Government should legislate by 2025 for the minimum energy efficiency rating for all non-domestic buildings, both rented and owned, to be EPC B by 2030. Government should legislate for all new non-domestic buildings from 2025 to have an EPC B rating. |
Government to drive the creation of sustainable material supply chains and influence market development through public procurement standards by 2027 (see Construction sector). |
UK to continue to show leadership through ambitious public sector decarbonisation by conducting its own trials to ensure alignment with the targets in the Heat and Buildings and Net Zero Strategies. |
506. The broader energy efficiency mission is not a complete package unless non-domestic buildings are considered. Energy efficiency measures have the potential to reduce business energy use by up to a third, and demand reduction is a crucial piece of the puzzle.
507. It is paramount that businesses save money on energy bills. The most vulnerable sectors during a period of high energy prices are energy-intensive manufacturing (for example paper mills and chemicals manufacturing), hospitality, and entertainment and recreation - all of which are large employers in the UK.
508. Government can offer support via a comprehensive and integrated communications campaign and energy advice service. Rolled out iteratively as and when material is ready from 2023, it can expand on the planned Industrial Energy Advice Service and include advice on low/no-cost measures, sources of funding or incentives, a payback calculator and sector specific guidance.
509. High energy costs significantly impact profit margins. Untapped measures are costing UK businesses £6 billion per year and 51% of industry surveyed saying that access to finance to make upgrades is a key barrier.362 In 2022, businesses' (industry and other non-domestic buildings) gas and electricity expenditure totalled around 12% or £46 billion of profits, up from around 6% or £23 billion in 2019.363
510. Direct funding is required. The Review recommends that there are direct funding measures for both SMEs and large companies or those in large buildings (and their landlords where applicable) or projects that are innovative in the short term. This could also involve extending the existing Industrial Energy Transformation Fund (to £185 million, in line with the Conservative Manifesto364) and new support for SMEs and in commercial sectors/buildings.
511. Government action can give businesses the capacity to invest. Businesses paying less on energy bills means more money to support other investments, directly supporting growth and UK competitiveness. HMG can maximise this further by supporting technological innovation and new markets through green finance, as well as by developing new regulatory levers by the late 2020s.
512. Government should legislate by 2025 for the minimum energy efficiency rating for all non-domestic buildings, both rented and owned, to be EPC B, to be implemented by 2030. Government should also legislate for all new non-domestic buildings from 2025 to have an EPC B rating.
513. This can have positive impacts on competitiveness. Improving operational energy and reducing embodied carbon in corporate buildings can also become a competitive advantage for the UK. For example, the University of Birmingham partnered with Siemens to deliver Internet of Things (IoT) technology at scale. This technology is in place across the campus and helps to better consider the use of space and avoid building structures with a huge, embodied carbon impact. This innovative technology not only helps buildings and companies to be more productive and competitive, but also offers Intellectual Property (IP) export opportunities. Pillars 2 and 5 will cover further export opportunities, including in the smart energy system space.
514. Putting standards in place can help build the market. By putting commercial minimum energy efficiency product standards in place by 2028, this will ensure that our market is seen as serious about energy efficiency, attracting more investment. This could be bolstered by new Enhanced Capital Allowances (ECAs) or super-deductions for energy efficiency products, including heat pumps and manufacturing equipment.
515. Further regulatory reform and increased advice can help grow this market. In 2019 the non-domestic building UK supply chain turnover was £2.4 billion - £5.7 billion, which could be expanded if there was better understanding around technology use, increased access to independent advice and clearer long-term regulation to enable businesses to evolve their business models. BEIS estimates that around £20 billion (CAPEX) is required to achieve all energy efficiency potential in non-domestic buildings.365 The Government should use the existing Energy Savings Opportunity Scheme (ESOS) to increase uptake of energy efficiency measures using powers, including extending coverage and requiring firms to take up recommendations.