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of heat pumps, in its drive to meet internationally agreed energy efficiency targets, could be stymied because of an out of date EPC algorithm.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.”