By Chris Gunn

Back in 2001, the first European Directive aimed at improving the energy performance of buildings was published in draft form. It came into force almost unscathed in 2003 and from 2008 was the foundation stone for the mandatory use of energy performance certificates (EPCs) across the EU when buildings are constructed, sold or let. Known as the Energy Performance of Buildings Directive (EPBD), it became the main regulatory tool in all EU countries for policy makers tackling energy and climate issues in the buildings sector.

The EPBD demanded much more besides energy performance certificates, such as minimum standards for new buildings and for refurbishments of existing buildings over 1000 m2, inspections of boilers and HVAC systems etc.. The EU “subsidiarity” principle, always pointedly ignored by Brexiteers, ensured each Member State could adopt different means to achieve the same ends set by the Directive. The UK, for example, introduced both EPCs and DECs and also MEES.

Over the intervening years, the EPBD has twice been ‘recast’, in 2010 and 2018, aiming to close loopholes, clarify grey areas and leverage policies to improve the whole building stock, rather than just individual buildings. Now a third recast is to be published in OJEU in June 2024, coming into force in 2026, soberingly a full 25 years after the EPBD was launched.

Although Brexit has divorced the UK from the direct effects of a new EPBD, the legacies of EPBDs enacted during our time in the EU remain ingrained in our legislation. Although many UK-based organisations and individuals own or occupy properties in the EU, we are no longer able to influence the direction of travel which we managed to do most effectively when members.

Understanding the Energy Performance of Buildings Directive:

EPBD Overview:

• Issued by: European Commission
• In force since: 2003
• Goal: 20% energy reduction by 2020
• Scope: All buildings, both domestic and non-domestic

Key Changes in the Recast:

• Energy Efficiency: All buildings undergoing major renovations must meet minimum energy efficiency standards.
• Energy Performance Certificates – (EPC): Must be included in sales and rental documents.
• Air Conditioning Inspections: Now include usage and improvement recommendations.

Impact:

• The proposed changes aim to achieve a 5-6% reduction in EU energy use by 2020.

 EPBD Goals:

• Improve energy efficiency across EU buildings.
• Achieve zero emissions for EU building stock by 2050.

Updated Requirements:

• By 2030: All new buildings to have zero on-site emissions from fossil fuels.
• By 2040: Complete phase-out of fossil fuel boilers.
• Renovations: Mandated decarbonisation plans for building stock.

Energy Monitoring:

• EnviroLogik offers comprehensive energy monitoring solutions to help building owners reduce power consumption and carbon emissions.

 Building Control Systems:

• EPBD requires building management systems (BMS) or building automation control systems (BACS) to enhance the energy efficiency and air quality. There are advanced solutions tailored for small and medium-sized buildings.

Legislative Background:

• The EPBD has been revised multiple times since 2002 to align with EU energy efficiency goals. The latest recast proposal was initiated in December 2023, with ongoing discussions in the European Parliament and Council.

Future Steps:

• Member States need to implement the directive into national law within two years of its enactment.

For more detailed information, download the Energy Performance of Buildings Directive.

What is the EPBD? What does it mean?

EPBD stands for the Energy Performance of Buildings Directive and is devoted to CO2 reductions from European buildings including the UK – which was an EU member when it was adopted

What is the long-term goal of the EPBD?

The EU established the Energy Performance of Buildings Directive all the way back in 2003. The goal; to incentivise widespread improvement of energy efficiency. It has since been regularly revised to align with EU goals throughout the years with an end goal of 2050 where there is hope that the EU’s building stock will commit to zero emissions. Around 40% of energy consumed in the UK & EU is used in buildings alone and over a 1/3 of UK’s energy-related greenhouse gas (GHG) emissions come from buildings.

What are the EPBD updated requirements?

All new residential and non-residential buildings to have zero on site emissions from fossil fuels by 2030. Publicly owned buildings are not exempt either with a target of 2028 in mind. The objective is to phase out fossil fuels in heating and cooling to completely phase-out boilers powered by fossil fuels by 2040. Measures aimed at renovation of buildings a requirement to establish plans to decarbonise building stock.

By measuring energy usage, it’s possible to manage time and temperature set points and hours of operation to reduce power consumption and reduce associated carbon emissions. The EPBD sets out the minimum requirements for the energy performance of new and existing buildings in the European Union (these were in place before Brexit). For example, it requires all Member States to establish energy certification schemes for buildings and to ensure that all buildings that are constructed, sold, or rented out have an energy performance certificate (EPC).

