Turning up the heat

Energy use in buildings accounts for the lion¹s share of the UK¹s carbon emissions and the latest attempt to reduce consumption is the introduction of energy certificates

 

by Kit Harvey with Tom Bainbridge

 

18 May 2007

 

This March saw the imposition of energy-performance certification requirements on those who construct, sell or let buildings. The Energy Performance of Buildings (Certificates and Inspection) (England and Wales) Regulations 2007 introduce energy performance certification in a number of stages, beginning with the domestic sector on 1 June 2007.

From 6 April 2008, buildings with a floor area of 500m² or over and, from
1 October 2008, all other buildings, will need to comply with the regulations. They establish two certification regimes:

 

Energy Performance Certificates (EPCs) will report the capability of a building to be energy efficient (its asset rating). An EPC must be provided to the owner or prospective purchaser or tenant whenever a building is constructed, sold or rented. They will incorporate recommendations for cost-effective actions to improve the rating, but there will be no legal obligation to carry out the measures identified

 

Display Energy Certificates (DECs) may be a more valuable measure as they will assess how well the building has performed based on actual energy consumption (its operational rating)
Buildings with a floor area of more than 1,000m², occupied by public authorities or by institutions providing public services to a large number of people - and which are frequently visited - will have to display a DEC in a prominent place and online. This will apply to buildings such as government departments, museums and swimming pools. However, the government intends to extend the DEC requirement to all large private-sector buildings, including hotels and shops.

There are a limited number of exemptions from both requirements, such as places of worship and buildings designed for less than two years' use. Boilers and air-conditioning systems play a key role in the overall energy efficiency of a building, so an operation and inspection regime is introduced for air-conditioning systems with a cooling capacity over 12kW.

Although an EPC will be valid for up to 10 years, it is likely that any improvements to the building will prompt owners to obtain updated EPCs or even DECs to capitalise on the benefits a higher rating will offer.

 

Implications

While the financial and market implications of EPCs and DECs will  be seen in due course, it is certain that energy performance will not only become a major economic driver in the property market, but will act as a badge of good management. Buildings certified to have poor performance may be regarded as inferior. Where recommended measures set out in EPCs for improvement of ratings are not acted upon, purchasers and tenants may look for assurances that the works will be carried out or that the cost of improvements are deducted from the purchase price.

Consequently, buildings that attain a higher rating are likely to be able to command an enhanced premium and higher rents (up to a limit). 

 
Although DECs will only apply initially to public buildings, private-sector organisations with buildings with excellent energy-performance ratings are likely to want to shout about it. Certificates of operational efficiency could be displayed by the private sector on a voluntary basis even before the legislative regime
is extended.

 
It is also possible that DECs may
be used to highlight discrepancies between EPC 'potential' and DEC 'actual' performance. A landlord might use the DEC's operational rating to highlight that poor performance of a building is due to the tenant's failure to manage energy rather than the building's inherent ability to perform well.

 

The lowdown: energy certificates

 

Energy Performance Certificates

 

• asset-rating based on the capability of the building
  

• last for 10 years
  

• required on construction, sale
  or rental
  

• required for dwellings from
  1 June 2007
  

• required for non-dwellings over 500m² and on construction of all non-dwellings from 6 April 2008
  

• required for all buildings from
  1 October 2008
  

• inspection regime for a/c units over 12kW

 

Display Energy Certificate

 

• operational rating based on actual performance of the building over
  12 months
  

• required for 1,000m² buildings occupied by public authorities or by institutions providing public services to a large number of people who visit frequently from
  6 April 2008
  

• likely to be extended to all 1,000m² buildings visited by large numbers of members of the public
  

• must be displayed both in the building and online

 

Kit Harvey is an associate at Nabarro, Tom Bainbridge a partner