a question of budget, and not of Passive House design, we just need better components to achieve it. Studies showed that Passive House can cost up to 20% more. However, architectural features regularly exceed the 30% of building costs. That's your glazed hand rails, that's your stainless steel finish here, your shadow gap there.

All that things, adding cost to the build. This is not Passive House, this is architectural features and we have to keep them separate. Passive House does not need to be expensive. How big is big enough? One thing that we need to keep in mind and I want to have it in there just as a reminder for us, Passive House, says 30 square meter per person. Learning from tiny house movement, we could achieve that easily I would say. Smart and good design is giving us that results in Australia and the US, where we have the biggest houses in the world. Australia here, and Canada here, US here. Then I think a good compromise might be 50 square meters, so 500 square foot per person might be a good compromise, instead of 80 plus square meters per person.

Now let us go back to the impact of size, shape, and compactness. The significance of size shape and compactness is not understood. This is the reason I want to really show it on that SPA-Home. This free-standing two already built with 125 square meter, 1,250 square foot has a thermal envelope of 351 square meter. The use factor is now the thermal envelope square meterage, which divided by the 125 condition space. 2.81 is an additional Passive House cost of $48,000. That's now a two-story free-standing building. If you're now going to building, long single-story build, so we put the first story and the second story behind it, each other. The wide single-story build be putting them next to each other, or we're looking at the mid terrace house. What impact does that have?

We are having here now our situation. Our conditioned space is 125 square meter. For the long single-story building, the price goes up from $48,000 to $64,000. The wide single story build, it goes up to $59,000. In the mid-terraced house, it goes down to $26,000 additional costs. Here, we need to see the thermal envelope. The thermal envelope is here 510 square meter, it is here 473 square meter and here it's only 250 square meter. This square meterages needed before, didn't let exactly the same amount of energy through. That 500 square meter, that 470 square meter and that 250 square meter, they're letting the same amount of energy through as a total because it's the same building behind that walls, behind that roof, behind that slap. This means, my 500 square meter building needs to let only half of the energy through per square meter than my 2050 square meters.

Do you understand what I'm saying? In other words, I need twice as much wall, that performs as twice as good. I not only need more wall, I need to build a world better because of my compactness. This is where the cost-effectiveness comes in play if you're not building compact, so working with surfaces, not with shapes. I keep saying it over and over again, yes we can just build an ugly box. Then it may feel like living in a box, but can we do more? We can just take the same building, put a little bit of paint on it and it looks already far better. But if you are now save so much money, maybe we can get an artist involved then maybe, maybe we can get our surface look pretty awesome and have a really good thermal envelope. Let us get function right, and then make it look pretty, that's what we have to do.

Working with surfaces can be materials, can be different stones, can be a combination out of timber or stone, or could be shading devices or balconies and garages that are added to the outside and then it takes the boxy look away. Let us work with surfaces. For our children, for our planet, let us do that.

Conclusions. The biggest one of investment for most of our clients is our building. It's the biggest one of investment, and it's the biggest ongoing cost for our mortgage and for our running costs. This is the reason that you really need to think of the budget, of the value of the investment. If you are looking at the bigger picture, we know from 2007, the next report is coming out in two months regarding this building. Building offers the largest savings potential in all three categories, so it's the lowest hanging fruit out there right now, building Passive Houses compared to anything else out there. This is the reason why we really need to go and build a highly performing building envelope, not just because we want to build Passive Houses, but because of the future that we want to give. If this was too quick and you want to get more details, please read the article in BuildIT magazine, or join me on the next webinar on the 13th of April. Let me share the link with you guys.

Yeah, so what is the right question? The question is not, is Passive House economical? Or is Passive House creating a return of investment? No, that is not the question. The question is, can we afford not to? Can we stay energy dependent on a nation, on leaders that don't have our values, that don't stand for human rights, for our human dignity? Can we keep destroying the planet and let our children figure it out, because we are not willing to take the risk, because we don't have the courage to stand up for a humanitarian future for us humans, for our biodiversity for our appliance? The question is, can we afford not to? Thank you.

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