EPCs and Net Zero Coercion

If you live in the UK and own or rent a property, you’ll know about EPCs.  Their official name is an Energy Performance Certificate, although most people are more likely to consider them as Entirely Pointless Certificates.   They were introduced by the UK Government in 2007 to give anyone buying or renting a property a guide to its energy efficiency, rating houses in much the same way as electrical appliances on a scale of A (good) to G (worst).  The letter signifies how much carbon dioxide your property is likely to produce each year.  EPCs also provide guidance of how you could “improve” your home, with suggested measures to reduce the CO₂ emissions, along with an indicative cost of doing it.

If you sell or rent your home you have to obtain an EPC.  Currently you are not allowed to rent a property unless it has an A to E rating.  There were proposals to tighten this to an A to C rating, but those proposals have been pushed back.  However, many owners feel that EPCs are likely to be used as a stick to force them to make changes to meet net zero targets.  Although that has been consistently denied, a recent survey by the Social Media Foundation titled “Whose energy transition is it anyway?” shows that concern is still real.  That is reinforced by a new Government consultation on Reforms to the Energy Performance of Buildings Regime, which implies that EPCs may be turned into a net zero coercion tool.

At their most basic level, EPCs aren’t a bad idea.  Every EPC is publicly available on the EPC Register where you can search for any property.  As an illustration, I looked for the street where I live, which is a row of terraced houses in East London.  That gives the following results.

From left (West) to right (East) there are 19 main properties.  Most were built around 1890, with some replacement buildings constructed around 2000 and a few recent infills.  I’ve plotted the EPC rating of each, and at the bottom shown the expected rating the property would have had at the time it was built.  The bulk of the houses were built as family homes, but a few have since been converted into flats, and some of the 2000 rebuilds were flats.

The EPCs show that most of the owners have upgraded their properties, mostly by replacing single glazed windows, insulating their lofts and installing gas-fired central heating.  (In the 1890s, they were all built to be heated with open coal fires.)  These three measures lift them from an E rating to a D.  The 2000 builds, along with the 1890s house which was recently converted into three flats have more effective wall insulation, moving them to a C, while the new builds, which are recent and meet current building standards are at an A.  But there are anomalies, not least the pair of identical flats at the East end of the road, which have a C and E rating respectively.

This is all fascinating, and shows how an EPC can be useful, but if we’re honest, it probably doesn’t tell the owners anything that they don’t already know.  When we moved in, the EPC that came with the house suggested replacing the windows, suggesting a price that was about 20% of what it actually cost, and recommended we installed solar panels, which we can’t do, as they’re not legal in a conservation area.  Which means that the previous owner had paid good money for an EPC which was rubbish.

The Government has recently conducted some excellent research on the real costs and benefits of retrofitting older houses (of which the UK has about 8 million), published as the DEEP report (the Demonstration of Energy Efficient Potential).  Alongside some excellent retrofitting data, it points out that the current assessment guidelines for EPCs are likely to give the wrong rating, making them irrelevant.  That seems to have triggered a discussion on where EPCs should go culminating in a consultation that looks at beefing them up.

The first change proposed is to make regular EPCs mandatory for all properties.  At the moment, if you’re not selling or renting your house, you don’t need one.  Now, the question is how often you have to spend £100 on having one, with suggestions ranging from every year to once every ten years.

The second is to make them more accurate, which is good, but by doing more measurements, which will end up costing more, as assessors will need to buy more complex measuring equipment.

A third change is what appears to be an intention to use EPCs as a marketing tool to inform owners about how they could modify their property to becoming net zero.  The sting in the tail of this, is that it plays to the coercive approach where you may be banned from renting or selling you property if it does not meet an appropriate rating.  That has serious implications, as increasing your rating is neither quick, nor cheap.

The Cost of Retrofitting

The proposed law banning properties being rented unless they have at least a “C” rating has been suspended for the time being, but it has caused a lot of activity among councils and housing associations, who would need to retrofit large numbers of properties to continue letting them out.  This, in turn has spurred London boroughs to look closely at the options and the costs for retrofitting.  Many are publishing retrofitting guides, which provide valuable information on how to do it, including potential costs. 

