Minimum energy performance standards (MEPS)

The main objective of MEPS is to ensure a minimum level of energy efficiency and to avoid locking in huge amounts of potential energy savings when a building is constructed or significantly refurbished. In addition, banning the most inefficient buildings and technologies helps accelerate market transformation in the building sector and its associated product markets such as those for windows, boilers, air conditioners, and insulation materials, as both builders and component suppliers are induced to innovate in order to comply with the requirements.
There are two main types of MEPS govern¬ments have to choose from when planning to introduce building standards: prescrip¬tive and performance-based standards.
Prescriptive standards set individual requirements for building components, installations and design options such as building orientation or number and size of windows. The requirements most commonly applied are heat transfer coefficients (U or K values) for walls, roofs, and windows as well as design specifications for HVAC installations. Prescriptive standards are easy to understand and implement, but they are also inflexible, and they do not allow designers to optimise for lowest construction cost (IEA 2008a; Goldstein 2006).
Performance-based standards on the other hand set a maximum value for the energy consumption (or CO₂ emissions) of the building as a whole. Provided that there is a viable and accepted calculation methodology in place, designers and builders usually prefer this method since it gives them the freedom in the design process. This has economic as well as policy advantages: it encourages building designers to save money and fosters innovation (IEA 2008a; Goldstein 2006). However, better trained building professionals and inspectors are needed to implement, and control compliance with, such performance-based requirements (SBCI/CEU 2007, p.19).
Performance-based standards can also be combined with prescriptive standards on specific equipment or components (insulation, windows, boilers), so as to ensure that the most efficient equipment is used when retrofitting existing buildings (WEC 2008, p.42).

Worldwide implementation
According to a survey of more than 80 countries (33 of which are OECD Member Countries), 40 countries had established mandatory MEPS, 21 had voluntary and/or mixed standards, 11 had proposed standards, and 9 did not have standards as of 2009 (Janda 2009). More recently, Iwaro and Mwasha (2010) used the same methodology for a survey to which 53 developing countries and emerging economies responded. Out of these, six had mandatory MEPS, 12 had mixed mandatory and voluntary MEPS, and ten had proposed standards, with the remaining 25 having no standards.

Governance level
MEPS are usually defined at the national level. Yet, there are also cases where the requirements are set at the regional, federal state or even local level. Even in federal systems, it will be better for the markets to set harmonised MEPS at a higher level; although there are examples such as India, where it has only been at the local level that MEPS could first be made mandatory.
Due to the special importance of building energy performance for national climate and energy targets, and also with a view to ensuring a level playing field and planning security for the concerned supply chain actors, we recommend, however, to establish MEPS at the national level, with adjustments to regional/local circumstances (e.g. climatic) when deemed appropriate.

MEPS are applicable in all sectors, but should be defined separately at least for residential and non-residential buildings. However, we recommend considering even further differentiation of requirements, e.g. for offices, retail, education, hospitals, and production.

Related sectors

• residential
• industrial
• services

Only MEPS for buildings are discussed here. These should, at least, take into consideration space heating and cooling, including ventilation; but if possible, also sanitary water heating. In non-residential buildings lighting should be considered.

• Low Energy Building
• Ultra Low Energy Building
• Zero/Plus Energy Building

• Thermal comfort
• Site
• Microclimate
• Building form
• Orientation
• Building envelope
• Shading
• Colour
• Natural ventilation
• Passive cooling
• Passive heating
• Mechanical ventilation
• Cooling
• Heating
• Domestic hot water
• Lighting
• Vertical transportation
• Building integrated power generation
• Optimisation during the design Process

Related target groups

• Investor-occupier
• Investor
• Property development company
• Architect
• Engineering consultant
• Manufacturer of prefabricated houses
• Manufacturer
• Construction company
• System supplier
• Installation contractor
• Real estate agent
• Governmental actor

Direct beneficiaries

• Investor-occupier

  Direct beneficiaries of MEPS are all building owners who save on energy and energy costs

• User

  In terms of increased thermal comfort, these groups of building users will also benefit.

Indirect beneficiaries

• Manufacturer

• Energy consultant

• Architect

• Property development company

• Engineering consultant

• Manufacturer of prefabricated houses

• Construction company

• System supplier

• Bank

Relevant barriers

• Lack of interest and motivation in energy efficiency-improvement: For the majority of actors, energy costs are small compared to other costs and possible savings are therefore too small. MEPS enforce a minimum level of energy savings. They also reduce transaction costs such as information and search costs. Furthermore, MEPS help to overcome developer-buyer and landlord-tenant split incentives. If compliance can be ensured, MEPS will achieve a minimum level of energy efficiency (which may be quite high, i.e. set at quite low energy consumption levels) and reduce market complexity and transaction costs for investors.
• Knowledge and information barriers: With the introduction of MEPS, actors can be informed about cost-effective options for energy-efficiency improvement in buildings. MEPS will also reduce uncertainties about performance of buildings, potential energy savings and market development for more energy-efficient buildings.

