ESOS Phase 2: More than just a tick box exercise

Phase 2 of the UK Government’s Energy Savings Opportunity Scheme (ESOS) is now well underway. There are only 7 months until the compliance deadline of 5^th December 2019 is upon us.  So if you haven’t started yet, now is the time to ensure you avoid the last minute manic race to compliance that we experienced during Phase 1.

Phase 1: Recap

The dust has now settled since the ESOS Phase 1 deadline of 5^th December 2015. Reviewing the outcomes and speaking with many organisations who complied, it is fair to say ESOS Phase 1 was not a runaway success. As the first year of a new compliance scheme, with limited time for organisations to get to grips with the requirements and comply, many saw it as simply a tick box exercise to compliance instead of an opportunity to drive change and engage with board level directors about the opportunities available to establish meaningful energy efficiency programs.

Changing the approach for Phase 2

The positive news is that organisations are taking a different approach for Phase 2. Many accept that the compliance scheme is here to stay and are approaching it with an open mind and looking to get more value from it this time round. There are several key reasons for this change in approach.

Firstly is the significant increases in energy. The cost of energy has risen by 70% over the past decade and is forecast to rise a further 25% over the next three years. Many more organisations are now seeing increasing utility budgets as a risk to business and looking to drive down costs.

Many Energy Managers see ESOS as an opportunity to obtain budget to complete energy audits and identify savings, as the scheme is mandatory. We are seeing many organisations move away from compliance standard ESOS audits and now conducting higher quality Investment Grade Audits to get as much added value from the scheme as possible.

Data collection is easier second time round, organisations understand what data and information is now required and often established the relevant contacts within the organisation to collect the data for phase 1. This is allowing organisations more time to focus on the outputs of ESOS instead of the data collection piece.

The qualification criteria

Just because your organisation qualified for Phase 1, does not mean you automatically qualify for Phase 2, the organisation needs to meet the criteria on the Phase 2 qualification date, 31^st December 2018. Note the balance and turnover figures have changed for the UK since phase 1 due changes in currency rates.

An undertaking is mandated to comply with ESOS legislation if on the qualification date the company is:

• A UK undertaking with 250+ employees

OR

• A UK undertaking with fewer than 250 employees but has:
  • An annual turnover exceeding €50m, (£44,845,000) and
  • A balance sheet exceeding €43m, (£38,566,700)

OR

• Part of a corporate group which includes a UK undertaking that meets either criteria 1 or 2 above.

The key steps to complying with ESOS

1. Determine corporate groupings for qualification and participation

2. Determine the ‘Total Energy Consumption’ for the organisation for 12-month reference period

Your total energy consumption includes all input energy use in the UK, e.g. buildings, industrial processes and transport. It must be calculated in a common unit.

3. Identify the ‘Significant Energy Consumption’

Identify assets and activities that amount to at least 90% of your total energy consumption.

4. Determine Compliance Route

You can comply with ESOS using one or more of the following:

• ISO 50001 certification
• ESOS compliant energy audits (most common route)
• Display Energy certificates (DECs)
• Green Deal Assessments (GDAs)

The key output from the different compliance routes, is the identification of potential energy efficiency opportunities within the business and gaining visibility at board level.

5. Appoint ESOS Lead Assessor & Sign-off

Once completed a board level director and ESOS lead assessor will be required to sign-off the ESOS compliance.

6. Notify the Environment Agency, (EA) prior to compliance deadline.

Main takeaways

Start now – 75% of audited businesses had to undertake remedial actions to be fully compliant. Only 16% were technically compliant. By starting early, you can ensure you have the time to get it right and not risk the necessity of additional time and resource later.

Go Beyond Compliance – Look at ESOS as an opportunity to gain traction within the business to reduce increasing utility budgets. Look at ESOS beyond a tick-box compliance exercise and your organisation will gain much greater value from the scheme.

Co-ordinate ESOS with other schemes – Align ESOS with the new Streamlined energy & carbon reporting (SECR), scheme. Additionally, any measures that are implemented off the back of ESOS can be fed into your existing sustainability strategy and bolster your other sustainability disclosures, while maximising your energy reduction achievements.

If you are ready to get started, we can support you with all parts of the process from energy measuring, auditing, Lead Assessment and even ISO 50001 certification. Feel free to get in contact for further information.