Comment by Fay Holland, Senior Energy Policy Advisor, at Energy Systems Catapult.

Anyone who’s found themselves searching for somewhere to buy or rent will be familiar with the Energy Performance Certificate (EPC) rating – that sheet of paper with the coloured stripes telling you what the ‘rating’ of the property is. Some might have turned to their EPC for advice when looking to save money on energy bills this past winter. But what do EPCs really tell us about our homes, and can they help us make the changes we need to tackle climate change?

What are EPCs?

EPCs were introduced following a European Union Directive in 2007. They are based on an assessment of the building’s construction and heating system, which is used to estimate the annual energy consumption the building would have if occupied by the ‘average’ household. The EPC then gives a rating – from A to G – based on the estimated energy costs for the home. EPCs also offer some recommendations of how the householder can improve the score.

Homes are required to have an EPC when they are built or marketed for sale or rent and just under two-thirds of all residential buildings have had at least one EPC lodged since 2007. The EPC rating of new builds is calculated through the Standard Assessment Procedure (SAP), while for existing homes it is calculated through a reduced version known as RdSAP.

When they were originally introduced, EPCs were designed as a tool to compare the relative energy performance of buildings. Over time, they’ve been put to work for a wider range of purposes, including identifying fuel poor households, determining eligibility for government subsidies, and setting minimum standards for privately rented homes.

The government has set a target for all homes to have an EPC of C or higher by 2035, where practical, cost-effective and affordable, with fuel poor homes achieving this by 2030.

The case for EPC reform

While EPCs provide an accessible entry point for a consumer wanting to understand the energy use in their building, over recent years a consensus has formed around the need to reform the EPC system. Energy Systems Catapult has advocated for carbon performance requirements to be phased in for all buildings, but doing so relies on EPCs providing relevant and accurate information.

Some of the key issues that changes to the EPC system need to address are:

• Reliability

Many studies have identified a performance gap between the energy use estimated by SAP and the measured energy use in homes. Domestic Energy Assessors visually inspect a home to determine its characteristics and the methodology relies on the data they input being accurate. If, for example, the age of the house is not entered correctly, the assumptions made about how it was built change, leading to a significantly different result. The data input is also not stored for future assessors to use.

Alongside the headline measure (which is based on cost) the EPC also provides a figure for the primary energy use of a building and an Environmental Impact Rating based on the carbon emissions from the building. Because SAP and RdSAP are updated at intervals, the energy prices and carbon intensity values they are based on can lag behind the current figures, resulting in misleading outputs: the prices and carbon factors in the current version of RdSAP date from 2013

With the increasing availability of smart meter data and innovative methods for measuring the ‘in use’ performance of a building, there is potential to improve the accuracy and reliability of EPC ratings.

A more reliable EPC could unlock huge benefits, increasing property owners’ confidence that the outcomes they care about are being delivered when they invest in retrofit measures.

• Alignment with Net Zero

We know that decarbonising home energy use – particularly heating – is one of the biggest challenges the UK faces in getting to Net Zero. We have some of the leakiest housing in Europe and the majority of our homes are reliant on natural gas boilers, which burn fossil fuels to generate heat.

Currently, EPCs are not giving us the information we need to decarbonise their homes. In fact, they often do precisely the opposite, with a new combi gas boiler being one of the most common recommendations made by EPCs in the UK.

This not only contradicts the need to move away from fossil fuel use but also works against the government’s own target of scaling up the market of heat pumps to 600,000 installations per year by 2028.

The reason that EPCs favour gas over low carbon heating technologies is because the headline rating is based on energy costs. Despite heat pumps being more efficient than gas boilers, electricity is currently three times more expensive than gas per unit, so a cost-based metric favours the more carbon intensive heating method. The government has indicated that it plans to ‘rebalance’ the relative cost of gas and electricity, but the EPC system also needs to align with the UK’s Net Zero goals.

• A whole-system approach

EPCs look at each home individually – even where there are multiple homes within one building such as a block of flats. In reality, of course, homes don’t exist in a vacuum but are part of the wider energy system in a city, town, or village. How we use energy can have an impact outside of our own four walls.

Local authorities are increasingly adopting Local Area Energy Planning (LAEP) as a method to identify the changes needed to get their local area to Net Zero. For example, a LAEP might identify a particular street or area as suitable for a heat network or a priority area for the roll out of heat pumps.

By making recommendations for an individual home, EPCs are missing an opportunity to engage people in place-based plans. Without coordination, there is a risk that people might get contradictory signals from EPCs and LAEPs, leading to confusion or dissatisfaction.

Where next?

EPCs could play a valuable role in helping people to understand the energy performance of their home or building. However, they will only have a positive impact on decarbonising homes if they provide information that is accurate, relevant and aligned to the decisions people have to make.

To address this challenge, Energy Systems Catapult has been researching how the current EPC system works, and ways the metrics, methods and uses could be improved. We plan to publish our recommendations in the coming months, building on the Six Steps to Zero Carbon Buildings we published in 2020. We hope to continue the conversation with innovators and energy sector stakeholders to work towards an EPC system that drives building decarbonisation.