This Energy Savings Opportunity Scheme (ESOS) guide provides clarity on compliance requirements, benefits, and practical steps for businesses. Simplify ESOS’s complexities and pave the way towards efficient building energy management and compliance.
What is ESOS?
The Energy Saving Opportunities Scheme (ESOS) is a mandatory energy assessment program for large UK organizations. Established under Article 8 of the EU Energy Efficiency Directive, ESOS targets "large undertakings" in the UK, defined as businesses, not-for-profits, and non-public sector organizations meeting specific criteria, such as having over 250 employees or exceeding certain financial thresholds.
These assessments include a thorough review of energy consumption in buildings, industrial processes, and transportation. The aim is to identify opportunities for cost-effective energy savings, contributing to environmental sustainability and carbon emission reduction.
ESOS Phase 3
The Energy Savings Opportunity Scheme (ESOS) has evolved through its phases since its inception. Phase 1 of ESOS spanned from December 31, 2014, to December 5, 2015, marking the scheme's initial rollout. This was followed by Phase 2, which ran from December 31, 2018, to December 5, 2019.
Currently, we are in ESOS Phase 3, which started on December 31, 2022, ESOS has introduced more stringent requirements to cover a broader scope of energy usage and align with the UK's net-zero goals. Despite Brexit, the regulations for Phase III continue under the Energy Savings Opportunity Scheme (Amendment) (EU Exit) Regulations 2018.
Key changes include the mandate to include a summary template of compliance information in the ESOS report and the requirement to cover at least 95% of total energy consumption. This phase also introduces the requirement for energy intensity ratios in reports, further aligning the scheme with the UK's net-zero goals.
ESOS Phase 3 Qualification Date
The ESOS Phase 3 qualification date has been extended to June 5, 2024, giving businesses additional time to meet the enhanced requirements of this phase.
Key dates for ESOS Phase 3 are outlined in the below graphic:
Unlike voluntary rating frameworks like LEED, Green Star, NABERS, and BREEAM, compliance with the Energy Savings Opportunity Scheme (ESOS) is mandatory for most large UK organizations. The criteria for inclusion spans private businesses, not-for-profit entities, and non-public sector undertakings with either 250 or more employees or financial thresholds surpassing £44 million in annual turnover and £38 million in annual balance sheet total.
To adhere to the ESOS energy audit standards, the following requirements should be met:
- 12-Month Data Requirement
The audit must utilize a full year of verifiable data. This data should represent a continuous period, starting no earlier than December 6, 2018, for the third phase of compliance. It should also commence no more than 24 months before the audit and not be previously used for audits in earlier compliance periods.
- Energy Use and Efficiency Analysis
The audit should thoroughly assess the organization's energy consumption and efficiency, ideally through energy consumption profiling. This involves a detailed breakdown and analysis of energy usage in various organizational activities and assets to identify patterns and inefficiencies in energy use.
- Identification of Energy-Saving Opportunities
The audit is required to identify energy-saving measures that are both practical and cost-effective. The evaluation of these opportunities should compare the potential energy or cost savings against the investment required for their implementation, considering the full lifecycle cost, including purchase, installation, maintenance, and depreciation. Implementing these identified opportunities is at the organization's discretion.
- Site Visit Requirements
Conducting site visits is a critical component of the ESOS audits. While it's not mandatory to visit every site, organizations must ensure that they have gathered and analyzed data for all major areas of energy consumption. For entities with multiple or similar sites, a proportionate approach can be employed, applying findings from specific site visits to the entire portfolio. The lead assessor and the organization are responsible for deciding an appropriate site visit strategy that accurately reflects the energy usage of their assets and activities. This chosen approach should be well-documented in the evidence pack, with detailed justifications, for evaluation during compliance audits.
How To Comply with ESOS?
Here are the 6 steps you need to complete an ESOS Audit. By following these directions, your organization can meet the required standards and ensure compliance. The below guide covers the essential processes, from calculating energy consumption to notifying the Environment Agency of compliance.
- Calculate Total Energy Consumption via an Energy Audit
This initial step requires measuring the energy used by all assets and activities, including buildings, industrial processes, and transportation. Accurate measurement is crucial as it forms the foundation of the ESOS assessment.
