The Evolution of Energy Performance Certificates: Implications for Property Owners
Introduction
Energy Performance Certificates (EPCs) play a crucial role in the property industry, serving as the primary measure for the Minimum Energy Efficiency Standards (MEES) regime and driving other ESG-related regulations. It is essential for EPCs to provide accurate and reliable assessments of a building’s energy efficiency. In this blog post, we will explore recent changes to EPC rating calculations and propose upcoming fundamental changes that will significantly impact property owners.
Ambitious Energy Efficiency Targets
Under the Minimum Energy Efficiency Standards (MEES) regime, property owners face ambitious targets for improving the energy efficiency of buildings. In a previous Insight article titled “Countdown to Compliance with MEES: ‘Continuing to Let’ Commercial Property from 1 April 2023,” we highlighted the need for landlords of commercial properties to take immediate action to audit their portfolios and plan for the likely increase in the MEES threshold to a minimum EPC B rating by 2030.
Considering Recent and Future Changes
While preparing for future MEES thresholds, property owners must also consider the impact of recent and upcoming changes in EPC assessment methods.
The Case for Change in Rating Building Energy Efficiency
Initially introduced to benchmark energy performance and provide cost-effective improvement options, EPCs now serve various purposes, including regulatory implications such as MEES. However, it is widely recognized that EPCs are no longer fit for purpose. Domestic EPC ratings are based on energy cost, while non-domestic EPC ratings focus on carbon emissions. These ratings fail to provide a complete picture of a building’s energy efficiency. Moreover, EPCs are based on predicted or designed performance rather than actual energy usage, offering an idealized view of optimal performance.
Recent Changes in EPC Assessment Methods
EPC ratings are generated using methods derived from Part L (Conservation of Fuel and Power) of the Building Regulations. Changes to Part L, effective from 15 June 2022, have resulted in potential differences in EPC ratings when reassessed under the new methodology. These changes account for shifts in grid emissions factors, reflecting the increasing share of renewable and low-carbon sources in electricity generation. As a result, properties heated by electricity are likely to achieve improved EPC ratings, while gas-heated properties may see no change or a slight deterioration.
Anticipated Changes and Reform
Significant changes to EPCs are expected to take place between now and 2030.
The government plans to introduce SAP 11, a revised version of the Standard Assessment Procedure, which applies to new domestic properties. Set to come into force in 2025 alongside the Future Homes Standard, SAP 11 incorporates twenty-five recommendations aimed at improving the methodology. A RICS report, “Decarbonising UK Real Estate,” goes further by proposing the extension of these recommendations to non-domestic properties. It suggests additional improvements, including the clear presentation of three main metrics: final energy use, carbon emissions, and energy cost. Furthermore, four supplementary metrics could provide a more comprehensive evaluation of building performance, covering fabric energy efficiency, space heating demand, peak energy load, and on-site renewable generation capacity.
Fundamental Reforms for Net Zero
The “Mission Zero” independent review of the government’s net-zero target recommends further reforms to EPCs. It proposes a mandatory requirement for regular updates to EPCs and the adoption of a new metric that better accounts for the wider benefits of low-carbon heating systems. Under this new metric, EPC ratings could evolve into a holistic Net Zero Performance Certificate, providing consumers with detailed information about the heating technology used in a property and its associated effects.
Future Changes for Large Commercial and Industrial Buildings
In addition to the aforementioned developments, the industry eagerly awaits the government’s response to the 2021 consultation on introducing a performance-based policy framework for large commercial and industrial buildings over 1,000 square meters. Proposed measures include performance-based assessments, annual ratings, and mandatory disclosure.
Conclusion
As property owners strive to meet ambitious energy efficiency targets, they must adapt to the evolving landscape of Energy Performance Certificates (EPCs). Recent changes to EPC assessment methods and upcoming reforms signal a shift towards a more comprehensive evaluation of building performance and a stronger focus on achieving net-zero emissions. Staying informed and proactive will enable property owners to navigate these changes effectively and ensure compliance with future regulations while contributing to a sustainable future.