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Restricting urban biomass: A chance to improve city air quality

Reducing the volume of emissions for real estate activities and subsequently improving air quality is something EVORA Global supports clients in committing to. Often, this involves changing the way factors such as energy and heat consumption are managed. Switching from traditional fossil fuel to cleaner means is a great way to start, however, alternative means of heating still need to be carefully considered in terms of the overall impacts tied to them. 

Biomass systems are an example of an alternative heating source requiring such attention, due to implications for air quality from what they emit. In this blog we explore the potential issues with biomass and what the alternatives are for asset owners looking to move towards renewable heat. 


UK non-domestic renewable heat

The topic of renewable heat has been rising up the agenda as a key part of UK decarbonisation and net zero targets. According to BEIS it is estimated that a third of energy consumption in the UK is from heating, with  a substantial portion of this stemming from fossil fuel sources. 

Traditionally heating has been sourced predominantly from gas (~78%) in the non-domestic space, with only a small proportion from electricity (~8%) and even less from alternative sources (~6%) according to an Imperial College London and Vivid Economics analysis in 2018. As a result, to advance decarbonisation efforts, subsidy schemes such as the Renewable Heat Incentive (RHI) have been introduced. 

The Non-domestic RHI serves organisations that use alternative heating, incentivising the switch by paying generators for generated heat. In this way, renewable heating systems can be paid for in the long term, due to bill savings and cash flow from set tariffs lasting 20 years. Biomass, organic matter used for fuel, has been the most popular alternative, leading the way in terms of the RHI’s contribution to energy system decarbonisation. In fact, as of the end of August 2019, biomass accounted for 16,776 accredited systems across GB, with a capacity of approximately 4.1GW. This represents around 85% of the total number and generating capacity under the non-domestic scheme as shown in Figure One.

Figure 1 – Proportion of alternative heating installations by number and installed capacity (MW) across GB under the non-domestic RHI. 
Source: BEIS – RHI Monthly Official Statistics Table August 2019

Biomass is a carbon neutral fuel as carbon emitted is offset by that absorbed during the growth of the fuel (assuming that a sustainable supply chain is created with a continuous carbon sink and replenishment strategy in place). When compared to other fuelled boilers in Figure 2, data from the UK Houses of Parliament in 2016 suggests that the direct emitted carbon from biomass is lower than other conventional systems. This builds a strong case for using it in heat intensive settings.

Figure 2 – Average emitted carbon from conventional boilers of different fuel types
Source: UK Houses of Parliament 2016

Issues with air pollution

However, biomass has come under scrutiny due to other emissions which result from the combustion of the wood pellet fuel. Fine particulate matter (PM 2.5), ammonia (NH3), nitrogen oxides (NOX), sulphur dioxides (SO2) and other harmful substances have been found in high volumes on average from biomass systems. 

PM 2.5 is an air pollutant that is a major concern for people’s health and wellbeing due to reducing the quality of the air we breathe, causing respiratory difficulties and affecting lung function in the long term. This is primarily from the particulates themselves, however, PM 2.5 can act as a sink for other toxic substances which are produced from transport and industry which can also be drawn into the lungs. Therefore, it is of interest that the volume of PM 2.5 emissions is reduced in urban areas, due to the general proximity of the public to sources of emissions, as well as the relative density of pollution in these regions and other toxins that can be mixed in.

Data from EMEP/EEA air pollutant emission inventory guidebook 2016 illustrates the issue that biomass presents in Figure 3 below, with PM 2.5 emissions being the second highest of the comparative boiler fuels. When these systems are concentrated in an urban area, the issue is only exacerbated.

Figure 3 – Average PM 2.5 emissions from standard boilers of different fuel sources (*electricity does not factor source combustion)
Source: EMEP/EEA air pollutant emission inventory guidebook 2016

A BEIS consultation – restricting urban biomass

Due to issues arising from the continued rise in popularity around biomass and potential to impact air quality, Government outlined in an October 2018 consultation – Renewable Heat Incentive: Biomass Combustion in Urban Areas – the potential to restrict biomass facilities in urban areas. In effect, this will remove the financial incentive for all new biomass installations including combined heat and power (CHP). It has been a year since this consultation was introduced and Government has yet to provide a public response, however it is be speculated that the commitment to restrict urban biomass will follow through, as the Clean Air Strategy 2019 published in January 2019 reiterated the intention to do so.