Below you can see an example from an actual ESOS audit with the kind of metrics that are regularly measured:
- Identify Areas of Significant Energy Consumption
Organizations must pinpoint areas that account for at least 95% of their total energy consumption. This identification helps focus on the most impactful areas for energy savings. The increase to 95% coverage in Phase 3, up from 90% in Phase 2, reflects a more rigorous approach to capturing a comprehensive picture of an organization's energy usage.
To account for their most significant areas of energy consumption, organizations should find out if part of their consumption has been assessed by other energy measurement frameworks like ISO 50001 Certification, Display Energy Certificates (DECs), and Green Deal Assessments (GDAs).
To comply with ESOS, you can utilize a blend of ISO 50001, Display Energy Certificates (DECs), Green Deal Assessments (GDAs), and ESOS energy audits, as long as they collectively cover a minimum of 95% of your total energy consumption.
- Appoint a Lead Assessor
A critical step in the ESOS process, the lead assessor must be a member of an approved professional body register. This individual is responsible for overseeing the ESOS assessment, ensuring that it meets all regulatory requirements, and signing off on the final report.
Lists of approved registers for ESOS lead assessors are available, encompassing a range of professional bodies.
Association of Energy Engineers: Certified Energy Auditor International or Certified Energy Manager International.
CIBSE (The Chartered Institution of Building Services Engineers): CIBSE Low Carbon Consultant (LCC) register, ESOS Lead Assessor subset.
Elmhurst Energy Systems: Elmhurst Approved ESOS Lead Assessor.
Energy Institute: Chartered Energy Manager, Register of Professional Energy Consultants.
Energy Managers Association: EMA Energy Saving Opportunity Scheme Lead Assessor Register.
Institution of Chemical Engineers: Register of Chartered Chemical Engineers (MIChemE/FIChemE) ESOS LEA.
Institute of Environmental Management and Assessment: Register of IEMA members who can act as third-party lead assessors.
Stroma Certification Ltd: ESOS Lead Energy Assessor Certification.
- Notify the Environment Agency
Once the ESOS assessment is completed and the organization is compliant, a notification of compliance must be submitted using the online system. This notification includes detailed information about the organization's energy consumption, the compliance methods used, and the energy savings opportunities identified.
- Keep Your Records
Maintaining a comprehensive evidence pack is mandatory for ESOS compliance. This pack should document how the organization has complied with the scheme, detailing the approaches taken, the audits conducted, and the rationale behind the compliance strategy.
- Plot Your Decarbonization Journey
Now that you have a full view of your business’ carbon footprint you can begin taking measures to reduce your energy consumption. Investing in a building energy management system can offer enhanced insight as to which mechanical elements or even faults are causing your property to waste energy.
The Energy Savings Opportunity Scheme (ESOS) mandates strict compliance, and failure to adhere to its requirements can lead to severe penalties:
- Non-Notification Fines - If a business fails to notify the Environment Agency of its compliance, it can incur an initial fine of up to £5,000. This is followed by a daily fine of £500 for each working day the breach continues.
- Inadequate Record-Keeping - Failing to maintain adequate records of compliance efforts can attract a fine of £5,000, plus additional costs equivalent to the expenses incurred by the compliance body in establishing the violation.
- Non-Completion of Energy Audit - Not conducting an adequate energy audit can result in a substantial fine of £50,000, plus a daily fine of £500 for each working day the breach continues. This emphasizes the importance of thorough and regular energy assessments.
- False or Misleading Information - Providing false or misleading information during the ESOS compliance process can lead to a penalty of up to £50,000.
These penalties underscore the importance of strict adherence to ESOS regulations, prompt notification of compliance, accurate record-keeping, and the integrity of information provided. Failure to comply not only attracts financial penalties but can also impact a company's reputation and standing in the business community. Businesses must take their ESOS responsibilities seriously to avoid these repercussions.
