The Market Dilemma
- The UK has legally binding targets to achieve the following CO2 reduction targets;
- 34% by 2022
- 50% by 2027
- 80% by 2050
- The Built Environment is responsible for 45% of CO2 emissions;
- 27% Housing
- 18% Non domestic Properties
- 60% of these non domestic properties will still exist in 2050
- 18% of properties have EPC ratings of an F or G
- As such from 1st April 2018 these 18% of buildings will become non compliant with government legislation – Minimum Energy Efficiency Standards (MEES) and it is forecast that by 2022 up to 35% will become non compliant
Many companies will simply employ a local consultant to provide an up to date Energy Performance Certificate (EPC) and where it falls below the minimum performance rating of an E look to undertake the minimal amount of work required to achieve the necessary E rating.
However the cost of improving the energy performance of the property to comply with the legislation will generally rest with the Landlord, particularly in relation to existing leases. This is because, in the main, the cost of improvements falls outside most service charge regimes and are unlikely to fall within a fairly standard tenant’s obligation to comply with statute.
The MEES+ Offering
The MEES+ offer goes way beyond just ticking boxes and meeting the minimum requirements, the solution will transfer the risk of improving the energy efficiency of the property to Asset+ who will ‘guarantee’ the results. In most cases this will ensure an improvement way beyond a band ‘E’ which will not only future proof the property it will increase its market attractiveness and most likely its yield.
The ‘guarantees’ provided in the Energy Performance Contract will include the Landlord being paid back any shortfall if the energy savings set within the contract are not met.
Finance can also be included within the energy performance contract and in most cases the payments will be less than the energy being saved meaning the Landlord can ensure the property or properties are fully compliant with Zero capital outlay and Zero risk. This would like the illustration below;
The MEES+ model adopts an Energy Performance Contract, which have been used successfully in the UK Public Sector for some time now where Energy Service Companies (ESCo’s) such as Asset+ are engaged to improve the energy efficiency of a facility where the guaranteed energy savings pay for the capital investment required to implement the improvements.
The ESCo examines a facility, evaluates the level of energy savings that could be achieved, and then offers to implement the project and guarantee those savings over an agreed term. This will generally include a mix of both demand side and supply side energy conservation measures that are focused on reducing energy consumption and carbon emissions with the best possible commercial benefit. These are generally measured in terms of kWh’s saved or the NPV over the contract term so measurement in terms of an EPC rating would be new but ultimately the point of the legislation is the same i.e. to reduce energy consumption.
Paul Burnett, Managing Director of Asset+ advises:
‘Society and government now require a fundamentally different sustainable built environment, which requires the construction and property sectors to radically change. The MEES legislation is a stepping stone towards this and Landlords need to act now to avoid being slapped with a hefty fine. The first step is to ensure properties have a valid EPC that takes account of any changes and improvements made to a building. Once poor performing buildings are identified, the Landlord needs to decide if they just want to comply with Legislation and improve from an ‘F’ or ‘G’ to an ‘E’ or improve beyond this and look to both future proof and improve the marketability of their property. Our MEES+ solution provides the Landlord with a property or properties, which are fully compliant with Zero capital outlay and Zero risk.’
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