*4.3. Calculation of Total Construction Cost (Cost) and Annual Benefit (Benefit) for Economic Analysis* 4.3.1. Calculation of Total Construction Cost (Cost)

The calculation of the total construction cost of the improved model was entrusted to a construction cost expert. For the energy performance improvement, the performance level satisfying the "recommendation" of the GR technical reference [41] was applied. The mechanical equipment, the total heat exchange ventilation system (health improvement), and safety were separately quoted and applied. In addition, the aging performance improvement cost is the construction cost calculated based on the performance applied to a general house. The total construction cost came to about 20,000 USD; the construction cost per area is 714.2 USD/m2. Considering that the new construction cost of an aged facility in Korea is 2100 USD/m2 [45], it is possible to improve the energy performance of aged houses to the level of new constructions with a construction cost of about 33% compared to the cost of new construction.

Further, in the process of calculating the construction cost, it can be recognized that the energy performance and aging performance improvement should be carried out simultaneously instead of separately, while including the replacement of interior finishing (aging performance improvement) for window construction (energy performance improvement), and including the replacement of floor finishing for the improvement of floor heating, etc. This shows that the efficiency is high when the energy performance policy for aged houses and the housing stability policy for the people are implemented as a combined policy rather than as separate policies. Details of the total construction cost of the improved model are shown in Table 12 below.


**Table 12.**

Calculation

 of

construction

 cost for improved model.


**Table 12.** *Cont.*

#### 4.3.2. Annual Benefit Calculation

Generally, social cost refers to the cost born from the activities of producers on the public and society as a whole. Social cost may include the external costs as a basic factor, and it may include or exclude private costs depending on the particular definition [46]. External costs are the costs incurred in removing public harms such as soot, odor, and noise. The external costs are not internalized by producers, but they are very important from a social point of view. As environmental problems grow, the importance of the external cost on social costs increases.

The social cost concept used in this study focused on external costs while excluding the private costs incurred from the generation of electricity. The external costs in terms of power generation can occur regardless of the size of the project, such as carbon emission reduction, air pollutant emission reduction, avoidance of distribution line construction cost, and avoidance of measuring cost [47]. However, it was excluded due to the limitation of social cost data, such as the avoidances of the distribution line construction cost and the measuring cost. Accordingly, the benefits of economic analysis considering the social cost in this study were set with the effects from (1) energy consumption cost reduction, (2) carbon emission reduction, and (3) air pollutant emission reduction.

#### Benefit from Annual Energy Saving

The annual energy cost savings were calculated by converting the annual energy consumption savings in Table 10 into costs. The annual electricity rate per kWh was calculated by applying 'the electricity rates for house in Korea (low voltage)' + '0.093 USD per kWh of electricity rate for the section below 300 kWh'. The calculation method is the same as that shown in Equation (1).

Annual Energy Saving (USD/y) = (Energy Consumption [(kWh/(m2·y)) × Area (m2)] <sup>×</sup> Electricity Rate (USD/kWh) (1)

Benefit from Annual Carbon Emission Reduction

The benefits of reducing carbon emissions are the social benefits resulting from the reduced consumption of electricity and energy.

The social benefits of the annual carbon emission (CO2) reduction were calculated by converting the annual carbon savings in Table 11 into costs. To convert carbon emission reduction into cost, it was calculated by applying the average annual price of carbon credits in 2019 on the Korea Exchange (KAU 19), 22.8 USD per tCO2. The calculation method is the same as that shown in Equation (2) [47].

Benefit of annual carbon emission reduction (USD/y) = (Annual carbon emission reduction amount [(tCO2/(m<sup>2</sup>·y)) × Area (m2)] × Price of carbon credits (USD/tCO2) (2)

#### Benefit from Annual Air Pollutant Material Reduction

The benefit of air pollutant material reduction is also a social benefit generated by the reduced consumption of electricity and energy. The calculation method is the same as that shown in Equation (3) [22]. The social cost of air pollutants was referred to as the social cost per MWh for nitrogen oxide, sulfur oxide, and dust by air pollutants in the preliminary feasibility report of "Smart Grid Expansion Project (2015)" of KDI. The benefit of nitrogen oxide was applied with 6.92 USD/MWh, that of sulfur oxide was applied with 3.97 USD/MWh, and that of dust was applied with 0.71 USD/MWh [47]. Table 13 provides the results of calculating the annual air pollutant reduction benefits according to the annual electricity savings.

> Annual air pollutant reduction benefit (USD/y) = [(Annual electricity savings (kWh/(m2·y)) × Area (m2)] × <sup>∑</sup>[(Social cost of air pollutant (USD/kWh)] (3)

**Table 13.** Social cost according to the air pollutant reduction from the electricity saving.


Table 14 shows the calculation of the total cost and benefit for economic analysis.



