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What impact will the MEES legislation have on energy management of facilities?

04 April 2018

PFM asked industry experts what how the need to comply with Minimum Energy Efficiency Standards will impact on the FM sector and the way it manages energy consumption

With a seemingly endless list of areas of compliancy essential for FMs to master, concentrating on just one of these could perhaps be seen as a little indulgent.

However, the Minimum Energy Efficiency Standards (MEES) come into effect this April for the first time and could have serious implications on those attempting to renew or take out new leases on buildings.

This is part of the Energy Efficiency (England and Wales) Regulations 2015 and requires both commercial and residential properties to have an Energy Performance Certificate (EPC) rating of E or above when leased to tenants.

Those buildings with EPC ratings of F or G cannot be leased, according to the legislation. Bearing this change in policy in mind, we asked experts what effect complying with MEES would have on energy management, which has been an increasingly important area for many within the FM sector for some time.

Tidyco climate control director David Hithersay says when considering the built environment as being a major contributor towards greenhouse gas (GHG) emissions, coupled with the threat of inhibiting government targets to reduce environmentally detrimental figures, it is prudent for FMs to fully understand the need to be MEES compliant.

“The government estimates that 18% of all commercial properties possess the lowest EPC ratings of F and G,” he says.

“Whilst this may initially seem like a relatively low percentage, the long term detrimental impact to the environment will be significant if not addressed.”

Eliminating risk

Preparation is essential for FM professionals to ensure timely compliancy, Mr Hithersay continues.

Early awareness of non-compliance will allow sufficient time to make necessary adjustments prior to implementation, thus eliminating the risk of a “hefty fine” and he advises that a full premises audit should be scheduled whilst forming part of an operational project management exercise.

“There are many FM suppliers readily available to offer advice regarding the best course of action towards improving a building’s energy efficiency. Important to understand are longer term cost savings to be had by upgrading energy critical property applications.

“At its very core, MEES legislation is a positive move towards improving environmental conditions.

"There may very well be a need to include energy efficiency considerations at building design stage,” says Mr Hithersay.

Further insight is provided by Powerstar chief commercial officer Stuart Clegg, who states that whilst some buildings are not required to hold an EPC, such as some industrial sites, there are a plethora of eligible commercial buildings required to uphold MEES, such as retail or hotel properties.

“Undoubtedly, this will lead to a heightened importance on the energy efficiency of new and existing properties as those that fail to reach an EPC rating of E or higher cannot be legally let, resulting in lost revenue for the landlord and issues of relocation for the tenants.

“Ultimately, this is likely to cause energy efficiency to become a priority for many landlords and their tenants, especially concerning facilities on the cusp of an EPC rating of E or lower, for the foreseeable future.”

Mr Clegg further states that in response to this, energy managers should act swiftly to commission a survey of their facility and start exploring the available, cost-effective energy efficiency opportunities.

Whilst not all identified improvements directly impact EPC ratings, awareness of improvements towards energy efficiency in general can not only provide tangible benefits but can also help protect a facility in the future.

This is an “important step as the regulatory scope of MEES is expected to expand over the next five years, not to mention the ever-mounting pressure to reduce CO2 emissions and utilise energy more efficiently from the government and leading associations. “

When considering providers, choosing a reputable supplier that offers reliable, established and bespoke energy management solutions is essential to ensure optimal results,” Mr Clegg concludes.

In addition to the new requirements beginning to take effect from 1st April this year, with the regulations to be enforced upon the granting of a new lease and the renewal of existing leases, Metartec’s Stephen McCallum looks at how this will develop in the future.

From 1 April 2023, he advises, MEES will be extended to cover all leases, including where a lease is already in place.

All non-domestic property types are in scope of the regulations, except for those that do not require an EPC under current regulations, such as listed buildings.

Cost of non-compliance

MEES does not apply to lettings of six months or less, or to lettings of 99 years or more, it continues.

“In terms of the energy management of facilities, there is going to have to be a stringent process of evaluation and monitoring both commercial and non-commercial properties.

"With enforcement penalties between £2,000 and £150,000, no single entity or company can afford to ignore these changes,” Mr McCallum continues.

“80% of buildings are expected to still exist by 2050. This means the creation of energy improvement plans for the next 30 years in line with government targets are of the utmost importance.

"Not only does that mean that buildings firstly must pass EPC ratings (which around 20% will fail as they are F or G rated) but efficiency has to continually improve.

“That could see a quick increase in the money spent on the improvements of facilities with a steady decline once targets are met,” says Mr McCallum.

Energy management and brokerage specialist ZTP co-founder Alex Hill says: “In my opinion the MEES legislation will have a significant impact on the energy management of facilities for three reasons.

"Firstly, unlike other legislation introduced in recent years, MEES has been widely publicised to concerned parties through an effective communications campaign set on the back of almost 10 years market awareness and understanding of EPC reports.”

Secondly, he continues, there is a clear distinction for not only the fining structure, but also the application of fines.

Local authorities will not only be responsible for policing the legislation but will also benefit from retaining the fines imposed.

“This in itself is not worrying until we account for the relative ease that non-compliance can be identified,” he continues.

All of the information required to identify F and G buildings leased post March 2018 is already in the public domain, between the National EPC Register and multiple online lettings directories showing lease dates, acting parties, and tenants.

Anyone with a laptop and an internet connection could identify every non-conforming lease in the UK.

“Finally, and possibly the most important is that due to the awareness of MEES within the wider investment market, the legislation is already impacting investment decisions.

"We have already heard reports of financing being reconsidered for buildings scoring F, G or even E due to the implications on a building’s value if it can’t be re-let at the end of its lease.

“This is legislation that can, and will hit multiple stakeholders in the pocket and will drive direct action as a result,” Mr Hill concludes.

Attention is also drawn to yet more legislation coming into effect on 1 April that will impact on energy management, says ABB.

The new regulation, DCP161, will allow utilities to charge excess penalty rates when customers draw more power than expected, the company advises.

An amendment to the Distributed Connection Use of System Agreement (DCUSA), DCP161 is being introduced to offset the costs that distribution network operators (DNOs) incur when customers regularly use more electricity than agreed with their supplier.

Sustainable energy use

This new regulation is separate from the MEES (Minimum Energy Efficiency Standards) Regulations that will also come into force in April, says ABB, that will make it unlawful to let properties that do not meet minimum energy standards.

Both pieces of legislation are designed to encourage sustainable energy use. Whereas MEES has the aim to achieve the UK’s targets on CO2 emissions, DCP161 will help DNOs bill fairly so that the customers who draw excess power pay for the required upgrades to the power grid.

ABB further states that the new rules have prompted FMs to find ways to limit or cap energy consumption from systems such as heating, ventilation and air conditioning (HVAC) in a way that is invisible to building occupants.

The traditional way to achieve this is to install load control switches to control many individual loads. This can be complex and costly – however, the latest smart circuit breakers have the same capability built in with no need for costly engineering.

ABB Ability market development manager Atif Saleri says that the latest technology provides “accurate metering and the ability to control up to 15 individual loads or 15 groups of loads, but it can also be equipped with intelligent software that constantly monitors consumption and switches off low priority loads automatically, before switching them back on when consumption drops again”.

The above information shows beyond doubt that 1 April 2018 will be an important day for energy management within the FM sector, with serious implications for those that fail to plan or comply accordingly, but with numerous advantages for those that manage this most effectively and provide their facilities with energy savings, carbon emission reductions and allow them to continue to be fit for use in the future.

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