Energy Savings Opportunity Scheme (ESOS): Who, What, When & How?

Deadline for Phase 3: 5 June 2024

The Energy Savings Opportunity Scheme (ESOS) is a significant regulation aimed at improving energy efficiency and reducing carbon emissions for businesses in the United Kingdom. In this extensive guide, we will delve into the intricacies of ESOS, addressing key aspects, its phases, criteria, and why it is crucial for businesses. We'll also explore how you can qualify for ESOS, meet the qualification criteria and requirements, and the role of ESOS assessors. By the end of this blog, you'll have a comprehensive understanding of ESOS and how it can benefit your organization.

What is ESOS?

ESOS stands for Energy Savings Opportunity Scheme, and it's a mandatory energy assessment scheme in the UK. ESOS requires large businesses to conduct comprehensive energy assessments, identifying areas of significant energy consumption and recommending energy-saving opportunities.

The Purpose of ESOS

The primary goal of ESOS is to drive energy efficiency and reduce carbon emissions in the UK by promoting energy savings among large businesses. It aims to:

• Raise awareness of energy consumption and its impact on the environment.
• Encourage businesses to take action to reduce their energy usage.
• Identify and implement cost-effective energy-saving opportunities.
• Improve overall energy efficiency, thereby reducing energy costs.

ESOS Phases

ESOS operates every four years, in different phases, each with specific compliance deadlines. ESOS Phase 3, the date for compliance period the third and current phase, is in progress. The ESOS compliance phases are as follows:

• ESOS Phase 1: Completed on 5th December 2015.
• ESOS Phase 2: Completed on 5th December 2019.
• ESOS Phase 3: In progress, with a compliance deadline of 31st December 2022.

Who Qualifies for ESOS?

ESOS applies to large businesses in the UK. A large business, definition of a large, according to ESOS, is defined as one that meets any of the following criteria:

1. Employs at least 250 people.
2. Has an annual balance sheet total in excess of £18 million.
3. Has an annual turnover in excess of £38 million.

In addition, certain public sector bodies and not-for-profit organizations may also fall under ESOS requirements. For the full compliance information visit the Government page on ESOS Compliance

ESOS Compliance and Assessments

ESOS compliance involves several key elements:

1. ESOS Compliance Deadline: The ESOS Phase 3 compliance deadline is 31st December 2022. It's crucial for eligible organizations to complete their ESOS assessments before this date.
2. ESOS Assessments: ESOS assessments identify areas of significant energy consumption within the organization. These assessments recommend cost-effective energy-saving measures to improve energy efficiency.
3. ESOS Lead Assessor: An ESOS Lead Assessor is a qualified professional responsible for conducting or overseeing ESOS assessments. Organizations can appoint an in-house ESOS Lead Assessor or hire external experts.
4. Energy Saving Measures: Following the ESOS assessment, organizations are encouraged to implement the energy-saving measures recommended in the report. These measures can help reduce energy consumption and lower energy bills.

Qualifying for ESOS Phase 3

To qualify for ESOS Phase 3, third compliance period, your organization must meet the ESOS qualification criteria for a large business. You must also meet the ESOS qualification date, which is set for the third compliance period, specifically by 31st December 2022. By this date, your organization should have undertaken an ESOS assessment and be responsible for its findings.

What's New in Phase 3?

The government has recently undertaken a consultation to bolster the Energy Savings Opportunity Scheme (ESOS), bringing it in line with the UK's ambitious net-zero targets and intensifying efforts to enhance energy efficiency.

Changes are forthcoming in both Phase 3 and Phase 4 of the program. While the foundational legislation remains under Parliamentary scrutiny, these alterations are expected to be officially established by the close of 2023.

In Phase 3, the following adjustments will be implemented:

1. Introduction of a concise compliance information summary template within the ESOS report.
2. Inclusion of additional data in the compliance notification (a detailed list provided by the Environment Agency).
3. A requirement to encompass at least 95% of your overall energy consumption (more details below).
4. Incorporation of energy intensity ratios in ESOS reports (more information to follow).
5. Mandate for sharing ESOS reports with subsidiary entities.
6. Provision of more comprehensive information on the subsequent steps for implementing recommendations.
7. Imposition of a target or action plan following the Phase 3 compliance deadline, with reporting obligations for Phase 4.
8. Expanded data requirements for compliance monitoring and enforcement purposes.

