EPC system will be overhauled to include new metrics to measure energy efficiency

The way EPCs are measured could change to multiple different metrics rather than the current single metric, which the government claims is “insufficient”.

Under the current rules, EPCs are measured based on the amount of energy a property uses per square metre (e.g., for heating, lighting, etc.) and how much energy it loses (e.g., through poor insulation).

In our second series of articles, based on the EPC consultation, we will explore how the proposed changes to EPC measurement will affect landlords.

Introducing a new metric

Rental properties must have a minimum EPC rating of E unless a valid exemption applies. However, under new rules, all new tenancies will need to meet EPC C targets by 2028 and by 2030 for all existing tenancies.

Alongside overhauling the rules for landlords to meet EPC targets, the government has proposed introducing a new metric system to assess the way EPCs are measured, with the new system potentially coming in as soon as 2026.

The government is proposing domestic EPCs use four headline metrics: fabric performance, heating system, smart readiness and energy cost as headline metrics, with other metrics such as energy use and carbon provided as secondary information.

Fabric performance

The consultation says: “Fabric performance is a crucial aspect of a building’s energy efficiency, as it relates to the thermal properties of the structure and its ability to regulate internal temperatures, regardless of the weather outside.

“The level of insulation, window quality, and the quality of construction or retrofit all contribute to a building’s fabric performance, which in turn determines the typical demand for space heating and cooling.”

According to the consultation, improving fabric performance can also help enhance the efficiency of heating systems, particularly heat pumps.

The consultation says that including fabric performance as a headline metric on EPCs would offer several key benefits:

1. A fabric metric could provide a clear basis for identifying and prioritising improvements to the building’s thermal properties. This would enable building owners and occupants to make informed decisions about upgrading insulation, windows, or other elements of the building fabric to enhance energy efficiency.
2. By prominently featuring a fabric metric on EPCs, building owners and occupants would be encouraged to take action to improve the building’s thermal performance.
3. A fabric metric could serve as a proxy for thermal comfort. Better thermal comfort means homes will feel warmer in winter and more comfortable for residents, enhancing their overall well-being and satisfaction with their living environment.

For measuring the fabric performance of properties, the consultation sets out different ways in which it could be measured.

The Fabric Energy Efficiency Standard (FEES) is used as a compliance target for building regulations in new homes. It estimates a home’s heating and cooling energy demand, regardless of the heating system in place. FEES considers the energy needed to keep the home warm in colder months and cool during warmer periods.

Another key fabric metric is the Heat Loss Parameter (HLP) or Heat Transfer Coefficient (HTC). This measure is estimated using co-heating tests and other on-site techniques. However, unlike FEES, HLP/HTC does not account for solar gains or cooling demand, offering a more limited view of a building’s overall thermal performance.

The consultation says the government considers FEES will be the best way to measure fabric performance as it can assess a building’s resilience to the changing climate.

Heating system

A heating type system metric measures different heating systems based on their technology or type.

The heating system metric would incentivise low-carbon technologies such as heat pumps rather than electric heating.

The consultation says: “By clearly distinguishing systems and highlighting both their environmental impact and efficiency, a heating metric could provide straightforward guidance for achieving net zero.”

The government proposes designing the heating system metric as a ranking based on environmental impact and efficiency. For example, heat pumps would be ranked highest, low-carbon electric systems like direct electric heating in the middle, and fossil fuel systems at the bottom.

The government believes the metric design should look at more than just carbon emissions and look at factors such as fuel availability and sustainability.

For example, a more efficient heat pump should be ranked higher than a less efficient heat pump unit.

The consultation says: “This allows the metric to provide a more nuanced ranking beyond just broad categories of heating system types. Factoring in system efficiency in this way would incentivise installation of high-performing low-carbon options.”

Smart readiness metric

The smart readiness metric would assess: “a building’s potential to integrate smart technologies that can optimise energy consumption and the ability of consumers to benefit from cheaper smart tariffs.”

This could help users understand their building’s potential to reduce energy demand during peak periods using technologies like smart meters, appliances, storage systems, and time-of-use pricing.

The government says the aim of the smart readiness metric is to help reduce energy bills and take advantage of smart energy tariffs.

The consultation is asking for views on how a smart readiness metric should be defined and what relevant characteristics of the building and applications should be considered.

Energy use and energy cost

The two metrics, energy use and energy cost, focus on different aspects of a building’s energy performance.

Energy cost aims to help individuals understand the financial implications of a building’s energy efficiency and make informed decisions about potential improvements, while energy use provides insights into overall energy consumption and helps identify areas for efficiency improvements.

The current system uses the Energy Efficiency Rating (EER) to measure energy costs per floor area, reflecting all aspects of regulated energy performance. However, EER relies on fuel price assumptions that can quickly become outdated, as they are only revised with Standard Assessment Procedure methodology updates.

The consultation says: “prices for existing dwellings were last set in 2014, failing to reflect current energy costs and tariffs. Updating these assumptions could also shift EPC bands without any actual change in a building’s energy performance.”

The consultation adds: “A cost-based metric may not incentivise switching from fossil fuel heating to low-carbon alternatives because of the effects of the relationship between fuel prices incorporated within the methodology.”

The government believes a cost-based metric should not be the sole headline metric to determine EPC ratings.

The consultation says: “The government considers that there should continue to be a calculation of predicted costs of the energy used in the building and that a metric based on this should continue to be shown prominently on the certificate.”

The government says it will listen to stakeholders in designing a new cost-based metric and will ensure it remains balanced.

Energy use metric

An energy use metric provides information based on the property’s energy needs for heating, water and lighting as well as calculating the property’s overall energy use.

The consultation says energy use metrics can be useful as they provide a direct, reliable, and easily understandable way to assess and compare the energy efficiency of buildings and help users make informed decisions about improving energy performance.

The government acknowledges the value of energy use metrics and supports keeping them on the EPC. However, they believe the proposed headline metrics covering energy demand, heating efficiency, and electricity generation provide a more relevant and informative way to present this data.

Carbon metric

Currently, the environmental impact rating (EIR) on EPCs is based on modelled carbon emissions. This carbon metric tracks progress toward net zero across on non domestic buildings. The government states that the EIR is the headline metric on non-domestic EPCs and is not proposing any changes, but is seeking views on whether it should remain the headline rating for non-domestic buildings.

What do the changes mean for landlords?

The changes in the way EPCs are measured will mean landlords have a greater responsibility to meet EPC targets.

The government says in the consultation that it will allow landlords to choose how to achieve energy efficiency targets.

This will require landlords to meet a fabric standard through installing measures such as loft insulation, cavity wall insulation or double glazing, before moving on to a range of other options including batteries, solar panels and smart meters.

The government says in the consultation: “The preferred approach is to require landlords to prioritise meeting a standard set against the fabric performance metric, which is likely to require similar improvement measures as meeting an EPC C on current EPCs, and then to meet a standard set against either the heating system metric or the smart readiness metric.”

Stay tuned for more articles on the EPC consultation and what it could mean for HMO landlords.