The Scottish Government is proposing to overhaul Energy Performance Certificates (EPC) - giving building owners and occupiers more information than ever before. 

The potential reforms aim to be targeted and useful – helping pave a clear and achievable path towards achieving net zero.

On 25 July 2023, the Scottish Government published its consultation on reforming domestic and non-domestic EPCs to ensure they support future regulations on heat in buildings.

This follows the Scottish Government making a legally binding commitment to reach net zero by 2045, with interim reduction commitments of 75% by 2030 and 90% by 2040.

To achieve this, buildings need to be extremely energy efficient and it has developed a Heat in Buildings Strategy (HBS) - outlining how it plans to reduce emissions from buildings.

EPCs play a critical role in measuring the performances of buildings, and, in part, the progress the Scottish Government is making towards hitting its net zero targets - it commissioned research and established working groups in 2017-20 in response to recommendations from the UK Climate Change Committee.

Following these recommendations, the Scottish Government committed to the HBS in 2021 and launched a consultation on the introduction of a specific EPC metric - Energy Use - on domestic EPCs to assist in the delivery of the HBS. It is now consulting on further reform.

Current regime

EPCs currently provide basic energy efficiency information. Once lodged, they are valid for 10 years, or until replacement. 

Domestic EPCs display the Energy Efficiency Rating based on the modelled cost to run the building, normalised to its floor area.

Non-domestic EPCs display an Energy Performance Rating on carbon dioxide emissions, also normalised to floor area. They are produced using the National Calculation Methodology - defined by the UK’s Department for Levelling Up, Housing and Communities in consultation with devolved administrations. The Energy Performance Rating is “A-G” and one-100 in value - based on the calculated emissions for the building in kg CO2 / m2 / year.

A current EPC assessment collects basic information only, including floor area and construction type, heating, lighting and ventilation information. The assessment is non-intrusive and includes a set of improvement measures and the potential rating should these be implemented.

This absolute rating system has drawbacks. It allows the performance of different types of non-domestic buildings to be compared, but is less useful for demonstrating the performance of a particular asset class. The proposed reforms seek to address this to ensure EPCs display more appropriate and useful information.

Consultation and proposals

The aim of the consultation is to seek stakeholder views in advance of the introduction of revised Energy Performance of Buildings (Scotland) Regulations in winter 2023-24, with a view to amended EPCs coming into force shortly afterwards.

For both domestic and non-domestic EPCs the following reforms are being considered:

• Clarity on the purpose of EPCs.
• Reduction of the validity period from 10 to five years.
• Modernisation of the format, including moving to a webpage, adding interactive links, and providing tailored recommendations.
• Expanding the sharing of non-personal EPC data, including public access to records.
• Improvement in the assurance behind assessments by updating auditing requirements with a risk-based, smart auditing approach.
• To display the fuel type and heating system prominently. 

The metrics between domestic and non-domestic buildings will be different as they are incomparable as regards to energy efficiency.

The proposed reforms for non-domestic EPCs centre on the reduction of direct emissions, with the following metrics proposed:

• Energy Efficiency Rating (A to G) – modelled emissions from regulated energy use relative to a reference building - aligning with the UK system and allowing non-owners a means of comparing stock and easier identification of ‘good’ performance.
• Direct Emissions (kg of CO2e/m2/yr) – modelled direct emissions from regulated energy use allowing focus on decarbonisation.
• Energy Demand (kWh/m2/yr) - modelled regulated energy use under standardised conditions to allow comparisons between buildings.

The Scottish Government proposes the following reforms for domestic EPCs:

• Introduction of a set of metrics to provide an all-round picture of a building’s performance, including Fabric Rating, Cost Rating and Heating System Type.
• Displaying the Emissions Rating and Energy Use Indicator, not as headline metrics, but as useful indicators.

There is an acknowledgement that further reforms could be made, for example the inclusion of actual energy use data and Green Building Passports - providing information on renovations, warranties and retrofitting. Whilst under review, they are not currently proposed.

Timeline

The new regime is intended to be implemented once the amended Energy Performance of Buildings Regulations are introduced, ahead of proposed Heat in Buildings regulations.

Should EPCs be required as an evidentiary tool for the Heat in Building legislation, then introduction ahead of this could allow the market, EPC assessors and owners time to adjust.

It is likely to take time for the calculation processes to be amended, and for software providers and the EPC register to implement changes. The Scottish Government will also review the UK Government’s development of the Standard Assessment Procedure methodology and consider aligning EPC reform with its launch in 2025.

Summary

These proposals herald a move away from a ‘tick-box’ type exercise for obtaining an EPC. They are a legal requirement and must be treated as part of a proper diligence process.

There needs to be a seismic shift in the attitude and motivation towards energy efficiency, and coupled with the unprecedented increase in costs, demystifying EPCs could result in building improvements, environmental progress and lower costs. These can only be positive changes. Those operating in Scotland’s real estate industry should engage with the consultation – helping shape the reforms and contributing to a potential light bulb moment.