Energy Performance Certificates - The property expert's perspective

• There’s a lack of awareness across the industry as to the arrival of EPCs
• The behaviour of the occupants has not been taken in to account
• The various computer software interfaces generate different results

For now at least, the silly season of corporate booze-ups has been and gone. The last of the turkey sandwiches are beginning to take on that disconcerting shade of grey, and your wine rack looks naked.

As you begin to emerge from the bleary haze of indulgence, you may be thinking about the year ahead with hopes of health, happiness and prosperity. Don’t forget to factor Energy Performance Certificates into your thinking; they may well have a bearing when they are introduced to commercial buildings this year.

The theory is that EPCs will show the energy performance of a building using an asset rating of A-G, much in the same way that electrical appliances are rated but with more stringent energy performance thresholds introduced over time. With very few exceptions, EPCs will be required for all buildings when they are constructed, sold or rented out.

Despite their potential impact on the commercial property market, I continue to be alarmed by the lack of awareness across the industry of their impending arrival, let alone the dearth of appreciation for their role and implications. At this rate, it looks like there will be a lot of losers when the time for certification comes. As with most things, a reactive and ill-informed stance offers little prospect of capturing the benefits that EPCs offer.

Welcoming EPCs

Notwithstanding, I am encouraged by the fact that, for the first time, there stands to be a benchmarking mechanism for a significant proportion of the UK’s stock – both new and existing – which reflects the major impact of buildings on climate change. It will encourage investment, occupation and management decisions to take account of a broader suite of criteria, which has the potential to catalyse a shift towards greater credence for the triple-bottom line of building performance.

In broad terms therefore, the concept of a certification scheme for buildings in respect of energy performance should therefore be welcomed. If the design and implementation of the scheme is sound, it should be a valuable tool for the industry at large, as well as for the individual interests of owners and occupiers. Alas, herein lies the problem!

The EU and the UK Government seem to have concocted a scheme which, despite its conceptual promise, is likely to be about as helpful as the recent climate change discussions in Bali which concluded, like many preceding summits, with an agreement to have more discussions about climate change.

A missed opportunity

There are always going to be nuances with the introduction of new schemes such as this, but there is no doubt in my mind that this is a massive opportunity missed to introduce an effective market mechanism to tackle the carbon emissions, and the related financial performance, of buildings. Why so?

• The methodology used to determine asset ratings under the EPC regime is based on the predicted energy performance of buildings arising from their design – it pays no heed to the behaviour of occupants, the quality (and related thermal efficiency) of buildings as-built, nor the level of up-keep in building fabric and systems.
• The breadth and detail of building information needed to determine predicted energy performance can be very significant, with consequential time and cost implications.
• Standardised recommendations for improving energy performance which arise from the certification process may take no account of other important building considerations, such as legal restrictions relating to heritage value.
• The various computer software interfaces available to generate the predicted energy performance have been shown to generate different outcomes when exactly the same information is inputted, raising concerns about the validity and comparability of final asset ratings.
• In the short-term, the much-maligned delays in finalising the detail of the scheme and the certification methodology by Government risk overwhelming an inadequate system with certification demand.

Nevertheless, sentiment suggests that asset ratings relating to energy performance will become a consideration of value in both the sale and rental markets. The degree to which the impact on value is discernable will almost certainly vary according to other building, location and occupant-requirement factors. The key message is to know your stock – how do your buildings compare with their peers, when and where are the key risk points, and how is money best spent on maintenance and refurbishment.

Ironically, the requirement for Display Energy Certificates for ‘public’ buildings (in England and Wales at least) appears to offer a far more sensible and helpful framework. Display Energy Certificates will also show an energy rating for buildings, but this will be based on the actual consumption of energy associated with heating, cooling and powering those buildings. This requires simple data and is much more helpful as an energy management tool.

A pessimist

I’m going all out with two (admittedly, completely unfounded) predictions. Firstly, in the course of time, the methodology for DECs will be rolled out to all buildings as Government responds to market frustration with the meaningless asset ratings generated through EPC certification. Secondly, and perhaps somewhat mischievously, someone somewhere, deep in the bowels of HM Treasury, is looking at asset ratings for energy performance and thinking, “Hmmm… that’s a neat way of framing a new taxation framework!” Just a hunch.