*4.4. Economic Analysis Considering Social Cost*

4.4.1. Economic Analysis Criteria

For economic analysis, the net present value (NPV) method was applied instead of the commonly used CBA (cost–benefit analysis). This was performed because the present value of future accrued benefits can be provided, and this can be used for other analyses in consideration of the analyzed net present value [24]. In addition, for the economic analysis criteria for public policies and buildings, the revision and supplementary studies of the general guidelines for conducting preliminary feasibility studies for public corporations and quasi-governmental institutions of the Korea Development Institute (KDI) were conducted while referring to [23]. The social discount rate was calculated as 4.5%, and the analysis period was set to 30 years, as was the case for building. The calculation method is the same as that shown in Equation (4). As a result of the analysis, when the net present value is greater than "0", it is judged to be economical. Here, Bt refers to the benefit of 't' period, Ct refers to the cost of 't' period, r refers to the social discount rate (interest rate), and t refers to the number of years of use.

$$\text{NetPresent Value} \left(\text{NPV}\right) = \sum\_{\mathbf{t}=0}^{\mathbf{n}} \frac{\text{Bt}}{\left(1+\mathbf{r}\right)^{\mathbf{t}}} - \sum\_{\mathbf{t}=0}^{\mathbf{n}} \frac{\text{Ct}}{\left(1+\mathbf{r}\right)^{\mathbf{t}}} \tag{4}$$

#### 4.4.2. Economic Analysis Result

As the result of the GR economic analysis of the aged house, the net present value was found to be "−10,267.15 USD (49.7%)", indicating that it is not economical, despite the effects of carbon reduction and air pollutant reduction applied. The amount of government support for the GR of low-income elderly households is not the total construction cost of "20,981.50 USD (100%)", but it may instead be estimated to be "10,267.15 USD (49.7%)" corresponding to the amount of support excluding residents net benefits (annual energy consumption reduction cost) and the social benefits from carbon and air pollutant reduction (see Table 15).


**Table 15.** Economic analysis result (net present value, NPV).

#### **5. Discussion**

According to the analysis results, among the total construction cost of GR, which has the effect of improving the health of residents of aged houses and reducing greenhouse emission, the ratio of construction cost for health, safety, and energy saving was 59%, and the ratio of construction cost for improving aging performance was 41%, as presented in Table 12.

From the 59% of health, safety, and energy saving construction cost, the energy saving cost incurred during the operation period is 43.2%, which is directly returned to the resident as a benefit generated while the resident continues to live in the property after GR. From the remaining 15.8%, 7.7% (2.4% + 5.3%) can be offset by the social benefits stemming from the carbon and air pollutant reduction effect according to the reduction in electricity consumption. That is, 15.8% of the actual cost is supported by the government for health, safety, and energy saving construction costs, but 7.7% is offset by the environmental improvement effect (effect of reducing carbon and air pollutants), so it can be estimated that only 8.1% would be supported. Seoul, Korea achieved a reduction of 4.7 million TOE of GHG emissions from December 2019 to April 2021 with the One Less Nuclear Power Plant Project, an energy transition policy [48]. Of the project budget, 89% was invested in the installation of new and renewable energy including solar power [49]. However, solar power is mainly installed in existing buildings, so there may be a difference between the installation efficiency of the system and the actual production efficiency due to climate influences such as surrounding buildings, maintenance, and the rainy seasons [50]. In areas with high building density, such as Seoul, there is a limitation to the quantitative expansion of energy conversion that can be achieved by installing solar power, so it is necessary to diversify the energy conversion policies rather than continuously increase the installation of solar power. As of 2021, 10 years have passed since this support policy was started, Seoul Metropolitan Government is still providing subsidies for solar power installation as part of the energy transition policy, which total 8.38 billion USD per year [48]. Some of this subsidy may be changed to support GR policy by linking it with energy conversion policy considering the energy saving effect (reduction of carbon and air pollutants) according to GR. Figure 5 presents the ratio of the energy saving construction cost support amount of GR as part of the energy conversion policy linked with the energy saving effect of GR.

**Figure 5.** Concept of policy for supporting low-income housing stability from GR linked with the energy transition policy.

