The Government has released its latest consultation supporting the intention outlined in the Queen’s Speech last week to enshrine principles in law and set legally binding improvement targets to protect the environment. In June 2019, the UK became the first major economy to legislate to bring all greenhouse gas emissions to net zero by 2050. The Government aims to set a clear long-term trajectory to 2030 is designed to provide time and certainty to non-domestic landlords, businesses and the energy efficiency market in delivering the energy savings to support a zero-carbon future.
The Clean Growth Strategy, published in October 2017, outlined how the UK intends to maximise the opportunities of clean growth and meet its commitments under the Climate Change Act 2008. In the Clean Growth Strategy, the Government committed to support businesses to reduce their energy use by at least 20% by 2030 and is consulting on how best to improve the energy performance of non-domestic private rented buildings through tighter minimum energy standards. The continuum of improvements to the energy efficiency of non-domestic buildings will reduce carbon emissions and energy use, help make businesses more productive, and grow the energy efficiency market. The Government intends to amend the 2015 Non-Domestic Private Rented Sector Regulations, to set a more ambitious target as it believes that it will be the most effective way to drive wide-ranging action in the rented sector by 2030.
The Government introduced minimum energy efficiency standards in 2018 which aimed to improve the worst performing buildings in both the domestic and non-domestic stock. From April 2018, landlords of non-domestic private rented sector (PRS) properties have not been permitted to grant a new tenancy or to extend or renew an existing tenancy if their property had an EPC rating of an F or G. From 1 April 2023, this prohibition on leasing will also apply to continuing with an existing lease; i.e. all non-domestic PRS properties will need to be at least EPC E.
Improving the way in which businesses use energy will be vital to seizing the opportunities that this transition will bring. Upgrading the energy efficiency of rented buildings across the UK, both domestic and nondomestic, poses a unique challenge. Landlords and tenants often do not have aligned incentives to improve the performance of the building, and a lack of accurate data has made it difficult for the energy efficiency of a building to be reflected in rental value. In terms of engaging with energy efficiency, many businesses have reported barriers related to cost, time and competing priorities.
This consultation outlines two different targets the Government could set to tighten minimum energy efficiency standards. The Government’s preferred target is that landlords of all non-domestic privately rented properties in England and Wales ensure their properties achieve a minimum energy efficiency standard of Energy Performance Certificate (EPC) band B by 2030, provided the action required is deemed cost effective by meeting a seven-year payback test.
The alternative trajectory of EPC C by 2030, we will ensure that implementation reflects that heat decarbonisation can be achieved by a mixture of low carbon heating systems in buildings such as heat pumps as well as low carbon heating infrastructure such as heat networks, biogas and hydrogen networks. It is however anticipated that this trajectory will only bring 42% of non-domestic buildings to an acceptable efficiency standard.
Under both trajectories, landlords will have over a decade to plan the improvement of their property or property portfolios. This should in turn help minimise disruption to businesses.
As part of our response we will be sharing our knowledge and understanding of energy use in the non-domestic building stock and our experiences of working with the current MEES regulations. We will also be responding to the wider consultation and we welcome your views. We are particularly seeking views on the following questions:
• Do you agree that 2030 is the appropriate date to set the future trajectory?
• What are the opportunities and challenges of the Government’s preferred EPC B target?
• Have you experienced any issues regarding the current seven-year payback test which could be improved to support the tightened goals?
• Would a phased approach be more achievable than one deadline in 2030?
• What type of financial and non-financial incentives could encourage landlords to install measures earlier than the 2030 deadline?
• Currently are the anticipated costs, bill savings and payback periods accurate?
• What are the key factors that would determine the pass-on cost to the tenant?
• Is there a possibility that under certain types of lease the costs of improvements might be shared between landlords and tenants?
The current consultation will close on 7th January 2020 and we are collating views on the proposed targets. To provide your input, email the compliance team at compliance@carbon2018.com or call Melanie Kendall-Reid on 01252 87 87 22.