What do I need to do to complete ESOS?

ESOS Phase 3 necessitates that organisations undertake the following key actions:

Energy Consumption Measurement: To meet ESOS compliance, organizations are mandated to measure their overall energy consumption over a 12-month to 12 months' period, encompassing energy usage in buildings, industrial processes and transport, and energy used in supplies and transportation.

Identification of Efficiency Opportunities: ESOS compliance compels organisations to pinpoint areas where energy consumption can be curtailed and optimised. These areas commonly entail the adoption of energy-efficient technologies, streamlining operational procedures, or even modifying building designs.

Energy Audit Completion: The completion of an energy audit is a pivotal facet of ESOS compliance. An energy audit entails a systematic assessment of a company's total energy consumption, highlighting instances of over energy use and wastage, and offering insights into enhancing total energy consumption efficiency. Typical audit procedures encompass a review of energy bills and data, on-site surveys to identify energy consumption and patterns, and the presentation of recommendations for improvement. Energy audits serve as a catalyst for organizations to identify opportunities for cost reduction, diminish their carbon footprint, and bolster their sustainability performance.

Reporting for Compliance: The reporting process entails the aggregation of significant energy consumption data, the conduct of energy assessments, and the submission of comprehensive reports to the scheme administrator. ESOS reporting serves as a valuable tool for organizations to spot potential and identify cost effective well-saving opportunities, enhance energy efficiency, and curtail carbon emissions.

It further fosters the adoption of sustainable business practices and ensures adherence to legal obligations for eligible companies. Once the report is duly compiled by a member of an approved and accredited ESOS lead assessor, it is submitted to the Environment Agency for validation.

Want more background on ESOS, click here for the government documentation.

All of these measures as I will deepdive later are covered by a energy management solution such as OAK, click here to simplify complying with ESOS while making savings!

Now, regarding the advantages of adhering to ESOS Phase 3:

Benefits of Compliance: Compliance yields numerous advantages for organizations, including:

1. Reduction of Energy Consumption and Costs: ESOS compliance empowers organisations to reduce their energy consumption, resulting in substantial cost savings.
2. Enhanced Energy Efficiency and Reduced Emissions: Compliance fosters the improvement of energy efficiency, leading to the reduction of greenhouse gas emissions, which is crucial for environmental sustainability.
3. Elevated Corporate Social Responsibility and Reputation: By adhering to ESOS, organizations bolster their corporate social responsibility, enhancing their reputation and demonstrating commitment to sustainable practices.
4. Identification of Operational Opportunities: Compliance enables organizations to identify novel avenues for operational enhancement, consequently leading to additional cost savings.

All these features are covered by energy management solution such as OAK, while automating your ESOS process we will also guarantee that we identify savings opportunities for your business. Get your Free Savings Estimate here!

What happens if I do not comply to ESOS?

Are there consequences for non-compliance?

Certainly. The Environment Agency (EA) has adopted a stricter enforcement approach and has outlined penalties for various violations of the ESOS regulations:

1. Failure to Notify: In cases of non-notification, organizations may face an initial penalty of up to £5,000. Additionally, a daily penalty of up to £500 can be imposed for each working day that the organization remains in breach. This penalty applies regardless of whether an energy audit has been conducted or not.
2. Failure to Maintain Records: When organizations fail to maintain necessary records, they could incur an initial penalty of up to £5,000. They may also be liable for a sum that covers the compliance body's cost to confirm the responsible undertaking's compliance with the scheme. The organization is obligated to take corrective measures to address the breach.
3. Failure to Conduct an Energy Audit: Non-compliance with the requirement to perform an energy audit may result in an initial penalty of up to £50,000. A daily penalty of up to £500 for each working day in breach may also be imposed. To rectify this breach, the organization must take remedial actions. It's worth noting that new entrants to ESOS face a more lenient initial penalty of up to £5,000.
4. Failure to Observe an Enforcement/Penalty Notice: If an organization disregards an enforcement or penalty notice, they may be subject to an initial penalty of up to £5,000, with additional daily penalties of up to £500 for each working day the breach continues.
5. False or Misleading Statements: Making false or misleading statements can result in penalties of up to £50,000.

