Insight into the Energy Performance Certificate (EPC) Reform: Better Addressing Climate Change Concerns

The construction sector has embarked on a major reform process. The second half of 2021 was eventful: the The new energy performance certificate (DPE) for residential properties has taken effect On July 1, 2021, the final version of the decree related to the RE2020 regulationsfor housing was published at the end of that same month, and its counterpart for commercial buildings was released for public comment in September. At the same time, theClimate and Resilience Act was published in the Official Journal on August 24. Among other things, it sets targets for the building sector, with the key directive being the removal of the least energy-efficient housing—so-called “energy-wasters”—from the rental market starting in 2028.

The goals that have been set are still far from being achieved.Currently, only 40,000 homes with an F or G energy efficiency rating are renovated each year^[1] of the 4.8 million housing units involved. The same observation applies to the remaining housing units: the number of renovations—around 150,000 homes per year—falls short of the target set by the Energy Transition for Green Growth Act of 500,000 renovations per year, and the type of renovation is often insufficient (single-measure projects and low energy savings)^[2].

These findings raise questions about the consistency between the established goals and the means of action. It is conceivable that the new decrees will help strengthen the emerging legislative framework for combating global warming and achieve the goals set for the sector.

This note focuses on the Energy Performance Certificate (EPC), a key tool for monitoring building performance. It provides an in-depth analysis of the content, purpose, and implications of this reform from a climate perspective and assesses its alignment with the objectives of the National Low-Carbon Strategy, the national climate roadmap.

What is the DPE?

An energy performance certificate is an official document that allows you to measure a building's energy performance and to display it on “energy” labels. It is mandatory when selling or renting properties.

The Energy Performance Certificate is also a key element at the European level, since it is included in the eligibility criteria for the European Green Taxonomy for the building sector*^[3].

The documents outlining the DPE reform^[4], originally scheduled for early 2020, were published on March 31 in the Official Journal and are effective and enforceable as of July 1, 2021. Existing energy performance certificates (DPEs) issued before July 1, 2021, may be used until January 1, 2025, within the limits of their 10-year validity period. After that date, all posted energy performance certificates will have been issued using the new method.

Changes to the Energy Performance Certificate and Their Impact on Building Performance Classes

The Energy Performance Certificate (EPC) is issued for all types of buildings, but this reform applies only to residential buildings. Its purpose is to make housing assessments more reliable, easier to understand, and more ambitious from a climate perspective^[5].

The reform is reflected first and foremost in the consideration of greenhouse gas (GHG) emissions in the establishment of energy efficiency class thresholds, whereas the previous version included only the primary energy parameter. However, with this single parameter, a home heated with natural gas or heating oil could have a better rating than a home that consumed less final energy and was heated with electricity. The primary energy required to generate electricity is indeed higher than the primary energy derived from burning heating oil and natural gas, but overall, it results in lower carbon emissions. The inclusion of GHG emissions therefore mitigates this effect by favoring low-carbon energy sources, such as electricity in France in our example.

Changes have also been made to the energy threshold values: the top energy efficiency classes are now more accessible, and the range of the middle and lower classes has been narrowed, resulting in a lower threshold for the lowest class. Figure 1 illustrates these new thresholds.

The reform also includes updates to key data used to calculate a building’s energy and climate parameters (in particular, conversion factors for energy to kWh, conversion factors for kWh to greenhouse gas emissions that reflect the carbon footprint of various energy sources, and the conversion coefficient for electricity to primary energy).

In addition, a significant change has been implemented to improve the reliability of the DPE: the conditions for conducting the assessments must be based on the building's physical data (such as construction method, type of insulation, heating system, type of windows and doors, etc.). Energy consumption related to lighting and the operation of auxiliary systems is also taken into account. Certification of the validity of the assessment is issued by a certification body accredited by COFRAC (French Accreditation Committee).

In particular, the reform no longer accepts the so-called “invoice-based” energy assessment method, which conducted the assessment based on the usage patterns of the households living in the dwelling without taking into account the building’s specific characteristics. While this method provided a more accurate picture of actual energy consumption, it did not allow for a fair comparison of buildings, one of the goals of this energy performance certificate (EPC) reform. For example, a home with poor energy efficiency but that is rarely used could receive a better rating than a well-designed home that is used frequently.

The Order of October 8, 2021 supplements the decree of March 31 by making changes to the calculation method and providing flexibility regarding the means by which assessors obtain data. In fact, the preparation of the first energy performance reports under the new reform revealed significant discrepancies between actual energy consumption and theoretically calculated consumption, which needed to be corrected^[6]. A guide for inspectors clarifies all the information that needs to be known when preparing an Energy Performance Certificate (EPC)^[7].

