Blow to sustainability policy as study shows commercial building improvements cost more than they save

The majority of energy efficiency improvements to commercial buildings outlined under the government’s Green Deal will cost more to implement than they will save on energy bills, exclusive research carried out for Building suggests.

The Green Deal is an initiative to help meet carbon reduction targets, where loans for energy efficiency improvements are paid back over 25 years by savings on bills. The revelation that the majority of improvements will not meet the initiative’s “golden rule”, where energy bill savings must be equal to the costs of the work, is the latest in a series of blows to the government’s sustainability agenda.

In a study, QS Cyril Sweett found that changes to building fabric, services improvements and renewable energy installations will not generate enough savings to pay back the capital and loan costs for the work on the majority of non-domestic buildings.

The firm modelled an existing primary school, office, industrial unit and retail warehouse to assess energy use. Energy efficiency improvements were modelled to see how much these would cost and how much energy would be saved. The modelling included interest on the loans, projected increases in energy bills and income from the feed-in tariff and Renewable Heat Incentive.

The only improvements that met the golden rule were upgrading the fabric of the industrial unit and installing PV and solar thermal panels on the retail warehouse. All other measures cost more to implement than the savings they generated.

Cyril Sweett said if the government went ahead with the Green Deal in its current form it would only work for “very poorly performing buildings and the lowest of low hanging fruit.” It added the government had a long way to go to develop the details of the scheme.

A DECC spokesperson said:“We cannot comment on this research as we have not seen it. However, under government plans only a charge that meets the golden rule can be recouped through the energy meter at a property.”

The revelation comes as the government looks set to backtrack on its earlier aim, as laid out in last month’s Carbon Plan, to extend Display Energy Certificates (DECs) to all commercial buildings from October 2012.

Speaking at the launch of a report by the UK Green Building Council backing the DECs on Tuesday, communities minister Andrew Stunnell said that more evidence was needed to ensure that the DECs would not cost businesses money.

The news comes in the wake of widespread disappointment at the green measures in last week’s Budget, which watered down standards for zero-carbon homes, announced that the Green Bank would not be able to borrow for at least four years, and made no announcement on incentives to encourage the Green Deal.