Getting Buildings ‘Fit for 55’

Summary

Further to our Overview of Fit for 55, we set out below a summary of the amendments to European Union (EU) legislation that will shape the built environment landscape and pave the way for EV charging and a smart metering infrastructure. These proposed amendments are required as it has been reported that the energy consumption of buildings needs to fall by 14%, and associated emissions by 60%, to meet Europe’s 2030 climate target.

New buildings

All new buildings constructed within the EU must be zero–emission buildings by 2030 and new ‘public’ buildings must be zero–emission buildings by 2027. According to the Proposal for a Directive of the European Parliament and of the Council on the energy performance of buildings (2021/0246 (COD)), in order to be classed as ‘zero–emission’, “a building [must have] a very high energy performance in line with the energy efficiency first principle, and where the very low amount of energy still required is fully covered by energy from renewable sources at the building or district or community level where technically feasible (notably those generated on-site, from a renewable energy community or from renewable energy or waste heat from a district heating and cooling system).”

Additionally, from 2030, the life–cycle ‘global warming potential’ of new buildings will need to be calculated in accordance with the ‘levels’ framework (an assessment and reporting tool for sustainability performance of buildings) to ensure that the whole life–cycle carbon emissions of the building are measured. Member States will also have to address other matters of a building’s environmental resilience which extend beyond the building’s energy performance. These include; healthy indoor climate conditions, adaptation to climate conditions, fire safety, risks related to intense seismic activity and embedded carbon.

Major renovations

The Renovation Wave Strategy contributes to core European priorities – not only to climate neutrality, but also green and local jobs creation and healthier, affordable–to–run homes and workplaces in every part of Europe. It envisages the overhaul of 220 million existing buildings by 2050. This undertaking will affect a majority of the 440 million people living in the EU, involving vast material demands and driving consistent economic activity.

The existing minimum energy performance standards that are currently in place in individual Member States will be replaced with new EU–level minimum energy performance standards for the worst performing public and non–residential buildings. The Commission hopes the new standards will trigger the need for a number of buildings to be renovated to ensure compliance with these standards. The standards will require Grade G buildings to be renovated and improved to, at a minimum, energy performance Grade F, at the latest by 2027, and to at least energy performance Grade E by, at the latest, 2030 (see below in respect of re–grading). The worst–performing residential buildings will also be required to be renovated and improved to at least Grade F by 2030 and to at least Grade E by 2033. 

Member States will be required to establish specific timelines for achieving higher energy performance grades by 2040 and 2050, in line with their chosen pathway for transforming their national building stock into zero–emission buildings. 

Member States will also have the option to introduce national minimum energy performance standards to be adopted into their national renovation plans. 

The proposed legislative amendments permit Member States to exclude certain categories of buildings, including, amongst others, places of worship, temporary buildings, residential buildings intended to be used for less than four months in a year, and stand–alone buildings with a floor area lesser than 50m2, from the obligation to comply with minimum energy performance standards. It will be interesting to see how Member States interpret this exclusion and how they apply it to address the pressure exerted by the proposals on the private and public sectors. The Commission considers that Member States should not be allowed to subsidise fossil–fuel boilers as of 2027. To encourage the swift deployment of zero–emission heating systems, and to avoid investments in new generations of fossil fuel–based boilers become stranded assets, zero-emission buildings should not be permitted to generate carbon emissions on–site.

Member States will be required to introduce a scheme of renovation passports. This will look like a step–by–step renovation roadmap for a specific building resulting from an on–site energy audit.

Infrastructure for sustainable mobility

We have seen steps towards infrastructure for sustainable mobility being taken in the UK recently in accordance with Approved Document S and the second set of amendment regulations to the Building Regulations. 

Transport is the UK’s most polluting sector, with petrol cars accounting for the bulk of emissions. The UK government hopes to slash emissions from Britain’s roads by encouraging people to switch to electric vehicles: point 4 of its Ten Point Plan heralded the ban on the sale of new petrol and diesel cars from 2030, 10 years earlier than previously planned. Smart metering infrastructure will act as the building block on which smart charging is based, providing access to information about energy usage and helping ensure the integration of smart metering into the energy system. This year, new regulations will come into force that will require new residential and commercial developments to provide EV charging. The policy is set to provide 145,000 charge points every year to 2030, and the powers to control compliance will sit within the Building Control Regulations.

The new regulations have significant implications. From 15 June 2022, EV charging points and/or cable routes will be required at:

• new dwellings (including flats) with associated parking;
• residential properties with more than 10 parking spaces;
• buildings undergoing material change of use to create new dwellings;
• residential buildings undergoing major renovations with more than 10 parking spaces;
• new non–residential buildings with more than 10 spaces; and
• every non–residential building undergoing a major renovation, again with more than 10 parking spaces.

There are certain exemptions. These include where installing EV charging points and/or cable routes will  cost more than £3,600 per charge point for the grid connection; changes of use of listed buildings or buildings in conservation areas; or in enclosed or open-sided car parks.

Smart EV charging will play a crucial role in the decarbonisation of the UK’s transport infrastructure and smart metering is part of the necessary upgrade of the UK’s energy infrastructure with domestic smart EV charging systems needing to coexist with its architecture. Market growth will depend on the interoperability of smart charging products with other services and devices in the smart energy ecosystem, especially for heating.

Last year, the Environmental Audit Committee started looking into technological innovations which could contribute to tackling climate change and, as part of the exercise, it called for evidence on battery (including the UK’s manufacturing capacity for the production of batteries and the associated supply chain for power electronics, machines and drives. To serve its domestic market, the UK will need eight gigafactories by 2040. The UK government has committed to spend up to GBP 1bn on supporting the electrification of UK vehicles and EV supply chains (including developing gigafactories) and GBP 20m to fund EV research and development.

