Watt's next? Consultation proposes reforms to the energy performance of buildings regime in England and Wales

Shortcomings in the current methodology for assessing the energy efficiency of buildings have been highlighted by stakeholders for some time. It has been suggested that energy certificates fail to provide sufficiently granular detail and frequently present an inaccurate picture of a building's energy performance. A recent Which? report on reform of energy performance certificates (EPCs), commenting in the context of residential property, stated: "unfortunately, there is substantial evidence that the metrics and information in many EPCs may be misleading, and homeowners, tenants, landlords and policy makers could be making decisions based on inaccurate information". With consumers facing fuel poverty, businesses under increasing obligations to accurately report carbon emissions and the government seeking to reach net-zero emissions by 2050, reform to the current framework is overdue.

A government consultation, which is open until 26 February 2025, seeks views on proposed amendments to the energy performance in buildings (EPBs) regime. The suggested reforms will affect both domestic and non-domestic buildings and aim to improve the accuracy and usefulness of EPCs. It is anticipated that a more complete representation of building energy performance will better meet the needs of building owners and users, as well as better aligning the framework with the government's net-zero goals.

The minimum energy efficiency standard that a building must achieve in order to be let are not covered in this consultation. Realities are expected to force the government to reduce the planned pace of increases to the minimum standards required before letting non-domestic property. Domestic lettings have already seen a "reprieve" from the former aim of achieving a minimum C rating on the building's EPC (previously to be phased in from 2025).

EPC validity

EPCs are currently valid for 10 years. The government suggests that requiring more regular EPCs – for both domestic and non-domestic property – will improve the accuracy of information about a building as well as prompting more regular consideration of sustainability focused upgrades. Views are sought on the introduction of shorter periods of validity, a move that would necessarily have financial and practical implications for landlords. Which? suggested a validity period of five years would appropriately balance the benefits of accurate information with the need to avoid unnecessary red tape.

In the residential sector, plans indicate that landlords will be required to renew an EPC on its expiry, rather than, as at present, renewal only being required on the property being re-let.

The existing regime creates a great deal of uncertainty over the treatment of listed buildings. It is proposed that all listed buildings should be required to have an EPC but it is acknowledged that recommendations for improvements will need to be tailored to take account of heritage features and additional guidance will be required. Owners of listed buildings will still be able to claim an exemption from complying with minimum standards where appropriate.

Display Energy Certificates (used to provide energy efficiency information about public buildings) are also covered by the consultation. Among other suggestions, it is proposed that the current 10-year validity period for certificates required for smaller public buildings should be reduced to seven years.

Additional EPC metrics

The current reliance on a single carbon-emissions metric based on standardised heating patterns and an assumption of fixed fuel prices is acknowledged to be flawed, as it fails to provide a "sufficiently rounded picture of performance". A range of additional metrics are considered in the consultation and it is noted that the "utility of different metrics may differ between domestic and non-domestic buildings given differences in the way that energy is used".

Proposals for domestic sector assessments include adding information to the EPC about insulation levels, the potential to integrate smart technologies to optimise energy consumption and energy costs. These largely reflect the recommendations on reform of the domestic EPC rating metrics put forward by the Climate Change Committee, which were made with the aim of supporting consumers to make better informed decisions and to reduce emissions from homes. Updated assessment methodologies for domestic dwellings are already in train, with a consultation on the detail for the Home Energy Model (which will be implemented alongside the Future Homes Standard) anticipated shortly.

The government's preliminary view is that these additional metrics are not appropriate for non-domestic buildings. It is suggested that non-domestic buildings should continue to be assessed on the basis of a headline carbon metric – at least for the time being – but commentary on this assumption is welcomed. The consultation cites a need for consistency in the short term; however, improving reliability of reporting for non-domestic buildings is also necessary. The commercial sector has already had to adjust to a recent change to the methodology in June 2022, which took account of the decrease in carbon emissions from grid electricity in comparison with gas. This resulted in the EPC ratings fall for some gas-heated properties; where this took a building below the minimum required standards, unexpected upgrade costs fell on landlords.

While closing the gaps in the data sets will alleviate some of the challenges posed by current EPCs failing to provide an accurate picture of a building's performance, considerable costs will be involved for landlords, in particular, in adjusting to additional measurement metrics. Transitional arrangements will be key to ensuring viability of implementation. This will include ensuring that appropriate guidance and education for energy assessors is in place. It is acknowledged that the current quality of training and standards needs to be improved, even before factoring in any additional metrics. The need to tackle fraudulent EPC assessments is also highlighted by the consultation, although it is unclear how widespread dishonest practices may be.

Improving compliance

The consultation also raises concerns over the number of buildings (usually older housing or commercial property) that do not have an EPC, despite being in-scope. In addition, the consultation identifies "very low" compliance with the requirement for high-powered air-conditioning systems to be assessed at least every five years. To incentivise compliance and the achievement of the government's goals to decarbonise the built environment, the consultation suggests increasing the financial penalties. Additional data and guidance for the enforcement authorities on their responsibilities is also proposed.

It would be sensible to increase the penalty for failing to procure the necessary air-conditioning inspections (currently £300) to a greater level than the cost of the inspection itself. However, lack of enforcement is probably more likely to be the root of non-compliance, rather than the level of the potential penalty. The enforcers – local weights and measures authorities, usually acting by trading standards officers – currently face significant funding challenges and tend to rely on complaints being made rather than taking any proactive steps to enforce the regime. The failure to ring-fence funding allocated for EPC enforcement has in practice seen the money diverted to other projects.

Osborne Clarke comment

The government's recognition of the limitations of the current framework and its proposals for reform indicate a willingness to implement necessary modernisations and to align with other plans are helpful, certainly in relation to domestic premises. Any changes to the assessment metrics for homes following consideration of the responses to this consultation are likely to be introduced in the second half of 2026 in conjunction with the roll-out of the Home Energy Model and Future Homes Standard. The position in relation to non-domestic premises is less clear, although in the short-term no changes are anticipated.

Building owners will want to keep a close eye on the evolving landscape regulating the energy performance of buildings. Any changes will be particularly important given the increasing use of EPCs to meet sustainability reporting requirements and as green leasing requirements become market standard. While this consultation focuses on measurement and enforcement, we are also expecting an update from the government on the minimum energy efficiency standards that buildings need to achieve in order to be let. It is anticipated that as part of the government's "Warm Homes Plan", a new target date of 2030 will be set for homes in the private rental sector to achieve a minimum EPC C rating. Clarification is required for non-domestic premises.

The relationship between adjusting the metrics used to measure a building's energy efficiency and the minimum standards that must be achieved before that building can be let must be taken into account by the government in connection with reform. Landlords in both the domestic and non-domestic sectors will need sufficient time to prepare for and adjust to any proposed changes.

This Insight was written with the assistance of Georgia Higgs, a Trainee at Osborne Clarke.