The Department for Business, Energy and Industrial Strategy (BEIS) recently published its response to the consultation on proposals to strengthen the Energy Savings Opportunity Scheme (ESOS) held in September 2021, to improve the uptake of energy efficiency measures, and increase the benefits for participating businesses. The core proposals included:
- improving the quality of audits through increased standardisation of reporting requirements
- the inclusion of a net zero element to audits
- requiring public disclosure of high-level recommendations by participants
ESOS is a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria. Read more about it here.
Consultation outcome and decisions
There has been an overall support to strengthen and improve the scheme, and the core proposals (mentioned above) received widespread support.
On 19 July 2022, the Government announced its intention to include powers to make the necessary changes to the scheme in the Energy Bill via a government amendment. Subject to the necessary Parliamentary scrutiny and scheduling including seeking views from the devolved administrations, the Government intends to implement some of the changes in advance of the current Phase 3 compliance deadline, and others, such as adding a net zero audit element, in Phase 4.
The proposals to be adopted in Phase 3 on a mandatory basis relate to:
- a standardised template for including compliance information in the ESOS report, generally comprising ESOS information the participant should already have available*
- the reduction of the 10% de minimis exemption to up to 5%
- the addition of an energy intensity metric in ESOS reports
- requirement to share ESOS reports with subsidiaries
- requirement for ESOS reports to provide more information on next steps for implementing recommendations
- requirement for participants to set a target or action plan following the Phase 3 compliance deadline, on which they will be required to report against for Phase 4
- collection of additional data for compliance monitoring and enforcement
Government also indicated that the following options will be consulted on as developments in future phases:
- extending the scope of the scheme to include medium-sized businesses, not already part of a corporate group containing a large business
- mandating action on audit recommendations
* What standardised details to be captured?
- Organisational details including corporate group structure, highest UK parent (and overseas where appropriate), Companies House registration numbers for the entities in the group and Standard Industrial Classification (SIC) codes.
- Reason for qualification in ESOS – based on employee numbers, turnover, balance sheet or inclusion in corporate group.
- Route(s) to ESOS compliance used.
- ESOS lead assessor details and details of all other personnel involved in conducting site visits and/or completing the report.
- Total Energy Consumption, Significant Energy Consumption and any de minimis exclusions.
- If ISO 50001 certification is used, an explanation of how certification scope matches (or otherwise) the scope required by the Significant Energy Consumption.
- Use of 12 months energy data, estimates and energy profiling for ESOS compliance.
- Number of sites, site sampling method used and rationale for this method
- Brief summary of the main audit findings (e.g. total savings identified) and actions taken since any previous audit.
- Confirmation that board member signing off is an Executive Director for the highest UK parent, as registered with Companies House.
ESOS and NET ZERO
The consultation outcome indicated broad support for the proposal that ESOS should include an assessment of actions needed to meet future net zero commitments.
BEIS indicated that it will introduce changes in Phase 4 to refocus the ESOS scheme to cover both energy efficiency and net zero. The net zero assessment will identify potential risks to the business of moving to net zero and well as possible emission reduction trajectories and ensure that investment in energy efficiency now does not prejudice those net zero trajectories.
The Government will consider the scope of the net zero elements and how net zero considerations should be incorporated into the strengthened scheme, and is supporting BSI to produce a Publicly Available Specification (PAS) to set out the net zero requirements for an ESOS audit, which they expect to include a public consultation on the new PAS standard to enable it to be available early in 2023.
At a minimum, net zero assessments will require confirmation that any ESOS recommendations are aligned to net zero goals and should include recommendations that look to reduce GHG emissions even where these do not currently generate a direct energy cost saving.