Most take the approach of looking at categories of retrofits, based on cost and what they achieve.  The DEEP reports do this in very fine detail for the Energy House in Salford.  Most of the above fall into three categories:

DIY measures

These are the simple things that a home-owner can do, such as draught-proofing, insulating loft hatches, adding heating controls and radiator thermostats, and using LED bulbs.

Medium measures

All of the DIY features, plus secondary glazing, loft insulation, an air source heat pump and PV panels.

Comprehensive

All of the above, plus internal and external wall insulation, mechanical ventilation and heat recovery.

Note that these improvements prioritise reducing CO₂ emissions, rather than improving user comfort or reducing running costs.  But that is the Government imperative – get rid of CO₂.

Every house is different, so the costs and starting points will vary, but collating the suggested costs across a number of these retrofit guides, give an estimate across a range of different properties for each of these levels of retrofit.

The DIY upgrades would take an “F” rated property to an “E”.  To reach a “C” you’d probably need to do the medium upgrade.  Most planning applications I’ve seen have decided to install internal and external wall insulation to be sure, but haven’t gone down the route of PV or heat pump.  In conjunction with replacement windows, that approach is going to cost around £35,000 per property.  It’s a choice that is most cost-effective for the landlord to be sure of getting a “C” certificate, but isn’t necessarily the most effective for the tenant’s energy costs.  But that’s a business decision that anyone renting or selling a property is likely to make.  There’s no estimate for a comprehensive retrofit for a late 20th century home, as it should have been built with a high level of insulation.  The medium cost is to upgrade the heating to a heat-pump and adding some PV.

The payback time for these enhancements, calculated on how long it would take to pay for their cost, based on any resulting energy savings are:

It is difficult to understand why, or how, most householders, landlords, councils or housing associations can fund this.  It puts the retrofit bill for Britain’s eight million older properties at somewhere between £200 billion and £500 billion, to be paid by the owners.  Making these houses comfortable would be a more affordable £15 billion, but the Government wants us to pay the excess to meet their net zero target.

There is a strong implication in the consultation that EPCs should be the marketing vehicle to persuade owners to spend this sort of money, which suggests that nobody at the Department for Energy Security and Net Zero (DESNZ) has any idea of how marketing works.  Making everyone pay for a more frequent, more expensive EPC which tells them their home is rubbish is unlikely to persuade them to shell out tens of thousands of pounds. 

The consultation runs to many pages and asks 48 questions, including a key one (no 35), which is “To what extent do you agree or disagree with these proposals to improve compliance?”  That is their emphasis, which gives us a good impression of where they want EPCs to go. 

All of this is driven by a desperation of reaching net zero at any cost.  We should minimise the energy that we use in heating our homes, but the primary focus should be on comfort and cost of living.  We currently can’t install smart meters in a timely fashion, so there’s little hope of installing tens of millions of heat pumps, let alone replacement windows and wall insulation.   The answer is not to create new levels of EPC bureaucracy and increase costs for homeowners.  The Government, and DESNZ in particular, needs to understand the importance of getting everyone on board with the move to net zero, rather than focusing on EPCs as an instrument of torture for homeowners.  The SKF report is well worth reading.  They’re a strong advocate of net zero, but realise that the current Government attitude is likely to alienate rather than garner support.

There is a lot we can learn from EPCs.  The small exercise I did for our street reveals a lot.  Taken nationwide, it would give us very useful data about the scale of the retrofit problem.  At the moment, retrofits seem to be largely the result of gentrification driving individual upgrades, or fear of legislation from public landlords and housing associations.  Savills have done some basic analysis in London, but as far as I know, EPCs are little used.  (Let me know if you’ve seen any good research.)  We need to recognise their value by using them to inform housing policy and resist the Government approach of turning them into a tool of coercion.