From the total construction cost of GR, the construction cost for aging performance improvement (41%) can be supported by the home repair and construction support policies for self-owned or rental households among low-income households with less than 60% of the median income in Seoul [51]. The scope of support is wallpaper, flooring, insulation, sanitary equipment (wash basin/toilet), lighting, etc., the scale of support is up to 1200 USD per household, and the support can reach up to 3200 USD by linking with the energy efficiency improvement project of the Korea Energy Foundation [52]. In addition, the Korean Government is subsidizing all or part of the cost of improving aged housing for lowincome elderly households based on Article 15 of the Act on Support for Underprivileged Group, Disabled Persons and Age, etc. (support for housing remodeling expenses) [53]. From this study, the government can determine the amount of support by investigating the maximum payable dead amount to each households share amount (A%), calculating the "subsidy for the housing stabilization policy for elderly households (= 41%−(support for house repair and construction, 16.7%)−(resident share (A%)) by considering the size of the city and county unit budget secured, and establishing a plan to support each year depending on the number of supported households. Therefore, the size of the GR subsidy per households can be adjusted at a maximum of 24.4% of the total construction cost, according to the resident's share (A%).

Accordingly, it is possible to reduce the burden of construction cost for the GR implementation of low-income elderly households, and to increase the effect of improving facilities in aged houses from GR. It is expected that if the government utilizes the direct/indirect effects of GR, then the low-income elderly households can perform GR with support of a 1/4 of the GR construction cost, and the burden of the amount of support can be reduced as a result.

#### **6. Conclusions**

In this study, the economic feasibility of GR was analyzed while considering health, safety, and energy by investigating the status and characteristics of aged houses of lowincome elderly people in Seoul. From the literature review, problems in the health, safety, and energy aspects of aged houses and architectural improvement directions were derived. Further, the aging status and energy performance of nine single-family and multi-family

houses in which low-income elderly people in Seoul reside were investigated. A GR project was planned to improve health, safety, and energy performance by selecting one aged house where GR analysis was possible among the nine aged houses surveyed. Based on this plan, the total construction cost and energy performance before and after GR were analyzed, and the economic analysis was conducted in consideration of the social cost. As a result of the economic analysis of the GR for aged houses in which low-income elderly people live, the net present value was "−10,267.15 USD (49.7%)", indicating that there was no economic effect even though energy saving (9080.83 USD, 43.2%) as well as carbon (504.85 USD, 2.4%) and air pollutant reduction (1128.67 USD, 5.3%) effects were applied.

Nevertheless, from the analysis result, we propose a GR support plan linking with the current energy transition policies and the aged housing support policies for the lowincome people, in an attempt to expand the GR of low-income people who are vulnerable to the health and safety of the aged houses and unable to implement GR. Of the total GR construction cost, the energy saving construction cost (59%) can be offset by 15.8% by linking with the energy transition support policy and by the energy consumption reduction amount of residents (43.2%). In addition, of the total construction cost of GR, the construction cost for improvement of aging performance (41%) was partially offset in Seoul by housing repair and construction support, and it was possible to secure a budget according to the Act on Support for Underprivileged Groups, Disabled Persons and Age, etc. of the Korean Government. Therefore, it is possible to calculate the subsidy for the housing stabilization policy for low-income households (=41%−support for house repair and construction, 16.7%−resident share, A%). Accordingly, it would be possible to establish policies at the city or county level to provide support each year according to the total supported households of low-income elderly people and the size of the budget secured.

Finally, in this study, the concept of a support policy was suggested through GR to improve old housing of small-scale low-income elderly people. However, this study has a limitation, in that the analysis was made only for detached houses. It is necessary to increase the reliability of the analysis result by increasing the number of buildings to be analyzed in the future. In addition, to improve housing of the poor, according to various housing types and ages in Korea, more diverse types of measures to improve housing for the general population are needed in the future. In the analysis process, ECO-2 was used to analyze the energy consumption of an aged house, but for the usage profile, the housing type of a general family, which is the default value of the program, is reflected, so it may differ from the housing patterns of elderly households and ordinary people. This value is the default value set by the government. Therefore, it is necessary to modify it or to revise the study so that more practical results can be derived by adding supplementary data.

**Author Contributions:** J.K., conceptualization, energy audit, energy simulation, green remodeling model development, and cost–benefit analysis, project administration; S.N., writing—original draft preparation, writing—review and editing, methodology, energy audit, proposal for improving green remodeling; D.L., energy audit, data collection and analysis, writing—original draft preparation, writing—review and editing. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research was supported by a grant (code 22AUDP-C151639-04) from Urban Architecture Research and Development Project Program funded by the Ministry of Land, Infrastructure, and Transport of the Korean government.

**Institutional Review Board Statement:** Not applicable.

**Informed Consent Statement:** Informed consent was obtained from all subjects in-volved in the study.

**Data Availability Statement:** The data presented in this study are available on reasonable request from the corresponding author.

**Conflicts of Interest:** The authors declare no conflict of interest.