The reform also introduces the concept of Building Energy Performance Certificate (BEP) for multi-unit buildings, as distinct from the individual BEP (energy performance assessment for a single dwelling). The collective energy performance certificate is based on data provided at the condominium level. Although it is less precise, it will allow all co-owners who do not have an individual energy performance certificate to have a valid assessment for their property, whether it is for rent or for sale. This collective energy performance certificate is part of the Climate and Resilience Bill requiring the preparation of a comprehensive technical assessment and a multi-year construction plan for all condominium associations and will be issued Mandatory starting in 2024.

Finally, the content has been redesigned to make it more understandable and educational and now includes various recommendations on energy use, equipment maintenance, and potential energy-efficiency improvements.

What impact can we expect this Energy Performance Certificate (EPC) reform to have on greenhouse gas emissions from residential buildings?

Changes to the conversion factors and performance class thresholds result in a new distribution of housing units across the classes. Buildings with the highest greenhouse gas emissions are now classified as energy-inefficient buildings (classes F and G), while energy-intensive buildings with lower greenhouse gas emissions are no longer included in this category. According to the ministry, 800,000 homes are now classified as energy-inefficient, including 600,000 heated with heating oil and 200,000 with natural gas. 800,000 homes are excluded from this category, including 600,000 heated with electricity and 200,000 with biomass. In total, The number of substandard housing units remains unchanged at 4.8 million, out of a total of 37.2 million housing units. As requested by the government, the other classes remain unchanged, with only a few transfers within classes B through D.

It should be noted, however, that the methodological discrepancies identified and corrected by the October 8 order highlight the risk of once again seeing a discrepancy between the number of energy-inefficient homes calculated by the energy performance assessments (DPEs) and the 4.8 million estimated by the SDES study^[8]. We will have to wait for the results of the new energy performance assessments (DPE) over the coming months to ensure consistency between the two figures. If the discrepancy persists, we will either need to adjust the DPE methodology again or accept that the number of energy-inefficient homes is currently underestimated and that the renovation measures to be implemented will need to be adjusted accordingly.^[9].

The DPE is a essential measuring tooltoward achieving the goal of eliminating energy-inefficient buildings. This goal, first set forth in the LTECV and included in the Climate and Resilience Bill, calls for the renovation and replacement of the 4.8 million homes in question by 2028. To go even further, recent amendments to the bill have moved up the deadline for phasing out the lowest energy efficiency class (Class G) to 2025.^[10].

Eliminating energy-inefficient buildings would result in a reduction in greenhouse gas emissions of 14 MtCO2e/year, or 17% of the sector’s emissions (the residential and tertiary sectors generated 80.8 MtCO2e in 2019).^[11]. Given the changes made possible by the EPC reform, it is clear that the EPC will serve as a means of combining the goal of eliminating energy-inefficient homes with the goal of reducing the carbon footprint of housing, as set forth by the SNBC.

However, for the Energy Performance Certificate (EPC) to serve as a measurement tool that lives up to national ambitions and is consistent with the objectives of the National Climate Change Strategy (SNBC), He must define the appropriate performance class levels and incorporate the appropriate criteria.

In his letter to the ministry dated March 22, 2021^[12], the High Council for Climate (HCC) lists recommendations to help the Energy Performance Diagnosis (DPE) better align with the National Low-Carbon Strategy (SNBC). These include, in particular, to bring the energy and GHG levels of Class A and B buildings in the Energy Performance Certificate (EPC) up to BBC standards (Low-Energy Buildings), levels recommended by the SNBC, in order to guide residential energy consumption toward an ambitious enough target to ensure the sector’s genuine decarbonization. This also involves to include in the Energy Performance Certificate (DPE) the goal of completely phasing out heating oil by 2028, as specified by the SNBC. Indeed, while classifying oil-heated homes as energy-inefficient is a good way to phase out this heating method, it is not enough, since some of these homes remain outside this category.

Finally, since the Energy Performance Certificate (EPC) is now based solely on the specific characteristics of the building in question, it excludes any analysis of how the building is actually used. In this context, the HCC proposes improving statistical data on the housing stock to account for both building characteristics and usage patterns, as these two factors significantly influence energy consumption. The creation of the National Observatory for Energy Renovation (ONRE) could help in this regard.^[13]. To achieve the goal of phasing out the most energy-intensive buildings, it seems essential to study and regulate consumption through measures related to the building's energy-efficient retrofit and its use.

Conclusion

The DPE is now a simple way to assess the energy and climate performance of housing. Including a climate criterion makes the Energy Performance Certificate a better indicator of carbon emissions and will facilitate impact renovations. However, it is important to align it with the national objectives defined by the SNBC in order to ensure the sector’s genuine decarbonization. However, the Energy Performance Certificate (DPE) does not accurately reflect actual energy consumption due to differences in usage, and reforming it alone will not be sufficient to successfully carry out and accelerate the shift toward large-scale, effective housing renovation. It is therefore essential to have additional tools in place to encourage renovation projects that meet the right level of ambition.

*As a reminder, the European Green Taxonomy lists, along with associated criteria, activities that contribute to climate change mitigation or adaptation and serves as a benchmark for sustainable finance.