Explained: the new mandatory energy performance rating framework for large commercial and industrial buildings

A new energy performance rating framework for large commercial & industrial buildings launching April 2022. Here’s our explainer...

Explained: the new mandatory energy performance rating framework for large commercial and industrial buildings

A new energy performance-based rating system for large commercial and industrial buildings is set for launch in April 2022. To help you get prepared, here’s our explainer on what we know so far.

Performance-based energy ratings – what’s on the way?

The government is consulting on a national framework for rating the energy and carbon performance of commercial and industrial buildings above 1,000m².

It applies to England and Wales only; annual ratings and mandatory disclosure will be the first step.

The consultation was launched on 17 March 2021, and runs until 9 June. 

Why is it needed?

The UK is committed to its 2050 net zero target, and one of the biggest challenges it faces is emissions from commercial and industrial buildings, which account for a third of UK emissions from buildings.

In England and Wales, only 7% of commercial and industrial buildings are larger than 1,000m². Yet these buildings use over 53% of all the energy used by commercial and industrial buildings, and the associated carbon emitted from these buildings. 

What will landlords and building owners need to do?

Under the proposed framework, owners and single tenants of private non-domestic buildings above 1,000m² will be required to:

  • onboard their building onto the framework
  • submit, every year, their metered energy use data (and other relevant information) to the ratings administrator
  • receive a rating based on the building’s annual energy and carbon performance. The rating will then be:
    • disclosed, publicly, both in the building and online
    • used to satisfy some of the current ‘trigger points’ that exist under EPC regulations. For example, prospective tenants and buyers must be made aware of the rating before the building is let or sold.

Building owners and single tenants will be required to obtain a rating annually, and from the second year of being on the framework there will be a regulatory obligation to have that rating disclosed online.

When does it come into force?

The government plans to introduce the rating in three phases over this decade.

Phase one will apply to the office sector only; phase two and phase three of the rating’s introduction will address the remaining sectors.

Phase one (offices) will start with a soft launch in April 2022 – which will require all appropriate sites to register and produce a rating within the first 12 months. Disclosure of the rating in the first year will be voluntary but highly encouraged.

Following the Phase one soft launch, mandatory ratings and disclosures will be required and enforced going forward. This soft launch approach to mandatory ratings and disclosures will also be applied to other sectors when they are added to the framework.

What’s the difference between the proposed new ratings system and EPCs?

An Energy Performance Certificate (EPC) assesses carbon and energy performance through theoretical modelling and by evaluating the standard of the building’s fabric and services.

It doesn’t actually measure metered energy consumption and associated carbon emissions: that depends on how well the building is being maintained and how effectively energy is actually being used.

The new system aims to tackle this “performance gap”. 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. 

Will the new system replace EPCs?

This is not yet decided, and is a key point in the consultation. The government wants to streamline compliance obligations for building owners, but is also keen to retain the Minimum Energy Efficiency Standards regulations (which are based on EPC ratings). The consultation sets out some options to align the two.

Will the new ratings system be successful in reducing building emissions?

The framework is based on a highly successful Australian scheme: The National Australian Built Environment Rating System (NABERS).  Over the last decade NABERS has delivered average energy reductions of 34%: these results are world leading. Where this approach has been applied on a voluntary basis in the UK, for example through the Real Estate Environmental Benchmark (REEB), the results have been comparable.

Last year the Better Buildings Partnership in the UK launched a voluntary scheme – NABERS UK, to allow commercial offices to understand their in-use energy performance. The government is using this as a model for the new mandatory national scheme.

Will we be required to improve a building’s performance rating?

The government says there will initially be no regulatory obligation to improve ratings. This will allow the businesses, building owners and the wider market a chance to respond to the framework. 

Is there crossover with ESOS?

Yes. Currently, large businesses are required to carry out an audit of their energy use, including energy used in buildings, every four years, under the Energy Savings Opportunity Scheme (ESOS). The ESOS audit report provides tailored recommendations to reduce energy use in the participant’s buildings. The government says ESOS participants could opt to use future ESOS audits specifically to identify how to improve their rating for a particular set of buildings.

Who is responsible for getting the rating and what type?

The government considers that landlords and businesses should only be required to improve the performance of the features of the building that are in their control – so it is suggesting that there be two possible rating types available:

  • Base building rating: Building owners with tenant space
  • Whole building rating: Owner occupier/single tenant sites

Next steps

Office buildings will be affected by the new framework first, with a soft launch proposed for April 2022. But all businesses and building owners can started getting prepared to ready their buildings for the introduction of the framework. More details on the framework are on gov.uk.

The consultation was launched on 17 March and runs until 9th June 2021.

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