Consultation to improve MEES

The Department for Business, Energy & Industrial Strategy (BEIS) has published a consultation to seek views on proposed targets for the Minimum Energy Efficiency Standard (MEES). Currently MEES make it unlawful to grant new leases to properties with an Energy Performance Certificate rating of F and G.

The Government’s options

The Government has identified two potential trajectories for strengthening the PRS (Private Rented Sector) Regulations. These aim to unlock the economic opportunities of low carbon growth, and deliver important energy and carbon savings:

  • The Government’s preferred route is that all non-domestic privately rented buildings achieve a Minimum Energy Efficiency Standard of a B rating, by 1 April 2030. This is provided the measure (or package of measures) required to reach an EPC ‘B’ proves cost effective.
  • The alternative option is that all non-domestic privately rented buildings reach a ‘C’ rating by 1 April 2030, if cost effective.

In both cases, the Government recognises that not all buildings will be able to reach the required minimum standard. In this instance the Government proposes that landlords can continue to lease their building (from 2030) providing they can prove that the building has reached the highest EPC band that a cost-effective package of measures can deliver.

The impacts

BEIS estimates that using the ‘B’ rating EPC route, an investment of approximately £5 billion up to 2030 is required. The estimated average payback time would be 4-5 years. Their modelling suggests this will translate to £1 billion in bill savings for business in 2030. This would deliver an overall value of £6.1 billion to the UK economy. The annual benefit to businesses by using this option is projected to be approximately double that of the ‘C’ rating EPC.

Regardless of the option chosen, BEIS proposes that existing exemptions will continue to apply. This means that landlords will be required to carry out upgrades that are cost-effective, with an expected payback on energy savings of seven years or less. If the work cannot meet this criteria then landlords are able to register an exemption, valid for five years.

The proposed timescale

The Government has asked whether a single implementation date of 2030 is appropriate for landlords to meet the determined rating. As an alternative it has been suggested that incremental targets leading up to 2030 could be introduced. This would encourage landlords to improve the EPC rating of their buildings over time.

The consultation is expected to close on 7 January 2020.

Stay informed with EIC insights

Our Market Intelligence team keep a close eye on the energy markets and industry updates. For the timeliest updates you can find us on Twitter and LinkedIn. To find out more about our Minimum Energy Efficiency Standard (MEES) solutions click here.

Updates to the SECR Scheme

The Streamlined Energy and Carbon Reporting Scheme (SECR) came into force at the start of this month. Quoted companies and large unquoted companies and LLPs are affected, and will now be required to make a public disclosure within their Directors’ Annual Report of their UK energy use and carbon emissions.

Over the last few months the ETG (Emissions Trading Group) have been consulting with various parties and collating feedback and queries regarding the guidance for the scheme. As a result, a number of minor updates have been made to the SECR section (Chapter 2) of the Environmental Reporting Guidance.

 

A guide to the updates

All of the updates can be found in Chapter 2 of the Environmental Reporting Guidance.

Below is a summary of the changes:

  • Page 14, 20, 36 – hyperlinks for ISO 14001, BS 8555, ISO 14064-3 and ISO 14064-1 have been updated.
  • Page 26 – reference to public sector has been expanded (first paragraph and footnote 22) and also for charitable organisations (second bullet point).
  • Page 26 – new paragraph inserted to ensure that guidance is not seen as a substitute for the SECR Regulations.
  • Page 30 – reference to corporate group legislation has been expanded (sections 1158 to 1162 of Companies Act 2006) in the last paragraph of section 2.
  • Page 33 and 39 – amended reference to NF3 to reflect that it is not currently listed as a direct GHG in section 92 of the Climate Change Act.
  • Page 45 – footnote 39 referencing Government consultation published on 11 March 2019 on the recommendations made by the Independent Review of the Financial Reporting Council.
  • Pages 50-56 – changes to reporting templates to recommend grid-average emission factor is included as the default by those organisations that choose not to dual report.


Our view on the changes

These updates provide useful clarification on outstanding queries raised by EIC such as dual reporting of electricity. Dual reporting remains voluntary but doing so allows companies to demonstrate responsible procurement decisions. For example, those selecting to procure electricity from renewable sources with a lower emissions factor can demonstrate this within their energy and carbon report if they choose to dual report.

EIC work closely with the ETG and BEIS to help the group reach key decisions regarding carbon compliance scheme development and implementation, including SECR, and will continue to do so. As a result we are able to ensure all of our customers receive the most up-to-date information and we are always on hand to support with SECR compliant reporting.

Click here to learn more about the Streamlined Energy and Carbon Reporting scheme.

7 things you need to know about SECR

    1. SECR stands for Streamlined Energy and Carbon Reporting, a new UK Carbon Reporting framework. Companies in scope of the legislation will need to include their energy use and carbon emissions in their Directors’ Report as part of their annual filing obligations.

 

    1. It starts on 1 April 2019 and companies will need to report annually, reporting deadlines align with the company’s financial reporting year.

 

    1. The scheme affects UK quoted companies and ‘large’ unquoted companies and LLPs, defined as those meeting at least two of the following; 250 employees or more, annual turnover of £36m or more or an annual balance sheet of £18m or more.

 

    1. It will affect over 11,000 firms from high street retailers to manufacturers.

 

    1. SECR requires companies to report the following: their Scope 1 (direct) and Scope 2 (indirect) energy and carbon emissions (electricity, gas and transport as a minimum). Previous year’s figures for energy and carbon. At least one intensity ratio (e.g. tCO2/turnover). Detail of energy efficiency action taken within the reporting year. Reporting methodology applied.

 

    1. Not meeting the reporting requirements can result in accounts not being signed off and missing the filing deadline could lead to a civil penalty. So it’s important for organisations to fully align communications between their energy and finance teams and to get a head start where possible!

 

  1. There is an overlap with other reporting and compliance schemes such as ESOS so savvy businesses can save time and hassle by using data collection from one to support compliance with another.

Find out more at our Streamlined Energy and Carbon Reporting (SECR) service page.