The Government is consulting on the introduction of a performance-based policy framework where the rating of energy and carbon is measured on large commercial and industrial buildings above 1000m2 in England and Wales. The consultation closes on 9 June 2021.
The framework will require owners and single tenants of buildings to obtain an annual rating, which will be based on metered energy use data and other relevant information. This will be publicly disclosed online and in the building.
By completing this performance-based rating, it will show prospective buyers and tenants how the building is performing, in terms of climate impact, against similar building types. This will also provide a clear indication of running costs to expect if they use the building for the same purpose.
The Government plans to introduce this rating in three phases over the 2020s:
Phase One: Offices
This will be a soft launch in April 2022 which applies to offices (estimated to be 10,000 offices in England and Wales). The Government’s aim is for phase one to reduce annual energy bills for businesses by £116m by 2030. This will require building owners and single tenants to register with the ratings administrator and produce a rating within the first 12 months. Disclosure of the rating will be voluntary in the first year, but it is still highly encouraged. The Government are proposing to legislate the mandatory disclosure from the second year of being on the rating framework.
Phase Two and Three: Remaining Commercial and Industrial Sectors
Once phase one is complete, phases two and three will introduce the ratings for the remaining commercial and industrial sectors. After a certain amount of time, (still to be decided), there will be sanctions for non-compliance. This means that publication of non-compliance can affect reputation and incur a penalty fine system which will be added to the balance sheet.
However, there are likely to be some exemptions. Certain building types or use, for example those with links to national security, or where energy is too sensitive to release, could be exempt. There will be no exemptions based on perceived difficulty of implementation.
With this information in mind, the aim of this scheme is to decarbonise business energy use through more measurably efficient commercial and industrial buildings. This will be helping the UK achieve the net-zero greenhouse gas emissions by 2050.
The proposal applies to England and Wales, but the ratings methodology is still under development to ensure it applies across the UK. The Scottish Government is participating in elements of the development framework and will be informed by the outcome of the consultation. Any decision to apply the methodology in Scotland will be subject to a separate consultation by the Scottish Government. It is reported that the UK Government will shortly be publishing a short guide on the steps building owners and businesses should take to prepare for this new rating system.
Mark Richardson, Partner at BB&J Commercial commented “recognition of the need to tackle energy efficiency issues within the broader picture of climate change can only be a positive thing. These proposals are at an early stage and the amount of detail available is limited. One of the issues we face in terms of commercial buildings is a range of very old stock that will be of limited energy efficiency. I would hope and expect as more details emerge and timelines become clearer that the Government will be offering incentives and grants to assist in the upgrading of older buildings so they will meet minimum requirements for the benefit of all of us in the attempt to become more energy efficient.”
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