Energy Performance Certificate (EPC) reform: consultation

1. Introduction

1.1 Background

The Scottish Government has legally binding climate change targets to reach net zero by 2045, with interim reductions of 75% by 2030 and 90% by 2040^[1] (relative to 1990 levels). Scotland’s buildings currently account for around a fifth of our emissions. To meet our statutory climate change targets, we need our homes and buildings to be highly energy efficient, and ultimately to use climate-friendly, zero direct emissions heating systems (ZDEH)^[2]. Upgrading buildings to be more energy efficient means they will use less energy. This means less heat is wasted through poor insulation, and due to this, fewer greenhouse gas emissions are released into the atmosphere. In tandem, switching to zero direct emissions heating completely removes direct emissions from heating our buildings.

The Scottish Government’s Heat in Buildings Strategy^[3] sets out our plan to reach net zero and address the wider challenges of reducing our buildings’ contribution to climate change and mitigating fuel poverty. In the Programme for Government we committed to consulting on proposals for a Heat in Buildings Bill this year. Subject to consultation, this Bill would seek powers to introduce regulations requiring domestic buildings to meet a minimum fabric energy efficiency standard equivalent to EPC C by 2033 and to prohibit the use of direct emissions heating systems in domestic and non-domestic buildings by 2045.

Energy Performance Certificates (EPCs) are a vital tool to help our buildings reach net zero. They are a long-established feature of the domestic and non-domestic property markets. EPCs provide information about the energy efficiency of a building that allows for comparisons to be made between buildings under standard operating conditions. They also suggest potential steps the owner could take to improve the energy efficiency of their building.

EPCs must be provided when a building is sold or let to a new tenant^[4]. They have also formed part of the Home Report^[5] since 2008. This helps current and prospective tenants or owners make informed choices when moving or considering improvements to their buildings.

It is widely accepted that EPCs require reform. The Scottish Government commissioned research^[6] and established working groups^[7] during 2017-20 to make recommendations for reform. This programme of work responded to long-standing criticism and recommendations from the UK Climate Change Committee (CCC). The CCC, as our statutory advisers, have recommended reform to ensure that EPCs are fit-for-purpose to help deliver net zero. Following these recommendations and the findings of the research and working groups conducted by the Scottish Government, we committed in the Heat in Buildings Strategy in 2021 to bring forward proposals to reform EPCs.

In 2021 we launched an initial consultation^[8] on EPC reform, the results of which were published in 2022^[9]. This consultation focused on the introduction of a specific EPC metric, Energy Use, onto domestic EPCs and to rename the existing metrics. The intention was that this metric would support delivery of the Heat in Buildings Strategy. Following feedback from this consultation, and further policy development, we now consider that a set of metrics is likely to be required to maximise the value of EPCs. This includes a fabric focussed metric which would be more appropriate to support policies intended to drive fabric improvement.

As a result, we are now consulting on wider reforms to both domestic and non-domestic EPCs to ensure that they are fit for purpose to support future heat in buildings regulations. Alongside this, it is essential that the proposed reforms provide interested parties with clear and useful information about buildings.

1.2 Purpose and Objectives of this Consultation

The purpose of this consultation is to set out the Scottish Government’s final proposals for EPC reform and to seek stakeholder views ahead of the introduction of new legislation. Following this consultation, we intend to introduce revised Energy Performance of Buildings (Scotland) Regulations to the Scottish Parliament in Winter 2023-24, subject to the necessary legislative vehicle being in place. This would mean that revised EPCs can come into force shortly afterward. This timeline is intended to allow reformed EPCs, with metrics that appropriately reflect the performance of buildings, to be in place in advance of wider proposed Heat in Buildings regulations. However we will review the UK Government’s timeline for development of SAP 11^[10], which may provide a more appropriate point to introduce the reformed EPC. SAP 11 is planned to be launched in 2025.

This consultation sets out the following:

• Section 2 sets out the current EPC system in Scotland;
• Section 3 summarises stakeholder recommendations for reform, and previous research, working groups and consultation;
• Section 4 presents our proposals for EPC reform;
• Section 5 sets out the proposed timeline for implementing the reforms.

