Energy Saving Opportunity Scheme (ESOS) Update
UPDATE NOVEMBER 2014 - for all your ESOS needs visit our new ESOS Solutions page at www.sgs.co.uk/esossolutions
You may be aware of potentially significant legislation changes with regard to energy monitoring and use. In order to keep you updated of progress of the legislation we have prepared a short summary of the requirements as well as commentary on potential issues and concerns on implementation.
It is important at this stage to note that the legislation is purely proposed and in consultation and so requirements and implementation are likely to change prior to formalisation.
The Energy Saving Opportunity Scheme (ESOS) launched for consultation by the Department of Energy and Climate Change (DECC) in late July 2013, which could see all businesses with more than 250 employees obliged to commission an ‘approved’ assessor either in-house or externally to carry out comprehensive audits of all their energy usage, including transport, every four years.
The consultation closed on 3 October 2013 and SGS is waiting for feedback from DECC and will update interested organisations in due course. To receive your updates register at www.sgs.co.uk/subscribe
Introduction to ESOS
Properties in the United Kingdom are already subject to a number of compliance, auditing and inspection requirements covering issues such as asbestos, fire risk and legionella. It now appears that energy will be the next major audit requirement for UK property owners.
Over the next two years, the government looks set to introduce ESOS. The Scheme is a compulsory programme of regular energy audits for 'large enterprises' that are to be undertaken by 5 December 2015. Following the undertaking of the audit, enterprises will then have to assess their overall position on energy consumption. The requirement derives from the EU Energy Efficiency Directive that came into force on 14 November 2012; this update identifies the key features of the directive and the government's proposed light-touch approach to its implementation.
The key requirement under ESOS can be found in Article 8 of the directive. In short, EU member states must introduce independent and cost-effective energy audits for all 'large enterprises'. An 'enterprise' is defined as "any entity engaged in economic activity, irrespective of its legal form". This will extend beyond companies and include partnerships and unincorporated associations, among other entities. 'Large enterprises' are defined as any non-small or medium-sized enterprise (SME) and is therefore any enterprises that have:
- 250 employees or more; and
- an annual turnover exceeding €50 million or an annual balance sheet total exceeding €43 million.
The Public Sector is not required to participate.
According to DECC, the audits would cost in the region of £17,000 on average in the first instance and £10,000 for each subsequent audit, which will substantially improve the business case for a dedicated energy manager.
Although each audit will result in a set of energy saving recommendations, the business is not obliged to follow them up. DECC estimates that ESOS could save each business an average of £56,400 per year with just £17,000 of investment.
However the scheme may overlap significantly with existing energy efficiency legislation, and place yet more administrative pressure on energy managers. Of the 7,300 businesses expected to fall into ESOS, up to 6,000 are set to be already in the CRC Carbon Reduction Scheme, as well as mandatory carbon reporting.
Proposed implementation of the Directive
The government considers that the United Kingdom has already made considerable advances in energy efficiency through a number of measures, such as the Green Deal. The government also recognises that ESOS will have many similarities with a number of existing UK policies, such as the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, climate change agreements and mandatory greenhouse gas reporting.
Therefore, the government is proposing that enterprises be allowed to make full use of any data from other schemes as part of their ESOS assessments. Further proposals regarding the interaction of ESOS with existing UK regulations/best practice include:
- excluding from an ESOS assessment any energy use that is not paid for directly by the relevant enterprise;
- allowing buildings that have valid display energy certificates or that have undertaken Green Deal assessments within the past four years to be deemed to have satisfied ESOS requirements for that building;
- allowing use of the data collected in a climate change agreement to assist in respect of ESOS obligations;
- deeming a transport fleet to be compliant with ESOS transport requirements if it has been subject to a Green Fleet review within the past four years;
- allowing enterprises that are certified to ISO50001 or ISO14001 (where this meets minimum standards of the directive) to be deemed ESOS compliant;
- allowing audits in 2015, at the discretion of the ESOS administrator, to be based on other initiatives, such as the Carbon Trust Standard, and in subsequent years allowing these initiatives to be certified for their approach as any other enterprises wishing to conduct ESOS assessments would be; and
- allowing flexibility around the period of time for which energy data is required, making it easier for enterprises to use data measurements from other schemes to inform the ESOS assessment.
The government has also expressed a wish to interpret the directive in a practical and proportionate manner, and has therefore set out that ESOS assessments must provide, at a minimum:
- a review of the total energy use and energy efficiency of an enterprise as a whole – this would include an energy intensity ratio (e.g. energy use per employee) and the variation in energy use over time within key buildings, industrial operations and transport activities; and
- clear information on potential savings that identifies and quantifies cost-effective energy savings opportunities – this should, wherever practical, be based on a life cycle assessment instead of simple payback periods.
This approach would appear to differ from a literal reading of the directive, which appears to require enterprises to create an energy profile for all key sites, transport and processes.
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