The Energy Savings Opportunity Scheme (ESOS) is a mandatory assessment and energy saving identification scheme administered by the Environment Agency to ensure UK compliance with the European Union 2012 Energy Efficiency Directive. The overall aim of the scheme is to increase energy efficiency, improve business profits and competitiveness along with mitigating climate change. The estimated net benefit of the scheme to the UK is approximately £1.6 billion between 2015 and 2030.
The Environment Agency have cast the net wide and ESOS is mandatory for organisations comprising of over 250 employees or those with less than 250 employees but with sales of over £38.5m and a balance sheet of over £33.5m. Under the scheme, an organisation is defined as a corporate body or partnership or an unincorporated association carrying on a trade of business, with or without a view to profit.
There are hefty fines to ensure compliance. Failure for organisations who meet the eligibility criteria to comply carry fines of up to £50,000 and further charges of £500 per day thereafter until compliance is met.
Under the scheme, organisations are responsible for checking eligibility from 31st December 2014. The scheme also has provisions to catch organisations who are close to qualifying at 31st December 2014 and those who have grown or shrunk in recent times. Where an organisation qualifies to take part in ESOS, full compliance is required by 5th December 2015.
The ESOS review comprises of four main elements:
1. The calculation of overall energy consumption for buildings, industrial processes and transport over a 12 month period.
2. Identification of areas of significant energy consumption that account for at least 90% of total energy consumption.
3. Preparation of an audit, identifying practical recommendations for energy savings.
4. Reporting compliance in the form of a final submission. This must be submitted by 5th December 2015.
As part of the process, organisations are required to compile a detailed evidence pack to be provided to the Environment Agency should they request sight. The actual final submission is just an overview and will not include the audit report or the detailed evidence pack, however the Environment Agency can demand sight of this. It is not known how many audits the Environment Agency will review however substantial fines (up to £50,000) can be levied if ESOS compliance has not been carried out correctly.
Whilst organisations are entitled to complete the majority of work internally, it is likely most will require external help. At the very least, an independent lead assessor must be appointed to ensure the assessment meets all ESOS requirements. The assessor will need to sign off that the assessment meets all requirements before compliance can be reached. There are a number of lead assessors available although it is believed there will be a shortage to cover all organisations involved in the scheme. The Environment Agency suggests that currently approximately 50% of organisations who will need to comply with ESOS have done nothing about it. It is therefore important that organisations act now to review whether they will need to comply. If they do, then appropriate arrangements to complete the work required should be made in addition to appointing any external help and a suitable lead assessor.
At this stage it is interesting to note that whilst organisations need to identify energy savings opportunities, there is no obligation for these to be implemented. However given the time and financial costs to meet compliance, it would seem logical that organisations would seek to implement sensible changes to reduce energy consumption and recoup the cost of compliance.
The overall crux of the scheme is to bring the importance of energy consumption and efficiencies to the forefront of an organisation. It is estimated that there is potential for annual energy costs to be reduced by up to 30% through energy efficiency and improved energy management. In addition the implementation of carbon management strategies highlighted by the ESOS audit also carry the benefit of aiding Organisations to meet their corporate social responsibilities by reducing its carbon footprint. However, compliance may prove to be a strain on time and budgets for many organisations.
Andrew Lees is a consultant at Expense Reduction Analysts.