Energy usage is racing up the business agenda

B&ES, Building & Engineering Services Association
The business of energy efficiency - David Frise

The threat of energy prices not falling and legislation means that building owners and end users have never had more incentive to invest in energy efficiency refurbishment, says David Frise.

The full scale of Ed Miliband’s miscalculation over energy prices finally hit home when the main fuel providers admitted they would not gamble on cutting bills this winter because of Labour’s threatened price freeze.

The so-called ‘big-six’ energy firms will not risk a cut now in case Labour wins the General Election and they are stuck with the lower tariffs for 20 months. Consumers, therefore, face another winter of high energy costs whether wholesale gas and electricity prices fall or not — profiteering and electioneering in one unhealthy package.

The coalition Government is not without blame, as it is also guilty of putting political gain before a sustainable national energy policy. Political uncertainty at home and, particularly, abroad does not make for a healthy energy market. Ongoing price volatility means it is more important than ever for building owners and managers to take control of their own fate by investing in energy efficiency.

Lowering bills and having some measure of energy security should be incentive enough, but commercial landlords have another good reason for finally tackling those long postponed improvement and refurbishment jobs that can reduce energy consumption.

A study by the consulting engineer WSP shows that more than 35% of existing commercial buildings in the UK would fail to meet the mandatory energy-efficiency standards which are expected to come into effect in 2018.

Illegal

The Department of Energy & Climate Change (DECC) plans to introduce measures that would make it illegal for commercial landlords to rent out properties with energy ratings lower than E on their Energy Performance Certificate (EPC). Officials estimated that this would hit 18% of the existing rental stock, forcing owners out of the market unless they brought their properties up to scratch.

However, WSP said many buildings currently at E will have been downgraded to F by 2018 because EPC scoring will have tightened to reflect more stringent Building Regulations. This means it will be more like a third of existing properties that fail to reach the standard.

Having an EPC rating that will enable a building to be let in the future is an important driver for improving energy efficiency.

WSP modelled five reference buildings to show how the EPC bandings have changed between 2008 and 2013 and then compared that with how the regulations will change by 2018.

‘Our research shows EPC ratings drop half to one band each time the regulations change,’ said Anna Walton, WSP’s lead on EPCs. ‘These proposals will have a significant impact on owners’ ability to lease their buildings if they’re adopted. Many property owners are already reviewing their buildings and developing proactive strategies in anticipation of the regulations and getting ahead of the game, which is the right approach in our view.’

The British Property Federation (BPF) has been broadly supportive of DECC’s proposals, pointing out that mandatory standards would have a ‘significant influence on the future quality of the UK’s rental stock’. However, they also point out bringing buildings up to E ratings would ‘require significant investment’ and could actually be ‘prohibitively expensive or difficult’ for many building owners.

Yet, surely it makes sound business sense to bite the bullet and start making these investments? Landlords have to ask themselves whether they want to remain in business beyond 2018 or leave expensive built assets to rot.

Large end users are also facing increasing pressure to invest in the energy efficiency of their properties with the launch of Energy Savings Opportunity Scheme (ESOS).

This new measure is part of the UK’s response to the EU Energy Efficiency Directive, which expected to affect over 7000 organisations employing more than 250 people, an annual turnover above €50 million or an annual balance sheet total of €43 million. They will have to carry out detailed analysis of their energy consumption and identify opportunities to improve their energy efficiency at least once every four years. The first round of reporting is due by 5 December next year, with compliance managed by the Environment Agency.

What makes ESOS different from many other similar regulations is the focus on ‘potential’ energy saving. It is not too prescriptive and gives the management of the companies an opportunity to look for places where they can make savings in the future. While all such regulatory instruments can easily descend into bureaucratic box ticking, at least the ESOS boxes ask for some creative thinking and give room for engineers to manoeuvre when looking for practical solutions.

Opportunity

In that sense, this should be viewed by financial managers as an opportunity and not simply as a regulatory burden. Investment will be required in staff time and in energy-saving measures, but the upfront cost does not have to be huge and should deliver a long-term business return.

To comply with ESOS, organisations will have to assess all their areas of significant energy consumption (making up over 90% of total energy consumption), ‘unless it is possible to demonstrate to a lead energy assessor that this is covered completely by either ISO 50001, Green Deal Assessments or Display Energy Certificates’, Environment Agency guidance states.

They will need to provide 12 months’ energy-use data and produce ‘cost-effective recommendations’ for improving their performance, but there are no hard and fast rules for how these improvements are delivered.

Faced with the risk of being stuck with lower tariffs if they reduce energy prices, the ‘big six’ energy firms are expected to hold prices.

At least one site visit must be carried out to make sure the recommendations do have some grounding in fact and are not just theory. It also gives companies a chance to include measures they have already taken, which is a step forward on previous assessment schemes, which did not give due credit to investments already made.

It is an opportunity for organisations to embed energy best practice across their property estates and give staff responsibility for continuing good work. The organisations appoint their own lead assessors, so this work becomes a key part of business strategy.

A senior manager must sign off and take overall responsibility for the audit trail and recommendations for improvements, but this should be a welcome opportunity for them to embed a cost-saving culture into the staff — all to the benefit of the company’s bottom line.

These developments could kick start a major programme of building refurbishments focused on energy efficiency with the consequent knock-on impact on the building engineering services industry.

Firms that are members of B&ES have the skills and solutions to help organisations meet their business goals and satisfy regulators. However, it is very important that we don’t get too fixated on individual technologies and stress the importance of making sure basic measures that can lower energy demand are addressed first — such as improved insulation, draught proofing and controls.

In many cases, simply upgrading conventional heating and cooling equipment will be enough to achieve valuable running cost savings and ESOS compliance so long as the plant is properly commissioned and an intelligent control strategy is in place.

Adding renewables to a building should only be considered once improvements to the fabric and existing building services have been made — and even then only where they are cost-effective and technically appropriate. Buildings that are refurbished using advanced sustainable techniques that minimise heat losses can easily meet energy-saving targets, such as those set out in the new Part L of the Building Regulations, using conventional high efficiency gas-fired technologies.

The legal and business incentives for energy efficiency can transform our market by encouraging owners and operators to focus on opportunities to cut their running costs and, simultaneously, improve the ‘end-user experience’ in their buildings. This is rapidly pushing the sector back towards its pre-recession peaks, and we need to be ready to respond.

David Frise is head of sustainability at the Building & Engineering Services Association (B&ES).

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