Big surprises in the new NSW sustainable buildings planning policy

EXPLAINER: The NSW government is introducing a new state environmental policy (SEPP) that will set new standards for energy, water and thermal performance of new homes, and extend BASIX environmental rating standards to some non-residential buildings for the first time. There’s even provisions for net zero commercial buildings and the measure of embodied carbon.

As part of the new Sustainable Buildings SEPP, announced on Monday, the state will increase the state’s building sustainability index (BASIX) energy efficiency standards to line up with the latest revision to the National Construction Code (NCC).

Unexpectedly (for some observers) the new SEPP will also introduce new requirements to measure and report embodied carbon across a number building types, using Green Star and NABERS rating tools. This data will be used to inform embodied emissions policies in the future.

The policy package will come into force on 1 October 2023, following a one year transition period that’s designed to give the development and construction sectors time to adjust to the new standards. 

The planning reform is significant, because the NSW planning system doesn’t currently have rules covering the operational carbon emissions, water or embodied carbon performance for new non-residential buildings.

For non-residential buildings, all energy performance pathways under the NCC can be used, including Green Star and NABERS. Any scope one emissions from burning fossil fuels onsite will be able to be offset through Climate Active Carbon Neutral certified credits. 

Residential buildings will be required to meet a higher BASIX thermal performance standard of at least 7 Stars under the Nationwide House Energy Rating Scheme (NatHERS).

However, there are some notable exceptions to the non-residential properties covered, with industrial sites and shopping centres not initially included under the new rules, (with the promise they may later be included). The delay is supposedly because of the additional complexity they pose.

The major changes for residential buildings under the policy are:

• updates to BASIX online tool and interface
• introduction of materials index calculator for embodied emissions.
• increased energy and thermal performance standards (for detached homes and apartments over five stories)
• water standards unchanged

Non-residential developments covered by the code will need to meet:

• energy standards and associated offsets for large commercial developments
• new water standards for large commercial developments
• demonstrate that the building can operate without fossil fuels by 2035 (for state significant and large commercial buildings)
• energy performance for large commercial developments, verified after the building is occupied and offsets purchased for residual emissions

The policy will also implement the Trajectory for Low Energy Buildings policy, which was adopted by the COAG Energy Council in 2019.

Override of local requirements

As with the BASIX SEPP it replaces, the new Sustainable Buildings SEPP will override any local energy efficiency requirements for new residential buildings. 

The good news is that the non-residential standards are being treated as a minimum requirement, giving local councils the flexibility to introduce tougher standards. 

This is important, given the Sydney City Council last week introduced new planning laws that require new office buildings, hotels and shopping centres will need to meet minimum energy ratings standards from January 2023 and achieve net-zero energy use from 2026.  

What’s actually in the policy?

The sustainable buildings SEPP policy package will supersede the old BASIX SEPP, and span three different regulations: 

• the new sustainable buildings state environmental planning policy 2022 (SB SEPP)
• amendments to the Environmental Planning and Assessment Regulation 2000 
• changes to the Environmental Planning and Assessment (Development Certification and Fire Safety) Regulation 2021

The transition will be supported through:

• upgrades to the BASIX online tool
• technical guidance for key initiatives such as embodied emissions and net zero
• webinars and training to assist councils and industry 

After its introduction on 1 October 2023, the new SEPP will be reviewed every three years, starting in 2025.

How is the sustainable buildings SEPP different from the design and place SEPP?

The new sustainable buildings SEPP follows in the footsteps of a previous sustainable planning proposal introduced by the former NSW planning minister, Rob Stokes, called the Design and Place SEPP.

However, on 5 April 2022, during a lunchtime event organised by developer lobby group Urban Taskforce Australia, Planning Minister Anthony Roberts announced he was dumping the policy, aside from an update to BASIX requirements.

Along with an update to the state’s BASIX requirements for residential developments, the DP SEPP included a major revision to the state’s apartment design guidelines, along with a new urban design guide for master planned communities.

The ADG and UDG included guidelines for cooler, lighter coloured roofs in new housing estates, deep soil connections between sites, and minimum natural ventilation requirements for apartments.