These restrictions are aimed at steering potential installers of RHI systems away from biomass toward different measures, namely, those with a zero PM 2.5 emission status, as well as energy efficiency measures. As a result, BEIS suggest that the potential net present value of banning urban biomass from January 2019 could be as much as £89mn, with £23mn sourced from air quality impact savings alone due to lower social resource costs. Furthermore, carbon saving of 0.6MtCO2e per annum could also be achieved if other RHI technologies are deployed instead such as heat pumps and solar thermal.


Alternatives for asset owners to consider

Despite heating systems being a staple in all buildings, the reliance on them is still up for debate. It can be considered that in a temperate region like the UK, the need for external heating systems providing heat to buildings is unnecessary, especially in new builds where most new installations are likely to be targeted. In the case of biomass systems, they may not even need to be considered if energy efficient measures can be designed into a construction in the first instance. Furthermore, when looking at older structures energy efficiency and heat dependence can be improved through retrofitting. 

New build thermal efficiencies are expected to increase in the next decade or so, with the tightening of Part L Building Regulations and promotion of better standards such as Passivhaus including improved insulation, reduced air flow and intelligent design to take advantage of solar thermal energy. This could, in the longer term, negate the need for external heating completely, biomass or otherwise as room temperatures are maintained through the day. Therefore, alternative heating arrangements can be put in place, these being smaller and possibly modular RHI accredited systems which can adapt to a growing company throughout the year. This would promote flexibility, energy savings and reduced emissions overall.

…alternative heating arrangements can be put in place, these being smaller and possibly modular RHI accredited systems which can adapt to a growing company throughout the year. This would promote flexibility, energy savings and reduced emissions overall.

However, for existing buildings, which make up most of the real estate stock, external heating will still be required regardless of energy efficiency measures put in place. But real estate within urban regions can still tap into the benefits of renewable heat while avoiding localised air pollution by investing in other generator types. Air source, ground source and water source heat pumps, solar thermal arrays and geothermal installations are RHI accredited systems that do not combust material and therefore have zero PM 2.5 or carbon emissions as a result. 

Utilising these technologies therefore help investors to contribute to sustainability standards, improve health and wellbeing overall and act as an alternative to sometimes expensive energy efficiency retrofitting as well as receiving subsidy for their contribution. 


In summary, though biomass is a good alternative to carbon emitting fossil fuel boilers, in the urban environment emissions of PM 2.5 are problematic and undesired. As a result of the BEIS consultation, newly installed urban biomass is likely to lose subsidy. However, there are alternatives in place which can keep buildings warm but will help to improve air quality, through either complete replacement of biomass systems, or by using intelligent design to negate the need for large external heating in the first place. 

For more information surrounding urban RHI systems or energy efficiency measures, please get in contact with the team. 

Net Zero carbon emissions by 2050: a Green Revolution

Bold Ambition? UK to Legislate 2050 Net-Zero carbon target.

Last night, Theresa May, in one of her final acts as UK Prime Minister, pledged to take on board recommendations from the Committee on Climate Change to establish a legally binding net-zero target by 2050.

The approach, proposed today (Wednesday 12 June 2019), would see the UK become the first member of the G7 group of countries to legislate for net zero emissions.

This is a bold commitment. It is a (in our view exciting) response to increased public awareness of environmental issues and the dangers faced from a ‘climate emergency’.

This follows parliament’s declaration of a climate change emergency back at the start of May and Theresa May’s determination to leave a positive legacy after she steps down from the role of Prime Minister.

Whilst this is an exciting step, there is a lot to do and 2050 is just over 30 years away.  The strategy and the means to deliver on this target is yet to be determined. Key questions include:

  • How will it be financed?
  • What technologies will be given priority?
  • And what will the role be of international carbon credits? Net Zero plans will allow the offsetting of emissions.  Control is needed to prevent and avoid loopholes

Some of the negative press about the plan focuses on cost. The Treasury has indicated that is will cost £1 trillion. However, this misses the point. Calculations don’t, for example, consider the uplift in the green economy for example. And in even simpler terms, the long term costs of not doing anything are far greater.

This is just the beginning of this new phase of tackling climate change, it isn’t a silver bullet and there is much detail to agree for an effective strategy to be set in place. Time will tell, but for now, I am going to be positive.

It really does feel like we are turning the corner.

Clean Energy for all Europeans Package: future implications for the real estate sector

On the 13th of November the European Parliament adopted new targets for energy efficiency and renewable energy generation as part of its wider package of clean energy initiatives.

