Energy Bill

Memorandum submitted by the British Property Federation and the UK Green Building Council (EN 05)

 

introduction

1. This is a joint submission on behalf of t he British Property Federation (BPF) and the UK Green Building Council (UK-GBC ). The two organisations regularly work in partnership on areas of common interest. The BPF is a trade association that represents the interests of all those who own or invest in property ; the UK-GBC is a charity that campaigns for a sustainable built environment, whose members include businesses from across the construction and property sector.

summary

2. The Energy Bill , according to G overnment, ‘has been designed to provide for a step change in the provision of energy efficiency measures to homes and businesses’ . In order to achieve that aim, we need to know how much energy is being used in the first place. However, the property sector is not routinely measuring accurate operational energy use from private sector non-domestic buildings. A mandatory roll-out of D isplay E nergy C er t ificates (DECs) would address this problem in a way that w ould bring significant economic , as well as environmental, benefits.

3. DECs provide a rating for non-domestic buildings based on actual energy use, incorporating all energy uses in the building, which must be prominently displa yed to visitors. By contrast, Energy Performance C ertificates (EPCs, required on property transactions) provide a theoretical rating based on assumed patterns of use and occupation, and only take account of a limited range of energy uses within the building (those covered by Building Regulations). DECs are currently required only in buildings occupied by the public sector over 1000m2 and e vidence is now emerging of the value of DECs in public buildings, with substantial year-on-year improvements in DEC ratings and reductions in energy costs. This has happened because there is a reputational driver to improve and because of the financial incentive of reduced energy bills.

4. To be clear, t he Green Deal for business could be applied to ( probably smaller ) , non-domestic buildings without the need for a DEC , by using some other form of assessment methodology . However, this would be a huge missed opportunity, because DECs not only provide the basis for measuring improvements made to a building through a Green Deal package – and indeed provide an incentive to take up Green Deal in the first place – DEC s can also provide the standardised, common methodology that begin s to align and make consistent a number of different, sometimes overlapping, policies in this area.

5. Government has already committed, through the Carbon Plan published in March 2011, to ‘ Extend Display Energy Certificates to commercial buildings ’ , by October 2012 [1] . To fulfil this commitment, the Energy Bill must be used to put down enabling legislation , which would simply give the Secretary of State the necessary powers to extend DECs through regulation .

extending decs – the evidence base

6. The following section sets out, in brief, the case for extending DECs to commercial buildings . C ase studies and more detailed information is available if requested .

Saving energy, saving money

7. At a very basic level, DECs provide better data on energy use in non-domestic buildings, which is currently lacking. This information enables better building management and results in energy, carbon and financial savings. Strong evidence of this is now emerging from the large number of DECs that have been carried out in the public sector (over 85,000 have been completed) , and a small number that have been carried out voluntarily by the private sector.

8. Non-domestic buildings account for 17% of carbon emissions. In its report Building the Future Today , the Carbon Trust reported that the carbon footprint of the country’s 1.8 million non-domestic buildings can be reduced by 35% by 2020, compared with 2005 levels, with a net benefit of £4 to 5 billion delivered to the UK economy through energy savings. Beyond that date, t heir analysis suggests a carbon reduction of 70 to 75% at no net cost to the UK [1] .

9. Carrying out a DEC is not a financial burden, even on small businesses. A simple, low cost, ‘entry level’ DEC can be produced based on very basic data such as building type, area, occupancy hours and energy usage. Within a few years, DECs could effectively become automated to further reduce cost. By linking directly to utility metering data, the costs of annual updates will be reduced, and DECs can be extended to a large number of buildings at very low cost.

10. More costly than the DEC itself is the accompanying advisory report, if it requires a site visit. However, a low cost and simple DEC could have a ‘zero cost’ advisory report attached, with generic recommendations which does not require a visit. However, the poorest performing buildings, for example F and G rated buildings should, in due course, be required to have a rigorous energy assessment by a suitable professional.

11. Based on approximate calculations, the cost of producing a DEC can be recovered through making between a 1% and 5% energy reduction from energy bills per year. Even where site visits by qualified advisors are required, the actions taken as a result of that advice is likely to pay back many times over.

