Concept’s Guide to the Energy Savings Opportunity Scheme (ESOS – Phase 3)

In July 2022 the government published details on how it will strengthen the ESOS scheme in phase 3 and beyond (you can learn more in our recent blog post).  All changes are subject to parliamentary scrutiny, so below is our guide to the scheme as it stands. We’ll update this guide when changes come into force.

The basics: ESOS in a nutshell.

What is the Energy Savings Opportunity Scheme?

The Energy Savings Opportunity Scheme (ESOS) makes ‘energy audits’ mandatory for big companies. It requires participants to carry out an assessment of their energy use, across their buildings, transport and industrial operations.

What does it mean in practice?

An auditor will need to review your organisation’s energy data (using 12 months of data) and survey your sites (using energy consumption profiling), in order to understand where energy is used – and wasted. Based on this information, the auditor will draw up a list of recommendations on how your organisation could save energy.

Is it a carbon tax?

No. ESOS is intended to highlight instances where energy is being wasted, to encourage a change in behaviour. It is not a direct tax on CO2 emissions.

How can I reduce the amount I have to pay under ESOS?

The scheme is set up so that, if your organisation follows the energy-saving recommendations that accompany the assessment, savings on energy bills should outweigh the cost of the assessment. In fact, the Government estimates participants could save 13.5 times the cost of the assessment.

The participants

Find out who’s liable under ESOS.

Who does it affect?

ESOS affects “large UK undertakings” and their corporate groups. This means businesses, not-for-profit bodies and other non-public-sector organisations that:

• employ 250 or more people
• have an annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million

What about the public sector?

The scheme largely excludes the public sector – that is, public bodies which must adhere to the UK Public Contracts Regulations 2006 (England, Wales and Scotland).

What if my organisation is part of a group?

A smaller undertaking will also qualify if it is part of a larger group which contains at least one “large undertaking” that qualifies.

Where a corporate group participates in ESOS, unless otherwise agreed, the highest UK parent will act as the ‘responsible undertaking’ and be responsible for ensuring the group as a whole complies with the requirements of ESOS.

What if I’m already subject to other energy legislation?

You’ll still have to carry out an energy assessment under ESOS. However, you may be able to reuse some of the data collected as part of compliance under other schemes, such as Streamlined Energy and Carbon Reporting. Many organisations in scope of ESOS will also have SECR obligations; the systems in place to collect and audit energy use will be helpful to both schemes.

What if I’m already covered by ISO 50001?

If your organisation is fully covered by ISO 50001, you don’t need to carry out an ESOS assessment – just submit a notification to the regulator. If you are considering this route to ESOS compliance, we can help.

The details

Get to grips with the ins and outs of ESOS.

How often do energy assessments have to be carried out under ESOS?

Organisations that qualify for ESOS must carry out ESOS assessments every 4 years. We are now in the third of these 4-year cycles (known as phase 3).

What is the next deadline for ESOS compliance?

The notification deadline for phase 2 passed on 5th December 2019. The deadline for phase 3 is 5th December 2023.

Who is ESOS regulated by?

The Environment Agency administers the scheme for the UK and regulates the scheme in England. The Scottish Environment Protection Agency, Northern Ireland Environment Agency and Natural Resources Wales regulate the scheme in their own countries. Offshore, ESOS is regulated by the Secretary of State for Business, Energy and Industrial Strategy.

Does ESOS involve auditing ALL of my organisation’s energy consumption?

90% of total energy usage (“areas of significant energy consumption”) is required to be included in the ESOS assessment, but this can be defined by the participant in a variety of ways (by type of fuel, by site, by part of an organisation, etc.), provided that a rational approach has been adopted.

What types of transport energy use are included?

Transport energy usage to be included under ESOS is that where the participant has been supplied with the fuel direct. So it excludes, for example, company travel by rail or air, but company cars would be included where the employee claims the cost of fuel from the employer organisation.

Can anyone in my organisation oversee the ESOS assessment?

No. The ESOS process needs to be overseen by a Lead Assessor who is a member of an approved professional body register. An in-house employee will either need to apply to one of these approved bodies, or you’ll need to work with an external consultant, such as Concept.

Will my energy use be made public?

No. The intention of ESOS is not to publicise or ‘name and shame’ participants.

Does ESOS require every site within the organisation to be surveyed?

Not necessarily. If your organisation has multiple, similar sites, a few sample sites can be surveyed and findings extrapolated.

What if I supply energy to another organisation?

The supply rules indicate that participants are responsible for all energy they consume, but not, for instance, energy that is purchased for supply to a separate third party, such as a tenant occupying part of a site, provided it is measured/metered. Landlords are responsible for the energy in common parts of multi-occupant buildings, however.

What type of recommendations will be made under ESOS?

Recommendations will be specific to your organisation, and there will be an emphasis on what is most cost-effective and practical. However, common recommendations may include insulation, building controls improvements, lighting upgrades and sub metering installation and monitoring.

The penalties

Find out what happens if you don’t comply.

Are there penalties if I fail to comply?

Yes. The EA has recently strengthened its enforcement approach and says it will impose penalties for each separate breach of the ESOS regulations:

• Failure to notify: an initial penalty up to £5,000, plus a daily penalty of up to £500 for each working day the organisation remains in breach. This penalty will apply regardless of whether (or not) the organisation has undertaken an energy audit.
• Failure to maintain records: an initial penalty of up to £5,000, plus a “sum representing the cost to the compliance body of confirming that the responsible undertaking has compliance complied with the scheme”. The organisation must also take steps to remedy the breach.
• Failure to undertake an energy audit: an initial penalty of up to £50,000, plus a daily penalty of up to £500 for each working day the organisation remains in breach. The organisation must also take steps to remedy the breach. Note that there is a more lenient approach for new entrants, however: a lower initial penalty of up to £5,000.
• Failure to comply with an enforcement/penalty notice: an initial penalty of up to £5,000; plus up to £500 for each working day the organisation remains in breach.
• False or misleading statement: up to £50,000.

Will the non-compliance be made public?

Yes. If you don’t comply, it is likely that the name of your organisation, the amount you were fined and the reason for the penalty will be published on the Environment Agency website.

Will I be fined if I don’t implement the energy-saving recommendations?

No. Only the assessment is mandatory, not implementing the recommendations. However, putting in place these energy-efficiency measures represents an important way to recoup the cost of the audit.

What next?

Is ESOS likely to change?

Yes. In July 2022 the government published details on how it plans to strengthen the ESOS scheme in phase 3 and beyond – our recent blog post explains all.  All changes are subject to parliamentary scrutiny. We’ll update this guide when changes come into force.

Support with ESOS compliance

An experienced carbon consultant can provide a Lead Assessor for your ESOS compliance and offer advice on how to get the best out of the ESOS process.

At Concept Energy, we have a long history of carrying out energy surveys, and helping our clients to achieve legislative compliance. Our consultants are accredited under the CIBSE Low Carbon Consultants scheme, and as CIBSE has been approved to operate a register of accredited ESOS Lead Assessors, we are well-placed to support our clients through the ESOS process.

Bear in mind that the more time and energy you invest in ESOS process, the greater the financial savings you’ll see as a result. If you’d like to talk through ESOS compliance with one of our experts, please get in touch.

Further Information

• Government guide to ESOS
• Contact Concept Energy for further advice on ESOS
• Read our blog post about upcoming changes to the ESOS scheme.

Get in touch