Building energy performance – what you need to know
Proposed amendments to the Energy Performance of Buildings Directive aimed at ensuring buildings are catergorised as zero-emission buildings, by 2030 for new builds and 2050 for existing buildings, are currently going through the EU's legislative process. This article considers some of the key changes relating to energy performance certificates, minimum energy performance standards, data exchange and renovation passports.
In December 2021 the European Commission (Commission) published its proposal for a revision of the Energy Performance of Buildings Directive (EPBD).
The proposal is part of the European Union's "Fit for 55" package, consisting of several pieces of legislation intended to meet the EU objective of a minimum 55% reduction in greenhouse gas emissions by 2030 compared to 1990. An update to the EPBD is seen as critical to achieving the EU's climate objectives as the built environment accounts for 40% of the EU's energy consumption and 36% of its energy-related emissions.
Overall objective
The main objectives of the proposed changes are that:
- all new buildings should be zero-emission buildings by 2030
- existing buildings should be transformed into zero-emission buildings by 2050
The recast EPBD would provide a definition of zero-emission buildings for the first time, with the proposed definition being "a building with a very high energy performance […] where the very low amount of energy still required is fully covered by energy from renewable sources generated on-site, from a renewable energy community […] or from a district heating and cooling system".
Energy Performance Certificates (EPCs)
The current proposals introduce new provisions relating to EPCs (or BER certificates, in the Irish market), with a view to making the certification process more stringent and easier to compare across the EU. By 2025, all EPCs would be based on a harmonised scale of energy performance classes. The Commission has proposed that these energy performance classes would be rescaled so that:
- the "bottom" 15% of stock representing the worst-performing buildings fall into Class G
- most remaining buildings are evenly distributed across classes B-F
- any buildings in Class A meet the zero-emission building standard
The Council of the European Union (Council) has also suggested the introduction of a new category “A+”, corresponding to buildings which, in addition to being zero-emission buildings, contribute on-site renewable energy to the grid.
It is proposed that the validity of EPCs in classes D-G would be reduced to five years, to ensure they reflect the latest efficiency standards. EPCs in classes A-C would continue to be valid for up to ten years.
It is also proposed that all Member States would establish a database for EPCs and transfer the necessary data to the EU Building Stock Observatory, so that the Commission can build up a picture of energy performance across the EU. The national database would be publically accessible.
Minimum Energy Performance Standards (MEPS)
The Commission proposes the gradual introduction of MEPS to trigger the renovation of the worst-performing buildings, leading to their gradual phase-out.
The Commission proposal is that Member States will ensure that all commercial buildings within their jurisdiction achieve at least energy performance:
- class F from 1 January 2027
- class E from 1 January 2030
It is proposed that the upgrade in energy performance would be triggered by a sale or letting of the building.
Member States can choose to exempt a limited set of buildings with particular characteristics from having to meet MEPS. For example heritage buildings, religious buildings, temporary buildings with a lifespan of two years or less, and small buildings.
Member States would need to develop an enabling framework to promote MEPS in their territory and, importantly, to ensure that appropriate financing is in place for renovations.
Data exchange
One proposal which may be of particular interest to those involved in the letting of commercial premises is a requirement for Member States to ensure that building owners, tenants and managers can have direct access free-of-charge to their building systems' data.
Further detail is required as to how this will operate in practice, but theoretically such a provision should be of assistance to those involved in green leasing arrangements and those who have agreed to share building performance data with their funders or investors, ultimately with a view to improving environmental performance.
Renovation passports
The draft legislation introduces the concept of a building renovation passport (building passport). The intention is to have a common framework across the EU, for use on a voluntary basis by building owners. A building passport will be issued by certified experts based on inspection and set out a long-term renovation roadmap indicating a sequence of renovation steps with the objective of transforming the building into a zero-emissions building by 2050 at the latest.
Summary of other considerations
The draft legislation also contains other important proposals around:
- The installation of solar infrastructure – the proposed timelines differ across drafts produced by the various European institutions but the general thrust is a gradual requirement for all buildings – public, commercial and residential - to deploy solar energy installations.
- Further requirements for sustainable mobility infrastructure, like charging points for electric cars and bikes in or next to buildings, cabling for future infrastructure and parking spaces for bicycles.
Next steps
The Commission's proposal was approved by the European Parliament on 14 March 2023, which paves the way for negotiations with the Council. It is impossible to be precise as to the timing of the enactment and adoption of the recast directive. It seems that Q4 2023 is the earliest point at which a recast directive could be adopted and, after that point, Member States will have a 24 month period to introduce transposing domestic legislation. As such, it seems unlikely that we will see Irish legislation on these proposals until later in 2025.
Final comment
These proposals should be relatively easily absorbed in the context of newly-constructed properties, where we are already seeing a flight to quality when it comes to sustainability credentials. However, the implications for existing, older stock are potentially more significant. As anyone involved in the property sector will be aware, the cost of retrofit works are generally quite high. As many industry commentators have already noted, this could lead to a two-tier property market developing, with high prices being demanded for the newer and more in-demand green buildings and older, less green stock being less desirable.
The reality of these changes is already being felt in the English market where buildings which do not have an EPC rating of F or above will not be able to be traded or leased with effect from 1 April 2023. Research carried out by the Estates Gazette indicates that 120m square feet of commercial real estate across England will not meet this standard in 2023. The potential consequence for landlords is loss of income coupled with the capital cost of carrying out the necessary retrofit works, leading to a potential erosion of investment value.
It is therefore critical that all stakeholders involved in the Irish real estate market, and particularly property owners, are aware of this legislation as it progresses and are prepared for the incoming changes to proactively manage their assets with a view to avoiding them being rendered obsolete. For example, a positive consequence of the building passport scheme may be to assist with the timely and cost-effective renovation of older stock so that it is not "left behind". Further detail around both the EU and national proposals is consequently awaited with keen interest by the sector.
For more information in relation to this topic, please contact Andrew Ion, Partner, Aoife Smyth, Knowledge Lawyer, or any member of ALG’s Real Estate team.
Date published: 30 March 2023