What is the Energy Savings Opportunity Scheme?
The Energy Savings Opportunity Scheme (ESOS) makes energy audits mandatory for big companies. It requires participants to carry out an assessment of their energy use, across their buildings, transport and industrial operations.
What does it mean in practice?
An auditor will need to review your organisation’s energy data (using 12 months of data) and survey your sites (using energy consumption profiling), in order to understand where energy is used – and wasted. Based on this information, the auditor will draw up a list of recommendations on how your organisation could save energy.
Who does it affect?
ESOS affects “large UK undertakings” and their corporate groups. This means businesses, not-for-profit bodies and other non-public-sector organisations that:
- employ 250 or more people
- have an annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million
What about the public sector?
The scheme largely excludes the public sector – that is, public bodies which must adhere to the UK Public Contracts Regulations 2006 (England, Wales and Scotland).
What if my organisation is part of a group?
A smaller undertaking will also qualify if it is part of a larger group which contains at least one “large undertaking” that qualifies.
Where a corporate group participates in ESOS, unless otherwise agreed, the highest UK parent will act as the ‘responsible undertaking’ and be responsible for ensuring the group as a whole complies with the requirements of ESOS.
How often do energy assessments have to be carried out under ESOS?
Organisations that qualify for ESOS must carry out ESOS assessments every 4 years. We are now in the third of these 4-year cycles (known as Phase 3).
What is the next deadline for ESOS compliance?
The deadline for ESOS Phase 3 was recently extended to 5th June 2024, giving participants more time to comply with the scheme’s new requirements, as well as giving assessors more time to carry out assessments.
What’s new in Phase 3?
The government recently consulted on proposals to strengthen ESOS, to align it with the UK’s net zero goals and drive greater action on energy efficiency.
Changes will take place in Phase 3, and Phase 4, and while the underpinning legislation is still subject to Parliamentary scrutiny, we can expect to see them set in stone before the end of 2023.
In Phase 3 you will now need to:
- Include a summary template of compliance information in the ESOS report
- Include additional data in the compliance notification – (the Environment Agency has set out a list which you can find here).
- Cover at least 95% of your total energy consumption (more on that below).
- Include energy intensity ratios in ESOS reports (more on that below).
- Share ESOS reports with subsidiaries.
- Provide more information on next steps for implementing recommendations.
- Set a target or action plan following the Phase 3 compliance deadline, and report against this for Phase 4.
- Provide additional data for compliance monitoring and enforcement.
What is an energy intensity ratio?
This is a new requirement for Phase 3. An energy intensity ratio defines your energy consumption within the context of an appropriate metric. For example, you must set out your energy use in terms of kWh per m2 for buildings, kWh per unit output for industry, and kWh per miles travelled for transport.
What are the changes to the “de minimis” rule?
In previous phases, participants were able to exclude up to 10% of their total energy consumption through “de minimis” rules, however, new rules being brought in for Phase 3 require organisations to cover at least 95% of their total energy consumption. This is to ensure that the ESOS report covers more of an organisation’s estate, now that the scheme is well established.
What type of recommendations will be made under ESOS?
Recommendations will be specific to your organisation, and there will be an emphasis on what is most cost-effective and practical. However, common recommendations may include insulation, building controls improvements, lighting upgrades and sub metering installation and monitoring.
What information should we provide on next steps/implementation?
Organisations aren’t yet required to implement any of the energy saving opportunities identified. However, the government wants to make ESOS more effective by getting organisations to flesh out how implementation might work. In Phase 3, ESOS reports should:
- Provide an indicative programme of options – outlining combined costs, benefits and payback period for the package.
- Suggest intervention points for measures that can’t be implemented now. This could be, for example, when renewing a transport/equipment lease or when replacing existing equipment.
- Signpost where buildings covered by the report are also covered by the Minimum Energy Efficiency Standards (MEES) for non-domestic buildings and whether this is relevant to the recommendations in the report (for example where there may be a requirement on landlords to carry out work that would affect a recommendation.
- Provide information on government schemes which could support businesses to implement energy savings opportunities recommended in the report.
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