When a government introduces MEPS, it should ensure that education and training programmes are available at the same time so that the relevant market actors have the necessary expertise and skills to implement the requirements. Together with demonstration projects and feasibility studies demonstrating adequacy and cost-effectiveness of the requirements imposed this will prepare and ease their implementation, and also ensure that the expected energy saving impact is achieved.
Since MEPS are primarily aimed at cutting off the worst practices from the market, they should always be combined with other policies that encourage energy performance levels better than the minimum standard. This can avoid lock-in effects and make the standard dynamic. Financial incentives as well as information, including mandatory energy performance certificates, and advice are crucial in this regard.
For existing buildings, such other instruments, including energy audits, information and motivation, financing and financial incentives will be needed to trigger and ensure energy-efficient refurbishment or renewal at all.

Agencies or other actors responsible for implementation
A government agency must be assigned with the task of control and enforcement.

Funding
Some basic funding is required for methodology development, enforcement of the standards, and for provision of training, but overall funding requirements remain rather low compared to other policy types.

Test procedures
A valid and accepted methodology for measuring energy consumption and efficiency is a prerequisite for the introduction of MEPS. Data on the energy-related characteristics of the building stock and on energy consumption patterns is needed.

Others
A sufficiently skilled workforce in the building sector is another important pre-condition for successful implementation.

1. Development of calculation method/ measurement procedure
2. Preparation through life-cycle cost analysis
3. Preparation through demonstration projects
4. Training of building professionals
5. Enactment of legislation and definition of monitoring and reporting requirements, compliance regime and fines for non-compliance
6. Implementation (incl. control and monitoring)
7. Evaluation
8. Regular revision

Responsibilities
Policy Design:
Government: taking lead in steps of design and implementation and enacting legislation (see below); establishment of appropriate complementary measures within the policy package
Scientific experts and possibly building professionals: development of measurement and calculation methodologies and training; life-cycle cost analysis

Policy Implementation:
Building permission authority or independent assessors: compliance control and enforcement
Architects and builders: actual implementation of the energy performance requirements; the one who is in charge of steering the construction process: depending on the actor constellation this can be the investor-occupier him-/herself, the developer, the architect/ civil engineer, the manufacturer of pre-fabricated houses, the energy consultant, or various combinations of these actors

Quantified target
It is possible to estimate ex-ante how much energy can be saved through MEPS by comparing the energy consumption of a (conventional) reference building with that of a building built in accordance with the MEPS. In combination with the expected new-built/refurbished floor area, a concrete energy savings target can be determined.
As an operational target, governments could also target a specified rate of compliance.

Co-operation of countries
For countries planning to introduce MEPS, it may be helpful to exchange knowledge, experiences and lessons learned with countries that already have a long tradition with this instrument. Especially in terms of calculation methods and design tools, such international knowledge transfer can significantly reduce policy implementation costs and time.

Monitoring
National authorities can establish a monitoring system tracking the data per m² of new or renovated buildings and on the planned, or better on the actual, energy performance in kWh/m²/year submitted to the (usually local) building approval offices. The building approval offices will have to collect and forward these data to the national monitoring system. An alternative, particularly for existing buildings that undergo an energy-efficient renovation, may be to collect data from Energy Performance Certificates (EPCs). This will be easy if the EPC data has to be disclosed. It will be necessary to distinguish between new and refurbished buildings. Random inspections may be used to validate that buildings are in fact built or renovated in accordance with plans and savings are achieved. In this way, energy savings not realised due to non-compliance can be estimated and minimised at the same time if there are penalties. Furthermore, empirical surveys of investors and users may be carried out to estimate side effects such as direct rebound effects, free-rider and spill-over effects. Based on this data, energy savings compared to conventional new buildings before MEPS introduction or compared to the energy performance level of the existing buildings before renovation can be calculated.
In order to evaluate economic benefits and costs, both the full costs and the incremental costs of energy-efficient refurbishment or of new buildings meeting MEPS requirements vs. conventional new building should be monitored for samples of buildings. The monitoring should also include design costs and policy implementation costs. For calculation of energy cost savings, avoided marginal costs of energy supply need to be estimated, both from the investor/user and the society’s perspective.

Evaluation
An evaluation system can be established by giving the task to a national authority, e.g. an energy agency. The agency should calculate energy savings each calendar year and do random sampling and surveys to verify data and side effects every two to three years.
For calculation and evaluation of energy savings, the formulas and methods developed by the European project EMEEES may be used. Economic benefits and costs can be evaluated using the California Standard Practice tests (CPUC 2001) and the data mentioned above under monitoring. In addition to the data directly monitored for the policy or measure, data from sample surveys on compliance, rebound effects, free-rider and spill-over effects may be needed for a better estimate of energy savings, and incremental costs of energy efficiency improvements and avoided marginal costs of energy supply will be needed for evaluating benefits and costs.