The “Clean Energy for all Europeans Package” aims at moving towards a renewable future with reduced dependence on coal, gas and oil. The new agreements adopted this week target a 32.5% energy consumption by 2030, as well as requiring 32% of energy spend be on renewably sourced energy by 2023 within the bloc. Additionally, 14% of fuels utilised in transportation will have to be issued from renewable sources by 2030.

The legislation, divided into three major documents, stipulates that member states will have to roll out specific measures to address disparities in energy production and provision, and make renewable energy available for citizens to produce, purchase and sell.

Each member state will be asked to develop a 10-year national plan addressing energy and climate, detailing objectives, contributions, policies and measures, by the end of 2019. This will then have to be updated each decade.


What does it mean for real estate investors with pan-European portfolios? 

The agreement aims at reducing CO2 emissions, maximising energy efficiency, reducing energy costs for European consumers, and fighting global warming. These are goals that have been growing in prevalence over the past decade and are now at the heart of the EU’s agenda, with this recent legislative development further evidencing its importance to the bloc. With buildings consuming around 40% of the energy used worldwide, real estate is inherently at the heart of this commitment.

Firstly, real estate investors with pan-European portfolios can expect a wave of new incentives and regulations promoting renewable energy over traditional energy sources. The design, extent, and stringency of new legislation could however vary from country to country as each is being allowed to develop its own action plan. Considering renewable energy projects at your assets or switching to green energy contracts, now available from most major suppliers, are great ways to contribute toward these goals and enhance your portfolio’s environmental credentials.

An additional benefit of moving toward renewable energy sources is reduced exposure to the price volatility of traditional energy sources such as coal and oil as a result of geopolitical, legislative and environmental dynamics. Not only is renewable energy better for the planet, it may not be long before it comes at a lower and more stable price.

Real estate investors with pan-European portfolios can expect a wave of new incentives and regulations promoting renewable energy over traditional energy sources

It is unclear as to whether national-level plans will mainly apply to primary energy producers, and the extent to which they will involve public and private bodies. It is likely, however, given the scale of this new European directive, that such national goals will to some degree affect all stakeholders involved in the energy supply chain.

As the real estate sector is at the very core of the fight against climate change and in the reduction of greenhouse gas emissions, real estate investors may be expected to comply to new emission thresholds, standards and increased transparency, in order to meet new national targets. This will certainly require additional resources and capacity to be devoted to better, more structured and regular energy and environmental reporting to external governmental and institutional bodies. Moreover, these new commitments should act a trigger for creating a more transparent energy supply chain for buildings. Re-evaluating and adopting a better step-by-step energy supply strategy will become increasingly important in the years to come.

Real estate investors may be expected to comply to new emission thresholds, standards and increased transparency, in order to meet new national targets

Finally, the initial Energy Efficiency Directive of the European Commission clearly stated the overarching goal of this agreement. By reducing greenhouse gas emissions, improving air quality and using resources efficiently, the idea is to move towards a healthier, more comfortable and respectful future for people and the environment. It is of fundamental importance that all stakeholders understand the role that businesses and investments play in shaping the years ahead, and how this legislative step fits into a larger framework of creating resilient value for the future.


Sources:

  1. Energia, efficienza e rinnovabili al 32,5 e 32 per cento nel 2030. La Repubblica. Published.
  2. European Commission. 19 June 2018. Energy efficiency first: Commission welcomes agreement on energy efficiency American [Press release].
  3. European Commission. 13 November 2018. Commission welcomes European Parliament adoption of key files of the Clean Energy for All Europeans package. [Press release].
  4. European Commission. Buildings.

Moving towards lower carbon electricity generation

The latest UK carbon (‘Carbon’ is being used here as short hand for carbon dioxide emissions – CO2) conversion factors from the Department for Business, Energy & Industrial Strategy (BEIS) demonstrate that a significant and much-needed decarbonisation of the electricity grid is being achieved.


The latest (2017) carbon emissions from UK electricity generation has reached its lowest recorded figure at 349g CO2/kWh. It is worth noting that there is a two-year delay in the release of updated carbon factors in the UK and so, in reality, this rate relates to electricity generated in 2015.  As seen in Figure 1 below, this compares favourably to the latest global average of 506g CO2/kWh2 (although the average for EU countries is still lower than the UK at 302g CO2/kWh).

Figure 1: Average carbon emissions from electricity generation.

Please note: These values relate to the direct (‘Scope 1’) carbon emissions from electricity generation only (i.e. ‘Scope 3’ or ‘well-to-tank’ emissions are excluded).

