The UK target of Net Zero Buildings (NZB) means that new buildings and major renovations should have a net zero impact on carbon emissions from 2030 onwards. This sets the tone for our buildings of the future but what does this mean for our existing buildings? Projections are that half of the existing building stock will still be around in 2050. Even at a reasonable rate of major renovations this still leaves the property industry with its work cut out.
Policies such as the MEES regulations should definitely help to improve efficiencies in existing buildings through refurbishment works and upgrades to take building spaces up to E rating or better. The MEES regulations have undoubtedly got more companies thinking about cost-effective improvements to commercial properties. However, one of my gripes with the whole EPC scheme is that the rating approach is based on theoretical design performance – the elephant in the room of course being that actual energy consumed doesn’t feature at all.
This means that it’s entirely possible to have a good EPC score on an office and it still be energy inefficient. This is something I wrote about a few years ago with the Better Buildings Partnership and found it was not an isolated example. Furthermore, there are certain types of energy use not captured by EPCs which only potentially complicates the problem. Let’s not forget that addressing actual energy usage is fundamental to succeeding in meeting national and international carbon reduction targets.
This discrepancy between design intent and actual energy usage has been written about extensively under the banner of a concept most of you will hopefully be familiar with – the ‘performance gap’. Studies suggest that this difference between how we think buildings perform and how they actually perform could be underestimated by as much as 50%.
This brings me to one of my main points. Of course, actual energy consumed is significant but so too is the source of that energy; if energy is consumed we need it to be from renewable or ideally carbon neutral sources. Therefore, yes energy efficiency needs to be addressed but so too does the decarbonisation of those supplies.
Decarbonisation targets are likely to be missed, so what does this mean?
The UK Government has targets to improve the decarbonisation of grid energy supplies but research suggests that this is likely to be missed. Also, with the Government limiting financial support for certain types of renewables, investors are hardly getting the certainty that would really help to boost the market. We’ve seen a number of renewables/solar companies going into liquidation, however, demand on the whole for onsite renewables seems to be maintaining (?)
Clearly, in addition to the grid energy mix there’s a role for decentralised green energy generation. Two trends which will be significant in terms of the overall trajectory of the energy sector are the decentralisation of energy generation and energy storage. These are predicted to both increase rapidly.
So what does this all mean for strategies of property owners and investors? Clearly, there’s a business case for investment in energy efficiency because of the financial impact of operating costs. As a proportion of overall costs of occupation, this can be hugely variable depending on the organisation, but can relate to factors such as the regional location of property as an example. Nonetheless, DEFRA/DECCs energy price forecasts are that they will continue to rise faster than the rate of inflation so the costs are not going to reduce. Overtime, the cost of renewable energy should become more competitive but there’s little sense in consuming green energy profligately. This means that the property industry really needs to make decarbonisation of energy in existing property portfolios part of its strategy.
As my colleague, Paul Sutcliffe, has said Science Based Targets is an approach that is gaining more momentum and rightly so. However, what’s fundamental to achieving the carbon reductions required is an honest assessment of what can realistically be delivered, at the industry-level, through building efficiency and what will be achieved through greening energy supplies.