I was asked recently what needs to change for net zero to become more than just a policy ambition? Just what would need to happen for us to finally see buildings being retrofitted or newly built at the scale needed?
My first response was to question the term ‘Policy ambition’ as this seems a very nebulous term given that most of our politicians are using net zero to support their own short-term agenda.
We currently have parties who actively or passively support net zero policies, and others who either rubbish the entire premise of net zero (calling it ‘net stupid!’) or are at best, suggesting the goal posts should be moved, by kicking the climate change ‘can’ further down the road to help the current economic outlook.
Minimum compliance and technical standards have been delayed and delayed … and delayed.
Chris Newman Net Zero Design Manager
How can we plan properly?
Construction projects are not quick things as anyone involved will tell you. Getting finance to fund a major development needs certainty so the market needs clear indications of what is coming, when it is coming and what is set in stone for the foreseeable future, otherwise how can you plan your retrofit?
However, there appears to be little to no Governmental, regulatory or legislative incentive to decarbonise. There aren’t even any real penalties for not decarbonising existing commercial real estate
Businesses are crying out for clarity on issues such as changes to EPCs, Minimum Energy Efficiency Standards (MEES), carbon taxes, etc. to help create consensus around decarbonising existing assets, the commitment to capital expenditure to achieve this and, as a result, the growth of an appropriate skilled and financially stable supply chain to deliver it.
Low hanging net zero fruit
At the same time, government talks of using electric heat pumps to help us get to net zero but, the policy only really focuses on the residential sector, which is of course very important.
However, there is a significant opportunity to use heat pumps to decarbonise the commercial sector and this can happen much more quickly.
This really is ‘low hanging fruit’ as has been clearly shown by the Public Sector Decarbonisation Scheme, which has helped schools, libraries, Town Halls and other public buildings remove gas heating and replace it with commercial heat pumps. Incentivising business rates or introducing tax reductions aligned to carbon reductions could have a similar impact in the commercial sector.
For new buildings, it’s even simpler … Government needs to provide minimum compliance and technical standards that align with the UK’s legally-binding goals of net zero by 2050 – this can be achieved via the Future Homes Standard and the Future Building Standard.
However, these changes have been delayed and delayed … and delayed.
There is also the parallel issue with building regulations such as Part L, that need to be overhauled to catch up with the latest approaches to building services design and the innovative, advanced products and technologies now being used.
What about ROI?
Business finance in this area is currently predicated on a traditional return on investment model of between 2-5 years, so the next major hurdle to overcome is the ‘Spark Gap’.
When fossil fuels such as gas are significantly cheaper than low or zero carbon electricity, the business case for decarbonisation requires much more detailed planning to maximise every possible benefit, more consensus within businesses to ensure all involved parties are aligned and an increased appetite for risk compared to ‘business as usual’ due to the uncertain legislative landscape and potential operational cost implications.
As we continue to delay significant and lasting change in either the regulations or the cost of energy, more and more buildings are “baking in” future difficulties by renewing fossil fuel infrastructure and appliances. Many businesses are therefore signing leases that will hold back their decarbonisation journey by keeping them in buildings that haven’t transitioned.
A rush to beat new regulations
Before we see any future policy changes more aligned to net zero outcomes, I think we will see rapid growth of projects that conform to existing requirements, so they can avoid new, more challenging requirements. This will further delay our net zero transition and the adoption of the methodologies and technological solutions that will ultimately deliver it.
That said, there are examples where global finance is already ahead of legislation with investors insisting on future-proofed assets to avoid ending up with ‘Stranded Assets’ that can’t realise their full potential.
Another significant barrier is the UK’s energy infrastructure which can often require significant capital expenditure at an individual building level causing further delays in project starts and completions.
However, we have recently seen some of the levies placed upon electricity reduced to prevent the spark gap against gas from becoming even larger although this only stops the problem getting worse and hasn’t started to reduce the price gap between gas and electricity.
Let’s see where we get to during 2026!
Chris Newman is Net Zero Design Manager
