Buildings Energy Performance – an update

We reported in March 2023 on the major revision of the Energy Performance of Buildings Directive (EPBD) which is underway. The EU institutions have now agreed on a provisional text for the recast EPBD (the updated text), which differs in several key aspects from the draft we discussed last year. This update follows the themes of our previous bulletin and outlines some of the most significant changes.

Zero-emission buildings

The updated text clarifies the requirements for zero-emission buildings, which are central to the EPBD's main objectives. The overarching ambition is that:

• all new publicly-owned buildings are zero-emission by 2028
• all new buildings are zero-emission by 2030
• existing buildings become zero-emission by 2050

Note that the obligation on public bodies for their premises to be zero-emission now only extends to buildings owned by public bodies, and not to those occupied by public bodies as per the previous text. The updated text provides that “where public bodies aim to occupy a new building that they do not own, they shall aim for that building to be a zero-emission building”.

Zero-emission buildings are now defined as buildings that have no on-site carbon emissions from fossil fuels and low energy demand and operational greenhouse gas (GHG) emissions, In this context, Member States must:

• set a maximum energy demand threshold for zero-emission buildings that is at least 10% lower than the threshold for nearly zero-energy buildings
• set a maximum operational GHG emissions threshold for zero-emission buildings (which may vary for new and renovated buildings)
• ensure that the energy use of zero-emission buildings is covered by renewable, carbon-free or efficient sources, either on-site, nearby or from the grid

Energy performance certificates (EPCs)

The intention to harmonise EPCs across the bloc has been dropped. Instead, what the institutions refer to as “improved” EPCs will be based on a common template across the bloc, with common criteria intended to make the comparison of certificates across the EU easier. Member States will be required to operate a system of certification on a closed scale using letters A-G remains, with A corresponding to zero-emissions and G representing “the very worst-performing buildings in the national building stock at the time of introduction of the scale”. The transition to compliance with the new template certificates must take place within two years of the directive entering into force.

An A+ class has been added in the updated text, to label buildings with a maximum threshold for energy demand at least 20% lower than for zero-emissions buildings and generating more renewables on site than they require.

For EPCs below level C, Member States must ensure that buildings owners are invited to a one-stop shop to receive renovation advice, either immediately after the EPC of the building expires or, if earlier, five years after the EPC issued.

The updated text also clarifies that the national database of EPCs which is to be established by each Member State will host aggregated and anonymised data of building stock only.

Minimum energy performance standards (MEPS)

The most substantial changes in the updated text relate to MEPS. The requirements for individual buildings to achieve a minimum BER rating before they could be either let or sold have been removed in their entirety and replaced with a more general approach based on the average energy consumption of the buildings stock in each Member State, as follows:

Non-residential

The new minimum energy performance standards set ambitious targets for renovation, with the bottom 16% of stock to be renovated by 2030 and the bottom 26% by 2033. Member States are also required to establish specific timelines for the renovation of the remaining non-residential stock by 2040 and 2050, in line with the pathway to achieve overall zero-emission status.

Member States can apply limited exemptions to specific buildings based on expected future use, serious hardship or an unfavourable cost-benefit assessment, but only under strict conditions. Where the overall renovation needed to meet the MEPS threshold is not cost-effective, those individual measures that are cost-effective must be implemented.

Residential

Member States must adopt their own national trajectories to reduce the average primary use of residential buildings by 16% by 2030 and by 20-22% by 2035 (in each case, when compared to 2020). At least 55% of this reduction must be achieved through renovating the worst-performing 43% of buildings. In their renovation efforts, Member States cannot disproportionately exempt rental residential units.

Exemptions

Member States can exempt the following from the requirement to meet minimum energy standards:

• heritage buildings (or, in the Irish context, protected structures)
• places of worship / religious activities
• holiday homes used for less than 4 months per year
• small buildings with a useful floor area of less than 50m²
• defence installations

Supports

Member States are to support compliance with minimum energy performance standards by providing appropriate financial measures and technical assistance, as well as designing integrated financing schemes.

Renovation passports

Renovation passports will provide information on the current and potential energy performance of a building, as well as guidance on how to achieve a staged deep renovation. The updated text fleshes out the detail of how they will function. It stipulates that they must include a graphical representation of the roadmap and its various steps as well as information on:

• current energy performance
• the relevant national requirements and standards for energy performance and fossil-fuel phase-out
• the costs, savings, payback periods, and benefits of each step, as well as the technologies, techniques, and materials to be used
• the available funding, technical advice, and advisory services, including one-stop shops
• the options for improving the circularity and life-cycle emissions of construction products, as well as the health, comfort, and adaptive capacity of the building
• the potential connection to an efficient district heating and cooling system and the smart readiness of the building

There are also a number of optional items which passports may include, varying from indicative timing for the various steps, to a list of trades and professionals in the area who may carry out the renovations.

Solar energy

We now have certainty regarding the timelines for the requirement to fit solar energy installations on all buildings, as follows:

This obligation is subject to the solar infrastructure installation being “technically suitable and economically and functionally feasible”. Each Member State can set its own rules for how to apply these criteria and what buildings may be exempt. They can also measure building size by ground floor area, not useful floor area, if they can prove that this leads to a similar level of solar energy capacity on buildings.

Sustainable mobility infrastructure

The updated text introduces new measures to promote sustainable mobility in relation to new and renovated buildings. These measures apply to:

1 Non-residential buildings with more than five car parking spaces, either newly built or undergoing renovation. These buildings must have:

1.1 one recharging point for electric vehicles (EVs) for every five parking spaces

1.2 pre-cabling for EV recharging points for at least 50% of parking spaces, to allow for future installation

1.3 bike parking for at least 15% of the average number of users or 10% of the total user capacity of the building, whichever is higher, and with sufficient space for larger bikes such as cargo bikes

2 Existing non-residential buildings with more than 20 parking spaces. These buildings must have, by 1 January 2027:

2.1 one recharging point for EVs for every ten parking spaces

2.2 pre-cabling for EV recharging points for at least 50% of parking spaces

2.3 bike parking for at least 15% of the average number of users or 10% of the total user capacity of the building, whichever is higher, and with sufficient space for larger bikes

3 Residential buildings with more than three car parking spaces, either newly built or undergoing renovation. These buildings must have:

3.1 pre-cabling for EV recharging points for at least 50% of parking spaces

3.2 one recharging point for EVs for new residential buildings

3.3 at least two bike parking spaces for each residential unit

Next steps

The European Council still needs to formally adopt the proposal before the recast EPBD can become law. We expect this to happen in the near future, although the exact timing is unclear. After the Council has formally adopted the proposal, the recast directive will be signed and published. Members States, to include Ireland, will then be required to transpose the directive into national law by 2025. 

There are a number of areas where the Member States have scope to come up with their own national legislative agenda, not least in the context of MEPS. At the time of writing, we have no detail as to what the Irish legislation will look like and how it may impact individual assets. It therefore remains critical that all real estate stakeholders, and particularly investors, stay on top of developments at a national level – as is so often the case with such matters, the devil will be in the detail.

For more information in relation to this topic, please contact Aoife Smyth, Knowledge Consultant, Andrew Ion, Partner, or any member of ALG’s Real Estate team.

Date published: 27 March 2024