Construction update

Heavy rainfall and storms have captured recent headlines and we have been relatively fortunate in experiencing mild winter temperatures. However, even in such conditions the media have picked up on the increased mortality rates in the winter months and unfavourable comment has been passed on the energy efficiency of the UK housing stock.

The government has committed to increasing the energy efficiency of new buildings in England and has developed a “zero carbon” buildings target in response to two pieces of EU legislation: the Energy Performance of Buildings Directive 2010 and the Energy Efficiency Directive 2012. The definition of “zero carbon” used by the government is such that a building must have no net emissions of carbon dioxide over a year. However, frustratingly, there is yet to be universal agreement within the industry on how to measure the emissions of carbon dioxide from a building.

The target set by government is that all new homes and schools will be zero carbon by 2016 with all new public buildings to be zero carbon by 2018 and new non-domestic buildings to be zero carbon by 2019. The government intends that the construction industry will achieve zero carbon buildings by three methods, which are, in order of priority:

• ensuring the fabric of buildings retains as much energy as possible;
• sourcing low carbon heat and power on site; and
• the application of “allowable solutions” for carbon emissions.

The government targets will no doubt influence decisions about the design and construction of all developments in the coming years. For new homes, the government intends to achieve its targets by a staged reduction of the amount of carbon dioxide permitted to be emitted under the Building Regulations 2010. Already as of 2013, all new homes were required to emit 44 per cent less carbon dioxide than 2006 levels (as expressed in part L of the Building Regulations).

It would appear, anecdotally at least, that in building new homes and other developments, the focus of the construction industry has been in line with the government’s priorities. Energy efficiency is more than ever a core consideration in the design process. Materials have become increasingly effective at retaining energy, especially heat, within the building.

Some practitioners may also have experience of potential buyers for new homes and potential purchasers or occupiers of commercial buildings being increasingly focused on the energy efficiency of their homes or units from the outset. This is driven by an increased desire to be ‘seen to be green’
and increasing fuel costs pushing energy use
up the agenda.

However, no matter how effective a building is at retaining energy, that energy still has to be produced. While most of us immediately think about the large-scale wind or solar farms, with all the land and planning law issues such sites bring, another government-favoured approach is for energy to be produced from renewable sources close to the point of use. It is argued that energy produced in this manner is more efficient as less energy is lost as heat while transmitting it from one location to another along wires or pipes. As a necessity, the production of energy on or close to site is usually carried out on a small scale.

Small process

Microgeneration is the term given to the process of producing energy and heat from a low carbon source on a small scale. Section 82 of the Energy Act 2004 defines it as the production of electricity below 50 kilowatts or heat below 45 kilowatts thermal by biomass, biofuels, fuel cells, photovoltaics, water, wind, solar power, geothermal sources or combined heat and power systems.

The process has become a key component of the government’s energy policy and, it is predicted, will become even more popular as a solution to meeting zero carbon building targets. The results of the government consultation, published in August 2013, made clear that housing developers must decide how to meet their obligation to produce zero carbon homes.

No doubt many will instinctively look to the ‘allowable solutions’, perhaps better understood as carbon offsetting or abatement. But this is the least preferred option from the government’s perspective and, accordingly, numerous incentives exists to encourage further take-up of microgeneration technologies. Much of this was laid out in the Department of Energy and Climate Change’s microgeneration strategy, published in June 2011.

Some developers may view the addition of microgeneration as a further expense and burden. This initial reaction may be misplaced given the incentives available and the added value that some perceive such technologies give to a development.

Of course, as with any technology, a principal concern is that the technology used is effective and fit for purpose. The Department of Energy and Climate Change has sought to address this by working with the microgeneration industry to produce the Microgeneration Certification Scheme (MCS), which seeks to provide quality assurance and a formalised complaints procedure for consumers.

Most importantly, to qualify for the government’s financial incentives, the product and installers of microgeneration technology must be certified under the scheme. An application for judicial review against the decision by the MCS not to certify a thermodynamic solar product by a Portuguese manufacturer because it used hybrid technology at the time untested by the MCS, was dismissed in October 2013 (Energie Est LDA v Secretary of State for Energy and Climate Change and another [2013] EWHC 3026 (Admin)). This serves to emphasise the importance all parties involved in microgeneration must place on the MCS certification.

The financial incentive for electricity under sections 41–43 of the Energy Act 2008 is feed-in tariffs (FITs) and for heat under section 100 of the Energy Act 2008, the renewable heat incentive (RHI).

To get the full benefit of FITs, the property is required to have an EPC of band D or higher. FITs are paid on two tariffs, a generation tariff and an export tariff. The generation tariff is a fixed rate amount paid for the electricity produced. Currently, the generation tariff for solar PV of 4kW or under is 14.9p per kilowatt hour and for wind turbines between 1.5 and 15 kW is 21.65p per kilowatt hour.

Generation tariffs are set to reduce on an annual basis to reflect the increased affordability of microgeneration technology. The export tariff is an additional bonus sum paid on the amount of electricity that is ‘sold’ back to the grid. The export tariff for all technologies is 4.64p per kilowatt hour.

Renewable sources

Practitioners with public sector clients will be interested to note that, following the Sale of Electricity by Local Authorities (England and Wales) Regulations 2010, local authorities are entitled to sell electricity generated from renewable sources back to the grid. Therefore, local authorities can benefit from the FIT scheme and this may well be a consideration in how the zero carbon requirement for new schools is met by 2016 and for other public buildings two years later.

The RHI has been implemented in two phases, with phase one being for non-domestic use and phase two for domestic. Phase one has been available since November 2011 for non-domestic renewable heating systems installed since July 2009. The eligible technologies include biomass boilers, solar thermal, ground source heat pumps, water source heat pumps, biogas and deep geothermal.

Phase two is due to commence on 1 April 2014 and will replace the renewable heat premium payment currently in place. The RHI will be available for domestic properties and will cover air source heat pumps, ground source heat pumps, biomass boilers and solar water heating, installed since 15 July 2009. The tariff received by the homeowner under the RHI will vary depending on the type of technology installed:

• air Source heat pumps - 7.3p per kilowatt hour;
• biomass - 12.2p per kilowatt hour;
• ground source heat pump – 18.8p per kilowatt hour;
• solar water heating – 19.2p per kilowatt hour.

Where an installation is sold, the RHI payment will be made to the new owner. This makes the microgeneration of renewable heat more attractive for both developers and purchasers of new homes and units.

In addition to the financial incentives, the government has sought to ease the regulatory burden in by simplifying the planning system for microgeneration. This is in accordance with the obligation contained within the Green Energy (Definition and Promotion) Act 2009.

Part 40 of schedule 2 of the Town and Country Planning (General Permitted Development) Order 1995 (GPDO) now includes microgeneration equipment for domestic properties. The effect of this is that planning permission is deemed to have been granted for numerous types of microgeneration equipment on domestic houses or flats and other buildings or within the curtilage of a house or flat.

Part 43 of schedule 2 of GDPO has a similar effect for six classes of microgeneration equipment for non-domestic buildings which meet certain criteria. These categories are: solar or solar thermal on a building, standalone solar, a ground source heat pump, a water source heat pump, a flue forming part of a biomass heating system or a
flue forming part of a combined heat and
power system.

A simplified planning system, financial incentives and ambitious government targets in respect of new buildings look like creating the right environment to see an increase in the number
of microgeneration schemes and systems in operation.

Chris Holwell is a partner at Freeth Cartwright