How to get scalar value from a SQL statement in a .Net core application?

.Set<TEntity>() is for entities backed by the context.

You can try a workaround

DbConnection = connection = _context.Database.GetDbConnection();

using(DbCommand cmd = connection.CreateCommand()) {

    cmd.CommandText = "select dbo.FunctionReturnVarchar(@id)";    

    cmd.Parameters.Add(new SqlParameter("@id", SqlDbType.VarChar) { Value = id });

    if (connection.State.Equals(ConnectionState.Closed)) { connection.Open(); }

    var value = (string) await cmd.ExecuteScalarAsync();
}

if (connection.State.Equals(ConnectionState.Open)) { connection.Close(); }

What you need in this scenario is the ExecuteSqlCommand method with bound output parameter:

var resultParameter = new SqlParameter("@result", SqlDbType.VarChar);
resultParameter.Size = 2000; // some meaningfull value
resultParameter.Direction = ParameterDirection.Output;
_context.Database.ExecuteSqlCommand("set @result = FunctionReturnVarchar({0});", id, resultParameter);
var result = resultParameter.Value as string;