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Deriving value from the minimum energy performance standards


Investing in energy efficiency has been widely acknowledged as one of the most effective tools for reducing building energy demand and associated greenhouse gas emissions, yet the government has been slow to act in this area. Could MEPS be the beginning of significant change? Stephen Barlow examines the issues


T


his slowness to act is particularly clear on the various barriers and market failures affecting property


developers and tenants in the non-domestic private rented sector (PRS). This is in spite of clear opportunities available to help businesses manage volatile energy costs, mitigate negative environmental impacts and create a better built environment. Compliance obligations under the CRC Energy Efficiency Scheme (CRC) and Energy Saving Opportunity Scheme (ESOS) have so far focused on addressing information market failures alone, but organisations are still left with challenges beyond this. Perhaps the most significant and high profile of these is termed ‘split incentives’. This is where landlords have no interest in improving the energy efficiency of an asset as the benefits are accrued not by themselves, but by the tenant in the form of lower bills. Other problems compound these market failures, such as the perceived ‘hassle costs’ of technological and behavioural interventions.


To put it bluntly, once CRC consumption data has been accurately measured, what is there to discourage a participant from treating their allowances liability as merely a cost of doing business? Similarly, what is there to stop the results of a company’s ESOS energy review from gathering dust in a desk drawer? At least the improvements in measurement and management of consumption data, as well as understanding and awareness of energy efficiency investment opportunities brought about by CRC and ESOS, will not be in vain. The introduction of The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 – widely referred to as the Minimum Energy Performance Standards (MEPS) – signal a positive step forward towards improving the sustainability of existing commercial building stock. What actually are the Minimum Energy Performance Standards and how will they impact portfolios across the country?


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