The government’s controversial policy of phasing out natural gas boilers in favour of heat pumps, in its drive to meet internationally agreed energy efficiency targets, could be stymied because of an out of date EPC algorithm.

Regardless of the fact that many older poorly insulated properties would be unsuited to heat pumps, fitting one with the current method of calculating a property’s energy efficiency rating could mean that a property with an EPC rating of C would be pushed to a D.

Currently there are some rather bizarre outcomes to the EPC system that need to be tackled if the above targets are to hold any credence with property owners and energy specialists and the Government have acknowledged this.

Heat pumps use more electricity

The problem is that heat pumps use electricity which is more expensive than natural gas. The same goes for a property heated by LPG (Liquefied Petroleum Gas) which as a gas is more expensive than mains gas. The EPC system currently incentivises the use of mains gas over electricity or LPG on a cost basis.

Tom Spurrier, of the UK Green Building Council, a leading industry body, has said:

“We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may actually fall. Properties with Liquid Petroleum Gas (LPG) are also marked down because the gas is more expensive than mains gas.

One Whitehall source told The Daily Telegraph: “We are aware of this problem and it is being reviewed.”

The Conservative MP Craig Mackinlay, the chairman of the Net Zero Scrutiny group, said:

“Given that heat pumps can actually increase energy use, on which EPC certification is derived, they could push a property that might have been rated C under an old method into D. That could make it both unrentable and possibly even unsaleable, if some of the more nonsensical Net Zero measures that we hear about are realised.”

Headlong drive to net zero

Cabinet ministers have expressed concerns about the speed the Government is going with its transition to net zero. Households and businesses a concerned about the costs this will introduce at a time when gas shortages are resulting in record energy price increases – it could be the biggest cost-of-living squeeze in a generation.

Energy Performance Certificates (EPC) grades are likely to mandated at a minimum of “C” for rental properties in the near future from the present grade “E” and the rating is increasingly being tied to property prices and mortgage approvals.

Property values influenced by EPC ratings

Research by the price comparison website Moneysupermarket shows that by improving a property’s energy rating from G to A can increase its value by as much as 14 per cent.

The way that the ratings are currently estimated, based on a formula arrived at in 2012, means that by moving away from natural gas to so called “energy efficient systems” could result in properties becoming unsaleable and unlettable.

Currently the EPC calculations estimate what it costs to heat a home, rather than the carbon emissions a heating system produces. Heat pumps whether air source or ground source produce less CO2 than a gas boiler, but they are not necessarily recorded cheaper to run.

A ground source heat pump, which is more efficient than an air source system, can cost up to £25,000 and is currently the only mainstream alternative to a gas boiler, though the Government is experimenting with switching natural gas boilers to burn hydrogen.

Few alternatives to natural gas

Rishi Sunak, the Chancellor, and Kwasi Kwarteng, the Business Secretary, have both pushed back on a headlong dive into renewable sources and heat pump conversions, arguing that the UK should continue to rely on natural gas production as the country moves towards net zero with the 2050 target.

The EPC system was drawn up in 2007 as a way of nudging property owners into making their houses more efficient. It has become increasingly important over time, with lenders such as Natwest now offering so-called green mortgages with cheaper rates for properties graded A or B.

Not fit for purpose

Nicholas Mendes, the mortgage technical manager at John Charcol, has said that the current EPC system is “not fit for purpose” as the green ratings have now became crucial in lenders’ mortgage calculations:

“Having an A, B, or C EPC rating will no longer be a unique selling point, but the expectation. Whether you’re purchasing or remortgaging, be prepared, as we could see the best rates be for green mortgages in the future,” Mr Mendes says.

A Government spokesman for the Business Department told The Daily Telegraph:

“Energy Performance Certificates provide useful guidance for consumers and businesses outlining how energy efficient buildings are in a simple and comparable manner.

“We are already looking at ways the system can be improved through our EPC Action Plan to ensure they are as accurate and effective as possible.”

14 COMMENTS

  1. Problem solved then – the Government are going to change the EPC algorithm so it gives the results they want it to show.

    Can I change my tax algorithm to show the figure I want it to show too?

  2. The Govt should have sorted out the EPC algorithm BEFORE proposing that it be used as the yardstick by which all properties are measured. By proposing 2025/8 as the target date for EPC C before the algorithm was a valid measure LLs are caught between a rock & a hard place – either assume the worst & pay up / sell up or assume it will change and risk getting caught out.

