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Note by Calor Gas Ltd to the Communities and Local Government Select Committee on the EPC Aspect of the Enquiry into Existing Housing Stock and Climate Change
Energy Performance Certificates (EPCs) must now accompany the sale of all homes in the UK with 3 or more bedrooms. They will gradually become compulsory to cover all house sales. They are designed to influence consumer behaviour in the purchase and alteration of homes; and, it is clearly hoped that house builders will have an eye to favourable EPCs being awarded after construction. The aim is to push the housing market towards lower carbon outputs.
They suffer from a fundamental flaw inherited from a system of grading houses by their notional cost of providing energy for heating and hot water per square metre. SAP ratings between 1 and 120 must be provided before buildings can be erected or converted. The lower the energy cost, the higher the rating. These SAP ratings are effectively transposed into the EPCs where they are shown in the form of bands from A (cheap to heat) to G (expensive to heat). The essential purpose was, as a Government consultation put it: "A reduction in the carbon emissions they [homes] would otherwise produce." Thus, the flaw at the heart of the system is the link assumed between heating costs and carbon output. But this is unfair to a premium fuel such as LPG which is often cleaner in its emission profile on a range of pollutants, often including carbon - see above.
We propose as a replacement to the Energy Efficiency banding a banding based solely on dwellings' carbon emission rate (calculated at the same time as SAPS). The following data is taken from a model, based on SAP Worksheet (Version - 9.80 draft July 2004), which illustrates how SAP scores are calculated. In comparing four methods of heating (LPG, oil, electricity and mains gas) we found the following results based on a constant four bedroom house with identical solar, internal and external gains all being constant with the fuel used for the central heating system being the only variable. Model based on a 4 bedroom detached house
The data illustrates that under the current fuel cost based calculation for SAPs, a more expensive fuel such as LPG, which produces considerably less CO2 than both heating oil and electricity, is penalised and given a far lower rating under this system - actually two bands less than oil. By translating the bottom line figure into 'bands' a more accurate indication of the true environmental impact of a home can be communicated to the consumer. In this example, oil and LPG would actually be in the same band (or depending on the band range, LPG might be one better). The Scottish EPC system is intriguingly different. It contains a banding system A-G, but this is solely related to relative carbon output. In England there are two illustrations side by side - the first being the A-G banding based on cost called an Energy Efficiency Rating, and the second being the Environmental Impact Rating (CO2 emissions). The Scottish EPCs contain a space for advice on low cost measures for cost-effective energy savings. The Scottish system does not unfairly skew the housing market, complies with EU legislation, and gives useful information on how to save money. If consumers thinking of purchasing or renting a home, or house builders are forced to comply with a system of skewed price signals it could alter the pattern of our housing stock for the worse, not the better. The English EPC system has another potential flaw because the snapshot taken of heating costs does not take the volatility and relative volatility of fuel prices adequately into account. Volatility in energy prices over recent years has been influenced by more labile meteorological patterns, and by political factors - not least nervousness over the price of oil, and by relatively sharp variations in demand, including, for instance, dramatically increased levels of demand for energy in China. With continued uncertainties over pipeline integrity in chronically unsettled parts of the world, and with the decline in North Sea production it could well be that such volatility is likely to increase rather than decrease. In the UK we are seeing a tightening of markets because of declining UKCS gas production, making us more susceptible to the vagaries of European gas prices derived as they are from a less liberalised market context. A statement of the relative expense of one form of domestic heating over another is therefore unlikely to hold stable over a 15 year period, and the risk is that the certificate will be an unreliable indicator.
OFGEM's recent "Probe Into Wholesale Gas Prices" (October 2004) was sparked by wholesale gas prices increasing by over 80% in October 2003 compared with gas for delivery in October traded in September: "The traded gas markets have seen unprecedented volatility...in recent weeks with significant and rapid movements seen in both prompt and forward gas prices on a number of days. The increase in gas prices has also had a significant impact on the wholesale price of electricity...since September 2003, the wholesale price of electricity has risen by over 43%. This has been largely driven by increases in gas prices although increases in international coal prices have also played a part..." So, there is energy price volatility, and although the prices of oil and gas are linked: "As competition develops in key European markets the link between oil prices and gas prices is likely to break down or be significantly diluted". In other words, an EPC relating to the heating costs of a home delivered in one month may have little bearing on the outturn price, and increasingly in future fuels may be expected to vary relatively in price over time rather than maintain a constant or predictable relationship. This is another reason for adopting the Scottish format. Recommendation · The Scottish EPC system should be adopted in England and Wales. |