This is just one of the findings of the IPF’s latest research which examines the cost of energy efficiency improvements in existing commercial property. The IPF is an individual members organisation for those operating in the UK commercial real estate investment market.
The 81-page report assesses a range of discrete and combined packages of improvement measures for their impact on Energy Performance Certificate (EPC) ratings, energy use, carbon emissions and cost.
The report’s key theme is a discussion of the most effective decarbonisation strategies for existing buildings, particularly the removal of gas from buildings in favour of electric powered heating systems.
Role of BMS in building energy management and decarbonisation
The report underlines the importance of active energy management as a tool for saving energy and decarbonising buildings of all types, with some buildings able to reduce their energy use by a third. For example, buildings with high out-of-hours energy use.
The report estimates the cost per m2 of metering and installing BMS according to building type with logistics warehouses and offices at the lowest end of the spectrum at £6 and £8 respectively, and retail and build-to-rent residential the most expensive at £45 for both sectors.
Costing energy efficiency improvements according to the latest EPC modelling
The IPF’s ‘Costing Energy Efficiency Improvements in Existing Commercial Property’ was first published in 2009, following the implementation of EPCs and in anticipation of the first Minimum Energy Efficiency Standard (MEES) Regulations.
Fifteen years later and EPCs and MEES are now part of the market environment. Moreover, a change in EPC modelling method took place in June 2022 which, the report explains, could result in a change (downgrade) in EPC rating for some buildings. Meanwhile, the MEES are set to tighten further: Commercial property landlords have until 2028 to improve the EPC of their assets to a C rating. A minimum EPC of B will be required by 2030.
For example, previously, if buildings were trying to get to an EPC rating of C, changing the lighting (to T5 or LED) would be a relatively cheap option and could in many scenarios reach an EPC of C. For a B rating, a building would typically need LEDs and an air source heat pump (ASHP).
However, under the latest methodology, lighting upgrades are not always enough to improve the EPC and may make the EPC score worse. This is due to a scenario whereby an increase in the heating demand (due to the fact that LED systems emit less heat) is met by a gas fuelled heating system which has higher carbon emissions than an electric fuelled system, which produce less carbon thanks to the decarbonisation of the UK’s grid.
To reach an EPC B, therefore the report’s authors conclude, buildings typically need an ASHP, lighting and fan power upgrades. The improvements needed are more significant, hence so are the costs to reach the desired EPC.
IPF’s analysis shows that to achieve an EPC B, asset owners may need to invest between around £200/m2 to £800/m2 on a package of these three improvement measures – lighting, ventilation and heat pumps.
The report authors applied the seven-year payback test, as defined in the MEES guidance, to all energy and carbon saving packages across all building typologies. The results show that the only improvements that payback within seven years are those that are part of a planned refurbishment scenario and this is limited to lighting and ventilation improvements.
Here is a summary of the IPF report’s key findings:
- Changing the heating type to direct electric or heat pumps can significantly improve the EPC rating of any building, assuming it is replacing gas. This is due to the decarbonisation of UK grid and therefore lower carbon factors for electricity.
- As the carbon emissions factor for electricity will continue to fall, the impact on EPC rating will continue to favour heat electrification and by 2030 some buildings may find that it is impossible to achieve an EPC B without electrifying heat.
- For most buildings, a combination package of three improvement measures – lighting, ventilation and heat pumps will meet the requirement of an EPC B.
- The seven-year payback criteria, as defined in the MEES guidance, makes it clear that incorporating these interventions into the next refurbishment cycle for an asset is key to cost-effectiveness in meeting standards.
The report’s methodology
2024’s ‘Costing Energy Efficiency Improvements in Existing Commercial Property’ represents a significantly expanded and updated version of the 2009 edition.
The data-driven study was led by Currie & Brown, with additional modelling support from Introba, and is based on a set of seven building typologies, now including build to rent and student accommodation. It reflects the latest EPC methodologies and has been expanded to reflect the implications for net-zero carbon targets, in particular Carbon Risk Real Estate Monitor (CRREM) pathways.
A range of discrete and combined packages of improvement measures have been assessed and a fully downloadable Excel tool is available that allows the user to apply the findings to specific cases they might be working on.
You can download the IPF’s report here.
How can Priva support commercial landlords?
- Priva supports regulatory changes that improve building performance – mirroring our own focus on cloud-based solutions that will boost the efficiency and sustainability of commercial buildings.
- We welcome conversations with commercial landlords, commercial real estate operators or managers who want to make their buildings more energy efficient, smarter and intelligent. Drop us line if you’d like to discuss your energy challenges.
- Find out the ways in which digitalisation can help companies to decarbonize their buildings in this whitepaper.
- Read more of Priva UK’s blogs about the MEES deadline (and the scale of the EPCs / MEES challenge for commercial landlords).