Providing a reputational incentive

12. The private sector wants to show it is taking sustainability seriously. A mandatory roll-out of DECs provides a reputational benefit to improving performance, allowing benchmarking against peers. Evidence from the public sector clearly shows the stigma attached to a poor performing building . The Department for Energy & Climate Change itself has improved its DEC from a G rating to an E rating, not least because of negative media reports [1] . Businesses, particularly high profile names, will not want to risk the negative PR that will come with poor performing buildings.

Creating a market for refurbishment and sending a signal to investors

13. A comparable and reliable energy rating scheme will increase the value of sustainable buildings, and could reduce vacant periods, sending a signal to developers and investors that sustainable buildings are higher quality buildings. This in turn will create a market for refurbishment of commercial buildings and have a beneficial impact through out the supply chain.

Streamlining and coherence of policies

14. DECs can be used to align policies, reducing burden for business. DECs would be complementary to various existing policies and help to rectify deficiencies which threaten to undermine their effectiveness.

15. For example, t he data gathered under the CRC-EES is aggregated by organisation, and will require considerable interpretation by landlords, often with unsati s factory benchmarking, to permit them to engage tenants effectively in energy efficiency activities. The asset rating (offered by an EPC ) will do little to assist, since it is based upon theoretical improvements and not upon actual energy use.

16. DECs can also help the non-domestic G reen D eal to deliver the golden rule . A number of industry studies have proven that there is commonly a gap between the design performance and actual performance of non-domestic buildings . DECs will help to ensure that energy efficiency improvements purchased under the Green Deal deliver on their anticipated bill savings, will ensure that easy energy management actions are adopted and over time will generate a set of robust benchmarks for buildings in-use (which the industry currently sorely lacks).

Closing the performance gap

17. There is a lack of transparency on energy data in the commercial sector, which seriously hampers industry verification of the effectiveness of low carbon measures. There is a significant gap between design stage figures and operational performance data where it exists. Extending DECs to commercial buildings will help overcome this problem and will have a positive impact on future design and retrofit of buildings , helping to ensure that solutions that are put in place by government and industry actually have the impact predicted.

Why is regulation needed – why won’t a voluntary approach work?

Lack of energy awareness

18. M ost non-domestic buildings are occupied by someone other than their owners, and the owners provide varying proportions of the energy used in the building to their tenants, with the remainder being bought by tenants directly. With these splits in both purchasing and operational responsibility, it is difficult for landlords and managing agents to know, and even more difficult to influence, how much energy a particular tenant uses. Meanwhile, very few tenants know how much energy and of what kinds (e.g. electricity, fuels) the landlord’s services use, and what proportion is attributable to them. Without this information, and its collation and interpretation, purposeful improvement is difficult as opportunities for savings can lie hidden.

19. All sorts of factors can affect how much energy a property may use over the course of a year – warm winters and inclement summers, sudden increases or decreases in the level of occupation of a property, changes of use and changes in management practices can all be contributing factors to increases or decreases in anticipated levels of energy use. At present, there is a paucity of benchmarks available which assist owners and occupiers of commercial property to anticipate the effect of these changes. Historically this has not mattered as energy prices have been traditionally low and climate change has not registered as a key motivator of choices in property which owners choose to own and tenants choose to occupy. However, with Government legislation such as the CRC-EES and the prospect of mandatory carbon reporting, there is a clear need for capacity building so that industry can measure, manage and improve cost-effectively .

Limitations of a voluntary approach

20. A reliance on the market to produce methodologies to rectify the above issues is liable to lead to sub-optimal outcomes, since robust benchmarks require a critical mass of data to be collated. Moreover, industry methodologies tend to be adopted predominantly by market leaders and the resulting benchmarks suffer from fact that they are based on a repository which is self-selecting. By contrast, a mandatory rating would grant a true picture of the performance of the existing non-domestic stock, provide an accurate barometer of progress toward climate change reduction targets and yield an account of where existing opportunities lie for cost-effective savings.