Relevant individual dynamics and side-effects

• Avoiding lost opportunities: By ensuring a minimum level of energy efficiency, MEPS tap a good part of the potential energy savings when a building is constructed or significantly refurbished. However, depending on the level of stringency of MEPS, there will still be savings locked in; that is why additional instruments are needed to motivate market actors to exceed MEPS and prepare the next steps of tightening MEPS.
• Dynamic market transformation and/or innovation: MEPS remove the most inefficient building practices and technologies from the market As mentioned above, MEPS should be regularly updated and strengthened; and this should be clearly communicated to the industry so as to create or maintain incentives for technical innovation. Performance-based standards foster innovation more than prescriptive standards do. However, there is a danger that inefficient components or little thermal insulation is offset by on-site renewable energy generation. Such lock-in of energy inefficiency should be avoided.
• Creating Spill-over effects: Standards for new buildings also affect the energy performance of existing buildings: as building refurbishment usually seeks to bring consumption levels up to the current state-of-the art in new construction, the MEPS for new buildings often effectively also work as a standard for existing buildings (IEA 2008a, p.12). Furthermore, MEPS have a similar influence on energy efficiency of building components (such as windows), as energy-efficient components are needed to comply with MEPS.
• Minimising rebound effects: Higher levels of thermal insulation as mandated by or resulting from MEPS could lead occupants to feel they are in an energy-efficient building and can thus afford to enjoy higher levels of thermal comfort (i.e., higher internal temperatures in winter and lower internal temperatures in hot climates or seasons, when space cooling systems are installed). In that case, MEPS would cause some rebound effects. Such direct rebound effects, where they occurred, have been reported to be around 10 to 30 % of the predicted energy savings (UKERC 2007).

Sustainability aspects
Sustainability aspects such as water, material and waste efficiency can be addressed through integration of corresponding requirements into building codes.

Co-benefits
By ensuring a minimum level of energy efficiency, MEPS also create – at least to a certain extent – the co-benefits in terms of health, productivity, employment, and poverty alleviation that come along with energy-efficient buildings.

• Delays in development of calculation method
• Debates about the LCC analysis
• Delays in legislation due to political processes and lobbying
• Lack of compliance and or resources for ensuring it

The following measures can be undertaken to overcome the barriers:
Timely and thorough policy planning can avoid most of these barriers through.

Advanced countries such as China, Denmark, Germany or Sweden have already achieved energy savings of 50 to 75 % in today’s new buildings as compared to conventional building practices of the past through their MEPS. The European Union has recently decided that all new buildings should be ‘nearly zero energy buildings’ from January 2021 (Energy Performance of Buildings Directive 2010/31/EU).
China, for instance, has achieved a calculated minus 50 to 65 % of energy consumption for new buildings vs. conventional building practice in the 1980s.
“In France, regular surveys show that successive thermal regulations led to a reduction in energy consumption per square metre by a factor 2 to 2.5.”
“In California, the California Energy Commission has commissioned some studies on occupant behaviour and energy use in new houses, and concluded that code requirements are generally being met during construction. The building energy efficiency levels in California are significantly higher than in other US states with similar climates but no mandatory energy standards. Building Standards alone were estimated to be responsible for energy savings equal to about 3 percent of total energy consumption in California in 2003” (all UNDP 2010, p.23).
“The cumulative energy savings achieved (through MEPS) for new dwellings, compared to dwellings built before the first oil crisis, is about 60% on average in the EU. The additional savings that are targeted with future revisions in the standards are also impressive, at 20-30%” (WEC 2008, p.43).
However, “Relatively few countries have carried out evaluations of their building codes. According to the few studies available, it seems that the actual energy performance of new buildings are below what could be expected from the building regulations. Such a situation can be explained by behavioural factors (such as higher heating temperatures, more rooms heated, or longer heating period over the year) and by a non-compliance with the building regulation” (WEC 2010, p. 58-59).

“Only a few countries have estimated the additional costs that each round of new building codes has caused. Nevertheless, from the few results available, the additional costs are limited to a few percentage points (of construction costs, remark by bigEE), if any at all” (WEC 2010, p. 58-59).
Policy costs are not negligible – adequate staffing is a must both for policy development and evaluation at the national level and compliance control at the local level. However, in comparison to large-scale information or even to financial incentive programmes, the programme costs for MEPS are much lower.

Most countries set the energy efficiency requirements for MEPS in accordance with least life-cycle costs (IEA 2008). As a consequence, energy cost savings will exceed or at least match incremental costs of energy efficiency improvement and there will be a positive net benefit.
For example, the European Directive on energy Performance of Buildings (EPBD, 2010) requires Member States to set minimum energy performance requirements with a view to achieving cost-optimal levels. The same is the case in the USA.
In addition to energy cost savings, many developing countries will benefit from being able to defer investment in power generation, and building energy efficiency creates particularly high net employment effects (cf. sources cited in our document “Why policy needs to assist building and appliances markets to become energy-efficient”).
For instance, the retrofitting of 50 million US buildings (40 percent of the current building stock) by 2020 would require $500 billion of private and public investment but would directly and indirectly generate approximately 625.000 sustained full-time jobs and save consumers USD 32 billion to 64 USD billion a year in energy costs, or USD 300 to USD 1.200 a year for individual families (CAP, 2009).