The Energy Savings Opportunity Scheme (ESOS) has been running since 1 January 2017. If your business qualifies for ESOS, you must comply or face significant penalties. ESOS has been subject to three phases, and the Phase 3 deadline is 5 December 2023. With less than a year to go, we look at what this means for your business.
What is ESOS
The ESOS scheme is a mandatory energy assessment and energy-saving initiative that the UK Government introduced in 2014. It’s designed to help organisations reduce energy usage, lower carbon emissions, and save money through energy efficiency measures. Large organisations are required to assess their energy usage every four years and use this assessment to identify new ways to save energy. The Environment Agency manages the scheme in England, the Northern Ireland Environment Agency, the Scottish Environment Protection Agency, and Natural Resources Wales. Non-compliances, for example, failing to submit before the deadline, can incur penalties from the applicable agency. Penalties range from publication of non-compliance on their websites to a £50,000 fixed penalty. This fine will also increase for each day of non-compliance.
Who needs to comply with ESOS phase 3?
It’s estimated that more than 11,000 businesses in the UK are in the scheme’s scope. These “large undertakings” are defined using the following thresholds:
- Employing more than 250 people, or
- Annual turnover of more than £44M AND an annual balance sheets total of more than £38M
For overseas businesses, they will also have to comply if they employ more than 250 people in the UK. And if your business is part of a larger organisation and this organisation is above these thresholds. Organisations qualifying for ESOS must undertake an energy audit every four years to identify wasted areas and implement energy efficiency measures. It’s important to note that this is a progressive scheme, so companies must register in time every time a new phase starts. If your business previously qualified under phase 1 or 2 and no longer qualifies, it’s a good idea to submit a DNQ (Do Not Qualify).
What is ESOS phase 3
The Phase 1 compliance date was 5 December 2015, and Phase 2 was 5 December 2019. We have now entered Phase 3 with the compliance date of 5 December 2023. There were several changes to Phase 3 that were published in August 2022.
- The inclusion of standardised information – a template is provided for the population to ensure certain information is standardised for all participants.
- Change to the de-minimis rules – this is reduced from 10% to 5% and is likely to mean more site surveys and the inclusion of transport for many organisations.
- Inclusion of an action plan and sharing the report with subsidiaries – to improve Senior level buy-in and understanding of the following steps across the business.
- The collection of additional data – including intensity metrics.
The good news is that there are no changes to the existing site surveys, so those previously completed do not need to change.
What’s required for ESOS phase 3
There are five stages to the process:
- Measure your company’s energy consumption. This should be completed over 12 months and needs to include energy consumed in your sites, processes, and transportation.
- Identify areas of significant energy consumption. You can exclude some of your energy consumption under the 5% “de-minimis” category.
- Analyse the data. This should audit your energy consumption and how energy-efficient your organisation is. It outlines ways to become more energy efficient, detailing the benefits of these measures and the costs associated with adopting them.
- An approved lead assessor must check the report. There are a few exceptions to this rule, but generally, a lead assessor must review the report before the company directors sign it off.
- Notify the applicable agency. The Environment Agency in England, the Northern Ireland Environment Agency, the Scottish Environment Protection Agency, or Natural Resources Wales.
The benefits of ESOS Phase 3
The benefits of compliance activity aren’t always easy to see. Regulation, compliance, and corporate red tape are often seen as “just do it” activities that businesses may not immediately realise the benefits of. But acting on your ESOS survey recommendations can turn your compliance activity into actual savings. Surveys will identify practical and cost-effective ways to save energy and money. So, when organisations face increasing energy prices, acting on your audits ahead of the deadline can save your organisation a lot of money. It’s more important than ever to reduce your energy costs and consumption as much as possible. The faster you start your ESOS Phase 3 compliance, the more time you have to take advantage of the energy-saving recommendations and boost your bottom line whilst energy prices are high.
Beyond ESOS Phase 3
With the volatility of the energy market, marking ESOS Phase 3 a priority for your business could give your business actual savings. And the most recent announcements about Phase 4 indicate that the government intends to get even more challenging. They will want businesses to take more action on their ESOS recommendations and ask for explanations when they choose not to complete recommendations in their reports. But more than anything, your ESOS compliance gives your organisation a real opportunity to set a strategy for reaching Net Zero – something that the government will indeed be using ESOS compliance to track in future phases.
Using an Energy Consultancy
An energy consultancy can provide invaluable advice and support to help you understand your obligations and meet compliance requirements. They can help you understand the different routes you can take to comply. They can carry out an ESOS audit and provide energy efficiency advice to help you understand your energy usage and identify areas of energy wastage. They can also help to develop a tailored energy efficiency plan to help you meet your compliance obligations and reduce your organisation’s carbon emissions.
Organisations should also consider the potential of renewable energy sources and the benefits of investing in renewable energy sources such as solar, wind, hydro, and biomass. An energy consultancy can provide valuable advice and guidance on your business’s best renewable energy options.
Ultimately, the ESOS scheme is an effective way for organisations to save money, reduce their carbon emissions and improve their energy efficiency. An energy consultancy can provide expert advice to help your business meet the ESOS compliance requirements and take advantage of the savings and benefits that energy efficiency measures can bring.
How we can help
The official phase 3 deadline is upon us, and without proper preparation, you are in danger of missing it. Compiling and submitting your energy audit is a complicated process, and businesses operating in the UK must take steps to ensure their compliance. If you need help with energy consultancy or ESOS phase 3, then we can help.
Working with us will ensure an effective energy audit and support you in implementing the recommended changes. We can be with you during all steps of your compliance. Driving energy efficiencies and saving your business money. Implementing these measures to save money while complying with legislation is possible.