Construction watchdog looking to change energy performance certificate operations

Efforts are underway at the Building and Construction Authority (BCA) to change the way energy performance certificates (EPCs) operate, Planning Minister Stefan Zrinzo Azzopardi said on Tuesday.

Speaking at a BOV Business Breakfast, the minister said that the BCA is working to make changes to the way the certificate operates. Details on the exact changes weren’t given.

“This will surely be of assistance in the changes banks will have to undertake and will help in the discussion in how we change and up the game in the construction sector.”

EPCs serve as a rating of a building's energy efficiency. This certification is obligatory for all new builds, rentals and transfers, and has been around since 2012.

Certificates are produced after a professional assessment by a warranted architect or engineer. Even banks are bound not to issue sanction letters for property loans unless an EPC is presented.

Tuesday’s Business Breakfast focused on the climate challenges and opportunities faced by Malta’s real estate sector.

Zrinzo Azzopardi, who was one of the keynote speakers at the event, emphasised the need to upgrade the energy efficiency levels of buildings.

“The time to act is now,” he said, admitting that this will be a significant change for government, the business community and the country as a whole.

He added that this change requires a collective effort by all stakeholders in real estate, particularly builders and developers.

“Unfortunately, the Maltese consumer is hardly aware of the conditions they should be asking for,” he said. “When purchasing something of minor investment, like a washing machine, the consumer might question the energy efficiency of that particular appliance, but the same questions aren’t made in the sale of property.”

He continued that while some developers are going the extra mile to make their properties more energy efficient, this attitude is not the general rule.

“Quality has to be the name of the game in the real estate market. It’s high time investors consider trends in the sale of property and other investment opportunities.”

The minister noted that banks finance the absolute majority of property purchases. “It’s pertinent that banks explain clearly to the public their obligations in the financing of property so investors and property purchasers address the necessity of the changes.”

He added that banks need to present a way forward on how they plan to adhere to environmental regulations when financing property purchases vis-à-vis energy efficiency. EPCs will gain more importance in this respect, he said.

“We can’t look at this matter as if it’s the financing of just another business transaction. Property is a ‘sui generis’ sector with ‘sui generis’ objectives.”

The importance of EPCs was reiterated by Michael Stivala, President of the Malta Developers Association. He noted that the EPC regulations were introduced in 2006, but there were no available assessors for several years.

He recalled that when energy bills skyrocketed because of the 2008 financial crisis, the relevant stakeholders reacted and some residential buildings were being built to an energy-efficient standard.

However, Stivala said that these developers lost money in the process because consumers did not understand the benefits of having an energy efficient unit.

“Those developers were competing for the same consumer, and the consumer didn’t know the difference,” he said.

It was only around 2012 or 2013, according to Stivala, that the EPC process came back to life and authorities started to ask for the certificate to cover previous years.

Chris Meilak, a partner with Ernst & Young, explained that demand changes slowly and responds to various factors. “At the moment, demand for greener and efficient buildings isn’t there.”

He argued that the end-consumer is not willing to pay extra for energy efficiency, and that the revolution. In this area will start from larger companies as they start to be subject to strict disclosure requirements.

“Certain brackets are not appreciating or willing to pay extra for this. On the other side, there’s already demand for certain requirements that fit into what we heard today.”

Financial consultant Steve Ellul, who was recently appointed CEO of Project Green, reiterated that the real estate industry is demand-driven, but this demand should be stimulated from the residential perspective.

He said construction companies need to be incentivised to invest harder in green construction, pointing out that 60% of existing investments on the local stock exchange is invested in the construction industry.

“I believe the money is there. In my opinion, we need the financial plumbing to redirect the money to green construction.”

BOV CEO Kenneth Farrugia pointed out that there are more enablers beyond developers and contractors that have an important role to play. These include engineers, architects and national government.

He said the biggest challenge will be to reconcile the short-term costs of the green transition with the medium-term value creation.

Ronald Mizzi, the permanent secretary within the Ministry for the Economy, pointed out that government is offering a list of schemes and initiatives to help in this. More so, ESG principles are being embedded into government’s work programme, with many electoral pledges and budget measures intrincally linked to ESG.