    We are potentially 3 years away from mandatory EPC C with no accurate measure to use! This is absolutely farcical. The Govt MUST get the EPC algorithm right AND give LLs time to make any necessary changes.

    As it stands, I am assuming the worst & selling up and if enough LLs are of the same mindset the housing situation for tenants in this country, already dire, is heading straight down.

    We need clarity & we need it NOW!

  3. …………and any Landlord that makes any “improvements” (other than legally needed) to their property during the next 3 to 7 years will be utterly bonkers.

    How can you consider changes to radiators, boilers, heating, water tanks, windows, insulation etc etc without knowing if it will be to your detriment.

    Then, once it’s all decided where we stand, there won’t be enough tradesmen to actually do what may need doing.

    All in the name of progress hahaha

    • You can’t so best sell up tip a dopey FTB.

      LL newed to dump their lemon properties quick

      I’ve already noticed former rental properties in the streets around me being sold up.

      These are properties that would need tens of thousands spent on them to reach EPC C status.

      The shrewd LL are dumping their lemon properties.

      Who can blame them!?

      They have seen the light.

      As increasingly will hundreds of thousands of other LL in the very near future.

      Rachel Reeves believes that LL selling up won’t affect tenants and that they can always source replacement rental accommodation.

      This is the stupid woman who wishes to be a Labour Chancellor.

      God help us all if this idiot understands so little as to how the PRS works!

      • To be fair to Rachel Reeves, according to Pointless just yesterday evening, she used to be under 14 British chess champion so so can’t be totally stupid! Probably better at judging chess moves than housing solutions, however.

      • Selling up! What about the capital gains tax 40% I believe, then the estate agent then the solicitor……………………….. Lucky if you end up with 50%

  4. I was advised by an EPC assessor that replacing a 1970s back boiler with a combi won’t necessarily improve an EPC rating, and could potentially worsen it. This speaks volumes for the EPC rating system. I have a great idea: instead of importing gas from Russia, why don’t we re-open our own gas production, and instead of relying on Russian coal, why don’t we mine our own? Another great idea: why don’t we get to the point of producing green energy cheaper than traditional, then encourage people to buy it rather than imposing more expensive energy on people who don’t want it and forcing them to install heating systems which don’t work as well as the ones they’re being forced to scrap at great cost and detriment to the environment?

    • Even better why don’t we dig up the 500 years of coal the UK has.
      Plus all the other fossil fuels the UK has.
      Global warming is a myth.

      Millions of years ago the climate was largely tropical.
      The world climate may be deciding to return to that sort of climate.

      It is nothing to do with man.

      No such thing rae human influenced climate change.

      The UK should use all it’s fossil fuel resources to be independent for energy purposes.

      The electorate expects the Govt to keep the lights on.

      Govt should nationalise all energy firms and all extraction firms.

      There should be just one institution which is responsible for supplying energy for the UK.

      They can dig it up; frack or whatever.

      Open up the coal mines again.
      Get all the oil and gas out.

      No such thing as man made climate change.

      We want cheap energy and we want it now!!

      Govts would do well to think on this.

      The electorate doesn’t want all this dopey green c##p!

  5. I restored a small Georgian house in 2014. It is in a Conservation area, and listed as a property of local Historical importance. Although work on my house was sympathetic to its style and History, I insulated as much as possible and installed energy efficient lighting, water heating system and Norwegian wall heaters which detect when a window or door are left open and shut themselves down. Insulating structure and pipes. The walls are made of cob. When having it EPC assessed (as I was to rent it out) my EPC report stated that ‘if you install cavity wall insulation….attach solar cells to the roof…increase insulation into the floor…’ You get the picture. I protested that the walls are cob, not hollow, the property is in a Conservation area and I’m not going to dig up the floor of the house. Also, the glass I installed into new wooden sash frames (to restore the property to it’s period look), I was disappointed that my EPC grading was not as I expected. The house is more energy efficient than it was originally without disturbing it’s period appearance. A case of the EPC system not fitting the assessment of period property. “Computer says no”. The EPC system should be overhauled to reflect the needs of those with period properties.

  6. Sorry, missed a sentence and could not edit the above.
    Meant to say that the glass I installed was very energy efficient heat retaining ‘Restoration’ glass.

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