The EPC provides information on the energy efficiency of the building, including its energy consumption and carbon emissions. The EPBD also sets out minimum requirements for the energy performance of new and existing buildings. Local National legislation to ratify the directive under way with a 20% reduction in energy consumption by 2020 viable for all buildings, domestic and non-domestic

Important changes in this revised proposal are:

All buildings should meet certain energy efficiency levels when they undergo a major renovation, and not only those above 1000m2 as it is today. A buildings EPC energy certificate and DEC’s for Public Buildings with its energy saving recommendations should be included in sales and rental documents. The inspection of air conditioning systems should include advice on how to use and improve the operation of the system, including if needed, a recommendation of replacement.

The impact of the proposed changes in the recast is estimated to equate to a further 5 – 6 % reduction of the energy used in EU in 2020 (which is equal to the current total energy consumption in Belgium and Romania combined!) The Energy Efficiency Directive (EED): The EED set a target of reducing energy consumption by 20 % by 2020, the recast included at least 11.7 % in 2030 compared to the projections of the 2020 EU Reference Scenario and requires Member States to establish energy efficiency obligations schemes.

MEES (Minimum Energy Efficiency Standards)

In the UK, we have adopted our system called MEES (Minimum Energy Efficiency Standards). These schemes require energy companies to achieve energy savings by implementing energy efficiency measures in their customers’ buildings. The EED also requires Member States to set out a long-term strategy for the renovation of buildings, with the aim of improving their energy efficiency.

EPC’s (Energy Performance Certificates)

The recast EPBD sets out to harmonize requirements for the energy performance classes on a harmonised scale from A to G. A classification will correspond with zero-emission buildings (ZEB) while the letter G is to correspond to the 15 % worst-performing buildings in the national building stock at the time of the introduction of the scale. The remaining classes (B to F) have an even distribution of energy performance indicators among the relevant classes.

The EPC shall comply with a template by end of 2025 and the validity of EPCs in lower classes (D-G) shall be reduced from 10 to 5 years. The current draft requires that by 2025 all energy performance certificates must be based on a harmonised scale of energy performance classes and comply with the template laid down in Annex V of the draft.

The current provisions on major renovation, which offer an opportunity to apply minimum energy performance requirements in place (to ensure minimum renovation depth) are complemented with new minimum energy performance standards (aiming to trigger an increase in renovation rates) for the worst-performing public (i.e. buildings and building units owned by public bodies) and non-residential buildings. Commercial and public buildings must achieve at least EPC class F by 2027 and class E by 2030

The recast EPBD introduces a definition of and aims to incentivise deep renovation –as a first step, before 1 January 2030, being a renovation that transforms buildings into nearly zero-energy buildings (ZEB). Staged deep renovation means a deep renovation carried out in several steps, following the steps set out in a renovation passport as per the requirements of the EPBD.

Renovation passport

The recast EPBD introduces voluntary renovation passports to equip building owners planning a staged renovation of their building. A renovation passport is a document that provides a tailored roadmap for the renovation of a specific building in several steps that will significantly improve its energy performance.

The EPBD requires that the renovation passport is issued by a qualified and certified expert, following an on-site visit; that it comprises a renovation roadmap indicating a sequence of renovation steps that build upon each other, with the objective to transform the building into a zero-emission building (ZEB) by 2050 at the latest.

It indicates the expected benefits in terms of energy savings, savings on energy bills and operational greenhouse gas emission reductions as well as wider benefits related to health and comfort and the improved adaptive capacity of the building to climate change; and that it contains information about potential financial and technical support.

Smart metering

Building Management Systems Consistent with the rest of the EPBD is an increased focus on ensuring that new buildings and renovation projects install suitable smart meters and building management systems to harvest data on energy performance. The requirements on this will impact on property management. Tenants and Building Managers must now install sub-meters to provide actual accurate  individual tenants energy usage billing.

Ban on fossil fuel heating

The proposed recast EPBD includes a legal basis for national bans of boilers based on fossil fuels, allowing us to set requirements for heat generators based on greenhouse gas emissions or the type of fuel used. Also, with the intention to avoid that investments in new generations of fossil fuel-based boilers become stranded assets, the recast EPBD includes a requirement that a zero-emission building (ZEB) does not cause any on-site carbon emissions from fossil fuels.

Solar panels

According to the Council draft, countries shall ensure that new buildings are designed to optimise their solar energy generation potential based on solar irradiance of the site to enable later cost-effective installation of solar technologies. Countries and businesses shall ensure deployment of suitable solar energy installations for all non-residential buildings with over 250 sqm floor area by end of 2026, further non-residential buildings undergoing a major or deep renovation by end of 2027 and all new residential buildings by end of 2029.

