UK government’s ‘Green Day’ announcements unpacked for the built environment
Whilst there wasn’t a huge amount targeting the built environment, many of the measures will have effects across the sector. We take stock below.
7 minutes to read
On 30 March the UK government released a raft of documents, consultations, and announcements under the title ‘Powering Up Britain’, billed as an ‘Energy Security Plan’.
Following on from the Budget in mid-March with not much focus on sustainability in real estate the UK government produced a suite of documents, consultations and announcements under the title ‘Powering Up Britain’, or as the press dubbed in anticipation ‘Green Day’.
Not just a response to the US Inflation Reduction Act (IRA) package of US$369bn or the EU’s Net Zero Industry Act, the government were legally obliged to update their Net Zero Strategy after a court found their plans to be incomplete and lacking in sufficient detail. They were also under pressure to respond to the Net Zero Review by the Rt Hon Chris Skidmore published in January – which they produced a separate paper for.
Energy Secretary Grant Shapps unveiled the “Powering Up Britain” package which included, among many other elements; a new Green Finance Strategy, Nature markets Framework and plans to explore a tackling 'carbon leakage', potentially through a carbon border adjustment mechanism (the ‘green industry’ reactions can be found here).
The direct takeaways for the property sector were limited. There were a few measures for residential properties, aimed at boosting energy efficiency improvements and the transition to cleaner energy provision, such as through heat pumps, yet there was no clarity on what energy efficiency standards may be brought in or any significant new funding to support this.
In other sectors the pace of EV charging and phasing in will have a part to play in real estate strategies, and the focus on nature markets is welcome news for rural landowners.
Residential energy demands
We have argued the need for a carrot and stick approach for the government to reach the targeted reduction in energy demand of 15% by 2030. The carrot was dangled but no stick.
A new Energy Company Obligation scheme – or ‘Great British Insulation Scheme’ – was announced which is slated to support around 300,000 of the least energy efficient homes which could save £300-£400 a year. This however is not a new measure but a revamp of the ECO+ scheme by extending grants to those in council tax bands A to D for improvements such as loft and cavity wall insulation (some common EPC improvement upgrades as we previously reported on).
The government also announced that they will launch a consultation on how to improve energy efficiency of owner-occupied homes but did not commit to a time frame for publishing the results. It’s been around 18 months since the latest Minimum Energy Efficiency Performance of Buildings (No.2) bill was tabled which set out the ambition to have all homes a minimum EPC C by 2035, Skidmore recommended 2033, but we are without clarity over if and when this will happen.
How we heat our homes got a little more attention. The government announced a £30 million Heat Pump Investment Accelerator to help deliver over 600,000 heat pumps per annum by 2028. In 2022, the estimated figure for installations was just shy of 60,000 or 10% of target with five years to go. As my colleague Liam Bailey pointed out the UK is lagging European neighbours with heat pump installations, and the National Infrastructure Commission (NIC) recently released progress review also highlights the shortfall.
The government also extended the Boiler Upgrade Scheme, which offers a £5,000 grant to anyone buying a heat pump, to 2028. They will also set out plans during 2023/24 to rebalance gas and electricity costs in household bills with the aim of making electricity bills cheaper – something which is a barrier for some making the switch.
EV developments
The NIC had recommended to “accelerate deployment of electric vehicle public charge points to reach the government’s expectation of 300,000 by 2030 and keep pace with sales of electric vehicles”.
The government have responded with publishing the final consultation on the Zero Emission Vehicle mandate: requiring that from 2024 an increasing percentage of manufacturers’ new car and van sales are zero emission.
They also announced £381m of funding, through the launch of the Local Electric Vehicle Infrastructure fund, along with £15m for the On-Street Residential Chargepoint Scheme, to support the rollout of much needed infrastructure.
The ways in which E-mobility are impacting real estate was previously examined by the Knight Frank research teams and the announcement will only accelerate this. We’ve spoken about trends of EV’s in distribution logistics as well as production capabilities in the UK.
But more broadly, charge-points, for example, will become an increasingly important amenity in a landlord’s customer proposition and will be vital to encouraging tenants to renew leases and attract new occupiers.
Nature was put front and centre
Coming in the same week that the Taskforce for Nature-Related Disclosures (TNFD) unveiled the final draft of its framework, part of the announcements included a Nature Markets Framework. This sits alongside the Green Finance Strategy to encourage green finance for nature-based solutions. Mark Topliff, Associate in Rural Research, noted:
“For rural businesses, the Nature Markets Framework is a much-needed set of principles that will help provide confidence and trust in accessing private and public funding opportunities that produce environmental benefits. It will also clarify how different income streams may be combined so that farms and estates can maximise income from private and public funding.”
He also noted that “There will still be work to be done around developing regulations and market infrastructure to ensure good governance. But when the framework is fully implemented, it should provide an improved incentive for rural businesses to engage with public and private environmental schemes.”
What you need to know
Grid capacity – The NIC progress review highlighted the barriers to further renewables deployment, such as securing transmission grid connections, must urgently be addressed to stay on track. The government revised a set of Energy National Policy Statements for consultation to cover these elements and tasked Electricity Networks Commissioner, Nick Winser, to advise government on what more can be done to accelerate grid delivery.
The ability to secure energy supply has been a key area of concern for investors and occupiers and holding up development across the country, most notably in west London where projects could be delayed more than 10 years. Any progress could be key for the industry in unlocking development potential and aid change of use.
Construction – The government launched a consultation on ‘carbon leakage’ where companies leave the UK for jurisdictions with less robust environmental regulation or carbon pricing with a proposal including its own carbon border adjustment mechanism, akin to the EU’s.
This would effectively impose a charge on some imports from countries where there are less strict climate policies and is likely to initially target energy-intensive products such as iron and steel, cement, aluminium, and fertilisers. This could add cost pressure to building materials which have already increased almost 30% in the past two years and have a knock-on impact for development.
Solar – To meet the target of a fivefold increase in solar by 2035 the government are “seeking widespread deployment of rooftop solar in commercial, industrial and domestic properties across the UK. To support our solar ambitions, we are accepting the recommendation from the Independent Review of Net Zero to set up a taskforce to deliver on this ambition.”
Carbon offsets – Slightly aside but released on the same day was a new set of global benchmarks for high-integrity carbon credits from The Integrity Council for Voluntary Carbon Markets – they aim to set “rigorous thresholds on disclosure and sustainable development”.
These show clear progression yet “insufficient” in terms of doing what’s needed to deliver impact, said Gilles Dufrasne, global carbon markets lead at non-profit Carbon Market Watch and a member of the council’s expert panel. He also was quoted saying that “the concept of offsetting itself should be abandoned."
Subscribe for more
Get exclusive market analysis, news and data from our research team, straight to your inbox.
Subscribe