EPCs are not fit for purpose as a measure of energy efficiency.
It’s a bold statement, we know.
But, it’s clear that the EPC methodology (SAP 2012) is outdated and flawed, which means that relying on EPCs as a measure of energy efficiency often gives misleading results.
In this article we’ll dive into the problems with the EPC methodology.
The inaccuracy of EPCs is a big problem, because they’re relied on today as a core tool in measuring energy efficiency and driving property decarbonisation.
EPCs underpin the many governmental policies that aim to reduce energy use (and therefore carbon emissions) by improving the energy performance of buildings as part of reaching our net zero targets.
They’re also used by many organisations in the property and financial sectors for important actions such as:
- Climate reporting compliance: to measure the financed emissions of a property portfolio and monitor progress against targets for improvement.
- Capital requirements compliance: organisations are increasingly expected to embed climate risk within their Internal Capital Adequacy Assessment Process (ICAAP) submissions – which means knowing which mortgaged properties have poor energy efficiency and high carbon emissions.
- Transition risk assessment: legislation on minimum energy efficiency standards has already reared its head for the private rental sector, and it’s likely we’ll see more as the urgency to decarbonise increases e.g. mortgage lenders required to meet a minimum EPC C for properties in their portfolio.
- Loan risk mitigation on mortgages: energy performance data is vital for accurate affordability assessments and property valuations, both of which lower risk for mortgage lenders.
- Green mortgage eligibility: some green mortgages reward homeowners that buy energy efficient homes rated EPC A or B with preferential interest rates.
Inaccurate EPCs, therefore, mean that financial institutions are producing inaccurate risk assessments and climate reports. They’re also less able to drive green lending opportunities forward, holding back the retrofit revolution which is vital for decarbonisation in the UK – hence why Bankers for Net Zero have made EPC reform one of their key workstreams.
But why are EPCs misleading? Well, there are 6 major problems with the EPC methodology:
- The EPC methodology focuses on the single metric of energy costs
- The EPC methodology uses outdated and flawed baseline assumptions
- The SAP points system is skewed
- The EPC methodology leaves too much scope for inconsistent data inputs from different energy assessors
- Not all homes have an EPC
- EPCs are valid for 10 years once produced.
Let’s take a closer look at each of these.
1. The EPC methodology focuses on the single metric of energy costs
The output of the EPC methodology is a prediction of how much it might cost to run a home.
The SAP calculations take a series of inputs relating to a property (such as age, construction materials, window types, fuel type) to model the expected energy use on heating, hot water, and lighting within a home. These inputs are used to calculate an Energy Efficiency Rating (EER) which is a measure of energy costs per square metre per year, not of energy efficiency (as the name might suggest).
The EER is then converted into a SAP score and EPC rating: the more expensive a property is to run, the lower the EPC rating.
EPCs are therefore a measure of the cost effectiveness of running a home, rather than the energy efficiency – which can lead to misleading interpretations of EPC data.
‘Energy efficiency’ is typically defined as the relationship between energy inputs and outputs i.e. the amount of output (e.g. heat energy from our radiators) that can be produced for a given input of energy.
This would usually be expressed as a percentage between 0% and 100%:
Energy efficiency is also commonly measured in relation to GDP output e.g. kilowatt-hours produced per pound spent on energy.
In terms of home energy use, we might also measure energy efficiency in terms of energy demand (output used) per square metre to account for the size of the home.
2. The EPC methodology uses outdated and flawed baseline assumptions
The EPC methodology relies on several baseline assumptions as inputs within the SAP calculations, including:
- Energy prices
- Carbon intensity factors
- Energy consumption.
More details on each of these can be found below.
Naturally, the use of assumptions reduces the level of accuracy in the results of SAP calculations.
This is reflected in research on the topic.
For instance, a study of 17,000 UK homes by CarbonLaces concluded that actual energy use was 91% lower on average than that calculated during an EPC assessment – suggesting a systematic overestimation of energy use in EPCs.
UCL Energy Institute’s Smart Energy Research Lab (SERL) came to the same conclusions, and also found that the overprediction of energy increases as the EPC rating of a house worsens – EPC C properties had an 8% average overprediction of energy intensity whereas EPC F and G properties were overpredicted by 48%.
And research by Etude for Passivhaus Trust also modelled the actual energy intensity of homes for regulated energy compared to their EPC rating and, as you can see from the graph below, found a huge amount of variance in the results.
Energy prices
Energy prices fluctuate regularly.
