Can non-domestic buildings benefit from the Green Deal?

When using the Green Deal for non-domestic buildings there are two main problems which are;

·        The energy efficient improvements will cost considerably more than in a domestic building therefore the cost is likely to exceed the savings on the energy bill, breaking the golden rule. A green deal loan will not be approved if it does not meet the golden rule.

·        Most commercial buildings are owned by a different company to the company paying the energy bills. The landlord may not be interested in investing, as they do not pay the bills. The tenants may not be interested in the investment as they may move to another property before receiving the full benefit of the savings.

Construction consultants Cyril Sweett carried out research into the Green Deal, which involved undertaking a cost-benefit analysis of four non-domestic buildings – a school, an office, an industrial unit and a warehouse. Actual buildings requiring refurbishment were used as examples. The buildings were assessed for current energy efficiency and retrofit improvements were made, where appropriate, using three refurbishment strategies: improvement of building fabric, services and switching to the use of renewable energy.
The costs were calculated to be paid back over 25 years with an interest rate of eight percent, and then compared to the expected savings over 25 years. The results were as follows:

• Industrial unit: loss of £48,000
• Warehouse: loss of £138,000
• School: loss of £742,000
• Office: loss of £1,043,000

This research proves that the Green Deal will only work for the very worst-performing buildings however, the Green Deal will become of particular relevance to landlords in the future. From 2018, there will be an obligation on commercial landlords to bring their properties up to a set EPC rating before it may be let again, provided there is no up-front financial cost to them. The Department for Energy and Climate Change (DECC) has advised that this threshold is likely to be an E Rating. Commercial landlords with properties below an E Rating will have to complete a Green Deal assessment to identify works needed to improve the EPC. If insufficient cost-effective improvements are found, the landlord may still have to implement any works that pass the golden rule even if they do not improve the EPC to the required minimum standard. Therefore, for commercial properties with an F or G, it will become mandatory to have a Green Deal assessment from 2018 onwards. For premises already let, any work undertaken under the Green Deal becomes consensual as consent must be obtained from all relevant parties that have an interest in the property. DECC have advised that there will be no cap for commercial loans, assuming that they comply with the golden rule.

The Green Deal on its own, based on the current provisions, is highly unlikely to have a significant impact in reducing energy consumption and CO2 emissions across the commercial estate. It may be beneficial for some, mostly smaller buildings, and it may act as a further incentive to implement measures when companies are faced with other environmental taxes and levies, such as the Carbon Reduction Commitment Energy Efficiency Scheme. It may also serve to highlight the bands of an EPC, and embarrass landlords and occupiers into carrying out improvements works.

If there is a serious intention for commercial properties to reduce energy consumption and benefit from the Green Deal, then certain aspects of the Bill must be reconsidered with commercial property in mind. Think of the potential benefit; one large retrofitted shopping centre or office building could save far more energy than well over 100 homes.