Energy Performance Certificates (EPCs) are expected to provide transparency regarding building energy consumption and function as a useful instrument to compare the energy performance of buildings. With energy costs accounting for an ever-increasing percentage of the total operating cost of a building, having a better understanding of a building’s energy performance can be a valuable tool for property owners and tenants during rental or purchasing decision making processes and negotiations.
EPCs could also contribute to driving (or at least informing) decisions during energy renovations and building upgrades.
However, no-one can say with certainty what the full impact of EPCs will be on the South African property sector. For example, to what extent (if any) will EPCs affect property valuations? Will rentals and tenant retention be influenced by EPC ratings? Will EPCs prove to be valuable when it comes to investment decisions for building upgrades? While we do not have sufficient data available to answer the many questions, we can and should, look at the information that is available from other countries where EPCs have been implemented.
In Europe, Energy Performance Certificates (EPCs) and their accompanying assessment methodologies are well established across many European countries as standardised methods for summarising the energy efficiency of individual buildings. (David Jenkins, 2017).
With the local property market poised to start implementing EPCs, it is worth considering possible obstacles in implementing them. In a 2017 paper (Ramón Pascual Pascuas, 2017), several obstacles were identified and first among these was the additional cost to the property owner. In this article, we will look at this hurdle in more detail.
The costs of EPCs
South Africa seems to face a similar challenge, with most property owners expressing concern (this is putting it mildly) about the additional cost that their budgets must accommodate to comply with EPC legislation and this while municipal taxes and utility costs continue to rise well above inflation on a year-on-year basis. Add to these the impact of higher vacancies and the direct cost of load shedding, then accommodating EPC costs in budgets that are already under pressure becomes a real challenge. And of course, the impact of Covid-19 on landlords and tenants were (and continues to be) significant.
The cost of an EPC is driven by relevant standards and regulations which oblige an EPC inspection body to employ staff members with the appropriate competence and experience to perform all inspection activities. Inspection body staff must invest an unavoidable amount of time and effort in each building that they assess.
While it seems to be generally accepted that the size of a building and the availability of information will be the main cost drivers, another significant cost driver could be the accuracy with which an EPC rating is determined. In a way, the ‘certification accuracy’ is linked to the availability of information – the more information a property owner can provide to an inspection body, the easier (more cost-effective) and more accurate energy performance certification and rating determination should become.
Making assumptions
The key question is, what if some critical information required for certification is not available? Where does this leave a property owner? He can either end up with a building that cannot be certified (which will result in a contravention of the Energy Act), or he can incur even more costs to obtain the information, for example by installing additional meters, or the inspection body could issue a certificate based on pragmatic assumptions. This raises the question as to whether the latter will be allowed.
For instance, if a property owner cannot provide generator fuel bills, can the inspection body instead use the running hours of the generator (which is available) supported by assumptions regarding generator load and fuel consumption (from the supplier) to calculate a conservative estimate of the annual fuel consumption of the generator? According to the standard, an EPC is based on measured energy consumption only, so strictly speaking, a calculation is not allowed. Where does this leave a property owner?
Where an inspection body must make assumptions to address missing or incomplete information and where such assumptions are conservative – in the sense that they do not materially change (especially improve) the rating of a building – the limited use of assumptions should be supported by standards and regulations. The provision should be that any assumptions used to determine a building’s energy performance should result in a more conservative building rating.
It is quite likely that SANS 1544 will be revised and improved soon to address the concerns raised by property owners. It is vital that property owners and industry bodies participate and contribute to the process of updating SANS 1544 – no opportunity to participate and comment on the draft revised standard should be missed. Discussions are underway already to establish an EPC Community Forum that will serve as a platform for everyone affected by the new EPC legislation to share opinions, ask questions and raise concerns.
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