We’ve seen the extreme of this in recent years with the energy crisis pushing costs through the roof.
The SAP calculations used to determine an EPC rating is based on static baseline costs.
The methodology used for EPCs is currently RdSAP 2012, published in 2012 and using energy prices from 2012 – the baseline has not been updated since then.
RdSAP is due to be updated to RdSAP 10 in 2024, but this does not include an update of the energy price baseline used (even though the update to full SAP 10 did).
SAP 2012 uses the following energy prices:
- Gas: 3.48p per kWh
- Electricity: 6.61p per kWh
In reality, the actual energy prices today (June 2024) are:
- Gas: 5.48p per kWh
- Electricity: 27.35p per kWh
As you can see, there are significant differences, especially in the huge increase in electricity costs.
This causes a huge flaw in how EPC ratings are calculated.
Weirdly, the energy bill estimates that are included on the EPC document are based on energy price data from BRE which is updated every 6 months – still outdated (especially given the 10 year lifetime of an EPC), but at least somewhat dynamically reflecting real energy prices, unlike the EPC rating.
A further issue with SAP’s reliance on energy costs is that – as we can see from the prices above – gas remains a cheap fuel in comparison to electricity. This means that homes run on electricity are penalised, even though they typically produce lower emissions.
This leads to misleading recommendations for improving energy efficiency – replacing a gas boiler with an electric heat pump will rarely improve an EPC rating, even though heat pumps are much more efficient and less carbon intensive.
Carbon intensity factors
Like with the baseline assumptions on energy prices, the calculations also rely on baseline assumptions for carbon intensity.
The SAP carbon factors used for EPCs were last updated in 2022. This update did reflect the reality of a much lower grid intensity. Before that they had not been updated since 2012.
However, it is still far from accurate.
EPCs use a static baseline of 0.519kg for carbon intensity – carbon intensity being a measure of kilograms of CO2 emitted per pound spent on energy.
This is a vast overestimation of the actual carbon intensity of the National Grid, which averaged 0.173kg in the past year (2023-4).
It’s also a simplification, because in reality carbon intensity of the Grid varies significantly depending on location.
For instance, Scotland has a large amount of wind farms and offshore wind turbines, meaning a larger proportion of renewable energy is contributing to the Grid in Scotland – lowering the carbon intensity.
EPCs for homes in Scotland should reflect this reality, but they don’t due to the static baseline used in the SAP calculations.
This is why for our dataset and environmental analysis reports at Kamma we integrate directly with the National Grid and use their real-time (half hourly) data on the actual carbon intensity of the grid, to increase the accuracy of energy performance data for property portfolios in the UK.
Energy consumption
Many inputs relating to a home’s energy use are based on theoretical models and assumptions for the building’s construction, rather than actual measurements or consumption data.
Here are a couple of examples:
- Thermal conductivity. The calculations use the building’s construction type, materials, and floor area to make default assumptions about U-values (i.e. how effective a material is as an insulator) for features such as windows.
- Insulation. Insulation is often only included in calculations if there is proof of insulation, as otherwise it cannot be seen by the assessor. It’s also difficult to determine actual thickness of insulation in hard-to-reach spots like cavity walls or under flooring, so assumptions are used for thickness.
Furthermore, many of the baselines used to calculate energy consumption of energy using items are outdated – particularly their energy efficiency, and therefore consumption.
Let’s look at a heat pump vs a gas boiler for instance, as potential heating methods.
For the heat pump calculation:
- Energy consumption. SAP 2012 assumes an annual energy consumption of 15,504 kWh for a heat pump – based on the assumption that a heat pump has an efficiency of 129%. This does reflect the fact that heat pumps produce more energy than they use. However, this is an incorrect baseline, with the actual efficiency of heat pumps today more like 350%.
- Energy cost used for the EPC rating (EER) calculation. SAP 2012 uses the electricity baseline of 6.61p per kWh (also, as we already highlighted, an incorrect baseline) – so 15,504 kWh x 6.61p = £992 per year.
- Carbon emissions used for EIR calculation. SAP 2012 uses the carbon intensity baseline of 519g CO2/kWh (again, as we’ve seen, an incorrect baseline) – so 15,504 kWh x 0.519kg CO2/kWh = 8.05 tonnes of CO2 emitted per year.
And for the gas boiler:
- Energy consumption. SAP 2012 assumes an annual energy consumption of 23,256 kWh based on an efficiency of 86% – which is roughly accurate, though it varies.