The Importance of ESOS for Businesses
The Energy Savings Opportunity Scheme (ESOS) is more than a regulatory requirement; it represents a significant opportunity for businesses to enhance their energy efficiency and operational performance. The benefits of ESOS assessments are multifaceted and can lead to substantial improvements for businesses in various ways:
- Cost Savings - One of the primary benefits of ESOS is the identification of areas where energy consumption can be reduced, leading to significant cost savings. By implementing the recommended energy-saving measures from ESOS audits, businesses can reduce their energy bills substantially.
- Enhanced Operational Efficiency - ESOS assessments encourage businesses to scrutinize and optimize their energy use. This process often leads to improved operational efficiencies across various departments, from production lines to office environments.
- Competitive Advantage - Companies that actively manage their energy consumption are often seen as industry leaders. By complying with ESOS, businesses not only adhere to regulatory standards but also position themselves as environmentally responsible, which can be an attractive trait for customers and investors.
- Carbon Footprint Reduction - ESOS assessments contribute to the broader goal of reducing carbon emissions. By identifying and implementing energy-saving opportunities, businesses can significantly lower their carbon footprint, aligning with global sustainability goals.
- Compliance and Risk Management - ESOS compliance helps businesses avoid potential penalties and reputational damage associated with non-compliance. It also prepares businesses for future environmental regulations, ensuring they are ahead in their compliance journey.
In summary, ESOS assessments offer businesses not only a path to compliance but also a strategic opportunity to enhance their energy efficiency, reduce costs, and contribute positively to environmental sustainability.
ESOS Phase 4
ESOS phase 4 is set between December 31, 2026 (qualification date), and December 5, 2027 (compliance date). As the regulatory environment evolves, businesses that may not currently meet ESOS criteria could become eligible, making it crucial for growing companies to stay informed and prepared. Here's a closer look at what's on the horizon during phase 4:
- Net Zero and Energy Efficiency Focus - Phase 4 will emphasize how organizations address both energy efficiency and the journey toward net zero, highlighting the need for comprehensive carbon reduction strategies and net zero plans.
- Rigorous Audit Standards - Audits will need to comply with either ISO 50002 or EN 16247 standards, elevating the rigor and quality of energy assessments. Note that ISO 50002 deals with energy audits, while ISO 50001 focuses on energy management systems.
- Elimination of DEC and GDA Routes - Display Energy Certificates and Green Deal Assessments will no longer be valid compliance routes, pushing businesses toward more thorough energy audits.
- Public Reporting and Transparency - There will be a new mandate for public disclosure of Environmental, Social, and Governance (ESG) targets and net zero assessments, enhancing accountability and transparency.
- Enhanced Monitoring and Data Collection - ESOS reports will require improved collection and monitoring of energy data, setting of controls, and staff training. This includes a focus on electricity demand and its systemic impact.
- Annual Progress Reporting - For organizations not covered by SECR, an ESOS web portal feature for annual progress reporting will be introduced, with an explanation required if goals are not met.
The push towards net zero and sustainability goals means the regulatory landscape for energy efficiency is continually evolving. This includes potential changes in regulations and standards, affecting how businesses approach energy management. For example, regulations for EPC ratings for residential buildings have been rescinded by the UK government. Staying ahead of these changes is crucial for compliance and seizing opportunities for energy efficiency improvements.
Conclusion: Leveraging Building Analytics for ESOS Compliance
In the realm of ESOS compliance, building analytics software plays a pivotal role. CIM's building analytics software utilizes operational data from buildings to automatically detect mechanical faults, promoting faster resolution times. This approach significantly cuts energy costs, improves tenant experiences, and boosts asset profitability, aligning operational efficiency with sustainable practices.
By analyzing energy data and providing actionable insights, CIM’s tools empower businesses to comply with ESOS and optimize their energy usage, leading to cost savings and reduced carbon footprint.
Building analytics exemplify how technology can streamline compliance processes, identify energy-saving opportunities, and enhance overall energy efficiency.
While you’ll still need to contract a licensed lead assessor, building analytics software can save you expenses on your energy audit as much of the necessary data is automatically displayed in real-time dashboards.
Businesses looking to navigate ESOS efficiently and harness the benefits of enhanced energy management are encouraged to contact CIM. Discover how CIM's building analytics solutions can streamline your ESOS compliance process and elevate your energy efficiency strategies.