Energy Savings Opportunity Scheme Phase 3 - A chance to make real business energy reductions

Business Insights

What is the Energy Savings Opportunity Scheme?

We are currently in Phase 3 of the Energy Savings Opportunity Scheme, otherwise and furthermore known as ESOS, which, whilst it is a mandatory energy assessment scheme for large UK businesses, it is also far more valuable than a tick box exercise. ESOS presents a real opportunity for businesses to improve energy and fuel efficiency, reduce carbon emissions and subsequently, reap financial benefits.

The scheme runs in phases of 4 years, therefore, organisations that qualify for ESOS must comply with ESOS in line with this frequency. There are various routes to compliance for ESOS, but the vast majority of companies choose to take the energy audit route. This involves audits of the energy used by their buildings, industrial processes and fuel use by transport. Only a qualified lead assessor is approved to conduct an ESOS assessment and deliver a compliant report for a company.

Join Comply Direct’s free ESOS Phase 3 webinar here for more information – choose from 22 June at 2pm or 6 September at 10am.

Which businesses are obligated to comply with ESOS legislation?

ESOS is a mandatory energy assessment scheme for large organisations in the UK that meet ONE of the below qualification criteria on the qualification date*:

  • employs 250 or more people, OR

  • has an annual turnover in excess of £44,000,000, and an annual balance sheet total in excess of £38,000,000, OR

  • an overseas company with a UK registered establishment which has 250 or more UK employees (paying income tax in the UK)

*The qualification date for phase 3 is 31 December 2022; the deadline for compliance is 5 December 2023.

How does ESOS compliance help businesses achieve energy and cost savings?

The energy audit route to ESOS compliance involves calculating a business’ total energy consumption for a 12-month period identifying the most significant areas, and at least 90% of the total energy consumption will be subject to ESOS compliant energy audits. The audits feed into a report of tailored recommendations setting out costed energy, fuel saving opportunities and good practice which would assist the company to make financial savings.

In addition, lead assessors may identify opportunities where appropriate in relation to behaviour change and potential for on-site renewable energy generation alongside any relevant grants, incentives or other available financially beneficial government schemes.

For example, savings demonstrated for some of Comply Direct’s ESOS customers (against total energy and fuel costs) include; Beiersdorf (14.2%), Regatta (20%), Vivid Imaginations (20.6%), and Sysmex (62.7%),

How can I ensure appointment of a quality lead assessor for my ESOS compliance project?

It seems like an obvious point, but a quality lead assessor will deliver the most quality ESOS report with meaningful and feasible recommendations for your business to implement. In the energy industry, low-cost lead assessors are generally those with the least experience and a limited track record. Therefore, it is important to get multiple comparative quotes and do your research into the credentials of each lead assessor, including how many ESOS compliance reports they have delivered, and whether they have ever failed an Environment Agency audit.

Substandard ESOS reports will not achieve compliance with the regulations, so in this scenario, the obligated company would have to start the process again with a different lead assessor and delay submission, leading to additional costs and possibly missing the industry compliance deadline.

There are not hundreds of qualified lead assessors available and it is important to note, as per stated in the Greenhouse Has Protocol (page 72), “that the knowledge and qualifications of the individual(s) conducting the verification can be more important than those of the organization(s) they come from….Companies should select organizations based on the knowledge and qualifications of their actual verifiers and ensure that the lead verifier assigned to them is appropriately experienced.”

What does the current government consultation mean for the future of ESOS?

July 2021 marked the release of the consultation on proposed changes to strengthen the current ESOS scheme as we move into phase 3.

The aims of the changes and improvements are:

  • To increase the number of ESOS participants taking action by improving audit quality

  • To increase carbon and cost savings by increasing the scope and number of recommendations taken up

  • To ensure recommendations are consistent with UK’s net zero commitments

Government’s response to the closed consultation is yet to be published and we anticipate this soon. However, we do know that the overarching aim of the consultation is to further improve quality ESOS reports and drive more real opportunities for businesses to save energy.

Some of the key proposed changes are set to be in effect prior to the phase 3 compliance deadline, including net zero audits and changes to the 5% de-minimis, so decisions will be made by The Department for Business, Energy and Industrial Strategy (BEIS) imminently on these.

In addition, it has been confirmed that failure to undertake an energy audit will result in an initial increased penalty of up to £50k and an additional £500 per day until the company complies with legislation. For entrants in their first year, this initial penalty will be £5k.

If you need support ensuring ESOS compliance for your business or just want to identify opportunities for reducing carbon emissions and improving environmental impact, contact Comply Direct’s carbon team who will be able to fulfil these requirements to the utmost quality – / 01756 794 951 /

Author: Susanna Jackson, Sustainability Consultant – Comply Direct Ltd