Given the two year delay between the electricity generated and the reported values, the true carbon emissions from electricity generated in 2017 are expected to be even lower than those stated in the latest carbon emissions. In November 2012 coal contributed 50% of electricity generation, however, in July 2017 the contribution was only 2%.  Based on this, we should expect a greatly reduced 2019 conversion factor given that coal generation in 2017 reached record lows.


Why the decrease?

In short, the observed trends in the fuel mix (and therefore the main driver of emissions) have been:

  • Less coal;
  • More nuclear;
  • More renewables; and,
  • More electricity directly imported from other countries with the use of interconnectors.

The UK is, typically, a net importer of electricity, with the majority sourced from France. This reduces our carbon conversion factor as France has a heavy reliance on nuclear fission which produces zero direct (‘Scope 1’) carbon emissions. For further information, please see Figure 2 which shows how the UK’s fuel mix has changed in recent years.

Figure 2: Quarterly UK electricity generation by fuel source.

As we all know, moving towards less carbon-intensive electricity generation is essential if we are going to meet our statutory carbon reduction commitments, most notability the 80% reduction by 2050 from 1990 (as outlined in the 2008 Climate Change Act).

As demonstrated by the data, the trends are going in the right direction, however, there is still a lot more the UK can do as we continue to lag behind some of the developed European countries (especially the Nordics). Future progress is being halted by a number of factors.


The Challenges

1.  Despite investments in UK clean energy more than doubling from 2010-2015, investments fell by 56% between 2016 to 2017. However with technological advancements in terms of affordability and efficiency, for solar and wind, there could be a reverse in the recent trend. Most notably, the operational costs of offshore wind farms costs have halved to £58/MWh. This is in contrast to the much more expensive rate agreed for Hinckley Point C at £92.5/ MWh6.

2. Continuing with nuclear as our main source of lower carbon electricity is approaching a bottleneck, with many of our active reactors due for decommissioning in the mid-2020s. This creates issues due to the lengthy process involved in commissioning new nuclear plants meaning we may not have enough time to adequately replace them.

3. The current government’s proposal is to substantially increase our reliance on directly importing electricity from other countries, from a current capacity of 5.7 GW to 20 GW by 2024. This equates to a jump of 6.5% to 24%, which further reduces our own energy security. This means the UK will need to become more reliant on mainland Europe than ever before to meet our increasing electricity demand.

4. Carbon efficiency assessments (i.e. conversion factors) often do not consider lifecycle emissions. Therefore, the carbon associated with the materials used in the building of each power station/turbine is ignored. This is especially pertinent to the nuclear power industry which requires huge amounts of concrete (which indirectly emits large amounts of carbon in its manufacturing), combined with a comparatively short operating lifespan.


Final Thoughts

Despite an uncertain future, there is cause for cautious optimism as the UK is moving in the right direction, with appropriate fuel switching as low carbon technologies become more economically viable. However, whether future changes in our fuel mix will be sufficient to meet our climate change obligations whilst simultaneously balancing electricity demand and energy security remains to be seen.

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ESOS Phase 2 – time to start planning!

It is now just two years to the day until the ESOS Phase 2 compliance deadline of 5 December 2019. Don’t be complacent – two years might sound like a long time away, but you will save time, stress, and money if you start taking action now by carrying out energy audits. Read on!


The Environment Agency, Scottish Environment Protection Agency (SEPA), Northern Ireland Environment Agency (NIEA) and Natural Resources Wales (NRW) have jointly advised organisations that they should all start now carrying out energy audits as part of the compliance process for ESOS Phase 2.

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With only a few exemptions for public bodies, the regulations require all other large UK organisations to take three important steps before the compliance date of 5 December 2019 for ESOS Phase 2:

  1. measure their total energy consumption;
  2. conduct audits to identify cost-effective energy efficiency opportunities; and
  3. report compliance to their national scheme administrator – the Environment Agency in England, SEPA in Scotland, NIEA in Northern Ireland and NRW in Wales.

Consideration should also be given at this early stage as to whether adopting an approved energy management system such as ISO50001 may be a more suitable route to achieving compliance (ISO50001 is the internationally recognised standard for best practice in energy management).

If you plan to implement ISO5001, then early action is definitely required. Alternatively organisations caught under the ESOS regulations should now start conducting audits to identify their cost-effective energy efficiency opportunities for ESOS Phase 2.

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Early action should avoid some of the issues and that occurred during the first phase of ESOS. According to Carbon Trust, around 2,800 organisations had to send notifications advising that they would be late in reporting compliance, and a number were ultimately fined.

Carbon Trust also reported that of the hundreds of compliance audits conducted for Phase 1, it was found that that just 16 percent of participants were fully compliant. A full three-quarters of audited participants needed to undertake remedial actions in order to become compliant.