We are consulting on reforms to both domestic and non-domestic EPCs. The content, methodology, and policy environment for the two types of EPC are very different. Neither the metrics nor methodology can be compared, as described later in the consultation. However, we are consulting on both types of EPCs as they both have a key role to play in meeting net zero. Our principles are to ensure EPCs are an appropriate tool for the role that they play, are accessible and clear, and that the value of the data we gather and hold is maximised.

1.3 Summary of Proposals

In summary, we propose to reform EPCs to:

• Introduce a set of domestic EPC metrics to provide a holistic reflection of a dwelling’s performance;
• Introduce a set of non-domestic EPC metrics to provide appropriate information about non-domestic buildings;
• Make additional changes to the EPC system to ensure that EPCs provide clear and useful basic information about a building’s energy efficiency for current and prospective building owners and tenants, and other stakeholders.

1.3.1 Domestic EPC Metrics

We propose to revise the information displayed on domestic EPCs by expanding the current metrics, renaming them, and reporting other relevant information. This would provide a more holistic view to current and potential homeowners. We propose to reform domestic EPC metrics to present the following headline set:

• Fabric Rating – setting out the current modelled fabric performance of the building in terms of its heat loss in standard conditions, in kWh/m²/year, calculated through the SAP assessment;
• Cost Rating – setting out the current modelled annual costs of running the building based on the SAP assessment, and how these costs could change as a result of measures recommended. This is the same as the Energy Efficiency Rating (EER) currently displayed on EPCs;
• Heating System Type – clearly identifying the heating system installed in the dwelling and whether or not it meets the proposed Zero Direct Emissions Heating standard.

Alongside these headline metrics, we also intend to report in a separate section:

• Emissions Rating – setting out the current modelled total emissions from the building in kgCO₂e/m²/year. This is the same as the Environmental Impact Rating (EIR) currently displayed on EPCs.
• Energy Indicator – reporting the modelled energy use of the dwelling in kWh/m²/yr.

In addition to metrics, we propose to display the basic fabric energy efficiency features (such as whether the dwelling has cavity wall insulation or loft insulation) more prominently.

1.3.2 Non-Domestic EPC Metrics

We also propose to reform non-domestic EPCs to focus on the reduction of direct emissions. The variety of building types and activities in Scotland’s non-domestic building stock mean that it is challenging to identify decarbonisation pathways that can be used across all buildings. We propose the following metrics for non-domestic EPCs:

• Energy Efficiency Rating (A to G) – based on modelled emissions from regulated energy use^[11] relative to a reference building to align with the rating system used across the UK;
• Direct Emissions (kg of CO₂e/m²/yr) – the building’s modelled direct emissions from regulated energy use^[12] to allow a focus on the decarbonisation of individual buildings. For buildings which only use grid electricity this will be zero;
• Energy Demand (kWh/m²/yr) - the building’s modelled regulated energy use under standardised conditions to allow comparisons between buildings.

Alongside this, we propose to display the heating fuel type and heating system more prominently on non-domestic EPCs. This is intended to reflect the importance of moving to ZDEH. This would be accompanied by text noting the relevant regulations.

We are proposing different sets of metrics for domestic and non-domestic EPC. This is because, as set out later in the consultation, domestic and non-domestic EPCs are not comparable and the energy efficiency context of each sector is different.

1.3.3 Additional Changes

For both domestic and non-domestic EPCs we propose to:

• Clarify the purpose of EPCs;
• Reduce the validity period from 10 to five years;
• Modernise the Scottish EPC format, including moving to a webpage format, adding interactive links to signpost further advice and support, and providing links to more tailored recommendations;
• Expand the sharing of non-personal EPC data to allow more effective use of this useful resource, including direct public access to current and historical EPC records^[13] (this would also apply to other related certificates, including Energy Action Plans and Display Energy Certificates);
• Improve the assurance behind EPC assessments by updating the auditing requirements with a risk-based, smart auditing approach. The operating requirements for approved organisations and their members will also be updated.