MEES and how EPBD are related

The UK’s Minimum Energy Efficiency Standards (MEES) aims to increase energy efficiency in commercial rental properties. The Government wants commercial properties to reach an EPC B standard by 2030. Technical complexities and costs are challenges, but innovation and sustainable tech offer opportunities. Achieving EPC B will positively impact the economy, environment and society and contribute towards net-zero goals. The path forward includes phased implementation, regulatory adjustments and support for landlords.

The Road to EPC B by 2030

In the United Kingdom, the imperative to enhance energy efficiency across all sectors is more pressing than ever as the nation strives to meet its ambitious net-zero carbon emissions targets. At the heart of this endeavour, in the real estate sector, is the Minimum Energy Efficiency Standards (MEES). Implemented with the intent to curb energy wastage and reduce greenhouse gas emissions, MEES represents a pivotal shift towards more sustainable living and working environments.

These standards make it unlawful for landlords to rent out properties below a specified energy efficiency threshold, marked by the Energy Performance Certificate (EPC) ratings of F or G, unless specific improvements are made or exemptions apply.

The Energy Performance Certificate (EPC) measures a property’s energy efficiency and carbon emissions. Essentially a grade from A to G, with A being the most efficient, the EPC provides potential tenants and buyers with vital information about the energy performance and environmental impact of a building. There has been a change to elevate the MEES requirement to an EPC rating of B by 2030 for commercial properties.

This move is designed to drastically increase the proportion of energy-efficient buildings within the commercial sector, signifying a significant leap towards achieving the UK’s environmental objectives.

What is MEES – Minimum Energy Efficiency Standards.

The Minimum Energy Efficiency Standards (MEES) were introduced as a cornerstone of the UK’s strategy to improve the energy efficiency of rented buildings, thereby contributing to the country’s broader environmental and energy-saving objectives. Originating from the Energy Act 2011, the MEES regulations took effect in April 2018, setting a landmark precedent in the fight against climate change and energy waste within the real estate sector. The primary goal of these standards was to eliminate the least energy-efficient properties from the rental market, specifically those with Energy Performance Certificate (EPC) ratings of F or G, the lowest grades reflecting poor energy performance.

The introduction of MEES was driven by the recognition that buildings are one of the UK’s most significant sources of carbon emissions, accounting for around 40% of the total energy consumption. The Government identified the rental sector, which includes  commercial properties, as a critical area for intervention, given the traditionally lower energy efficiency ratings found in rented buildings compared to owner-occupied ones. By mandating a minimum energy efficiency standard, MEES encouraged landlords to invest in energy-efficient improvements, thereby reducing carbon emissions, enhancing tenant comfort and promoting environmental sustainability.

EPCs are required whenever a property is built, sold, or rented, making them a vital tool for prospective buyers and tenants to consider its energy efficiency and potential energy costs. Properties with higher EPC ratings can command higher rental values, appeal to a broader tenant base concerned with sustainability, and offer reduced operational costs due to their more efficient energy use.

For tenants, MEES has shifted towards higher-quality, more energy-efficient living and working spaces. This not only translates to potential savings on energy bills but also contributes to the well-being and comfort of occupants. MEES indirectly encourages tenants to consider and prioritise sustainability in their rental choices. Overall, the MEES regulations represent a proactive approach to reducing energy consumption and carbon emissions from the built environment.

By linking the legal ability to rent out property with its energy performance, MEES has set a precedent for environmental responsibility in the real estate sector, pushing landlords and tenants towards a more sustainable and energy-conscious future.

Starting from 01 April 2023, the MEES regulations will apply to current tenancies of most commercial properties, limiting the landlord’s ability to lease properties with an F or G rating regarding energy efficiency. The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (PRS Regulations) provide the specific details of the MEES regime. The Expansion of MEES trajectory took a significant turn in 2023, marking a pivotal expansion in the scope of these regulations.

Initially focused on new tenancies and the renewal or extension of existing tenancies, the 2023 expansion extended the MEES requirements to encompass existing tenancies of most commercial properties. This expansion effectively made it unlawful to continue renting out properties with an Energy Performance Certificate (EPC) rating of F or G, regardless of whether the tenancy was new or existing, unless specific improvements were made to enhance the energy efficiency of the property, or unless the property was deemed eligible for an exemption.

This broadening of MEES regulations indicated the UK government’s intensified efforts to combat energy inefficiency and carbon emissions within the commercial real estate sector. By applying these standards to existing tenancies, the Government aimed to ensure a more comprehensive transformation of the commercial property market towards higher energy efficiency levels, thereby accelerating the nation’s progress towards its environmental goals.

