“In large and complex buildings in particular, the evidence is showing that there is almost no correlation between a building’s EPC score and its actual energy and carbon performance in practice.“ 

These are government’s very own words, acknowledging the limitations of the EPC. They underpin the proposed move, in this consultation, to a performance based rating system for large commercial buildings, recognising actual energy use and associated carbon emissions. As referred to in a previous blog, this new proposed “investment grade” rating is set to have a significant impact on real estate transactions, and crucially, is likely to underpin future regulation for decarbonisation in the built environment. 

Here are 10 key things to note about the current proposals:

1. Large commercial and industrial buildings only, over 1000m sq. There are only 7% of commercial and industrial buildings above that threshold, but according to BEIS, they account for 53% of energy use. Hence, the focus of attention.
2. Based on NABERS. The Australian scheme is thought to have delivered average energy reduction of 34% in ten years. The scheme has had voluntary take up already in the UK. Now the government are set to mandate something similar. 
3. Annual ratings (likely to be 1-6 stars). Buildings will be benchmarked against those of similar types. 6 stars and a building owner is likely to feel pleased. In addition, the government is set to assess buildings in relation to a net zero trajectory. 
4. Mandatory annual public disclosure. This will be required of owners and single tenants of buildings above the 1000m sq. threshold (save that public disclosure in the first year is set to be voluntary). The information required to generate the annual rating will include metered energy use data from owners/ occupants. 
5. Not just a new metric. Ratings are set to “fuel“ incentives and future regulation, driving forward decarbonisation towards net zero by 2050. Whilst at the outset, like NABERS, there will be no regulatory obligation to improve ratings, this is set to follow. Expect fiscal incentives and/ or higher regulatory thresholds in the future. As the government says, future interventions are set to ”tighten the screw”. 
6. End of the EPC? In short, no. The ratings are set for use in tandem (at least in some form), one indicating potential performance, the other actual performance. The government is mindful of increasing the regulatory burden, and therefore deliberately opens up the debate as to the extent to which this new rating could replace the regulatory function of EPCs (e.g. mandatory provision on sale or letting or, as below, MEES compliance). 
7. “Base building rating“ and “whole building rating”. These are terms that are set to become familiar (flowing from NABERS). The underlying principle is that owners and occupiers can only bear responsibility for building features in their control. So, in a multi-let office, a landlord will need a “base building rating”, reflecting the performance of central areas and services. A tenant of whole or owner/ occupier will need to deliver more, a “whole building rating”, having wider control.
8. Delivery. The manner of implementation of the scheme is still very much open for discussion. It is notable that the government anticipates a site assessment by a trained professional when the building is “onboarded” onto the scheme, and then every four years (unless the site fundamentally changes). It otherwise anticipates annual desk based audits (intended to be automated). The government seems keen to emphasise that compliance is not intended to be burdensome. 
9. When? We are set for a sector-phased approach with offices up first, probably with a soft launch in 2022 (requiring mandatory first annual ratings then). That would bring approximately 10,000 offices into play. However, the treatment of mixed use office buildings is subject to the consultation (i.e. what percentage of a building must be used as offices for it to fall within scope). Other sectors are then set to follow.
10. EPC B by 2030? To be clear, the MEES requirement for cost effective energy efficiency improvements, up to the revised threshold, is set to remain. In short, the benchmark potential of a building (as determined by its fabric and services) must go up too, not just this annual performance rating. The likely need to invest in a building, over the next decade, remains.