ESOS is being strengthened: Concept’s quick guide
The government has just announced its plans to raise the ambition and standards of the Energy Savings Opportunity Scheme, to make it a greater driver for energy efficiency action and align it with UK decarbonisation goals.
Some of the changes will take place in the current phase (Phase 3), with a compliance deadline of 5 December 2023. Other more ambitious elements are to be introduced in Phase 4 and beyond.
The government is developing new guidance for firms in scope, and all changes will be subject to parliamentary scrutiny, but in the meantime, here are the main changes we’re likely to see.
ESOS Phase 3 changes (compliance deadline 5 December 2023)
- Participants must set a target or action plan following the Phase 3 compliance deadline. Firms will need to report progress annually via the energy efficiency section narrative in SECR reports. They won’t need to meet the target in this current phase, but this will become mandatory from Phase 4 onwards (or organisations must explain why they haven’t met the target).
- A reduction of the 10% de minimis exemption to up to 5%.
- The addition of an energy intensity metric in ESOS reports. This needs to be expressed in terms of kWh/m2 for buildings, kWh/unit output for industry and kWh/miles travelled for transport.
- A standardised template for including compliance information in the ESOS report. This will generally comprise ESOS information that participants will already have available. The template is still being developed.
- ESOS reports must be shared with subsidiaries.
- ESOS reports will need to provide more information on next steps for implementing recommendations.
- Collection of additional data for compliance monitoring and enforcement. This will include data on corporate structure, details of energy consumption and emissions, and energy intensity metrics.
ESOS Phase 4 changes:
- The introduction of a ‘net zero element’ to ESOS audits. Phase 4 reports will need to include an assessment of actions needed to meet future net zero commitments. The government is currently working with BSI on the production of a new net zero audit PAS standard to facilitate this.
- Changing the ESOS balance sheet and turnover thresholds to align with SECR. Organisations would be in scope of ESOS if they meet at least one of the SECR qualification criteria: at least 250 employees, a balance sheet of at least £18 million, or turnover of at least £36 million.
- Mandating action on audit recommendations. Firms will need to provide an explanation if targets and goals have not been met.
- ESOS reporting will be required to follow an existing auditing standard such as ISO 50002 or EN 16247.
- Display Energy Certificates (DECs) and GDAs will be removed as compliance routes for ESOS.
The government is also considering extending the scope of the scheme to include medium-sized businesses; if it happens this will be introduced at a later phase. For more advice on changes to ESOS and your new obligations, get in touch on firstname.lastname@example.org