Non-Compliance Consequences

Organizations that fail to comply with the ESOS phase 3 regulations may incur penalties and other repercussions. The Environment Agency possesses the authority to impose fines of up to £50,000 for non-compliance, with an additional charge of £500 per day for a maximum of 80 days for sustained non-compliance. Thereby there is a minimum fine of £50,000 and a maximum of £90,000. It is, therefore, imperative for organizations to diligently adhere to ESOS Phase 3 to evade such penalties and harness the associated benefits.

ESOS Costs

The cost of an ESOS assessment can vary depending on factors like the size and complexity of your organization.

Factors which affect the Cost of a ESOS Report

The cost of ESOS reporting can vary significantly depending on the size and complexity of your organization. Here are some cost factors to consider:

1. In-House vs. Outsourced: If your organization has the expertise to conduct the ESOS assessment in-house, you can save on external consultant fees. However, larger or more complex organizations often opt to outsource the assessment to ESOS assessors, which can incur additional costs.
2. Energy Audits: Conducting energy audits to identify areas of significant energy consumption can be a substantial cost, especially for larger and more complex organizations. The number and complexity of energy audits required will impact costs.
3. ESOS Lead Assessor: If you choose to hire an external ESOS Lead Assessor, their fees will contribute to the overall cost. It's crucial to select an accredited and experienced assessor.
4. Energy Efficiency Measures: Implementing energy-saving measures identified during the ESOS assessment will involve an additional cost. The price will depend on the nature of the measures, such as equipment upgrades, energy-efficient technology installations, or process improvements.
5. Software and Tools: Some organizations invest in energy management software or tools to streamline data collection and analysis, which can come with associated costs.
6. Notification Fee: To notify the Environment Agency of ESOS compliance, there may be a nominal notification fee.

Why ESOS Matters

ESOS is a crucial initiative for large businesses for several reasons:

• Environmental Responsibility: ESOS helps businesses understand and reduce their environmental impact by reducing energy consumption and carbon emissions.
• Cost Savings: Implementing energy-saving measures identified through ESOS assessments can lead to significant cost savings on energy bills.
• Legal Compliance: ESOS is a mandatory scheme, and non-compliance can result in substantial fines. By adhering to ESOS, organizations avoid legal penalties.
• Competitive Advantage: Demonstrating a commitment to energy efficiency can enhance an organization's reputation and competitiveness in the market.

How to Prepare for ESOS Phase 3

To prepare for ESOS Phase 3, large businesses should consider the following steps:

1. Identify Eligibility: Determine whether your organization qualifies as a large business according to ESOS criteria.
2. Appoint an ESOS Lead Assessor: If you don't have an in-house ESOS Lead Assessor, consider hiring one who is accredited by a recognized professional body.
3. Conduct an ESOS Assessment: Ensure that your ESOS assessment is completed before the compliance deadline of 31st December 2022.
4. Implement Energy-Saving Measures: Following the assessment, take action on the energy-saving opportunities identified to improve energy efficiency.
5. Notify the Environment Agency: Notify the Environment Agency that your ESOS assessment has been conducted and meets the compliance requirements.

ESOS in a Net Zero World

With the increasing focus on achieving net-zero emissions, ESOS plays a significant role in helping organizations' energy spend and reduce their carbon footprint. By identifying energy-saving opportunities, businesses contribute to the broader goal of environmental sustainability and combat climate change.

The Role of ESOS Assessors

ESOS assessments require expertise, and organizations often turn to ESOS assessors for guidance. An ESOS Lead Assessor is a professional who is qualified to conduct or oversee ESOS assessments. They play a crucial role in helping businesses meet ESOS requirements.

