Are FMs prepared for proposed Minimum Energy Efficiency Standards in the UK?

Energy neutrality and net-zero carbon emissions have been high on the global agenda for developed countries. This has resulted in an explosion of net-zero commitments, both from governments and corporations. Previously in one of our articles, we have covered how the govt of the UK has been planning to standardize its buildings stock by introducing a performance-based policy framework. In addition, there was another announcement related to the energy efficiency of the Commercial building at the same time.   

On 17th March 2021, The UK government has launched a consultation on the proposed framework to implement tighter minimum energy efficiency standards (MEES) for privately rented non-domestic buildings in England and Wales to reach a long-term target of having an Energy Performance Certificate (EPC) rating of B by 2030. 

MEES was first introduced by the Energy Efficiency Regulations in March 2015 and has been in place since April 2018. The EPC framework was used to rate private properties based on their energy efficiency. 

What has changed?  

The UK Government is now asking commercial buildings to increase their energy efficiency commitment in order to help achieve its ambitious goals of at least a 20% reduction in business energy use by 2030 and net-zero carbon emissions in the UK by 2050. Facilities that meet the higher EPC rating will be exempt from the heavy financial penalty and be able to get into new leases.

Currently, landlords are prohibited from granting new leases (including renewals and extensions) for non-domestic privately rented properties with an EPC rating below E. same will be applicable to the existing leases from 1 April 2023, making it an offense to continue to let a commercial space with an F or G EPC rating even in the middle of a lease term.

As per the new consultation proposals (subject to some exceptions) landlords will need to present a valid EPC by 1 April 2025 and then will have until 1 April 2027 to improve the building to at least an EPC rating of C. Landlords will then need to repeat the process by providing a valid EPC by 1 April 2028 and subsequently ensure that by 1 April 2030 the building has improved to at least an EPC rating of B.

Simply put, buildings that previously had to improve their energy efficiency rating up to E must now improve it to C and B within a shorter period of time. 

The economical and environmental perspective behind higher MEES rating

For now, MEES is mandatory for privately-owned leased buildings that have a lease period of 6 months to 99 years. Although some types of buildings are exempt from the obligations for now, sooner or later they will come under one of the categories, and property owners will have to comply with the rule. 

It's a trade-off between up-gradation and penalty. Owners can upgrade building infrastructure with energy-efficient and sustainability-related measures or bear the financial penalty for inefficiency. In fact, in addition to the financial obligations from government agencies, they may also risk their reputation from a sustainability standpoint. In order to make an informed investment decision, investors are relying on technical due diligence (TDD) to learn how an asset actually performs and to identify potential risks. 

According to Nick Sanderson, CFO at Great Portland Estates London, commercial buildings that don't meet future legal minimum energy standards are at risk. “We are starting to see signs of offices being stranded by the growing demands of occupiers and regulators for sustainable buildings.” 

Since it is clear that efficient buildings are the inevitable future it’s better to start planning for it rather than waiting for obligations to catch up. By improving their MEES ratings, businesses will be able to future-proof their buildings from more stringent standards, making them more attractive to tenants and providing a better occupant experience.

What actions FM / Property owners can take?

Energy efficiency plan:
If the facility-wide sustainability roadmap is not in place then this is the right time to take the first step by creating an “Energy Efficiency Plan”. It can be considered as a subset of the sustainability roadmap. Facility managers should identify assets that need the most attention. Planning should begin with the building's data assessment, followed by the creation of baselines and the setting of targets. We have covered the net-zero planning in one of our previous blogs featuring Mitie’s net-zero strategy. 

The entire initiative should be able to assess the costs and benefits of improving energy efficiency and weighing these against other impacting factors within the business plan for the property.

Asset performance management strategy:
Through a holistic asset management strategy, energy and resource optimization, improved asset life, and better visibility into O&M activities can be achieved. It leverages the Process, People, Systems, Data, and Culture of the organization for the greater good. The asset performance strategy allows FM teams to prioritize business goals and align them with asset strategy by balancing cost, risk, and performance.

In one of our previous interactions Derren Mccredaie, head of estates, Sodexo healthcare had shared his thoughts on an ideal asset performance management strategy. According to him “when Asset reliability, higher functionality of the asset and low vulnerability of the systems aspects meet with resiliency then you get a great holistic asset performance management strategy” 

Use of analytics:
As we continue to zoom in on APM, we can understand the importance of analytics for building optimization. In terms of technology, data analytics has demonstrated its value in multiple ways in the real estate sector. Monitoring asset data at a granular level can give you a wealth of information about the asset's behavior, you can correlate the pattern with the surrounding context. FM can use this information to come up with optimum maintenance scheduling, chiller sequencing, and forecasting the load profile for a specific day as well as develop a risk model of asset failures.    

Sustainability roadmaps, APM strategies, and Analytics can be seen as concentric circles with descending impact zones. Technologies such as Digital twins, remote monitoring control centers, and building automation can help the building operators to facilitate their building optimization goals where energy efficiency is one of the many outcomes of the initiative.