A full three-quarters of audited participants needed to undertake remedial actions in order to become compliant.

The Environment Agency has also indicated that in England there were approximately 500 organisations that qualified for ESOS in the first phase but had not engaged with the scheme. There have been over 300 enforcement notifications sent out to date, more will be going out in the near future. Civil penalty proceedings have also been commenced against a number of non-compliant organisations.

During the first phase of ESOS, EVORA helped a number of organisations to comply with the regulation and we would concur with the Carbon trust’s reported findings that cost-effective measures could usually cut energy costs in buildings, transport fleets and industrial processes by about 20 percent.

ESOS reports have been proven to identify real energy saving opportunities. Good governance requires that Directors consider the report recommendations.

Further reading on ESOS:

ESOS Phase 2 Practical Hints and Tips


The EVORA team is ready to support you with ESOS Phase 2 compliance. Please don’t hesitate to get in touch to learn more.

CRC Annual Report Publication: Key Results for Phase 2

The CRC Energy Efficiency Scheme Annual Report Publication (ARP) covering the first 2 compliance years of Phase 2 has been published today.

CRC Annual Report: key results

Key results for Phase 2 to the end of the 2015/16 compliance year show:

  • Total revenue through carbon allowance purchases in 2015/16 increased 18.2% to £902,957,350 compared to 2014/15
  • Total energy use reported for 2015/16 was 3.2% lower than 2014/15: equivalent to 3,558,208MWh
  • Total reported emissions for 2015/16 were 9.7% lower than 2014/15: equivalent to 4,415,594tCO2
  • 1,858 participants registered for Phase 2; this is a small reduction in the number of participants when compared with the final year of Phase 1

The key results present some very serious numbers, including a near £1bn revenue stream for the government and some notable improvements in energy usage and carbon impact.

3.2% reduction in annual energy usage

The CRC is due to be scrapped following completion of the 2019 compliance year (in July 2019). The Scheme has been widely criticised by Participants as overly burdensome and costly to administer.  Others will argue that the benefit of identifying and reporting annual emissions has brought attention to energy efficiency improvements, as demonstrated through the 3.2% reduction in reported energy use.

Irrespective of what happens going forwards, monitoring will continue to be essential to ensure understanding of energy performance and to help track energy efficiency. Our proprietary software, SIERA, is a market leading, innovative and easy-to-use environmental management software system. SIERA is already managing billions of pounds worth of real estate, and is being rapidly adopted by large organisations across the globe.


Find out how SIERA can transform your data capture and reporting by calling our experts today.


 

IEA Energy Efficiency Market Report 2016: Key Takeaways for the Commercial Real Estate Sector

About 10 days ago, the International Energy Agency (IEA) released the long awaited Energy Efficiency Market Report 2016, confirming the agency’s growing support for energy efficiency policies and initiatives worldwide. One of the key themes of the report was the emphasis on the critical contribution that energy efficiency can make to broader energy policy goals.

With investment in energy efficiency in 2015 reaching $221 billion and energy intensity improving by 1.8% in the same year, the IEA confirmed that energy efficiency initiatives have reached a sufficient scale to influence global energy markets. The energy intensity improvement seen in 2015 amounts to triple the average rate seen over the past decade, which is a considerable advance, especially in the context of relatively low energy prices. The progress so far should, however, be seen in the context long term targets – as the IEA emphasizes, substantial further improvements will be required to ensure a smooth and timely transition to a sustainable energy system. Particular emphasis is given to the implementation of policy in areas which are either not regulated or subject to inadequate policies.

Given that an estimated 70% of global energy consumption is not subject to any efficiency requirements at present, the scope for improvement is substantial.

The regulation of previously unregulated areas of energy consumption is, however, not the only way to achieve substantial improvements. While the report analyses energy efficiency in the context of a wide range of sectors (e.g. energy intensive industries, light-duty vehicles, rail, shipping and aviation, envelope, lighting, appliances) the real estate sector clearly stands out. In 2015, the real estate sector (commercial, industrial and residential buildings) accounted for 53% of global incremental investments into energy efficiency; more than the next two largest sectors (transport and industry), combined.