ESOS Lead Assessors are typically accredited by a recognized professional body. They guide organizations through the complex process of ESOS compliance and help identify areas of significant energy consumption, suggest energy-saving opportunities, and ensure that all the energy being used in assessments meet the scheme's criteria.

The involvement of an ESOS Lead Assessor provides credibility and ensures that the assessment is conducted in compliance with the ESOS framework. Having a qualified ESOS Lead Assessor on board can simplify the process for large businesses, making the ESOS assessment and compliance more efficient and effective.

How does OAK help with ESOS?

OAK is a energy management software which significantly streamlines and simplifies the ESOS reporting process, making it notably more manageable for organisations. Here's how:

Automated Data Collection: OAK automates the collection of energy data, streamlining the often labor-intensive process of gathering the necessary information for ESOS compliance. This automation ensures data accuracy and completeness.

Real-Time Monitoring: OAK offer real-time monitoring of total energy use and consumption, allowing organizations to stay updated on their total energy consumption and their energy use, throughout the compliance period, which is invaluable for identifying opportunities for improvement.

Data Analysis: OAK takes care of your data analysis, identifying where your business is wasting energy and how you can optimise this. This enables organisations without having to delve into their own energy use data, pinpoint areas of inefficiency, to simply take action on OAKs recommendations to fulfill a key component of ESOS compliance.

Report Generation: ESOS reporting requirements often involve complex data analysis and reporting. OAK does all this for you by generating comprehensive reports that align with ESOS standards. This saves organisations imense time and effort while ensuring accuracy.

Documentation Storage: Organising and storing the vast amount of data and documentation required for ESOS compliance can be a daunting task. Energy management software offers secure storage and easy retrieval of documents, making it simple for organizations to maintain their compliance records.

Task Assignment: OAK notifies you what steps need to be taken to complete your ESOS reporting so that you stay on track.

Save energy: While OAK takes care of your ESOS reporting, our team of energy specialists guarantees you that we identify more potential energy savings opportunities than we cost! Thereby you are making money, as the OAK Hardware cost is 100% Tax Deductible. This makes OAK a net positive gain for your organisation. We not only provide your business Compliance reporting but also:

• Performance Reporting
• Custom Reporting based on your data
• Alerts for abnormal consumption (so you can have ease of mind that nothing is going wrong)
• Appliance Health Check
• Predictive Maintenance
• Industry Benchmarking (for your site consumption and Applaince Performance)
• ROI Backed Green infrastructure recommendations and financing!
• and much more.... Find our full services here

In summary, energy management software streamlines ESOS reporting by automating data collection, providing real-time monitoring and data analysis, simplifying report generation, facilitating document storage, and allowing for efficient task assignment. It not only eases the burden of compliance but also empowers organizations to identify cost effective and proactively manage their energy consumption and identify opportunities for cost savings and efficiency improvements.Want to Save on your Energy cost and fulfill your compliance needs?

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FAQ:

Will my energy data be shared publicly?

No. The intention of ESOS is not for profit bodies to publicise but rather to improve energy efficiency of businesses.

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

No, this is not necessary specifically if the sites are similar ie. If your organisation has similar structure among all sites samples can be taken and the findings can be extrapolated.

Will the non-compliance be made public?

Yes. Non-compliance is likely to be published on the Environment Agency website along with your company name and how much you were fined

Will I face penalties for not implementing the energy-saving suggestions?

No, you will not incur fines for failing to execute the energy-saving recommendations. The ESOS assessment itself is mandatory, but the implementation of the suggestions is not. Nevertheless, it's worth noting that implementing these energy-efficiency measures can be a valuable approach to recover the audit's cost over time.

What if I already adhere to ISO 50001 standards?

If your organization is in full compliance with ISO 50001, there's no requirement to conduct an ESOS assessment. You can simply notify the environment agency submit a notification to the regulatory authority. If you're contemplating this path to achieve ESOS compliance, we're here to assist you.

What's New in ESOS Phase 3?

