With so much currently happening: Brexit negotiations, new policy frameworks SECR, end of CRC and FiT… the list goes on; it’s hard to believe that there are only 12 more months to comply with the next phase of Energy Savings Opportunity Scheme (ESOS). We are on the countdown to ESOS Phase 2.
Energy Savings Opportunity Scheme (ESOS) is a mandatory reporting regulation that requires large undertakings to audit their energy use. The key word in this scheme is opportunity. The aim is to identify opportunity to save energy and potentially cut related energy costs.
Yes! It has already been 4 years. We are officially in the last 12 months to comply.
While ESOS phase 1 may be in the distant memory of the corporate world, it remains fresh in the minds of Consultants, Energy Managers and Lead Assessors. Also, ever present in the mind of the Environment Agency’s (EA) own auditors, the introduction of ESOS requirements in 2014 was chaotic. As a result, many companies struggled to complete the scheme before the first compliance deadline 5th December 2015.
During phase 1, over 2700 companies were forced to send notifications advising of their need for late compliance to the Environmental Agency. However, even with the resulting deadline extension into the first quarter of 2016, many organisations were ultimately fined for non-compliance.
The UK regulators continue to conduct ‘Compliance check audits’ for Phase 1 ESOS while companies should be preparing for phase 2.
Lessons Learnt from Phase 1
- Poor quality energy data
- Poor quality energy audits including due diligence due to poor quality data
- Poor quality reports due to lack of detail
- Lack of Early Action taken compounded by the availability of Lead Assessors
In 2018, it was reported that 15 businesses had been issued in civil penalties of up to £45,000 for non-compliance. While several other businesses received non-compliant designations without financial penalty.
Standards are expected to be considerably higher for phase 2
Are you ready?
Don’t leave choosing your assessor until too late. As the 12 months moves on it will be more challenging on the supply of auditors and Lead Assessors available to work with you.
Research suggests that few companies have started to secure the support of Lead Assessors for the fast approaching ESOS Phase 2 compliance deadline on 5th December 2019. Its time to actively support now to avoid repeating the bottlenecks and other challenges of phase 1. The countdown to ESOS Phase 2 is on!
What has changed since Phase 1?
In short, nothing has changed with regards to the regulation. Compliance dates remain the same for Phase 1 but have been updated to reflect the new Phase. The regulation will remain in place unaffected by the UK leaving the European Union.
If the size and structure of your organisation has changed since the first compliance period, then it is best you re-assess your organisation against the qualification criteria.
Who Must Comply?
Companies have grown, merged and evolved since 2014 which could mean that they are now eligible for compliance. For those who are new to ESOS…
If your organisation has maintained its size (as a large undertaking) for at least two consecutive accounting periods but has reduced in size since it remains eligible to comply. However, for organisations which were SME’s for two consecutive accounting periods, but has changed in December 2018, these would not be required to comply.
Even more so you must understand your organisations’ legal corporate structure when assessing the qualification.
All large undertaking (as defined in the Companies Act 2006) except Public Sector organisations, which meet any of the following criteria must comply with ESOS:
1. ≥250 employees
2. Annual turnover >£44mil (€50 mil) and, Annual balance sheet total >£38mil (€43mil)*
3. Part of a Corporate Group undertaking (overseas company) that meets one of the other criteria.
Your organisation will be assessed by these criteria as the ESOS qualification date – 31st December 2018. You may still be eligible to comply if your organisation is close to either of these criteria. Contact us for a consultation if you are unsure about your eligibility.
* Using the Bank of England spot exchange rate at the close of business on qualification date 31 December 2018.
Routes to Compliance
Energy Assessments and notification of compliance must be completed by 5th December 2019 to comply with ESOS via:
• ESOS Energy Audit
• ISO 50001 Certification
• Display Energy Certificates
• Green Deal Assessments
Assessments must consider all business energy consumption for buildings, industrial processes and transport over 12 consecutive months including qualification date 31 December 2018.
Does ESOS apply to our Europe based businesses?
If you are a multinational organisation with businesses throughout Europe, you may also need to comply in these territories. We have extensive experience with auditing for the transposed Article 8 of the European Energy Efficiency Directive; the ESOS equivalent in EU countries. Our lead assessors and consultants have worked in and with assessors in Europe to ensure our clients effectively comply with the regulation and meet business objectives. Make sure your business has the Countdown to ESOS Phase 2 in its sights!
To understand more about the energy audit compliance requirements for EU sites have a look at our Making Policy Clear – EED Article 8 or get in touch.
Acclaro Advisory Expertise
The Acclaro Energy Programme helps organisations adapt for and address the very visible responsibilities that sit within energy efficiency. We aim to deliver the right result for our clients. That’s why we start our programme by finding out your drivers and barriers to making energy interventions. Understanding your concerns means we can deliver recommendations that really fit the way you work. We’d be happy to assist you in taking action whether mandatory or voluntary to manage risk, reduce cost or enhance business reputation.
NB This blog was updated 19th June 2019