Energy efficiency as the fuel of economic development

The report takes an interesting approach to energy efficiency, prompting readers to think about it as the “first fuel” – an energy resource which is available to all energy system stakeholders in abundance and whose integration into energy development strategies can yield varied but important savings and benefits. The IEA highlights energy efficiency as a means to reduce emissions, help tackle air pollution concerns and climate change, but also praises it for its capability to lower energy expenditure. The report also places a lot of focus on the ways in which energy efficiency can help satisfy growing energy demand, improve energy access and energy security and ultimately contribute to economic resilience and the betterment of living standards. The priorities and goals of stakeholders committing to energy efficiency schemes will inevitably vary based on their specific circumstances.

The main achievement of the Energy Efficiency Market Report 2016 is that it manages to bridge the gap between sectors and stakeholders by portraying energy efficiency as a tool which can not only help deliver existing energy and climate goals but also bring about a broader range of the positive impacts such as those listed above.

Key takeaways for the commercial real estate sector

While being subject to a wide range of energy efficiency policies (including Energy Performance Certificates, Minimum Energy Efficiency Standards and Energy Savings Opportunity Scheme in the UK), the commercial real estate sector retains significant potential for further improvement.

On the one hand, energy expenditure in commercial real estate office buildings, for example, usually accounts for a large share of building service charge costs, providing a strong bottom-up incentive to improve energy efficiency. On the other hand, commercial real estate buildings make up a high share of global energy consumption and are also seen as having a wide range of energy savings opportunities, which raises their importance in the eyes of policy-makers. The combination of these top-down and bottom-up factors is a growing interest in the pursuit of energy efficiency in the sector.

What renders the commercial real estate sector truly unique is the range of market-driven certification, assessment and benchmarking initiatives which set an ever increasing industry standard for resource management and efficiency.

Initiatives such as BREEAM, LEED, HQE, ENERGY STAR and GRESB all reinforce incentives for stakeholders to measure and improve energy performance. Moreover, while energy management only constitutes one aspect evaluated in many of these initiatives, the identification and redressing of inefficiencies can go hand in hand with a stakeholder’s ability to attain higher scores.

So how can commercial real estate assets progress towards their potential for energy efficiency?

Our recommendation is to start with a robust measurement and analysis strategy which can, for instance, be undertaken as part of an asset and/or portfolio energy assessment aligned to standards such as ISO 50001. Such an approach is established on the basis of improving accuracy and completeness of energy consumption data which is fundamental in identifying potential areas to enhance energy management and improve efficiency. Analysis can then form the basis of meaningful performance improvement targets and ongoing monitoring and reporting to ensure continued progress. Such ongoing, documented processes will support in voluntary reporting to indices and certification, which can in turn provide an incentive for further improvements.

The growing interest and participation we have witnessed in voluntary certification, assessment and benchmarking initiatives, such as GRESB, are certainly a very good indicator of the commercial real estate sector’s engagement in energy management.


To gain more insight into the ways in which commercial real estate assets can benefit from becoming more energy efficient, refer to one of the following case studies:

For any other questions and to find out how we can help your organisation, please don’t hesitate to get in touch.


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Recapping The Energy Institute’s ‘Energy Management-Meeting the Standard’ Conference

Attending conferences can sometimes be a hit and miss affair in this industry. After frequenting a few of these events, both in my current role as a sustainability consultant and in my previous career as an environmental manager in the construction sector, I am all too wary of how easily these events can turn into a series of sales pitches provided by various companies presenting.

I needn’t have worried, the conference, run by the Energy Institute, involved a series of half hour talks from various sectors on a wide variety of energy related topics, all of which were 100% relevant to EVORA and more importantly, our clients.

The talks provided valuable snapshots of the great work being undertaken under the umbrella of energy efficiency and also provided some solid information on the impacts of regulations and policies.

Here is a summary of key points.

 

Article 8 Across Europe

Dr Martin Krusker of Siemens was asked, “who has implemented the requirements of Article 8 the best across Europe?”

Answer, the UK. The opinion of ESOS across the UK varies widely (some organisations considered it a pure legal compliance requirement whilst others saw a real opportunity to drive improvement) and, as a result, I was not expecting this response. From my experience, I felt that many of the smaller organisations just captured by the scheme found it a burden. There is also the issue, the white elephant in the room, that nobody has to action anything identified within ESOS audits….

The Environment Agency were consistently vocal in their opinion that thousands of businesses were going to be non-compliant – even though, as far as I’m aware there have been no penalties served, as yet, on these businesses.

However, it seems that in comparison to the remainder of Europe the UK did a stand-out job. Nevertheless, it is clear we should not rest on our achievements, there is plenty to improve upon during the next compliance phase.