21. Some large property companies have carried out DECs on their buildings as part of their sustainability strategies. These companies know that DECs can help provide them with information on which to base investment decisions. However, landlords are highly sceptical about publish ing DEC results voluntarily because they will disadvantage themselves in the marketplace by appearing to have poorer buildings than competitors who have unrated buildings. They do not wish to display their (possibly poor) DEC r ating, risk ing bad press and putting off tenants or investment when other s will not display their rating. Moreover, voluntary approaches by property owners and occupiers are dependent upon co-operation in rented non-domestic buildings, as neither party is under any obligation to participate in initiatives which may be instigated by either party. A requirement to complete a DEC w ould act as a spur toward dialogue between owners and occupiers and mutual co-operation on energy efficiency programmes.

22. The DEC methodology itself needs some improvement, for example around benchmarking. At the moment, there are cases in which improvements are being made to buildings, resulting in lower energy costs, but not an increase in the A-G rating . Therefore, a mass mandatory roll-out is needed, to gather enough data to then make i mprovements to the DEC methodology. Detailed recommendations have been made by UK-GBC as to how, practically, this should happen , central to which is a proposal in that in year 1, government should mandate a DEC assessment , but not the display. This would enable enough data to be gathered to make improvements to the DEC methodology and enable businesses to begin to save energy, but not suffer the consequences of displaying an artificially low DEC rating.

amending the energy bill

23. Amending the Energy Bill by adding a simple enabling clause would provide the necessary primary legislation, on which a Secretary of State could later act to roll-out DECs. We do not believe the clause needs to be too onerous, demanding or prescriptive – it is simply taking the opportunity provided by the Energy Bill to give the Secretary of State the necessary powers.

24. The following is a proposed, draft, clause:

(1) The Secretary of State may make regulations requiring occupiers and landlords of non-residential buildings to prepare display energy certificates ("DECs").

(2) For the purpose of subsection (1) a DEC is a document which-

(a) records information about the annual operational energy use of persons who occupy a building or provide services for it,

(b) gives an overall efficiency rating for the building, and

(c) is based on an advisory report.

(3) The regulations may include provision about enforcement (which may create criminal offences or make provision for civil penalties).

support amongst business

25. UK-GBC and BPF have over 700 separate organisations in their memberships combined, (with a small amount of overlap) . In addition, there are a number of businesses and organisations who have specifically expressed their support for the extension of DECs through the Energy Bill, including a number of high profile business leaders , who recently sent a joint letter to the government ministers that signed the Carbon Plan . The signatories to that le tter , and other organisations who wish to have their support on record are as follows:

· Adapt and Sustain Limited

· AECB

· Aedas

· Aldersgate Group

· Ann Bodkin Sustainability Consultant and Architect

· Ask Property Development Ltd

· Aviva Investors

· Balfour Beatty

· Bennetts Associates

· Berwin Leighton Paisner

· Better Buildings Partnership

· BG 2 Global Solutions

· British Council for Shopping Centres

· British Land

· British Property Federation

· Buro Happold Ltd

· Camco

· Canary Wharf Contractors Limited

· CIBSE

· CIOB

· Climate Change Capital

· Cundall

· Cutland Consulting Limited

· Davis Langdon, an Aecom company

· Drivers Jonas Deloitte

· DTZ

· E.ON

· Electrical Contractors’ Association

· EP&T Global

· EPR Architects Limited

· Exploration Architecture

· Full Circle Property Asset Management

· GVA

· Grosvenor Britain & Ireland

· Hab Housing

· Hammerson plc

· Haskoll Architectural Design Consultancy

· Henderson Global Investors

· Hermes Real Estate

· Hilson Moran

· Hines UK

· Integrated Environmental Solutions

· Lafarge Aggregates Ltd

· Land Securities

· Legal & General Property

· Lend Lease

· Marks and Spencer

· NG Bailey

· PRUPIM

· Quintain Estates and Development Plc

· Siemens Industry UK

· Skanska

· Stanhope

· Sturgis Associates

· UK Green Building Council

· Usable Buildings Trust

· Vertigo Sustainable Development Consultants

· Willmott Dixon Capital Works

· WSP Group

May 2011