Why EPC Bashing Is Misguided

*Featured as an article on EG Radius *

I often read articles where the lowly EPC is criticised because it does not match the actual performance of the building. This occurs with both domestic and non-domestic EPCs and though the focus here is non-domestic, much of what I am going to say applies to both, even though the domestic EPC is a very different animal being based on cost as opposed to the carbon emissions metric.

The point that is so often missed is that the EPC is not trying to mirror actual performance. The intention is to provide a result that is comparable across buildings of the same type, and that is done by standardising inputs like occupancy hours, heating set points, lighting levels and hot water usage, so ignoring actual usage is a key part of the process.

The EPC also only considers “regulated energy” – heating, cooling, lighting, hot water and auxiliary energy – and ignores anything related to “process” within the building, as well as all small power and white goods.

The upshot of this, in conjunction with a ‘reference building’ used in the background of the calculation, is that any building can be rated in comparison to benchmarks for that type of building. The original intention and use remain: to inform potential purchasers and new tenants of the energy performance of the inherent characteristics of the building – the fabric, heating, cooling, lighting, hot water and the efficiency of the pumps and fans.

How the building is being used by the current occupier is irrelevant for this, and that is why an “occupational rating” like a Display Energy Certificate or the NABERS type scheme is not used. It is crucial to remember as well that the non-domestic EPC is reporting carbon emissions, so an improved rating does not necessarily mean lower bills.

Not perfect, but with a principle

Of course, EPC ratings are also relevant in other situations and as part of the Minimum Energy Efficiency Standards are used to assess currently occupied buildings, with landlords having the responsibility to ensure compliance even though the tenant’s fit-out may be a big part of the final rating. This causes further criticism of EPCs and results in questions as to whether they are the correct way to judge compliance. But again, a big point is missed here.

The intention of MEES was never that all buildings reach the required rating at any cost, but to ensure all cost-effective recommendations were carried out where permission could be obtained to do so. The fact that the industry in general has been more for improving ratings than for registering exemptions implies there are other drivers for them to improve performance, be it ESG reporting, letability or rent maximisation. But if we do see EPC B as the target (as still seems very likely), exemptions will definitely move up the agenda.

Is the EPC perfect as it is? No, of course not. The “EPC Action Plan” developed under the Conservatives sought to add more triggers for an EPC, and reduce validity so as to make the EPC more up to date and relevant at any given time, and it is likely these changes (or similar) will still be brought forward.

The calculation methodology itself desperately needs more money spending on it to update the background assumptions, reflect new technologies and improve the extremely dated recommendations. But the underlying principle is sound and it very much “does what it says on the tin”.

Could the EPC be enhanced with operational ratings? Operational ratings assess actual energy usage based on real consumption data. This type of rating could complement the EPC by providing a clearer picture of how a building performs in real-world conditions.

For instance, while an EPC might indicate a building’s potential efficiency based on its design, an operational rating would reveal whether that potential is being realised. This dual approach could help identify discrepancies between expected and actual energy performance, enabling targeted improvements and fostering accountability.

A little push

The Conservatives appeared to be moving forward with this approach in 2021 with the consultation document Introducing a Performance-Based Policy Framework in Large Commercial and Industrial Buildings in England and Wales.

It suggested that by mandating operational ratings (very similar to the star rating of NABERS), stakeholders could better understand energy consumption patterns, encourage more proactive energy management, and facilitate the identification of best practices across the sector.

It seemed to offer a fairly simple-to-implement approach that would not result in undue cost to building owners and occupiers, but ultimately while never fully withdrawn it was not moved forward on the timescale originally proposed.

Crucially, it also recognised that operational ratings could not replace EPCs, but only work alongside them, as there are times when the asset rating is much more relevant than the operational. Away from the legislative process there are now clever industry solutions that can utilise an EPC model and add in real data to provide in-depth information to drive strategies and provide outputs for ESG reporting, providing a bespoke hybrid asset/operational approach.

It is well recognised that the UK led Europe in the development of EPC methodology. It’s good, and with a little push it could be even better. Don’t knock it.

Originally published at: https://www.egi.co.uk/news/why-epc-bashing-is-misguided/