A look ahead at the energy agenda for 2018

Legislation on the horizon for 2018 will have big implications for energy managers and for the sector as a whole, both from a compliance perspective and for creating new opportunities to improve energy performance. Three of the most noteworthy Government initiatives either coming into force next year, or being determined, are the Minimum Energy Efficiency Standards (MEES) legislation, the consideration of how artificial intelligence (AI) can be utilised more within industry, and the consultation on changing the carbon and energy reporting framework for companies.

All three of these initiatives provide the opportunity to improve energy efficiency. Whilst the former demands immediate action to ensure compliance, the outcomes of the latter two will be determined over the next year, and will encourage renewed consideration of building performance. AI in particular remains relatively unexplored within the energy sector, but its potential is huge in shaping the future. Government commitments to invest in AI exploration over the next year, as part of its Industrial Strategy, could advance many innovative projects already taking place within this space.

The MEES regulations are arguably the most important legislative milestone the commercial property sector has seen in recent years. Coming into force from April 1st 2018, the policy prohibits landlords from letting a sub-standard commercial property that fails to achieve an EPC rating of E or higher. From April 1st 2023, this legislation will be tightened, preventing landlords from continuing to let a sub-standard property.

Now that we are four months away from MEES being implemented, it is the last chance for energy professionals to act to ensure their buildings are compliant. In most cases, four months should grant enough time to implement any necessary retrofitting solutions, though inevitably this depends on the improvements required and the process involved. Replacing lamps, for example, involves little effort and can be done very quickly. Replacing boilers or handling equipment, on the other hand, may necessitate writing a specification, taking it to tender, and obtaining pricing before installation can even begin.

This means that energy consultants need to know now whether they are compliant, so they have time to execute an improvement strategy. One major problem inhibiting that process is that many property managers think that their existing EPC rating passes the minimum standard. Energy managers, however, should always ensure that this rating is accurate.

Many EPCs are inaccurate due to a lack of accredited EPC assessors pre-2011, and because default data was often used. The sharp incline in standards and the associated updating of SBEM has also resulted in many EPCs worsening. Recent research carried out by arbnco showed that one quarter of the 3,500 commercial properties registered on its EPC platform achieved a lower rating than that originally given, with one third of these dropping into the MEES ‘at risk’ categories.

Given the potential time constraints, energy managers should look to utilise software that can quickly and intelligently assess the type of improvements required, and offer a fully costed retrofit package. Software that provides an array of options is more useful than simply offering a slightly more efficient version of the original. A like for like replacement is unlikely to enhance the overall EPC rating. Technology that can provide a combination of solutions which might not have been considered previously can help energy managers to make smarter, more impactful decisions.

Many property professionals who are confident that they have long-term tenants may think MEES is not relevant for them until the second deadline in 2023. Regardless, energy managers should advise property managers or landlords not to wait for the building to go up for lease before they start looking at their EPC rating. Ideally an improvement strategy should be in place, but at the very least they should have an accurate EPC rating so they know what they’re dealing with, or, know where the gaps are within a portfolio of properties where EPCs may be inaccurate.

Whilst the Government is using MEES as a financial incentive to encourage energy efficiency, the commitment to exploring AI within industry could bring significant benefits to the energy sector by enabling buildings to operate more intelligently. In autumn, an independent review into AI was conducted, and recommendations were put to Government about how it can work with industry to grow the use of AI. In his autumn budget, the Chancellor committed to investing over £75 million to advance some of these recommendations as part of the Government’s Industrial Strategy.

The use of AI within the buildings sector somewhat lags behind other industries. Where it is developed and applied, the focus is often on facilities management, such as car park bookings, to make the user experience more efficient. Utilising AI to analyse building operation and energy performance remains relatively unexplored, but with increased funding being made available, over the next year we may witness some exciting developments in this field.

There are some advanced projects already underway exploring the use of AI in energy efficiency building simulation, though they are still in the early stages. Academics from the University of Strathclyde are currently working with arbnco to explore how AI can be used to create more accurate simulations. The project will look into how back-end machine learning AI can mine data from building simulation software to make quicker, more informed decisions, and can take into account from the outset factors such as finance constraints. The AI can produce an optimum recommendation, meaning that the risk of humans missing benefits through manually working out the best option will be eliminated.

The £75 million of Government investment could fund more projects like this, or help to usher in these benefits faster, particularly because one of its specific aims is to facilitate data access. Funding for research and development projects of this nature tends to come more from data trusts than from building groups, despite the latter benefiting from the outcomes. There is lots more potential for AI within the energy sector. In particular, it could be utilised to profile energy usage and address issues such as the energy performance gap. It could also bring significant benefits for fault finding, and in predicting failures before they occur.

In 2018, the Industrial Strategy could put some projects into motion that will transform the sector, and energy professionals should track these developments and be looking to implement AI that enables them to perform their job better. AI will not exist to make energy assessors redundant; the human work will simply be enhanced. It will allow energy assessors to conduct more work, more accurately and efficiently.

At the start of the new year, the Department for Business, Energy and Industrial Strategy consultation on changing the energy and carbon reporting framework for companies will close. The Government is seeking recommendations on its proposed changes to create a more streamlined reporting mechanism, primarily on how it should be implemented, who it should apply to, and what it should encompass. If the Government proposals go ahead, energy and carbon reporting will be done within the annual reports of companies made available by Companies House, meaning that companies’ total energy use will be publicly disclosed.

This is an extension of the current framework which requires UK quoted companies to report greenhouse gas emissions only, and will also apply to some UK unquoted companies. These changes could incentivise organisations to invest more in energy efficiency: public disclosure of total energy use could put pressure on organisations to act, and it will make business leaders more aware of how much they’re actually spending on energy bills in comparison to their peers.

Energy managers therefore, should be ensuring that the businesses within their portfolio are aware of the new framework, how building stock is currently performing, and what steps they could put in place to reduce their carbon output before the report is compiled. The Energy Savings Opportunity Scheme (ESOS) required many organisations to provide energy saving reports, and these could be incorporated into the new reporting framework.

If the public nature of the new framework does act as an incentive to improve energy efficiency, it could go some way to counter the potentially negative effects of the abolishment of the Carbon Reduction Commitment scheme and the subsequent increase in taxation through the Climate Change Levy. This move is unlikely to actually incentivise people to save energy; instead, they will blindly accept it as part of their tax bill.

If the new system of reporting is to enable a true comparison of buildings and establish any sort of benchmark, it needs to take into account an array of factors, which is something the consultation will hopefully address. If company size is used for determining who the framework applies to, then location needs to be considered alongside this. For example, in London, a building’s air filtration system may have to work several times harder than in rural Scotland, and opening a window might not be an option if the air is poor quality. Buildings aren’t built for energy –  they’re built for people – and the new framework should take this into consideration.

The energy landscape for 2018 is set to be shaped by new legislation that aims to promote energy efficiency, and new opportunities to explore technology that could transform the way we analyse energy. Whilst MEES and the energy and carbon reporting framework will necessitate changes – one with a looming deadline that energy managers need to be prepared for – the potential to explore AI could improve how a building performs from the outset, and is intrinsically valuable for occupiers and owners alike.

Mitch Layng is the Lead Energy Consultant for building energy simulation company arbnco