When we covered the topic of Stranded Real Estate – A Real Possibility last year, we identified two key factors driving stranding risk: (i) changing legislation and (ii) market demand for properties with excellent sustainability credentials.
It is timely to revisit the “changing legislation” driver now, with the Energy Performance of Buildings Directive Recast (the “EPBD Recast”) having just come into force on 28 May 2024.
The EPBD Recast aims to (i) increase the rate of building renovations, (ii) reduce energy consumption and (iii) promote the uptake of renewable energy in buildings. It also sets ambitious targets to achieve these objectives.
In some areas such as Minimum Energy Performance Standards (MEPS), Member States will have flexibility in terms of how they reach those targets.
Ireland will have until 29 May 2026 to implement the EPBD Recast into Irish law. It will be important, therefore, to keep a close eye on this implementing legislation, which we will follow as it progresses.
We have set out below a high level overview of some of the key points to be aware of in relation to the EPBD Recast.
Zero-Emission Buildings
“Zero-Emission Buildings” is a term which we are sure to hear more about as this is the new standard for new residential and non-residential buildings.
A “Zero-Emission Building” is a building with a very high energy performance, requiring zero or a very low amount of energy, producing zero on-site carbon emissions from fossil fuels and producing zero or a very low amount of operational greenhouse gas emissions.
- From 1 January 2028: all new buildings owned by public bodies must be Zero-Emission Buildings; and
- From 1 January 2030: all other new buildings must be Zero-Emission Buildings.
Minimum Energy Performance Standards
Non-Residential Buildings
There will be a gradual introduction of Minimum Energy Performance Standards (MEPS) for non-residential buildings which ensure that non-residential buildings do not exceed a “maximum” energy performance threshold. The 16% worst performing buildings will need to be renovated by 2030 and the 26% worst performing buildings by 2033. Member States will be required to establish specific timelines for the renovation of the remainder of their non-residential buildings by 2040 and 2050.
Residential
Each Member State will need to establish their own national trajectory for the renovation of residential buildings to ensure that the average primary energy use of the entire of its residential buildings decreases by at least 16% by 2030 and decreases by at least 20-22% by 2035 (when compared to 2020). At least 55% of this decrease must be achieved through the renovation of the 43% worst performing residential buildings.
Member States will be required to incentivise renovation through technical assistance and financial supports and introduce safeguards for tenants (such as rent support or caps on rent increases).
Member States will, however, be able to exempt certain categories of both residential and non-residential buildings from the requirement to meet MEPS (e.g. historical/heritage buildings and holiday homes).
Energy Performance Certificates (BER Certificates)
Energy Performance Certificates (“EPCs”) (or BER certificates as they are known in Ireland) will now be based on a common template used by all Member States to ensure comparability.
There will be a common “A-G” scale with “A” corresponding to zero-emission building and “G” corresponding to the very worst performing buildings in the national building stock at the time the scale is introduced.
“A+” corresponds to buildings with a maximum threshold for energy demand which is at least 20% lower than the maximum threshold for zero-emission buildings and generates more renewable energy on-site annually than it requires.
Phase Out of Boilers / Fossil Fuels
In order to ensure that the EU’s building stock is fully decarbonised by 2050, there will be a gradual phase-out of boilers powered by fossil fuels by 2040.
Solar Technology
Member States must ensure that all new buildings are designed to host rooftop photovoltaic or solar thermal installations enabling solar technology to be installed at a later stage in a cost effective manner.
There are various deadlines for deploying suitable solar energy installations this decade in respect of both residential and non-residential buildings, if technically suitable and economically feasible to do so.
Sustainable Mobility
There are also a number of measures to increase the amount of EV recharging points and pre-cabling installed in both residential and non-residential buildings. In addition, there are specific requirements for the provision of bicycle parking spaces in these buildings.
Now that the EBBD Recast has come into force, it is over to Ireland and other Member States to introduce their own implementing domestic legislation. As Member States have discretion as to how they will achieve many of the targets of the Directive, the detail of the implementing legislation will be key to gaining a complete understanding as how this will apply to Irish buildings.
Should you have any questions in relation to this, please do not hesitate to contact a member of our Commercial Real Estate team.