Retrofit: Non-domestic buildings

With the sector accounting for approximately 17% of the UK’s carbon dioxide emissions, the energy efficiency of the UK's 1.8 million non-domestic buildings has risen up the Government agenda in recent years.

As a result, a host of policies have been developed to drive improvements to their performance. These have varied in the degree of success they have achieved, and the buy-in they command from the organisations that they cover. While there is certainly significant room for improvement across the policy landscape, it is reasonable to suggest that the UK can claim some degree of leadership compared to many of its peers worldwide.

Below is a summary of some of the key policies covering the sector.

The Energy Saving Opportunities Scheme

Responding to the requirements of Article 8 of the EU Energy Efficiency Directive (EED) the Government has introduced the Energy Saving Opportunities Scheme (ESOS), which requires all large (non-SME) organisations in the UK to undertake audits of their energy use, including transport, processes and – most importantly for us – buildings. The scheme was designed to be light touch and to build upon existing policies (such as the CRC and DECs, see below) and while this means participants could comply with relatively little effort, we are hopeful that over time it could help to catalyse a great deal of new energy efficiency investment if businesses take it seriously.

The early signs from the first year of the scheme (2015) suggest that many companies have undertaken thorough audits, and are now making plans to implement the energy savings they have identified. It also seems likely that a slightly amended version of ESOS will form the centrepiece of a new streamlined non-domestic energy efficiency policy landscape, under the Government's review of business energy taxes (and reporting schemes. See below).

The UK-GBC was a member of the Government expert group that helped to develop the design of the scheme. The ESOS guidance document is available from the Environment Agency, the scheme’s regulator, and a guide on implementing opportunities has recently been published by DECC. Our ESOS event in March is intended to help identify lessons learned from the firs year of the scheme and showcase examples of best practice.

Minimum Energy Efficiency Standards (Private Rented Sector)

As a result of provisions in the Energy Act 2011, from 2018 it will be illegal to let out the least energy efficient non-domestic buildings. The standard is set at an Energy Performance Certificate (EPC) rating of E, with the expectation that this will rise over time in line with the UK’s national emissions targets. Once in force, these regulations are set to be a powerful driver for retrofit in the non-domestic property sector. A few years ago, it was unthinkable that inefficient buildings might become illegal yet now that prospect is just about to become a reality and the world is watching what happens with interest. Many UK-GBC members have reported that the regulations have already started to influence the market, even before they come into force.

The UK-GBC were members of DECC's Private Rented Sector (PRS) Working Group, which was convened to provide recommendations on how the regulations should be implemented. Since they were announced, we have also worked closely with members and the wider industry to ensure that the Government maintained its commitment and ambition. A number of different aspects of MEES have been discussed in a series of blogs on our website.

Display Energy Certificates (DECs) and Operational Energy Use

It is widely accepted that once in use, buildings often use a significantly greater amount of energy than is predicted by their design or their asset rating (i.e. their EPC). Recognising this, the Government has introduced Display Energy Certificates (DECs), which are mandatory for most public buildings. DECs must be displayed to the public, and show how the operational energy use in these buildings compares to established performance benchmarks (rated on a scale of A-G).

Here at the UK-GBC, we have consistently called for DECs to be rolled out to all non-domestic buildings. This almost happened under the Energy Act 2011, following a concerted campaign with our members and the wider industry. Unfortunately the proposals were ultimately dropped, but we continue to advocate a greater focus in the sector on operational energy use. Recently this has included us encouraging the Green Construction Board (GCB) to commission their “Bigger, Better Data” project, which looked at barriers and solutions to greater operational energy measurement, reporting and data sharing.

The Carbon Reduction Commitment Energy Efficiency Scheme

Launched in 2010, The Carbon Reduction Commitment Energy Efficiency Scheme (CRC-EES) requires participants to purchase and surrender allowances corresponding with their annual carbon dioxide emissions arising from their energy use. Over the years since its introduction, the scheme has been regularly changed and simplified, in the face of criticism that it is failing to drive genuine behavioural change. Despite these changes, the scheme remains unpopular with industry and is currently subject of a review looking at a range of business energy efficiency taxes (and the wider policy landscape, see below) that is expected to result in the demise of the scheme. 

The Green Deal for Non-Domestic Buildings

Developed alongside its domestic policy equivalent, the Green Deal for Non-Domestic Buildings (GDND) was intended to provide a financing mechanism to cover the up-front cost of energy efficiency measures. The idea was that this would be repaid over time through a levy placed on the customer’s energy bills ("Pay as You Save" (PAYS)) which, according the scheme’s “Golden Rule”, should be less than the savings resulting from the measures installed. Unfortunately, although technically still in place legally, the scheme has never taken off due to - amongst other things - an absence of financial backers. We remain hopeful that the PAYS principle may be revived at some point in the future.

Business Energy Efficiency Tax Landscape Review

In the summer budget of 2015, the chancellor announced a review of energy efficiency taxation, covering a wide range of schemes including the Carbon Reduction Commitment, the Climate Change Levy, the Energy Savings Opportunity Scheme and Climate Change Agreements. The review - which aims to simplify the landscape, in line with our demands before the election - is widely expected to see the demise of the reporting and revenue-raising elements of the CRC, to be replaced by a strengthened CCL and, potentially, more regular reporting (not necessarily full audit) under ESOS. It may also see the creation of a new energy efficiency incentive scheme. We submitted a response to the consultation, and are continuing to work closely with Government to help ensure the reforms deliver an ambitious outcome.