Commercial building energy efficiency requirements overhauled

February 2019

The overhaul of the National Construction Code (NCC) this year will target commercial building energy efficiency requirements. Developers and building owners subject to the energy efficiency requirements can adopt either the current provisions or the new 2019 provisions until 30 April 2020 when compliance with the NCC 2019 provisions becomes mandatory.

Partner Kristy Dorney says although developers may transition to the NCC 2019 over 12 months, there may be financial advantages in complying earlier.

Energy efficiency expert Dr Paul Bannister has discussed the findings of the review which has led to the changes and indicated the cost benefit analysis of any increase in stringency was a key consideration. The intention is to increase stringency to a point where the value of energy saved outweighs the increased cost of construction. He says whilst increasing energy efficiency
the changes are likely to result in buildings being cheaper to build.

MINIMUM STANDARDS OF PERFORMANCE

The rationale for the government mandating minimum standards of performance for energy use in commercial buildings was succinctly explained in a regulation impact statement released last year by the Australian Building Codes Board—

"the rationale ... is based on the proposition that industry would not make socially optimal energy efficiency decisions in commercial buildings without government intervention (this is often referred to as the 'energy efficiency gap'). That is, there are energy efficiency opportunities where the benefits to the community (including public benefits) outweigh the associated costs that are brought up by the change in regulation."

On this basis, the property industry has seen the introduction of—

  • energy efficiency requirements for buildings mandated in the Building Code of Australia (now NCC), introduced in 2003
  • the building energy efficiency certificate (BEEC) in 2011, which required commercial building owners to obtain and register a BEEC before leasing or selling office space of 1,000m2 or more and to disclose specific information about energy efficiency at the building and in marketing material, and
  • most recently, the City of Sydney moving to amend its development control plan to require new commercial buildings to achieve at least a 5.5 National Australian Built Environment Rating Scheme (NABERS) rating.

Initiatives to ensure building owners are turning their minds to energy efficiency are not entirely regulation driven. In the late 90s, the NABERS rating system was developed to allow comparison of the environmental impact of buildings in operation. In 2003, the Green Star rating system was introduced which rates the environmental impact of the design of a building. These voluntary rating regimes benchmark one building against another and allow building owners to market their buildings as a superior option for tenants and investors.

Under the NABERS regime, building owners can enter into Commitment Agreements where they commit to design, build and commission the building to a specified NABERS star level. Along with the clear financial benefits of developing an energy efficient building, the Commitment Agreement allows building owners to have early access to accredited performance measurement information which can be attractive to potential tenants, investors and stakeholders and used to market the building's energy efficiency performance generally.

Under NCC 2019, building owners who have adopted a Commitment Agreement can rely on the agreement to verify compliance with the energy efficiency requirements.

CONCLUSION

Not to understate the important environmental impact, energy efficiency in property makes good commercial sense. We are pleased to work with fund managers, commercial building owners and operators committed to reducing emissions in their commercial buildings and developing and operating environmentally sustainable and efficient buildings.

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