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Rating Energy Use

15 October 2005

Andrew Bray looks at the implications of the Energy Performance of Buildings Directive and discusses what premises and facilities managers can be doing now to smooth its implementation

AT THE BEGINNING OF JANUARY 2006, energy efficiency is due to take a major step forward. The Energy Performance of Buildings Directive (EPBD) will come into force across the 25 countries of the European Union. The measures envisaged under this legislation are designed to increase the energy efficiency of buildings - domestic, commercial and public sector - by more than 20 per cent.

One of the key ways in which the Directive tries to do this is through the introduction of 'consumer pressure'. An energy certificate, showing a building's energy performance, will have to be made available to prospective purchasers or tenants. In public buildings - and probably privately owned buildings visited by large numbers of the public (although this is still under debate within government) - the certificate will have to be 'prominently displayed'. No longer will energy merely be an unavoidable item buried in the service charges. The certificate will show this performance or rating in a series of bands - much like the labels already used on white goods such as washing machines, fridge/freezers and new cars.

Who will want to rent or own an F rated building instead of an A or B rated one?

This should give premises and facilities managers a powerful weapon in making their voices heard - and obtaining project funding - from senior management. The energy performance will not only be expressed simply in banding, but more quantitatively in terms of carbon emissions. For large companies, reporting of nonfinancial risks is now required within the Operating and Financial Review (OFR), and environmental issues fall under this category. Pension funds are required by law to take account of nonfinancial risks in potential investment choices. Increasingly, climate change is featuring in company reporting, in NGO surveillance of business behaviour and in government policy.

With the Government making climate change one of its priorities, the public sector is under pressure to respond. Public display of energy certificates will make an organisation's performance in this area more transparent - and open to criticism if inadequate in any way.

Financial impact
Of course the financial consequences of buildings with high energy consumption can no longer be ignored. Oil now costs more than $60 a barrel, compared with around $20 at the end of 2001. Major Wall Street analysts like Goldman Sachs are predicting that current prices will still be with us five years from now. Gas prices are based on those of oil and since most electricity in the UK comes from gas-fired plant, power prices have been rising steadily too. Add extra for the impact of climate change levies and emissions trading taxes and the energy costs start to loom a great deal larger on the finance director's agenda. More energy efficient buildings therefore become more important, both for owners and for tenants.

Also, in a world where carbon has a cost and more organisations are drawn into regulated schemes such as the European Emissions Trading Scheme, low carbon, high efficiency buildings have an extra attraction. As research carried out by the Sustainable Property Appraisal Project pointed out: 'Tenants with high carbon emissions in other areas of their business - large industrials, energy providers, major manufacturers for example - are likely to seek buildings which contribute as little as possible to their overall emissions i.e. energy efficient ones. The increasing cost of carbon emissions as policies to reduce national emissions are strengthened, is a significant risk for these types of business, and will be a factor in all their major business decisions.'

Unfortunately, with just a few months left before the Directive is due to take effect, it is still not clear just what information will be required for the new energy certificates - nor who will be qualified to award them. There is very little that is joined up right now in the Government's approach to this issue. There is plenty of rhetoric about the need to reduce emissions, but insufficient detail on how measures such as the Directive will work in practice.

If the Directive does come into effect in January, then any building that is sold or rented will require an energy certificate. But with so little time to get all the regulations in place, property owners could find themselves in difficulty. Will lawyers be prepared to complete transactions if certificates are not available?

The Government can ask the European Commission for a delay of up to three years if there are not sufficient trained personnel to carry out the certification process. However, up till the end of August ministers and officials were still claiming that everything would be in place by the end of December. If this is the case, final details about the information necessary for certification will only be announced very close to the start date.

What should you be doing about this issue? The Directive - and the last-minute approach to implementation - represents both an opportunity and a threat.

The opportunity lies in the benefits to an organisation from owning or renting properties with better energy performance. The energy certificate provides a measure of just how good that performance is, both in absolute terms and in comparison with other similar properties.Clearly, there is greater urgency for property companies with a continual turnover of sites or tenants to complete energy assessments and gain their certificates. Given rocketing energy costs and the need to be seen to be more environmentally responsible, the option for purchasers or tenants to choose a more energyefficient building is likely to become a factor in procurement choices. Energy performance therefore becomes a factor in the marketability of the property, along with the location, decor, cost, etc.

FMs and premises managers should be preparing now a programme to cost-effectively improve energy performance in all their properties. If energy management is outsourced to FM or energy specialists, get them involved in advance of the legislation taking effect. Energy certificates last a maximum of 10 years (although buildings can be re-assessed at any point in that cycle and an improved rating awarded). A phased programme of improvement will raise the commercial value of the property, while progressively providing other, nontangible benefits to the organisation, such as abetter environmental profile and improved credibility with potential investors.

Potential threat
The threat arises because, come January, sales and tenancy agreements will require the production of an energy performance certificate on the buildings concerned. Without them, property transactions could be delayed, postponed or made more complex. However, they cannot be obtained in advance of the New Year. In order to gain an energy certificate in as short a time as possible, an organisation will have to submit as much relevant information to the assessors as possible. To cut down the assessment time, as much of this as possible should be collated in advance. While the exact details of the certification process are still awaited, historical metered consumption data, energy bills, an inventory of relevant energy consuming equipment and their ratings, etc, will speed the process up considerably. Where time is money, delays should be minimised.

While the exact details of what will be included in the rating are still awaited, there is a certain amount of preparatory work that can be done in advance. The following actions will help FMs to minimise the threat and maximise the opportunity of energy performance certificates.
...collect energy usage data - from bills, reports etc. If these are not to hand, contact the supplier, or energy management provider, for duplicates
...collect relevant building data ¨C the floor area of the building, year and type of construction, plant and equipment used, etc
...engage partners/suppliers etc to assist - FM companies especially should be able to provide some of the technical data
...start to review areas where performance is known to be weak - e.g. having no BMS installed
...ensure any internal debates regarding funding are begun early
...develop a plan to improve things - unless you are happy for people to work in a G-rated building.

The Directive is coming. Some of the details remain to be settled, but there is much that can be done now to ensure its implementation causes as little inconvenience as possible. And remember, it offers a great opportunity to push forward the energy efficiency programme!


¡ñ Andrew Bray is Head of Energy Services at Johnson Controls.

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