The Renewable Energy Association (REA) is pleased to submit this response to the Environmental Audit Committee’s Inquiry on the Code for Sustainable Homes and Housing Standards Review. The REA represents a wide variety of organisations involved in renewable energy in the UK, across the power, heat and transport sectors, with members ranging in size from major multinationals to sole traders. There are over 950 corporate members, making it the largest renewable energy trade association in the UK. The REA’s main objective is to secure the best legislative and regulatory framework for expanding renewable energy in the UK.
1.1. The zero carbon homes policy was introduced by the Government in 2006, setting a clear trajectory for new homes to be ‘zero carbon’ by 2016. Around the same time the Code for Sustainable Homes was proposed as a means to set graduated standards for energy and environmental performance that exceeded the minimum levels enshrined in Building Regulations. For energy, the Code could be seen as an interim measure, with the highest level (Level 6) representing the true ‘zero carbon’ end-point foreseen in 2016.
1.2. In order to encourage the building industry to familiarise itself with these new challenges, social housing built with public funding has been required to exceed the standards in Building Regulations by building to higher Code levels (mainly levels 3 and 4).
1.3. In March 2011 the Government decided to remove ‘unregulated’ emissions (i.e. those resulting from plug-in appliances) from the definition of ‘zero carbon’ which meant that it was now only equivalent to Code Level 5. In addition, modelling work indicated that mitigating all of the regulated emissions on-site could result in disproportionate cost, so the concept of Allowable Solutions was introduced, allowing the developer to offset some of the emissions by investing in carbon mitigation elsewhere. Those mitigated ‘on-site’ would be required to meet a so-called ‘carbon compliance’ limit (on-site would include connected heat).
1.4. In 2003 the London Borough of Merton had introduced the pioneering concept that new development could be required to meet a share of its projected energy use from on-site renewable energy. This soon became known as the Merton Rule and the principle was eventually enshrined in the Planning and Energy Act 2008 through a private members bill introduced by Michael Fallon (currently Energy Minister). The Act allows local authorities to set requirements relating to energy efficiency, on-site renewable energy and connected heat through planning conditions (which must not jeopardise the viability of the development).
1.5. Merton-type policies have become very popular in the ensuing years, with implementation taking many different forms. Although energy and carbon performance standards in Building Regulations have been progressively tightened over the years they remain relatively undemanding minimum standards, so the planning conditions are seen as an effective way of accelerating progress towards ‘zero carbon’ and mitigating the environmental impact of development.
1.6. Returning to zero carbon policy, the announcement in 2006 had the desired effect of galvanising the construction and low/zero carbon equipment supply industry, which geared up to meet the challenge. However the way in which the target would be achieved and the trajectory towards it has still yet to be fully defined; indeed the process has stalled in recent years to such an extent that its achievement is now in serious jeopardy. The Government has used the economic recession and resulting slowdown in house-building as excuses for stalling, leaving the policy in considerable disarray.
1.7. The situation was further exacerbated by the Government’s recent decision to impose minimal tightening of the Building Regulations in 2014, leaving an enormous step to be achieved in 2016[1]. The 2014 standards can be achieved with slightly improved fabric and conventional services, so they do not incentivise the use of renewable energy technologies. Taking into account the fact that it takes several years for changes in Building Regulations to have any significant impact on building practice (mainly due to the length of time it can take a developer to build out a site), it can be seen that Building Regulations will not be driving the use of renewable technologies in new build until the end of this decade at the earliest.
1.8. In the meanwhile the Planning and Energy Act is the only measure that actually can incentivise the use of renewables. Its removal (as proposed by the Housing Standards Review consultation) would result in builders ceasing to incorporate renewable energy technologies into new build – a major step backwards and loss of the learning that has been achieved over the last decade. Once the experience has been lost the Government should not imagine that it can simply be turned on again in seven or more years’ time. We also believe that the building industry is lobbying to have on-site carbon compliance subsumed into Allowable Solutions, which would remove the need to mitigate carbon emissions on-site.
1.9. The Government’s indecision on zero carbon homes policy means that its implementation by 2016 is looking increasingly unattainable and it is only a small stretch to see the implementation date being extended in due course to 2019, the deadline imposed by the Energy Performance of Buildings Directive.
1.10. This increasingly likely narrative may be exactly what the building industry wants but it would make a mockery of zero carbon homes policy. Besides the delay and the watering down of the definition, mitigating emissions through offsets is a major departure from the original principle that future homes should be truly ‘zero carbon’. We believe that renewable energy technologies combined with strict fabric standards are the clear way forward and are very disappointed that, rather than capitalising on the good progress made to date, the Government appears to be bowing to pressure from the builders. This is particularly the case when the installed costs of technologies like photovoltaics (PV) have fallen so dramatically in recent years, undermining the argument that it is too expensive to mitigate emissions on-site.
1.11. It is worth asking where DECC fits into this, given its responsibility for meeting the UK’s greenhouse gas emission and renewable energy generation targets. It appears that DECC was persuaded by DCLG that uptake of renewables in new build will be incentivised by tighter Building Regulations, even though this will patently not now be the case, given the weakness of the 2014 standards. DECC has consequently excluded new build from the domestic Renewable Heat Incentive (RHI), resulting in the perverse situation that taxpayer’s money is paying to incentivise retrofit renewable installations while new homes continue to be built with conventional fossil fuel systems. Yet it is common sense that it is easier and cheaper to install renewables when houses or flats are being built than adding them later, not to mention the disruption caused to occupants when retrofitting.
