ESOS (Energy Savings Opportunity Scheme)
What is ESOS?
The Energy Savings Opportunity Scheme (known as ESOS) is a government mandated energy efficiency scheme based in UK Law with the Environment Agency as scheme administrator. Organisations that qualify for ESOS must carry out ESOS assessments every 4 years. These assessments are audits of the energy used by buildings, industrial processes and transport fuel to identify cost-effective energy saving measures; water however is exempt.
Organisations must notify the Environment Agency by a set deadline that they have complied with their ESOS obligations. The first compliance deadline was 5th December 2015 but was extended until 29th January 2016 for late compliances.
The scheme applies to large undertakings and groups containing large undertakings in the UK. An undertaking, as defined in the Companies Act 2006, is:
- a corporate body or partnership;
- an unincorporated association carrying on a trade or business, with or without a view to profit
ESOS is the UK’s implementation of Article 8 of the EU’s Energy Efficiency Directive and introduces regular energy audits that will highlight energy savings. These audits must cover 90% of the organisational energy and requires sign-off from a qualified Lead Assessor.
ESOS aims to reduce EU energy consumption by 20% by 2020. Routes to compliance include ESOS audits, Display Energy Certificates (DECs), Green Deal Assessments and ISO 50001. Public bodies are exempt. Large organisations that comply are classified as those with:
- In excess of 250 employees or
- A turnover of more than €50,000,000 (around £39.5m) and an annual balance sheet in excess of €43,000,000 (around £33.5m) at the time the law was passed
ESOS Phase 2
The cost of energy has risen by around 70% over the past decade and is forecast to rise a further 25% over the next three years. Energy prices are often very volatile and by 2020, non-commodity elements (taxation and levies) could account for approximately 60% of your electricity bill in the process overtaking the cost of wholesale energy (the raw energy element).
In commencing the Phase 2 process now you will have the opportunity to gather information in preparation for the deadline of 5th December 2019, which could be easier on your business and your budget, rather than compiling it in retrospect. Additionally, by implementing recommendations from your ESOS report, you can improve your organisation’s energy efficiency and therefore achieve financial savings to offset the upcoming incremental costs.
It is worth noting that quality Lead Assessors are in short supply. It has recently been reported that there is only one Lead Assessor for every 10 organisations. Ensure you are working ahead of your competitors to comply pre-deadline – don’t get caught out waiting for a Lead Assessor!
Outsourcing ESOS compliance has many benefits. Coral Energy's approach provides a full legislative compliance process along with expertise to implement energy savings at no initial cost.
Failure to comply: Phase 1 was conducted between 31st December 2014 and 5th December 2015, however, many companies did not comply with the scheme by the set deadline.
For those companies who failed to comply during Phase 1, many are now facing significant penalties and will now need to comply within Phase 2 regardless of their issued penalty.
A staggering 40% of organisations still were not compliant 4 months after the Phase 1 deadline. Make sure you act early to avoid a penalty for Phase 2.
How ESOS Works
An ESOS Assessment requires participants to do three things:
1. Measure the total energy consumption across buildings, transport and industrial activities.
2. Conduct energy audits to identify cost-effective energy efficiency recommendations, ensuring that at least 90% of the total energy consumption is subject to a compliant audit during each phase of the scheme. For the first phase of the scheme any energy auditing activity dating back to December 2011 may be used to support compliance provided that it meets the minimum standards required of ESOS energy audits.
3. Report compliance to the Environment Agency, which is completed on-line. The assessment must have been reviewed by a Board level Director and approved by a Lead Assessor.
An ESOS compliant energy audit needs to meet the following criteria:
- The data must be 12 months verifiable and be for a continuous period,
- The data must begin no earlier than 6 December 2010 for the first compliance period (and no more than 12 months before the start of future compliance periods),
- The data must begin no more than 24 months before the start of the energy audit,
- The data must not have been used as the basis for an energy audit in a previous compliance period.
Firstly you need to determine whether your business needs to comply with ESOS. If the answer is yes, then critically you should contact an ESOS Assessor as soon as possible to plan the audit as this should have been completed by 5th December 2015 and could take several months to pull together.
An approved Assessor is responsible for working with key parties in the organisation to identify opportunities to reduce energy costs, target energy waste and detail those opportunities in an ESOS Report. The audit should cover how energy is used in buildings, transport and industrial operations based on an analysis of data and site survey's as appropriate.
Participants are not required to implement energy efficiency recommendations identified by their Assessments. They will however only achieve the financial benefits that arise from avoiding energy waste if they do implement cost-effective recommendations identified.
ESOS is a rolling 4 year cycle as follows:
31 Dec 2014
31 Dec 2018
31 Dec 2022
6 Dec 2011 – 5 Dec 2015
6 Dec 2015 – 5 Dec 2019
6 Dec 2019 – 5 Dec 2023
5 Dec 2015
5 Dec 2019
5 Dec 2023
The Environment Agency issued an enforcement document in 2015 outlining the fines that can be imposed, which is up to £5,000 but is actually defined on a scale of charges. And if you do get fined, you still have to complete ESOS compliance, therefore, can you really take the risk of non complying?