ESOS: How to turn your legal obligation into an energy saving opportunity

Author
Rhiannon McCarthy
Content and Communications Manager | Power Direct Ltd
22nd May 2019
Member roleChamber member

The deadline for the first phase of the Energy Savings Opportunity Scheme (ESOS) passed in December 2015, which means that, if they haven’t already, qualifying businesses must now start the process to meet the phase 2 deadline of 5 December 2019 – and do so urgently!

ESOS is a mandatory energy assessment scheme enforced by the Environment Agency. Organisations that qualify must carry out ESOS assessments every four years. These assessments are audits of the energy used by the organisations’ buildings, industrial processes and transport, which enable the identification of cost-effective energy saving measures.

Approximately 10,000 organisations qualify for the scheme, who between them consume one third of the UK’s energy. This means early engagement and preparation for each phase deadline is key, in order to avoid any delay or increase in fees, caused by demand for the services of available lead assessors.

Does this requirement apply to your business?

Your business will need to comply with the legislation if one or more of the following applied on 31 December 2018:

Your business employs more than 250 employees

Your annual turnover is more than $50 million (£38,937,777) and your annual balance sheet totals more than $43 million (£33,486,489)

 

What to do if your business qualifies

If your organisation meets the qualification criteria, there are five key steps to compliance:

Step 1: Calculate your total energy consumption 

Step 2: Identify your areas of significant energy consumption

Step 3: Complete the required audits for one year’s consumption, under the direction of a lead assessor

Step 4: Submit your ESOS notification of compliance to the Environment Agency

Step 5: Keep records of compliance in an evidence pack 

 

Implications of non-compliance

Qualifying businesses will need to prove their compliance by 5 December 2019, or risk a fine or penalty for non-compliance.

 

Lessons learned from phase one

During the first phase of ESOS, too many businesses left their compliance activity until too late. The large spike in activity just one month before the deadline meant that there was a demand for lead assessors, which increased prices for those services.

The Environment Agency demonstrated leniency during phase 1 by extending the deadline. However, it undertook a significant level of audit activity after the extended deadline, including checking that obligated companies had complied, as well as reviewing the quality of the audits.  As a result, 15 organisations were penalised, with fines ranging from between £1,500 and £45,000.1

Only 21% of the applications were compliant, a further 55% were compliant with remedial actions identified, while 11% didn’t qualify and 13% were non-compliant.

Common reasons for non-compliance included that transport consumption wasn’t taken account of; or that businesses hadn’t covered the required 90% of their energy consumption; or that board members hadn’t signed off on the submission.

 

Turning compliance into an opportunity

The Environment Agency identified that the most common reason for delayed or late compliance was that businesses placed a low priority on energy efficiency and ESOS.2

ESOS should be viewed not simply as a legal requirement, but as an opportunity for businesses to improve energy efficiency, allowing potentially significant savings on energy spend.

An audit will identify how and where your business is using energy, with measures identified that include both costings and ROI. This means you can make informed choices on how to make investments that reduce your energy consumption and associated costs.

Implementing the identified energy saving recommendations in an ESOS audit is not mandatory. As a result, many viable energy saving recommendations from phase 1 remain unimplemented.

And yet, on average, a business can reduce its annual energy costs by 20% through improving energy efficiency and energy management. And the savings don’t always require a significant investment. The Carbon Trust identified that savings of 5-10% can be made with a small expenditure, such as installing or optimising lighting or heating control systems, changing the way you measure and monitor energy consumption, or engaging your staff to change their behaviour.3

According to the Environment Agency, if businesses qualifying for ESOS reduce their energy use by just 0.7 per cent, they will save around £250m each year.4

 

Need help?

The requirements of ESOS are complex, but engaging with a commercial energy auditing organisation early on can enable you to meet the auditing deadline in good time.

An auditing organisation can lead the process, while identifying measures for reducing energy consumption and maximising the associated business benefits. With qualified and registered lead assessors on hand to review and guide the process, you can be assured of the support you need right the way through to full ESOS compliance.

Call our team of energy experts if you would like an informal discussion on how we can help you on your journey towards ESOS compliance, or for anything else to do with your energy: 0333 1234 313.

 

References:

https://ea.sharefile.com/share/view/s58d41f8856947e88

Evaluation of the Energy Savings Opportunity Scheme

Guide to implementing energy savings

https://www.gov.uk/government/news/uk-firms-could-miss-out-on-huge-energ...

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