The next reboot for energy performance of buildings

Europe

The construction, technology and electric vehicle charging sectors are to be boosted by a rebooting of energy performance of buildings legislation. Provisions are also included to seek to unlock finance for energy efficient renovation of existing building stock.

On 19 December 2017, the European Parliament, Commission and Council reached political agreement on a proposal to amend (again) the Energy Performance of Buildings Directive 2010/31/EU (“EPBD”). This agreement was confirmed by EU ambassadors at the end of January 2018. This Directive (like many modern EU Directives) has a provision whereby it is subject to mandatory periodic review to take account of its progress and other aspects, including (and in particular in this case) intervening developments in technology (including building management systems and road transport) along with wider developments in decarbonisation of the economy and energy security laws. To this extent this periodic amendment is entirely consistent with the original legislative thinking.

Background

The building sector is crucial to the EU’s ambitions and targets in terms of decarbonisation of the economy. This sector is the largest energy consuming sector in Europe: reportedly it consumes 40% of final energy. 75% of European buildings are said to be energy inefficient and this primarily relates to the older building stock. It is no surprise therefore that buildings, and in particular the older building stock, is a significant feature of EU thinking in terms of advancing decarbonisation.

The EPBD first came into being in 2002 (and at that time several EU Member States did not have any energy efficiency laws in terms of buildings) and was recast in 2010. The European Commission largely considers that the legal architecture of the EPBD has worked (albeit enforcement in some Member States needs improvement) but needs to be improved, updated, refined and, in terms of the existing building stock, made more ambitious.

Below are comments on some aspects of the proposed revisions to the EPBD.

Renovation of existing building stock

This is the prime feature. The aim is to accelerate the cost-effective renovation of the existing building stock.

According to the European Commission, decarbonisation of new buildings is going well but the pace of decarbonisation of existing building stock is poor and so mechanisms are required to incentivise improvement. In particular the EU Commission recognises measures (including milestones in particular) are required to provide confidence to the construction and investment sectors.

Currently each EU Member State is required to produce a long-term strategy (to be updated every 3 years) for mobilising investment in the renovation of national (private and public) building stock. This is set out in Article 4 of the Energy Efficiency Directive (2012/27/EU). (Other than the last subparagraph) this Article is to be removed from that Directive and put in the EPBD. Its scope is also to be enlarged so that:

  • This long term strategy must set out a road map with clear milestones and measures to deliver on the long-term goal to decarbonise the Member State’s national building stock by 2050, with indicative milestones for 2030, 2040 and 2050.
  • To support investors (financial institutions, the construction industry and individuals) and their decision making, EU Member States will be required to introduce various mechanisms, including for (a) the aggregation of projects to make it easier for investors to fund energy efficient renovations, (b) de-risking energy efficiency operations for investors, and (c) the use of public funding to leverage additional private-sector investment to address specific market failures. 

Technology

Clearly there is considerable scope for penetration by technology into making buildings more energy efficient. “In fact, technological progress towards “smarter” building systems offers opportunities to support a more efficient implementation of the EPBD and also creates enabling conditions; to provide information to consumers and investors on operational energy consumption; to adjust to the needs of the user; to run the efficient and comfortable operation of the buildings; its ability to connect to electric vehicles charging; to host energy storage, and to support demand response in a modernised electricity market”.

Amongst the measures in the proposed revised EPBD are:

  • Encouragement of greater use of ICT and smart technologies to ensure buildings operate efficiently including self-regulating devices for temperature or climate control.
  • The introduction of building automation and control systems as an alternative to physical inspections.
  • A smartness indicator to assess the technological readiness of the building to interact with their occupants and the grid and to manage themselves efficiently.
  • Promotion of the roll out of charging infrastructure for electric vehicles (see below).

Interface with electric vehicles

It is not surprising that policy in terms of buildings and the electrification/decarbonisation of road vehicles would draw closer.

From an overarching perspective, Member States are to establish requirements for the installation of a minimum number of electric vehicle recharging points to all non-residential buildings with more than 20 parking spaces, by 1 January 2025.

Otherwise where there is to be a new build or major renovation electric vehicle recharging infrastructure may be required if the development includes a carpark, of more than 10 parking places, located inside the building or physically adjacent to the building (and additionally where major renovation is involved the renovation measures include the car park or the electrical infrastructure of the car park). Where this is the case (and subject to limited exceptions (not referred to in this article)), a distinction is drawn between residential and non-residential buildings, namely:

  • New non-residential buildings, and those undergoing major renovations will have to be equipped with at least one recharging point for every 5 parking places.
  • New residential buildings and those undergoing major renovations will have to include pre-cabling to enable the (later) installation of recharging points for every parking place. 

Technology and construction sectors

Clearly the technology sector benefits from this Directive.

The EU is aiming to place considerable reliance on the construction sector. The European Commission states “…the European construction industry has the potential to respond to a number of economic and societal challenges such as jobs and growth, urbanisation, digitalisation, demographic change, and at the same time energy and climate challenges. The construction industry generates about 9% of European GDP and accounts for 18 million direct jobs. Construction activities that include renovation work and energy retrofits add almost twice as much value as the construction of new buildings, and SMEs contribute more than 70% of the value added in the EU building sector”.

Comment

Some of the matters covered by the proposed revisions to the EPBD are already being incorporated by developers.

Hopefully the legislators’ intentions in terms of signposting the long term requirements and the measures that will be introduced to unlock finance for energy performance measures on renovation of existing building stock, will lead to major commercial opportunities in terms of existing stock.

The proposals have secured political agreement and therefore are likely to be passed into law in the near future. If so, the updated EPBD will be published in the EU Official Journal and will enter into force 20 days after publication. Member States will have 20 months to transpose the new elements into national law. In real terms these provisions now give rise now to potential due diligence and procurement queries in terms of real estate transactions.

For supermarkets, retailers, hotels & leisure, offices, hospitals, schools, and other organisations with high numbers of parking places, the electric vehicle recharging provisions are to be noted.