1.12. It is also reasonable to ask why the building industry should be so opposed to incorporation of renewable energy technologies in new buildings. The answer is that they regard the inclusion of renewables as nothing more than a cost burden that is difficult for them to recover through the sales price. The Government is sympathetic to this view, even though economic analysis shows that these additional costs are more than offset by the energy cost savings that will accrue to the occupants and even though the technologies help the UK to meet both our greenhouse gas emission and renewable energy generation targets.
1.13. The Committee should also note that new-build housing is not the only area impacted by the Planning and Energy Act 2008. Merton-type rules also typically cover new-build commercial buildings as well as housing and commercial buildings where significant renovation is planned. Combined, this is a significantly larger market for on-site renewables and carbon mitigation than just housing.
2.1. The renewable energy technologies that can reduce carbon emissions from new buildings are mature and available now, so it is difficult to understand why the Government is delaying the move to tighter standards under the Building Regulations. However while we wait years for the Building Regulations to catch up, the Planning and Energy Act has been able to respond effectively to grassroots demand from industry, politicians, NGOs and the public to address concerns around climate change at a local level.
2.2. Our clear position is that the Planning and Energy Act 2008 must be retained, at least until the future measures introduced as part of zero carbon policy provide strong incentives for the incorporation of renewable energy into new build. This also implies the implementation in due course of demanding carbon compliance standards in Building Regulations. The Code for Sustainable Homes energy standards should be retained until the tighter standards within Building Regulations make them redundant.
2.3. We believe that the country should be future-proofing its housing stock against the remorselessly rising costs of fossil fuels, delivering modern housing that is fit for the 21st century. Now that the driver that could have been provided by tighter Building Regulations in 2014 has been abandoned, at the very least the Planning and Energy Act should be retained. This would continue to encourage the construction industry to innovate, up-skill and improve its environmental credentials, preparing companies for the future zero carbon standards.
2.4. Government encourages local authorities to contribute to the UK’s target of reducing greenhouse gas emissions by 80% by 2050, as required by the Climate Change Act 2008[2]. A popular option has been for them to require new development to perform better than the minimum standards enshrined in Building Regulations. Retaining the Planning and Energy Act would allow local authorities to keep this vital tool at their disposal. Surely this is an excellent example of the ‘localism’ so enthusiastically championed by this Government.
2.5. We believe that the economic analysis presented in the consultation’s Impact Assessment is fundamentally flawed. It suggests that removing the Planning and Energy Act 2008 and Code for Sustainable Homes energy standards would save builders around £30 million a year but it omits to account for the energy savings that would result from this investment, or the necessary cost of bringing homes up to standard at a later date, or the negative impact this would have on environmental and renewable energy targets. We believe that the Impact Assessment needs to be repeated taking these factors into account, as well as ensuring that the renewable energy technology costs are based on the most up-to-date information.
2.6. If the Government wishes to move away from the diversity of conditions imposed by English local authorities under the Act, a solution would be to use the approach adopted in Scotland, where Building Regulations incorporate a menu of well-defined standards above the minimum that can be stipulated by local authorities through planning conditions or imposed when housing is publicly funded. We agree there should be a viability test, but it needs to take into account the long-term environmental benefits and cost savings to home-owners as well as the short-term costs to builders.
2.7. There is also a strong argument that it is the land value that should absorb the cost of higher environmental standards. Landowners need to accept that developers can no longer afford the high prices they have become used to. We suspect that the reluctance shown by developers is in part because they own land banks for which they paid too much at the height of the property boom, but this should not be accepted as a reason for accepting lower environmental standards. One only has to consult the reported profits of the major house builders to see that the costs of meeting higher environmental standards would make little dent in these.
3.1. We are very disappointed that the construction industry chooses not to see this as an opportunity for diversification and green growth. In fact we believe the building industry, financial sector and Government must learn to see this whole area as an opportunity rather than a burden, and we intend to play our part in achieving this. Developers need to sell the benefits of zero and low carbon energy as enthusiastically as they do other features: reduced environmental impact, cheaper and more predictable bills, more comfortable homes, etc.
3.2. Some renewable energy options may be eligible for financial support – developers must explain this to prospective purchasers and the more enlightened developers will find ways of sharing these benefits whilst absorbing some of the up-front costs. We would like to see housing developers enter into partnerships with the renewables supply industry so that both can benefit from this potentially huge market.
3.3. There are also relatively simple ways in which mortgages can use the resulting reduced energy bills to compensate for the additional capital costs, something that has been commonplace on the continent for decades. There is huge scope for the different players to work together creatively to find solutions of mutual benefit to all parties.
3.4. We intend to work with these market players to improve knowledge of the opportunities available and seek solutions to the perceived barriers, but in the meanwhile it is essential that the market driver provided by the Planning and Energy Act 2008 remains in place, at least until the measures to be introduced eventually as part of zero carbon policy can take over that role.
30 September 2013
[1] The standards to be implemented in 2014 are marginally more demanding than Code for Sustainable Homes Level 3
[2] The National Planning Policy Framework states explicitly in Paragraph 94 that “Local planning authorities should adopt proactive strategies to mitigate and adapt to climate change… in line with the objectives and provisions of the Climate Change Act 2008”.