These have not been carried over into the new sustainable buildings SEPP. The light coloured roofs are understood to be a (hard to understand) serious point of contention.

The tradeoff is that the BASIX updates with the Design and Place SEPP did not extend to any non-residential buildings – something that is included with the new SEPP.

What types of non-residential developments are covered – and how?

The introduction of the non-residential parts of the SEPP will be staged, with retail and industrial developments to be included at a future date.

There are a number of types of buildings that are excluded from the laws:

• mining
• residential care
• boarding houses
• the three ports of Botany, Newcastle and Kembla
• land zoned rural, industrial, environmental conservation and waterways
• Any development that is for the purposes of infrastructure

The new embodied emissions reporting rules under the SEPP will apply to all non-residential developments that are covered by the policy. This will align with the NABERS embodied emissions framework, when it’s released in 2023

The new energy and water standards under the SEPP will only apply to large commercial developments, which will be based on the NABERS certification processes for energy and water.

These are defined as:

• offices with a net lettable area greater than 1000 square metres
• hotels and motels with more than 100 rooms
• serviced apartments with more than 100 apartments

The energy and water use standards policy won’t apply to a refurbished building if its capital investment value (CIV) is less than $10 million. 

The statement must explain whether the building is all-electric. If it’s not all-electric, it will need to explain how it will be capable of operating with all energy from renewable sources (excluding back-up generators) by 2035.

A net zero statement, prepared by an engineer, will be required for large commercial developments (including offices, hotels, serviced apartments) and state significant buildings (such as for health, education and cultural buildings).

The statement must explain whether the building is all-electric. If it’s not all-electric, it will need to explain how it will be capable of operating with all energy from renewable sources (excluding back-up generators) by 2035.

How will this affect residential developments? 

All new homes and renovations over $50,000 will need to meet the Building Sustainability Index (BASIX) requirements as part of the planning approvals process in NSW, except for homes in the north coast climate zone and small apartment buildings of up to five storeys.

New residential homes will be required to meet a higher BASIX thermal performance standard of at least 7 Stars under the NatHERS scheme.

BASIX will use the NatHERS whole-of-home calculation methods to calculate the energy consumption of proposed residential developments. The BASIX energy standard is based on greenhouse gas emission reductions from the baseline amount.

All-electric homes (with electric heat pump hot water systems, efficient reverse cycle airconditioners and induction cooktops) will be considered to meet the higher BASIX standard. These homes will be treated as net zero carbon-ready, because renewable energy systems (such as solar panels) can offset their greenhouse gas emissions.

What does the property sector say?

The initial feedback from the industry has been positive.

In a statement, the Property Council’s NSW deputy executive director Lauren Conceicao said the property industry was a critical stakeholder on the journey to net zero and a sustainable future.

“We have long advocated for a national approach to energy provisions and supported the increase of standards for energy and thermal performance in alignment with the latest National Construction Code,” Ms Conceicao said.

“The implementation of requirements for embodied carbon are a necessary next step, but we caution government to avoid a disjointed approach for commercial and residential buildings. This will create confusion in the market and reduce the effectiveness of the provisions.”

Criticisms remain over Design and Place SEPP

However, despite the new policy, Total Environment Centre director Jeff Angel remains critical of NSW Planning Minister Anthony Roberts over his decision to dump the Design and Place SEPP.

“When the minister did the bidding of the developers in dumping public consultation and the wide-ranging Design and Place SEPP in early April this year, he showed his true colours when it comes to tackling urban heat, growing our cooling tree canopy and local green spaces, and walkability to services,” Mr Angel said.

“You can build an energy efficient house, but there is another major challenge. That is an external environment that is not producing killer heat, causing households to use more energy, incur health problems and lack convenient access to services and green spaces. By leaving this to developers, he is condemning millions of residents to a poor and declining urban environment, particularly in Western Sydney.

“Later introduction of some guidelines for urban design will simply create massive loopholes for developers. The minister’s recruitment of Matt Kean to bolster his announcement today is further evidence he has a credibility problem – but it will take more than that. He only listened to climate damaging developers who wanted the SEPP dumped.”

EDITED ON 30 AUGUST AT 13:51 TO ADD COMMENTS FROM JEFF ANGEL.