New sustainability requirements for non-residential development in NSW

The NSW Government published the State Environmental Planning Policy (Sustainable Buildings) 2022 (Sustainable Buildings SEPP) on 29 August 2022 revealing its key instrument to deliver sustainable buildings in alignment with its net zero target for 2050. It will commence on 1 October 2023. The policy will for the first time, introduce sustainability requirements for non-residential development into a state planning instrument. The new provisions focus on integrated design, requiring developers and consent authorities to consider how the proposed development responds to sustainability imperatives and is accordingly, future proofed. It will also introduce measures to verify sustainability performance and in some instances require offsetting to address performance gaps.

This article focuses on the requirements applying to non-residential development; you can learn more about the SEPP's effects on residential development and the general legislative changes here.

Non-residential development

Chapter 3 of the Sustainable Buildings SEPP contains new provisions that apply to non-residential development. Non-residential development captures new buildings, and refurbishments with a capital investment value (CIV) of $10 million or more. It does not include development for the purposes of residential accommodation or other specific forms of development which are excluded by section 3.1(2).

There are three key parts to the changes:

1. General sustainability requirements

Consent authorities will now be required to consider a proposal's sustainability measures when determining whether or not to grant development consent to an application for non-residential development. The consent authority must consider whether the development is designed to:

• minimise waste from associated demolition and construction, including through the choice and reuse of building materials;
• reduce peak demand for electricity including through energy efficient technology;
• reduce reliance on artificial lighting and mechanical heating and cooling through passive design;
• generate and store renewable energy;
• meter and monitor energy consumption; and
• minimise consumption of potable water.

2. Large commercial development

In addition to the general sustainability requirements, new standards apply to large commercial development.

Large commercial development is non-residential development involving the erection of a new building or refurbishments with a CIV of $10 million or more, where the development meets the following description:

• office premises with a net lettable area of at least 1,000m²; or
• a hotel or motel with at least 100 rooms; or
• a building with at least 100 serviced apartments.

The additional standards which apply to large commercial development include:

Energy and Water Performance Standards

Schedule 3 of the Sustainable Buildings SEPP contains energy use and water use standards that now apply to large commercial development. The new provisions mandate that development consent cannot be granted for large commercial development unless the consent authority is satisfied that the proposed development is capable of achieving those standards. A NABERS commitment agreement which commits to achieving the standards will satisfy the requirement and such an agreement must accompany the development application.

The obligations don't stop at the design stage. Developers will need to demonstrate that the energy and water use standards are achieved post occupation. A new condition of consent will attach to large commercial development requiring a person provide the following material within 24 months of the date an Occupation Certificate is issued or the date on which the building may be occupied or use, if an Occupation Certificate is not required:

• an assessment of the NABERS rating for water use achieved by the development;
• an assessment of the NABERS rating for energy use achieved by the development; and
• evidence that any offset requirement has been satisfied.

Developers will need to provide offsets in two instances where actual performance doesn't match the standard. Firstly, if a development does not deliver the energy use standard required by the Sustainable Buildings SEPP it will need to offset this deficiency using large-scale renewable energy generation certificates. The Department of Planning and Environment's (DPE) "Sustainable Buildings SEPP Overview" suggests offsetting must account for residual emissions calculated for a minimum 5-year period. The difference between the rated annual electricity use for a building compared to the standard will be provided in the post occupation assessment of NABERS rating for energy use achieved. Secondly, offsetting may be required as part of the net zero statement (addressed below). The consent authority must determine the type and number of offsets required for a large commercial development.

It is worth noting that the energy use standards don't apply to large commercial development (other than serviced apartments) on certain land within the City of Sydney local government area.

Net Zero Statement

Consent authorities will now also be required to consider whether large commercial development minimise the use of on-site fossil fuels, as part of the goal of achieving net zero emissions in NSW by 2050.

A development application for a large commercial development must be accompanied by certain information (referred to as a net zero statement) which demonstrates that the development won't use on-site fossil fuels after the use commences or alternatively, incorporates infrastructure or space for infrastructure, that will result in no on-site fossil fuel use after 1 January 2035. The aim of this provision is to encourage new or newly refurbished developments to source all energy from renewables by 2035 and avoid the need for future retrofitting.

The net zero statement will provide an estimate of the annual energy consumption for the proposed building and the estimated emissions related to that energy use. The post occupation assessment for energy use will verify the rated use of on-site fossil fuels for the development and the associated amount of carbon dioxide calculated for the first 10 years of occupation. DPE's explanatory materials suggest that any fossil fuel use will need to be offset for a minimum 10-year period. Offsetting will be facilitated by the purchase of Australian Carbon Credit Units or through Climate Active Certification. The Environmental Planning and Assessment Regulation 2021 will require the consent authority to determine the type and number of offsets required and this will likely be captured in a condition of consent.

3. State Significant Development

The net zero statement requirement will also apply to specific types of state significant development, being certain cultural, medical and educational establishments. When determining a development application a consent authority must consider whether this state significant development will minimise the use of on-site fossil fuels as part of the net zero goal by 2050.

Offsetting obligations will not apply to these forms of state significant development.

Embodied emissions

The Sustainable Buildings SEPP will now require an applicant to quantify and report on embodied emissions attributable to the development and development consent cannot be issued without that quantification.

Embodied emissions are greenhouse gas emissions resulting from the materials used to construct a building including emissions from extracting raw materials, transportation of materials for manufacture and the manufacture of those materials used to construct the building.

For non-residential development, DPE's "Sustainable Buildings SEPP Overview" indicates embodied emissions will be calculated via an online form on the Planning Portal that will measure key materials such as substructure, superstructure and façade of buildings through a bill of quantities that is to be prepared by a quantity surveyor, qualified designer, engineer or assessor accredited under NABERS. DPE has indicated the NABERS emissions framework could be applied once this has been introduced.

DPE has released an Embodied Emissions Technical Note which provides further details of the emissions reporting requirement.

The new recording requirement is a first step to tackling embodied emissions from construction materials. Reducing emissions in this area is key to achieving the state's net zero target. According to the Green Building Council of Australia, embodied carbon from buildings materials in 2019 represented 16% of Australia's built environment emissions and are set to make up 85% of emissions from the building sector by 2050 if not addressed.

DPE has indicated that capturing this data may help inform an embodied emissions target in future revisions of the Sustainable Buildings SEPP.