- Energy cost used for the EPC rating (EER) calculation. SAP 2012 uses the gas baseline of 3.48p per kWh – so 23,256 kWh x 3.48p = £809 per year.
- Carbon emissions used for EIR calculation. SAP 2012 uses the lower carbon intensity baseline of 216g CO2/kWh for gas heating – so 23,256 kWh x 0.216kg CO2/kWh = 5.05 tonnes of CO2 emitted per year.
As you can see, the end result is that a heat pump is estimated to be more expensive (£992 per year vs £809) and emit more carbon (8.05 tonnes vs 5.05 tonnes).
This does not reflect the reality of heat pumps being a very low carbon heating source and is why you will never find an EPC recommending switching to a heat pump – all because of incorrect, outdated baseline figures used in the SAP calculations.
3. The SAP points system is skewed
In their assessment of the EPC methodology, the UK’s Climate Change Committee highlighted that the SAP points system is also flawed.
The methodology converts the EER into a SAP rating using a numerical scale from 1 to 100, where 1 represents the highest energy costs – it’s also theoretically possible to score above 100, representing negative energy use i.e. more energy is generated from sources like solar panels than is consumed.
This is then further converted into an EPC band ranging from A to G, where A represents the most energy efficient property and G the least.
In particular, the CCC emphasise two issues with the rating system for residential properties:
- The SAP rating 1-100 scale is ‘opaque’ with little explanation of how it relates to actual units of energy used, making meaningful comparisons difficult.
- The EPC bands are not equally sized: an EPC A, for instance, is equivalent to 92-100 SAP points (an 8 point range), whereas an EPC C is equivalent to 39-54 SAP points (a 15 point range).
4. The EPC methodology leaves too scope for inconsistent data inputs from different energy assessors
SAP calculations have to be performed by an EPC assessor.
The assessor physically visits a property to collect a huge amount of detailed information about the home’s construction and energy use – from materials to insulation to heating systems to ventilation to window draughts, and much more.
Different assessors will use slightly differing measures, and different houses will have different existing information e.g. an accurate floor plan.
This variance, plus the sheer amount of inputs and measurements involved in the assessment, and the reliance on a human assessor to generate those inputs, introduces an inevitable layer of inconsistency to the methodology which is impossible to control for.
Studies have found that least 27% of EPCs have been found to possess inconsistencies caused by discrepancies across different EPC assessments.
Further, mystery shopping research published by the Department of Energy and Climate Change found that when multiple EPCs were produced for the same 29 homes two-thirds of them ended up with EPC certificates that varied by at least two bands.
Furthermore, the measurements taken by the assessors are also often inaccurate.
5. Not all homes have an EPC
Our analysis of the EPC register determined that only 51% of UK homes actually have a valid, in-date EPC certificate.
It’s only a legal requirement to have an EPC when building, selling, or letting a property.
Once created, an EPC is only legally valid for 10 years. And EPCs have only been a requirement since 2007.
So, any homeowner that has been in their home for a long time will not have a valid EPC – unless they’ve voluntarily opted to have an EPC assessment for their own retrofit purposes or curiosity.
That leaves a huge blind spot in terms of the energy efficiency of UK housing.
6. EPCs are valid for 10 years at a time
EPCs are valid for 10 years once produced – a long time in terms of energy performance.
We’ve already seen how energy costs can fluctuate in that time and, if not updated, how that can lead to huge inaccuracies within the SAP calculations.
On top of this, homeowners could make a huge amount of changes and improvements to a home over the span of a decade. None of these are reflected in their EPC – adding further blind spots to the dataset that we rely on to monitor progress on property decarbonisation in the UK.
Our analysis of the EPC register determined that of the 49% UK homes that have a valid EPC, 26% of them are 5-10 years old.
🤔 Is there an alternative to inaccurate EPCs?
We desperately need better energy efficiency and carbon emissions data for residential property.
The government is currently reviewing the SAP methodology and plans to replace it with a new Home Energy Model – but that’s years away from rollout (for EPCs) and will not solve the problem of missing and out-of-date certification.
To solve this problem we’ve developed an enhanced dataset on energy performance and carbon emissions – a reliable, accurate, and up-to-date view of the environmental impact of every UK home.
We combine EPCs with additional data from a range of sources, which is then checked, corrected, and calibrated. Where homes do not have an EPC our intelligent predictive modelling fills the gaps to an incredibly high level of accuracy.
Learn more about our enhanced data ➡️