 

Progression with ISO50001

The ISO50001 Standard is to undergo review to align with the high level structure of other recently revised standards (ISO14001:2015 and ISO9001:2015). The expectation is that this will be issued in January 2019 with a three-year implementation period.  If you want to get involved in the process of re-drafting the ISO50001 Standard, keep your eyes peeled for further updates on the EVORA website.

In Germany there is a tax incentive scheme for businesses which introduce ISO50001. Take-up of ISO50001 in Germany is therefore much higher than the rest of the world, Germany on its own accounts for more than 50% of all ISO50001 certifications. With Germany already being ahead of the UK in terms of renewable energy and pro-active energy policies it is yet another example of innovative policy making that results in German companies taking more responsibility in managing their energy consumption. I hope someday that the UK government will take as positive a stance as their German counterparts.

 

Energy Markets and Private Wire Systems

Talking about energy market costs culminated in a discussion on the potential of private wire systems to negate the continual rise of energy cost ‘add-ons’.

Historically, energy costs were made up of 60% the actual cost of a unit of energy with 40% added on for extras such as availability charges, demand charges, feed in tariff, climate change levy, distribution costs and so on. However, we are now moving to a point where this proportion is reversed, with 60% of energy costs being from ‘add-ons’, therefore the fluctuation in the actual cost of energy is making up less than half of the total cost of energy.

A private wire system removes these ‘add-ons’. Although only generally applicable to large demand energy users located in feasible areas, the opportunity to tap into local renewable energy projects in order to save costs and use a renewable supply is becoming an attractive option to some. This could become a viable option for some businesses if the proportion of ‘add-ons’ in energy costs continue to grow towards an unsustainable level.

 

Thoughts for the Future

These were just three of many talking points of the day. Although the next ESOS compliance deadline may seem like a distant worry, this event served as a reminder of the importance in determining how you can get the best out of a proactive energy management strategy (and value for money!)

However, as sustainability professionals we must lead by example and the venue was a timely reminder that there really is a long way to go before sustainability is naturally embedded. The conference room included multiple large halogen lights giving off vast amounts of heat combatted by huge industrial fans for cooling leading to a stuffy energy intensive bubble. A considerable faux pas for an energy management conference! Additionally, the travel information provided prior to the event listed detailed car directions, car parking facilities and airport links (with details of taxi journey lengths) before even mentioning train or bus options. Without joined up thinking and understanding, sustainability will never become the norm.

The event lasted for a day, but the topics discussed will be key themes in the sustainability arena for years to come.

For information on the services EVORA can provide please do not hesitate to get in touch today.


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Why MEES is Changing Behaviour Two Years Ahead of the Compliance Date

The Minimum Energy Efficiency Standards (MEES) regulations will make it unlawful from April 2018 to let buildings in England and Wales which do not achieve a minimum Energy Performance Certificate (EPC) rating of E. This will initially apply to new lettings and renewals only, but from 2023 will apply to all existing leases as well.

John Alker, Director of Policy and Communications at the UKGBC stated that MEES is “The single most significant piece of legislation to affect our existing building stock in a generation”. I would certainly agree with this on a number of levels.

But doesn’t MEES have its flaws?

YES!

Firstly, the minimum standard is based on an EPC rating but as we know, EPCs are renowned for their lack of correlation to actual energy performance and that, as a commoditised service, quality diminished significantly putting into question the accuracy and usefulness of many EPCs.  Note that the Government is aware of this issue and has entered into a consultation process designed to improve quality assurance of EPC assessments.

Secondly, EPC calculations are linked to building regulations, so as regulations get tougher, so does the ability to achieve a decent rating making MEES a moving target. Many have suggested that EPCs produced pre 2011, if re-modelled now, could be up to two ratings lower. If correct, this could potentially see in excess of 30% of building stock, at risk to 2018 regulations.

However, this is not what we are experiencing, primarily due to the poor quality of many existing EPCs. As an example, EVORA recently re-evaluated shopping centre units with an EPC ratings E – G, where the rental value of these units exceeded 75% of the total ERV of the scheme. The original EPCs were of poor quality, as shown through the use of defaults. By completing accurate EPCs, EVORA was able to secure at least a D rating and therefore mitigating MEES risks for the next 10 years.

It is also not yet clear what the future trajectory will be for the minimum standard, although it is possible that this will be raised come 2023. This makes refurbishment planning challenging for landlords, who generally work on ten year cycles.

Finally, there are a number of exemptions, not least the requirement to have the consent all of tenants, which is surely a get out of jail free card for any landlord.

