The Government has made a commitment to support businesses in reducing their energy usage, The target is a reduction of at least 20% by 2030. A consultation was released to gather views on the use of minimum energy standards to support the improvement of energy performance in commercial properties.
Stroma Certification has responded to this consultation on behalf of our members and you can read our response in full below:
The EPC is an effective indication of the energy performance potential of a building at a given point in time, but it is not an indication of actual energy use. Combining EPC data and actual energy usage would provide a fuller understanding of the energy use in non-domestic building stock. ESOS has brought about data that combines performance and actual energy usage via the use of DECs, but this is limited to companies that are required to take part in this scheme. Under EPBD only public sector buildings have been required to have DECs lodged on the government register.
Stroma Certification understands the NCM used for calculating energy use when producing EPCs. In our experience, energy is used in non-domestic buildings the following key areas:
In addition, the following aspects of energy assessment can affect the EPC rating in a meaningful way:
Areas of improvement
Stroma Certification agrees with the desired trajectory date. This sets a challenging timescale which would focus action needed by landlords. This should be achieved using interim target dates to encourage continuous improvement of buildings, or to inspire action to achieve improvement to the standard in advance of this date where desired and logical. This may also allow a market for energy efficiency solutions and potential new technologies to emerge and provides a sustainable market place.
However, the 10-year validity of the EPC does cause potential problems, whereby decisions being made by building owners could be based on an EPC up to 10 years old (i.e. from 2010) which now bares little resemblance to the current configuration. With such a long lead time there is a need for early compliance incentives. Landlords could be incentivised, maybe with stamp duty reductions, Council Tax reductions or a modification to the HMRC rules on capital allowances, to go early. Also, the Section 63 scheme in Scotland has some useful principles that could be employed. Landlords could be incentivised to have DEC assessments performed and made available for their tenants, to help them understand/appreciate their energy use and energy using equipment. If this were mandated until a building achieves the minimum standard of C/B then this may also motivate Landlords earlier upgrading.
The only comment Stroma Certification can make on this is that the market has shown its readiness to deliver for the current implementation of MEES and a future trajectory would create certainly to continue that. In order for business within the industry to invest and support the regulations, then a long enough trajectory is needed and 10 years to achieve B ratings with milestone targets would give businesses confidence that this isn’t a ‘boom and bust’ scenario, or activity wont be held back until the final few years of the regulation coming into force.
Whilst a good EPC rating is desirable, it is not the whole truth of how a building is used. Energy management principles need to be applied to deliver the potential carbon savings. Whether the minimum energy efficiency standard is achieved, basic energy management practice should be a focus, and this can be done using an annual DECs a 7 yearly Advisory Reports. The EPC validity period of 10 years is also not helpful in the pursuit of tracking and seeing improvements in building stock. Ratings will change with methodology and building regulations improvements. Fuel costs, installation costs and savings will change markedly within the 10 year validity.
Firstly, the notion of requiring three quotes is over-simplified and doesn’t work in reality, In non-domestic applications (as opposed to the domestic scenario), particularly in more sizable/complex buildings, a quote is never the first stage I the process of improvement – design is always considered first. The software tools used to produce EPCs, iSBEM or other solutions are compliance tools not design tools. It is therefore very difficult to get a correct calculated output for the 7-year rule. It is possible to oversize systems to ensure that the 7 year payback rule will fail. Also consider the changes in technology installation costs over time – technology gets cheaper. It is very much worth considering using the same 15-year payback test applied by Approved Document ADL2B as this is widely used for improvement mandated by the building regulations. Encourage a ‘cap’ (suggestion of a % versus rentable value) which Landlords had to spend to improve their property regardless. Maybe 10% per year? Will make Landlords take action to improve their property.
Although a single backstop date would most likely be the most economic – i.e. do all improvement work at the same time, there is a risk that a single 2030 deadline will lead procrastination until 2030 which will likely lead to deliver issues. The best solution is a set of phased milestones, but one that allows a Landlord to chose to exceed these for early compliance. Landlords should be advised that technology can get cheaper and working out the best plan to achieve compliance is key to delivering the desired result at the best possible cost outcome. The use of DECs could again be used to motivate reaching milestones early (see answer to Q6). Domestic MEES seems to point to success for having a date for new leases and a backstop date for existing leases with a years gap in between. This could be extrapolated as suggested by the consultation document; D by 2024, C by 2026 and B by 2028 for new leases alongside parallel dates for sweeping up passing leases, such as D in 2025, C in 2027 and B in 2030. As noted previously, Landlords could be incentivised with stamp duty reductions, Council Tax reductions or a modification to the HMRC rules on capital allowances, to go early. Anecdotally, and with reference to domestic MEES, the lender market also seems to be driving compliance, for not only Buy to Let mortgages but also for most property sales, due to risk averse lenders wanting to ensure that properties meet the minimum standards. It is possible that a similar effect will be seen in this market.
Stroma Certification cannot identify any reasons. However, the 7-year payback does seem to be a bit outdated now that there is no Green Deal in place in the market. Stroma Certification would encourage BEIS to review this exemption and link it to a 15 year payback.
The Agreement for Lease is currently being used effectively in this situation.
None that can be seen.
Firstly, enforcement needs to happen, and we cannot simply allow passive enforcement via the lenders and agents. The current enforcement is by Trading Standards Departments who have many competing priorities and areas to cover. Stroma Certification would suggest the Environment Agency as an alternative as this agency has seen effective enforcement of ESOS over the last 3-4 years. Alternatively, the government could consider the setting up of a specific enforcement agency to cover the various energy efficiency regulations in place. Enforcement brings compliance and so if not in place already, then a trial will be useful to inform on how best and most effectively to enforce the standards.
Bill savings, payback etc all based on predicted energy use generated by the SBEM calculation and not actual occupancy and bills (how the property is actually used). Understanding how a building is used, the occupancy and the fuel usage is key to understanding the bill savings and payback. This supports the use of a regular DEC.
Case study 1 – refers to gas heat pumps – Stroma Certification is not convinced this is this is a technology that is likely to be used for property improvement measures. Additionally, Stroma Certification isn’t convinced that the case studies support the theory that taking buildings from E-B compared to E-C is three times the private investment cost (referenced on page 21, paragraph 3).
Stroma Certification cannot comment on this.
This is not likely to be a large problem as refurbishment work will be done in simply complying with Building Regulation minimum requirements and will therefore involve energy performance improvements. The optimum time is when other work is being done. However, some concern centres around buildings that require large levels of work to achieve compliance (i.e. all exemptions considered) may be left void and be difficult to sell on. Stroma Certification is not able to add any detail in this matter as it is not our area of expertise.
Stroma Certification cannot answer this question effectively.
Yes, we think Landlords will possibly look to share the costs with tenants.
Sam Cantle, Technical Manager said: "Stroma’s response to this consultation is aimed at re-enforcing the value that an accurate EPC can bring to a building owner, whilst identifying areas that can lead to inaccurate information that prospective building improvements are based on. Stroma would like to see the Government close the known loopholes to encourage Landlords to make the necessary building improvements to improve the energy efficiency of their buildings, whilst recognising that the current Enforcement protocols are not effective in maintaining compliance with the legislation. Stroma have also re-enforced the view that the 10 year validity period of the EPC is too long to allow Landlords to make meaningful and precise decisions in relation to their property."
You can find the full consultation document Non-domestic Private Rented Sector minimum energy efficiency standards: future trajectory to 2030 here.