In the EU context, currently non–residential buildings that have more than ten parking spaces must install at least one electric–vehicle charging station and install cabling for one in every five spots so that charging points can be installed at a future date. 

The proposal amends the existing law:

• To apply to non–residential buildings with more than five parking spaces.
• To mandate cabling for every single space ensuring that, eventually, all of the charging points can be used simultaneously.
• Non-residential structures with more than 20 parking spaces would also be required to install at least one charging station for every ten spaces by the beginning of 2027 and one for every five by 2030.
• Newly built and renovated office buildings must also install at least one EV charging point. 

The existing exemption for SMEs is also proposed to be removed.

Buildings undergoing major renovation and new buildings are required to have bicycle parking spaces. This is to remove barriers to cycling to facilitate another central element of sustainable zero–emission mobility.

Smart Readiness Indicator

To facilitate the data collection related to buildings, a new requirement will be introduced ensuring building data is accessible to the building owner, tenant and manager or third parties.

Energy performance certificates (EPCs)

To ensure consistency across the EU, by 2025, all EPCs must be based on a harmonised scale of energy performance classes and comply with the template provided for in the legislative amendments.

The energy performance grades will be rescaled (taking into account national differences of building stocks) with the highest Grade A representing a zero–emission building and the lowest Grade G  including the 15% worst performing buildings in the national building stock. The rescaling is intended to ensure the Member States comply with the EU–wide minimum energy performance standards. 

The validity of EPCs of the lower D to G grades will be reduced from 10 years to 5 years to ensure they contain up–to–date information that helps members of the public reduce their consumption. All certificates will also be issued in a digital format. 

The obligation to have an EPC will be extended to (i) buildings undergoing major renovation, (ii) buildings for which a rental contract is renewed and (iii) all public buildings. As is currently the case, buildings or building units which are offered for sale or rent must have an EPC, and the energy performance grade and indicator will need to be stated in all advertisements, impressing the relevance and importance of energy performance on the market for sale and rental. 

All buildings occupied by public authorities will need to display their EPC (irrespective of their size).

Member States will be required to set up national databases for EPCs of buildings; such databases will also need to gather data related to building renovation passports and smart readiness indicators. 

Social Climate Fund (and the Carbon Price)

The introduction of a carbon price will be especially significant for households that use coal for heating, especially in lower–income countries. The European Commission’s Fit for 55 package of proposals would extend EU–wide carbon pricing from around 22% of EU greenhouse gas emissions today to over two thirds of EU emissions by 2030, according to an initial analysis by the Institute for European Environmental Policy (IEEP).

This three–fold extension comprises the phase-out of free allocation in the EU Emissions Trading Scheme (EU ETS), the extension of the EU ETS to the maritime, road transport and buildings sectors, and the revision of the Energy Taxation Directive (ETD), including the ending of energy tax exemptions for aviation and maritime.

To balance this, the Commission has put forward a proposal to introduce a Social Climate Fund to support households finance investments in energy efficiency, heating & cooling systems and clean mobility. In the current proposal this Fund would be financed through up to 25% of the revenue created by extension of the EU ETS to the building and transport sectors. 

To implement this, all Member States would have to establish a Social Climate Plan with an update every two years, together with the national energy and climate plans that will contain a set of measures and investments to address the impact of carbon pricing on vulnerable households. The calculation of maximum financial allocation per Member State depends on a set of indicators related to total population, amount of population at risk of living in poverty in rural areas, percentage of households at risk of arrears on utility bills, gross national income per capita, overall GHG emissions and CO2 emissions from fuel combustion by households.

Consequences

The amendments will strengthen the monitoring and enforcement policy. The provisions focus on the minimum energy performance standards and the improvement of the existing building stock. 

Currently, under the EU ETS, there is a cap and trade system. This is a system in which operators and installers of energy–intensive industries forfeit an allowance of emissions. Operators who emit fewer greenhouse gases than their allowance can sell the excess allowance to other operators. Those who do not comply face strict penalties. The EU ETS directive defines this allowance as €100 per tonne of CO2 that has not been surrendered in addition to buying and surrendering the equivalent amount of allowances. However, Member States are encouraged to enforce different penalties for other forms of non–compliance. Indeed, a litany of case law has emerged on this topic in the past year. 

The Fit for 55 scheme will strengthen the existing framework with increased monitoring (including monitoring of the financial arrangements through the European Anti–Fraud Office) and enforcement. According to the proposal, this will focus on minimum energy performance standards and the improvement of existing building stock. How this will play out remains to be seen. 

What does it mean in practice?

The proposals will now be considered and negotiated by the Council and the European Parliament. The legislative process can take up to 18 months. While each proposal in Fit for 55 relates to another, each provision will be independently debated. It remains to be seen when it will enter into force and in what form. 

The growth in the real estate sector will be key to the economic recovery of many Member States that have suffered as a result of the COVID–19 pandemic. It will therefore be interesting to see how Member States implement the proposals set out in Fit for 55. 

What is clear is that the current EU scheme is not enough to reach the EU’s climate goals. The new arrangement will mean that building developers must play a significant role in ensuring that the climate targets are met and tendering procedures will put a large emphasis on energy efficiency, for fear of penalties for non–compliance. 

All this means that the building industry, both public and private, must put climate goals at the forefront of their practice. As the proposal goes through the legislative procedure, the building industry should gear up for the change.