Energy Performance Certificate reform consultation: response

2. Introduction and Background

The Scottish Government recognises the important role that Energy Performance Certificates (EPCs) play in helping the public understand the energy efficiency, climate impact and costs of heating the buildings in which we live, meet and work. They also support a range of government regulations, policy and delivery programmes. We want to enhance EPCs so they continue to be a valuable source of information for home buyers, owners, and tenants, and to continue to support existing government policies and programmes.

At the same time, these enhancements will also make EPCs better positioned to play a part in any of the future regulatory systems or standards upon which SG has recently consulted. This reflects the fact that EPCs are a vital foundation for the Heat in Buildings programme and reforming them will underpin the heat transition.

In summer and autumn 2023, we consulted upon proposals to reform EPCs. The overall objective of these proposals was to better empower people with more comprehensive information. They could then use the EPC to improve the energy efficiency of their building and reduce emissions from their heating systems.

Our consultation responded to calls from stakeholders on the need to change EPCs so that they provide a better picture of a building’s energy performance and its contribution to net zero climate objectives. The proposed reforms were designed to address long-standing criticisms from the Climate Change Committee and others that EPC ratings are not aligned with net zero. Current EPCs were seen to, instead, reward the installation of polluting heating systems like gas and oil boilers. This would then disincentivise the fitting of clean heating systems like heat pumps or connection to heat networks.

The EPC Rating System

Our reforms to domestic EPCs would mean that they have clearer information about:

• how well a home retains heat, by providing new information on the fabric energy efficiency of the home – i.e. how well insulated it is. The rating would be based on the annual heat demand of the building (kWh/m²/year). The EPC would also clearly highlight whether key insulation measures (such as cavity wall and roof insulation) have been installed.
• a home’s heating system (its emissions category, cost efficiency, and thermal efficiency), by providing new information on the current system, and recommendations on what clean heating systems would reduce emissions and be most efficient.
• how well the building performs in terms of energy costs, before and after potential changes to the insulation and heating system are made.

We explained that these reforms would ensure current and prospective building owners and tenants have as much information as possible to inform choices they make about improving the fabric efficiency and installing clean heating systems in their building, and the impact on energy costs.

We also proposed to reform non-domestic EPCs to ensure that they contained more relevant information on building energy performance and emissions, in response to stakeholder feedback, and to ensure better alignment with EPCs across the UK.

The EPC Operational Infrastructure

We would reform the underpinning infrastructure on which EPCs are based – the assessor market, and the technical processes used to calculate and register EPCs. We would review the operation of the EPC assessor market and Operating Framework, including the skills and qualifications of assessors and mechanisms for consumer redress – to improve quality assurance and consumer confidence in EPCs.

We set out our intention to work with the UK Government and other devolved administrations in the development of the new Home Energy Model (HEM) calculation methodology (and associated EPC Register) which will replace the ‘Standard Assessment Procedure’ (SAP) methodology which is now life-expired.

We consulted on moving to a modernised, digital, EPC format and to revise regulations around EPC data sharing to broaden access to non-personal data to support organisations and industry who may use it. As part of this modernisation, we considered how the EPC and its information could be better displayed to the public, and how the way people interact with their EPC could allow better use of actual, rather than modelled, data sources.

We also consulted on reducing the validity period for an EPC from 10 to five years to help ensure that EPCs are relevant to the building at the time they are needed.

We proposed that these reforms to the operational infrastructure would be implemented to be ready for new EPC regulations coming into force.

In the related consultations on proposals for a Heat in Buildings Bill and Social Housing Net Zero Standard, we also proposed two additional areas of EPC reform outlined below:

The role of EPCs in relation to proposed standards

We suggested that EPCs should contain information on the proposed mandatory standards, so that current and prospective building owners and tenants would know the extent to which their building already complied, or which measures they could install to do so. This included being able to evidence that a building achieved a good level of fabric energy efficiency on the proposed new EPC rating scale, and that an EPC recorded the presence of a clean heating system.

The development of a Technical Suitability Assessment

We recognised that since EPCs are a standardised assessment, enabling comparison across the entire building stock, EPCs are by their nature limited in the detail of analysis and recommendations that they can provide for an individual building.

Many stakeholders have criticised the limits of EPCs as being inappropriate when determining which measures are suitable (or unsuitable) for buildings which are more technically complex or harder-to-decarbonise such as traditional and protected buildings or tenements. We therefore proposed that EPCs act only as basic evidence to support compliance with mandatory standards, and to provide an initial signpost towards more detailed assessment and technical advice where needed.

Hence, we proposed to develop an additional form of assessment beyond the EPC – a Heat & Energy Efficiency Technical Suitability Assessment (HEETSA). This could be used to evidence flexibility needed for such buildings to comply– i.e. for exemptions or variations to mandatory standards – and to ensure that any measures installed are technically suitable.

The Scottish Government is still considering its response to the consultations on proposals for a Heat in Buildings Bill and Social Housing Net Zero Standard, and will set out its position when responding to those consultations on points 3 and 4 above, on how EPCs and the proposed Heat & Energy Efficiency Technical Suitability Assessment could support proposed mandatory standards.

In this Government Response, we set out how we have taken account of the feedback given by stakeholders to the first two proposed areas of EPC reform (EPC Rating System and EPC Operational Infrastructure) and our final decision on the way forward.

The Scottish Government can now confirm that we intend to lay revised EPC regulations during 2025, with the intention to bring them into force in 2026. This timetable will give time for the assessor market and those in the property letting and conveyancing sectors to prepare. The specific date at which regulations come into force will be dependent on the date when the new UK Home Energy Model becomes available to calculate the new EPC ratings. We are liaising closely with the UK Government which expects the Home Energy Model to be introduced as the basis for calculating EPC ratings in the second half of 2026.

Prior to laying the regulations, we will also issue a short technical consultation which will set out increases to the EPC lodgement fee which we think will be needed to meet the cost of developing and maintaining the new technical and operational infrastructure to underpin the revised regulations:

• a new EPC Register (to link into a new UK Government cloud calculation-based data input and processing infrastructure that meets latest digital standards)
• a new Calculation Methodology (to replace the soon-to-be life-expired SAP with the new UK Home Energy Model for assessors to calculate EPCs under the new Rating System)
• a new onsite Audit & Inspection function to further enhance quality assurance of certificates for consumer benefit. This would also align with new procedures being adopted by the EU’s 27 member states under the recast Energy Performance of Buildings Directive

We believe that these reforms to the technical and operational infrastructure will ultimately benefit and better protect consumers, by making the EPC Register more accessible, and by driving up EPC quality.

In addition to this forthcoming technical consultation, we will also be informed by responses made to the UK Government’s recent consultation on EPC reform^[2]. The Scottish Government also has a common interest with the UK Government on the issues raised in chapters 4 and 5 of that consultation – on how EPC data is lodged and reported on the EPC Register; and on how quality assurance of EPC assessors can be improved across the UK internal market.

The UK and Scottish Governments will work jointly to consider our approach to policy making in this area across the UK, following the responses received to that part of the consultation. We expect issues relating to quality assurance to be addressed through a revised Operational Framework which will be implemented alongside the revised regulations coming into force.

The following chapters set out the Scottish Government’s response to its 2023 consultation on EPC reform.