As part of the UK Government’s commitment to becoming a net-zero carbon country, plans have been put in place to decarbonise the national grid by 2035.

The National Grid is undertaking a range of initiatives to support the decarbonisation of electricity, including investing in the infrastructure needed to support new low carbon generation connecting to the grid, creating an economically efficient system, and preparing for a decarbonized future.

As we continue to move away from coal power stations, and renewable generators are granted the go-ahead to assist the UK’s electricity system operator, the built environment can expect further changes to the carbon emissions associated with the electricity consumed by buildings. And with EPCs estimating carbon, clients should be preparing for the impact this could cause.

How is energy performance measured now?

Energy performance of buildings is estimated by energy performance certificates (EPCs). These provide a standardised method to compare the energy performance of buildings and, since they are legally required, all buildings on the market can be compared. The assessment process takes into consideration how the building is used, how well insulated the building is, the efficiency of the building services, and what fuel types are used to supply energy to the building.

How will lower carbon electricity affect my EPC?

Carbon factors quantify the mass of CO₂ emitted for every unit of energy used and allow comparisons to be made between different fuel types. EPC ratings for non-domestic buildings are primarily focused on CO₂ emissions, and so any changes in carbon factors will inevitably affect the predicted carbon emissions, and therefore the final EPC rating.

With the move to low carbon power generation to supply the national grid, the carbon factor for electricity has improved. This change is reflected in the 2021 Part L2 Regulations which came into force on 15 June 2022. The carbon factor of electricity is now lower than for gas. In real terms, this means a building that is heated by gas will likely receive a new EPC rating worse than its current EPC rating, but a building heated with electricity, especially by heat pumps, will receive a rating better than its current EPC.

Do I need to undertake work to improve my EPC?

It is acknowledged within the EPC assessment process that there is a limit to how much information the assessor can be expected to obtain during an inspection. Therefore, default values can be used where a specific piece of information is unavailable. These default values are pessimistic, which is why providing accurate and complete documentation on the building is so important. It can be possible to improve EPC ratings without carrying out any works.

Risks of the MEES legislation

Minimum Energy Efficiency Standards (MEES) require building owners to ensure that certain EPC ratings are achieved by their building. MEES first came into force for commercial properties in 2018 when it became unlawful to grant a new tenancy for buildings with an F or G EPC rating. From April 2023, this will also apply to existing leases. MEES will continue to become more stringent over time with future legislation requiring non-domestic buildings to achieve an EPC rating of B or better by 2030.

Non-Compliance with MEES can result in fines of up to 20% of the rateable value to a maximum of £150,000.

Next steps?

With this in mind, landlords should begin to update their EPCs using the 2021 methodology which includes the revised carbon factors, ensuring the EPC rating of their buildings is current with the new changes. EPCs are used by owners and occupiers, but also reported to the government, so it is essential they are recorded accurately.

Alongside the new carbon factors, EPCs have seen a number of other changes as the government look to reach their net-zero target by 2050, including the changes to the MEES legislation. This is an opportunity for clients to forward plan the energy performance of their assets, by instructing an EPC improvement report and carrying out the works needed to reach a B rating or better before the deadline.

The EPC improvement report establishes a baseline rating for the building and recommends pragmatic, costed options for improvements to achieve the desired outcome in the most cost-effective way possible. Hollis project management, M&E and solar PV services can then assist in implementing the recommended options to achieve an EPC B or better.

If clients have not yet updated their EPCs or would like more information about the impact of the new carbon factors, get in touch with our Head of ESG Consulting, Katherine Beisler, who can support you in your ESG goals and EPC rating.