The legal foundation for MEES, and by extension this expansion, is rooted in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015, commonly referred to as the PRS Regulations. These regulations set forth the detailed legal framework governing the implementation of MEES, outlining the obligations of landlords, the criteria for exemptions and the enforcement mechanisms to ensure compliance.

The PRS Regulations specify several critical aspects of MEES:

Scope: The regulations define the types of properties affected by MEES, primarily focusing on non-domestic (commercial) properties but also including domestic properties under certain conditions.

Compliance: Landlords are required to ensure their properties meet the minimum EPC rating of E before granting a tenancy to new or existing tenants. From April 2023, this requirement applies universally to all tenancies, including those already in place.

Exemptions: Property can be exempt from meeting the minimum energy efficiency standard under specific circumstances. These exemptions must be formally registered and are valid for a limited time, typically five years. Exemptions include cases where all possible energy efficiency improvements have been made, the property still cannot reach an E rating, or enhancements would devalue the property by 5% or more.

Enforcement and Penalties:  The PRS Regulations also establish the framework for enforcing MEES, detailing non-compliance penalties. Local authorities are empowered to enforce the regulations, with the ability to impose significant fines on landlords who fail to comply with the standards.

The implications of the 2023 expansion of MEES and the PRS Regulations are profound for the commercial property sector. Landlords are now under increased pressure to assess and upgrade their property portfolios to ensure they meet or exceed the minimum EPC rating of E.

This involves undertaking potentially costly renovations and improvements, such as installing more efficient heating and cooling systems, enhancing insulation, installing building control systems and upgrading lighting to energy-efficient models. This expansion represents both a challenge and an opportunity for the commercial real estate market.

While the upfront costs of upgrading properties can be significant, the long-term benefits include reduced energy costs, increased property values and an enhanced appeal to environmentally conscious tenants.

Moreover, by fostering a more energy-efficient commercial property sector, the UK takes a significant step forward in its commitment to reducing carbon emissions and combating climate change, aligning with broader global efforts towards sustainability and environmental responsibility.

The Government introduced a ‘payback calculator’ to assist landlords with the seven-year payback evaluation, featuring standardised costs for purchasing and installing energy efficiency solutions.

The option to gather three separate quotes will remain for those disputing the calculator’s estimates. The implementation of a comprehensive suite of energy efficiency measures might be required.

A registration fee of £30 per property, including VAT, is suggested, with the possibility of a cap on total costs for landlords with extensive portfolios being considered. In addition to current fines, which can reach up to £150,000 for letting properties in breach of PRS Regulations, landlords could face penalties up to £5,000 for:

• Not registering their property on the newly proposed PRS exemptions and compliance database.
• Failing to submit a valid EPC by the deadlines defined in the compliance window strategy. Submitting inaccurate or misleading details.
• Not providing a post-improvement EPC to demonstrate compliance.

Estimated Increase in Properties Covered by MEES

One of the most striking aspects of the move towards an EPC B rating is the anticipated expansion in the proportion of rented commercial properties covered by MEES. With the existing standards, the MEES regulations impact approximately 10% of commercial properties. However, by raising the bar to an EPC rating of B, it is estimated that around 85% of rented commercial properties across England and Wales will fall within the scope of MEES. This represents an approximately tenfold increase in the number of buildings needing to comply with these energy efficiency standards, encompassing around 1,000,000 buildings across the two nations.

This significant expansion in coverage is a clear indicator of the Government’s intent to dramatically enhance the commercial building stock’s energy efficiency. It also highlights the scale of the challenge ahead for property owners and the sector at large. Achieving compliance for such a vast number of properties within the given timeframe necessitates a collective effort from all stakeholders involved, including property owners, tenants, energy consultants and the construction industry.

By setting a clear, stringent standard to be achieved by 2030, the Government is not only elevating the environmental credentials of the commercial property sector but also enhancing its resilience and future readiness in the face of evolving climate challenges. This move towards EPC B by 2030 is thus a pivotal element of the UK’s broader energy efficiency and climate change mitigation strategy, with far-reaching implications for the commercial real estate industry, the environment, and the economy.

Challenges and Opportunities of the EPC B Target by 2030

The UK government’s ambitious target to elevate commercial properties to a minimum Energy Performance Certificate (EPC) rating of B by 2030 presents a complex landscape of challenges and opportunities for the real estate sector. While crucial for advancing the country’s sustainability goals, this initiative introduces a series of financial, technical, and regulatory hurdles that stakeholders must navigate. However, these challenges lie significant opportunities for innovation, investment in sustainable technologies, and progression towards net zero emissions.

