Thoughts

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EPC, an important insight into building performance

Thoughts

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    EVORA

Since the Minimum Energy Efficiency Standards (MEES), covering the Private Rented Sector in England & Wales, were published in 2015, there have been several key dates where it has become unlawful to grant a new lease for a property, both domestic and commercial, with an Energy Performance Certificate (EPC) rating of F or G.

 

However, as of 1st April 2023, this regulation was extended, with landlords unable to continue to let a property that has an EPC lower than an E rating, without a legitimate reason, or approved exemption (covered in the Government PRS MEES Guidance Document).

 

In 2022, the government estimated that¬†approximately¬†18%¬†of commercial buildings in England & Wales¬†had an F/G rated EPC¬†‚Äď our poorest performing building stock, and our biggest challenge in our efforts to¬†improve¬†the¬†energy efficiency¬†of buildings, contributing significantly to achieving¬†our net zero ambitions.

 

It is not a secret that EPC regulations have been a regular discussion point for our industry for many years, with concerns raised over the quality and consistency of reports produced, and fact the certificate does not consider actual building consumption data.

However, despite the need to consistently improve the reports, their methodology, and training for EPC Assessors, the fundamental objective of an EPC remains an important part of enhancing our understanding of the energy efficiency of the buildings we construct, we buy, we sell, we rent, and we work in.

 

EPC’s were designed and are intended to be used as an asset rating. The reports assess how efficient a building should be, considering factors such as the building age and fabric, HVAC, hot water, lighting, and any onsite renewable generation. Whilst an EPC may not consider actual building consumption, which can highlight inefficiencies in the operation and maintenance of an asset, it does provide an important insight into the performance of the building systems, which, if ageing, or inefficient, will be significantly impacting the energy efficiency, and associated energy costs.

 

Conducted by a suitably qualified professional (government approved energy assessors), an EPC provides an important insight into building performance, and looking into the ongoing government consultation into EPC regulations, it would appear they will remain a consistent tool for assessing asset performance for some time.

 

The consultation proposes uplifting MEES to B rating by 2030, with incremental, phased improvements in 2027, where a C rating should be achieved.

 

In light of the regulation change, effective from 1st April 2023, our clients should undertake the following steps:

 

  • Conduct a thorough review of their EPC coverage, and compliance to MEES at the earliest opportunity, if this has not already been done. It is important to note that EPCs currently have a 10 year validity for each certificate produced. This means that, if the government approve the B rated EPC minimum rating by 2030, any EPCs being drafted and lodged now, will cover this date, if not new EPC is lodged before 2030 to supersede current assessments.
  • A¬†forward thinking¬†approach should therefore be taken when considering¬†interventions at an asset, considering predicted end of life of current plant equipment, lease events between now and 2030, which¬†provide¬†opportunities to improve energy efficiency.
  • When planning any interventions, and setting CAPEX budgets, consider the impact of these on¬†current and future EPC certificates, as well as taking¬†a holistic approach¬†to ensure¬†interventions support a reduction in operational emissions, and minimising embodied carbon of any retrofit activities.

 

Whilst we hope our clients are using EPCs as they were intended¬†‚Ästto provide a better understanding of asset performance¬†–¬†the key message is that compliance with MEES is now an¬†additional¬†regulatory risk that needs to be integrated into¬†investment decision making and business planning.

 

MEES regulations addressed in this blog cover only England & Wales, other EU countries are also consulting on setting similar standards in the short term, so investment and asset managers with pan EU portfolios should remain cognisant of potential changes.

 

EVORA conduct many energy and net zero audits each year, across UK and EU. We often use EPCs prior to attending site visits, to get an initial perspective on the likely performance of the asset. We then review this in detail once on site, accompanied by actual building consumption data, to determine appropriate interventions to improve the energy efficiency of an asset, aligning to the energy hierarchy and science based targets for emission reductions.

 

If you would like to speak an EVORA expert, please contact us at¬†[email protected]