The government has recently undertaken consultations to enhance ESOS, aligning it with the UK's net-zero objectives and reinforcing action on energy efficiency. These changes are set to be implemented in both Phase 3 and Phase 3 and 4, pending approval through parliamentary scrutiny. Here are the key adjustments you can expect in Phase 3:

1. Introduction of a summary template for compliance information within the ESOS report.
2. Inclusion of additional data in the compliance notification, as specified by the Environment Agency.
3. Expansion of energy consumption coverage to encompass at least 95% of the total energy usage (details below).
4. Incorporation of energy intensity ratios within ESOS reports (details below).
5. Requirement to share ESOS reports with subsidiary organizations.
6. Provision of more comprehensive guidance on implementing recommendations' next steps.
7. Establishment of targets or action plans following Phase 3's compliance deadline, with reporting against these in Phase 4.
8. Submission of supplementary data for compliance monitoring and enforcement purposes.

What's Changing in Phase 4 of ESOS?

Phase 3 and 4 will introduce a new "net zero element" to ESOS audits, requiring reports to assess actions needed to align with future net zero commitments. To facilitate this, the government is collaborating with BSI to develop a net zero audit PAS standard. Furthermore, the following updates will be implemented:

1. Adjusting ESOS balance sheet and turnover thresholds to align with SECR (Streamlined Energy and Carbon Reporting). Organizations will be subject to ESOS if they meet any of the SECR qualification criteria: having a workforce of at least 250 employees, a balance sheet exceeding £18 million, or turnover surpassing £36 million.
2. Mandating action on audit recommendations. Firms will be required to provide explanations if they fail to achieve their targets and goals.
3. ESOS reporting will need to adhere to an established auditing standard, such as ISO 50002 or EN 16247.
4. Display Energy Certificates (DECs) and GDAs will no longer be accepted as compliance routes for ESOS.

What Is an Energy Intensity Ratio?

Energy intensity ratios, introduced in Phase 3, establish a framework for measuring your total energy consumption, in relation to a relevant metric. For instance, this metric allows you to express your energy usage as kWh per square meter for buildings, kWh per unit of output for industrial processes, or kWh per mile traveled for transportation.

This is also part of the monthly reporting of OAK.

In Summary

ESOS, the Energy Savings Opportunity Scheme, is a vital program for large businesses in the UK. It aims to enhance energy efficiency, reduce costs, and lower carbon emissions. ESOS assessments help businesses identify significant energy consumption and saving opportunities, and compliance with ESOS is a legal requirement.

Understanding ESOS assessment, deadlines, and the importance of energy efficiency can provide businesses with a competitive edge and contribute to a more sustainable future. In summary, ESOS is more than just a mandatory energy assessment scheme; it's an opportunity for businesses to become more environmentally responsible, reduce operational costs, and enhance their competitiveness in an evolving market. By taking action and implementing energy-saving measures, by looking into your energy consumed organisations can play a significant role in addressing the global challenge of climate change and achieving a net-zero future.

The Path to a Greener Future

ESOS is more than a regulatory requirement; it's a pathway toward a greener, more sustainable future. It is the UK undertaking a initiative to increase efficiency energy use among UK company. By participating in ESOS and taking energy-saving measures, businesses contribute to environmental sustainability, reduce carbon emissions, and improve energy efficiency.

This will also increase the need for renewable energy supplies from energy suppliers. As more companies will want their total energy consumption to be renewable. For each energy unit which turns renewable, there is a positive impact on the environment. You can do your part to save energy and increase green energy consumption.

Simply by improving your energy efficiency as a UK company and switching your energy supplies. OAK guides you through how you can optimise your energy use and reduce total energy consumption while doing so.

As businesses, industrial processes and transport, worldwide strive to achieve net-zero emissions, ESOS provides a valuable opportunity for large organizations to play their part. By embracing energy-saving opportunities, complying with ESOS, and collaborating with ESOS assessors, businesses and industrial processes can enhance their energy management, reduce costs, and contribute to a more environmentally responsible and sustainable future.

In conclusion, ESOS is a powerful tool for organizations seeking to balance economic success with environmental responsibility. It's a way to lower operational costs while making a positive impact on the environment. By preparing for ESOS Phase 3 & 4 and integrating energy-saving measures into industrial processes, businesses can advance towards a net-zero future and set a strong example for a more sustainable world.

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