Challenges

Financial Hurdles: One of the most immediate challenges the EPC B target poses is the financial investment required to upgrade buildings. For many property owners, the cost of implementing the necessary energy efficiency measures can be substantial. This includes the expense of retrofitting older buildings with modern, energy-efficient systems and materials, which may involve comprehensive renovations, installation of renewable energy sources and adoption of advanced building management systems.

Technical Challenges: The technical complexity of upgrading properties to meet the EPC B standard should not be underestimated. Each building presents a unique set of challenges, from structural limitations to historic preservation requirements, that can complicate the implementation of energy efficiency measures. Additionally, the availability of technology and expertise to carry out these upgrades varies across regions, potentially delaying progress in some areas.

Regulatory Hurdles: Navigating the regulatory landscape associated with building upgrades and energy efficiency improvements can challenge property owners and developers. Compliance with local building codes, planning permissions, and the specific requirements of the MEES regulations requires a thorough understanding of the legal framework and the ability to coordinate with regulatory bodies and obtain the necessary approvals effectively.

Opportunities innovation in building design and construction: The drive towards EPC B offers a prime opportunity for innovation within the construction and real estate sectors. Architects, engineers and builders are encouraged to explore new materials, technologies, and designs, prioritising energy efficiency. This could accelerate the adoption of cutting-edge solutions such as passive heating and cooling, advanced insulation materials and intelligent building technologies that enhance energy performance.

Investment in Sustainable Technologies: The EPC B target stimulates investment in sustainable technologies, from renewable energy systems like solar panels and wind turbines to high-efficiency HVAC systems and LED lighting. Such investments reduce a building’s carbon footprint and enhance its appeal to environmentally conscious tenants and buyers, potentially increasing its market value.

Drive Towards Net Zero: By setting a clear, ambitious goal for energy efficiency, the EPC B target aligns with the broader national and global drive towards net zero emissions. It represents a concrete step towards reducing the carbon impact of the built environment, one of the significant contributors to greenhouse gas emissions. The focus on upgrading existing buildings also highlights the importance of retrofitting and improving the energy performance of the current building stock, a crucial aspect of achieving net zero targets.

Enhanced Market Differentiation and Competitiveness: For forward-thinking property owners and developers, achieving and exceeding the EPC B target can be a crucial differentiator in a competitive market. Properties with high energy efficiency ratings may attract a premium in rental and sale prices, reflecting the growing demand for sustainable, cost-effective living and working spaces.

Future Building Standards

Building Control Systems

The Future Buildings Standard regulations aim to provide a pathway to highly efficient non-domestic buildings that are zero carbon ready. With sustainability a major focus for the building controls sector and aiming to promote the use of controls as key to the operational efficiency of buildings. One of the biggest factors affecting the Future Buildings Standard is the Part L regulations that look at the conservation of fuel and power in buildings other than dwellings.

With that in mind, the Building Control Systems Industry has recommended that guidance for the installation of BACS (Building Automation Control Systems) based on heating, ventilation and air conditioning (HVAC) output should be changed to a mandatory requirement for HVAC systems above 180kW to decrease to 70kW between 2025 and 2030.

This will encourage compliance with energy efficiency and carbon standards. In fact, creating a mandatory requirement will accelerate the uptake of BACS, leading to a reduction in carbon emissions and energy usage. The Building Control Industry estimates that a requirement to install Class A BACS in commercial and public buildings with an HVAC output over 180kW could save a total of £16.9bn in energy bills and 39.6 Mt of CO2e by 2040.

Furthermore, they advocate that an occupancy-based Class A controls strategy for new buildings across all necessary building services should be included to drive high levels of energy efficiency. Additionally, heating controls should be part of a wider controls strategy to support all heating, ventilation and air conditioning systems within a building.

With around 80% of current UK buildings still likely to exist in 2050, the retrofit market is crucial to ensure net zero targets are achieved, yet a black hole exists in current UK policy.

Additionally, with buildings using electric technologies for heat and transport often increasing the demands on the National Grid, integrated smart controls should be implemented where possible.

Occupancy demand-based controls for heating, cooling and hot water parameters should also be considered, especially as heating and hot water accounts for a large amount of energy consumption in non-domestic buildings. Occupancy-based controls often result in lower energy use and a reduction in user energy bills.

The Simplified Building Energy Model (SBEM) is a calculation used to demonstrate the energy performance of new and existing non-domestic buildings.