MEES and Behavioural Change

Despite these flaws and challenges we are seeing a significant change in behaviour well in advance of the 2018 compliance date. This shouldn’t be a surprise. MEES has the real potential to adversely impact many key value drivers including occupancy, rental growth, liquidity, cost of finance and yield on sale.

Greater Rigour Required

As such, it is focusing minds to ensure EPCs are carried out professionally and with rigour, whilst taking steps to understand portfolio risk supported by an appropriate strategy to mitigate.

As an example, more sophisticated energy modelling is being undertaken using Dynamic Simulation software packages to ensure the accuracy of EPCs and to better understand the opportunities to improve both energy performance and the EPC rating. We are currently supporting Hines on a major refurbishment in Canary Wharf, providing energy simulation modelling to ensure the design intent improves both the energy efficiency of the building as well as the EPC rating.

Understanding your MEES Risk

In addition, we are regularly using sophisticated sustainability management software such as SIERA on behalf of our clients, to analyse EPC ratings, lease events and ERVs together to understand and profile MEES risk.

Collaboration is going to be Essential

Ironically, rather than being a get out of jail free card, lack of consent by the occupiers, possibly due to business interruption issues, could impact on asset management plans to improve the overall EPC rating to ensure future marketability and to prevent possible price chipping on sale. This is also an issue for FRI assets where there is no legal right to gain access, but improvements may be necessary to achieve a minimum rating, prior to lease expiry to enable the property to be marketed to minimise the risk of void periods. These issues will drive the need for greater collaboration between landlord and tenant.

Improvement vs repairing obligations and what about dilapidations…?

Collaboration will also be key if the landlord intends to replace M&E equipment with more energy efficient kit, ahead of the end of its useful life, and is seeking the tenants to share in the costs or to recover fully through the service charge. The cost benefits to the tenants will need to be clearly articulated to get their engagement.

Staying on the theme of replacing kit, this is likely to have an impact on dilapidations where the landlord may require more energy efficient equipment to meet MEES regulations but the issue of improvement vs repairing obligations will arise. Again, collaboration and forward discussions will be key.

New lease terms?

New lease terms (notice my omission of ‘green’ which generally makes tenants and letting agents run a mile) could become the norm, specifically to bar alterations that adversely affect an EPC rating. But policing such terms will be a challenge.  Does this, for example, mean that every planned tenant fit-out or even minor alteration, has to be fully modelled to assess the impact on the EPC rating – possibly.

There are many other issues and challenges associated with the impending MEES legislation and whilst it is far from perfect it offers an opportunity to improve the energy efficiency and resilience of your assets and engage in long term communication and collaboration with your tenants. Surely that can’t be a bad thing!

How can EVORA support you?

EVORA can support you in understanding the upcoming MEES regulations, help you profile your MEES risk using our sustainability management software, SIERA and provide professional support in delivering and improving the EPC ratings for your assets.

EVORA is participating in a select group to provide industry guidance to DECC on the future of MEES regulations.

For further information or guidance on MEES please contact Ed Gabbitas: egabbitas@evoraglobal.com or 07557 529 106


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Legal Update: Scotland’s Energy Efficiency Programme

Changes to Scottish Energy Performance in Building Regulations

Publicity surrounding the introduction of Minimum Energy Efficiency Standards (MEES), which set a minimum EPC rating of E for leasing of properties from April 2018, has increased significantly in recent months, and rightly so. However, the Scottish Government has chosen to implement a different approach to drive energy performance improvement in buildings.

The Scottish Government has released guidance on the practical implementation of Section 63 of the Climate Change (Scotland) Act 2009 relating to the energy performance of existing non-domestic buildings.

The regulations, which come into force on 1 September 2016, require the production of a building specific energy Action Plan on the majority of buildings offered for sale or lease, which exceed 1000m².

The Action Plan, which is based on the output of Energy Performance Certificate (EPC) assessments, must be prepared by an approved Section 63 Advisor. Existing EPC assessors will need to complete further training and development to become approved advisors.

The Action Plan will identify appropriate measures to reduce energy consumption. Official guidance also indicates that the area threshold (currently 1000m2) is likely to drop over time. Following completion of the Action Plan, building owners will be responsible for either the reporting of annual energy use (in the form of a Display Energy Certificates (DEC) in England and Wales) or the implementation of physical improvement measures within a 3.5 year period.

Our EPC assessment team is already working to ensure it can provide Section 63 Advisor support.

Click the image to download this article as a handy one-page flyer.


For further information on regulations and requirements please contact Paul Sutcliffe: psutcliffe@evoraglobal.com or 07557 529 104.

Further information is available on – http://www.gov.scot/section63


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