As the real estate industry manoeuvres to meet stiff carbon reduction targets, our Managing Director and founder, Simon Crowe, has been speaking to investor relations agency Tavistock, on delivering commercial property net-zero ambitions and specifically whether as an industry we are taking the right approach and using the right metrics.

We’ve become side-tracked by Energy Performance Certificates (EPCs)

EPCs were introduced 15 years ago to measure the energy efficiency of buildings and, quite frankly, they have been meaningless. They give a building a rating between A (very efficient) to G (Inefficient), but the result is dependent on the quality of the assessor, and over the last 15 years quality has been very poor.

EPCs only provide a snapshot in time

All EPCs do is measure a moment in time. At your house you can turn on all the heating, open all the windows, turn on all your appliances and be burning energy for fun but it won’t change your EPC – a building with an A rating can be consuming loads of power, resulting in very high emissions.

“… if the ultimate aim for buildings is net zero, EPCs are simply not fit for purpose.  The Government should be measuring energy intensity.”

 

The Government’s first minimum EPC target of E finally comes into effect in April 2023, meaning a commercial building with an F or G will be prohibited from being leased. Furthermore, in light of the country’s Net Zero targets, the Government is consulting on proposals that every property, whether residential or commercial, must be performing at a B rating within the next 10 years, an enormous challenge. But, if the ultimate aim for buildings is net zero, EPCs are simply not fit for purpose. The answer is energy intensity, which is measured as kilowatt hours per square metre, or how many units of power per square metre you use per year.

To achieve net zero, buildings must run at an average of 55 kilowatt hours

To give you an example, most office buildings run at about 220 kilowatt hours (kWh) per square metre (sqm) per year. To be considered net zero you need to get that down to about 55kWh/sqm. The big trophy office buildings, which are mechanically ventilated and pushing air around the buildings, are operating at about 250kWh/sqm each, and a lot of that is due to poor operational management.

Of course, most landlords are, at least, doing something to improve their ESG credentials. We get a lot of calls for rolling out on-site generation products, such as roof top solar photo-voltaic panels and installing electric vehicle charging, because they’re simple, easy to understand and good marketing. They do reduce costs and they do reduce emissions, but they are only a start and do not reduce energy intensity.

Replacing gas boilers with heat pumps is fraught with issues

The biggest challenge, I think, will be heat pumps. By 2025 all new homes will be banned from installing gas or oil boilers and homes off the gas grid will not be able to replace their oil boilers from 2026. It’s only a matter of time until legislation is designed to prevent commercial buildings installing fossil fuelled heating. The Government’s favoured alternative are heat pumps which will lead to a lot of mistakes, as heat pumps operate quite differently to gas boilers, and many property owners who have heat pumps will tell you they hate them and their bills have gone through the roof. Selling the idea of heat pumps to landlords and fund managers is tough, but we’ve got to educate and get them thinking in a different way. If a heat pump is going to be an effective replacement for a boiler, the heating distribution system needs to be assessed and adjusted, i.e pumps, valves and radiators, otherwise heat pump specifications will be too large and running costs higher than they need to be.  Buildings also will need to reduce draughtiness and improve insulation.

We’ve got a lot to learn from the Scandinavians

I’m a big fan of district heating, which I believe is a really good solution for decarbonizing cities. It’s a fact that there’s more waste heat expelled from buildings in London each year than is required.  The basic principle is that some buildings will need heat and some will need cooling, so if you connect buildings together on a centralised heating system you can take excess heat from one building and create cooling in the next. The Scandinavians have been using heat networks for years and they think it’s mad that in the UK everyone’s got a small combustion power station in their own office building burning gas.

“My message to the real estate industry is that it has to realise that energy intensity is the true measure of net carbon zero, not EPCs”.

This is the first of a series of discussions with Simon about some of the key sustainability issues impacting the real estate sector.