New UK Net Zero Carbon Strategy Will Force Buildings Out Of The Fossil Age

On October 19th, the UK government announced a new net zero strategy that sets out policies and proposals for decarbonizing all sectors of the UK economy. This comes ahead of the COP26 summit in Glasgow which will run from 31st October to 12th November. The new Net Zero Strategy: Build Back Greener policy paper extends the November 2020 Ten Point Plan for a Green Industrial Revolution to outline a comprehensive pathway towards achieving the 2050 net-zero emissions goal. Both papers identify the built environment as a key action area. But what will the implications be for commercial building owners and operators?

The strategy sets out a pathway to accelerate the implementation of energy efficiency measures in buildings. It proposes a 2030 deadline by which privately rented commercial buildings must achieve a minimum energy efficiency standard of EPC Band B in England and Wales. The next step towards this goal arrives in 2023, where rented commercial properties must have an energy efficiency rating of E or greater. A study by Colliers found that 10% of London's existing office space has an EPC rating of F or G and may become unrentable if landlords do not act to improve their properties. Another proposal is to instate a national performance-based rating for the energy and carbon performance of large commercial and industrial buildings. A consultation on the policy was closed in June 2021 and a pilot will run in 2022. The scheme will enable building owners to compare the efficiency of their buildings and identify high impact retrofit opportunities based on the experience of others. Landlords that don't upgrade their buildings will be shamed and may miss out on rental opportunities.

The strategy also embraces the electrification trend - the move away from fossil-fuel-powered technologies to electricity-powered technologies for space and water heating. The report outlines the government's ambition to ban the use of gas-fired heating appliances installed in homes and workplaces from 2035, driving uptake of electric heat pumps or hydrogen boilers. As part of this, the government has announced it will review opportunities to reduce electricity costs by rebalancing energy levies (such as RO and FiTs) and obligations (such ECO) away from electricity to gas. This pricing change would help close the cost gap between electricity and gas, making electricity-powered assets more favourable.

The report also considers the potential role of hydrogen in domestic and commercial property heating. Large scale trials will take place to determine the feasibility of using hydrogen to decarbonize heating, with decisions to be taken in 2026 on the role of hydrogen going towards 2050. However, hydrogen has a range of limiting factors that are unlikely to be solved by 2026, and this deadline seems like way to appease hydrogen proponents. Although successful trials have been conducted where 20% hydrogen is blended with 80% methane and distributed to homes safely, carbon savings were only around 7% versus gas . Problems with production, storage and distribution are set to hinder the success of widespread hydrogen adoption. That said, there are high-value use cases emerging in applications that can't easily be electrified, such as industrial processes with high heat intensity.

The UK Net Zero Strategy is overall welcome news for the smart building sector setting out a pathway to bring the built environment off a reliance on fossil fuels. However, those that have been in the industry for the past decade will remember that there have been lots of false starts for building efficiency regulation in the UK. Notably, the government previously scrapped the Net Zero Carbon Homes target for 2016, as the requirements brought a significant cost premium to new housing. Commercial building owners and operators must closely track the evolution of the UK's net zero strategy into more concrete regulations in the aftermath of COP26.

For more insights on updating your energy management programme, read our recent report Best Practices: Planning For Net Zero Carbon Buildings.