ESOS – Energy Saving Opportunity Scheme Phase 3

The Energy Savings Opportunity Scheme (ESOS) has been running since 1 January 2017. If your business qualifies for ESOS then you must comply or face significant penalties. ESOS has been subject to three phases and Phase 3 has a deadline of 5 December 2023. So, with less than a year before the deadline, we take a look at what this means for your business.

What is ESOS

The ESOS scheme is a mandatory energy assessment and energy-saving initiative that was introduced by the UK Government in 2014. It’s designed to help organisations reduce their energy usage, lower their carbon emissions and save money through energy efficiency measures. Large organisations are required to assess their energy usage every 4 years and use this assessment to identify new ways to save energy. The scheme is managed by the Environment Agency in England, the Northern Ireland Environment Agency, the Scottish Environment Protection Agency, and Natural Resources Wales. Non-compliances, for example, failing to submit before the deadline can incur penalties from the applicable agency. Penalties range from publication of non-compliance on their websites to a £50,000 fixed penalty. This fine will also increase for each day of non-compliance.

Who needs to comply?

It’s estimated that more than 11,000 businesses in the UK are in the scope of the scheme. These “large undertakings” are defined using the following thresholds:

• Employing more than 250 people, or
• Annual turnover of more than £44M AND an annual balance sheets total in excess of £38M

For overseas businesses, they will also have to comply if they employ more than 250 people in the UK. And if your business is part of a larger organisation and this organisation is above these thresholds. Organisations that qualify for the ESOS are required to undertake an energy audit every four years to identify areas of energy that are being wasted and implement energy efficiency measures. It’s important to note that this is a progressive scheme, so it’s necessary for companies to register in time every time a new phase starts. If your business previously qualified under phase 1 or 2 and no longer qualifies then it’s a good idea to submit a DNQ (Do Not Qualify).

What is phase 3

The Phase 1 compliance date was 5 December 2015 and Phase 2 was 5 December 2019. We have now entered Phase 3 with the compliance date of 5 December 2023. There were a number of changes to Phase 3 that were published in August 2022.

• The inclusion of standardised information – a template is provided for population, to ensure certain information is standardised for all participants.
• Change to the de-minimis rules – this is reduced from 10% to 5% and is likely to mean more site surveys and the inclusion of transport for many organisations.
• Inclusion of an action plan and sharing of the report to subsidiaries – to improve Senior level buy-in and understanding across the business of the next steps.
• The collection of additional data – including intensity metrics.

The good news is that there are no changes to the existing site surveys, so those previously completed do not need to change.

What’s required for ESOS phase 3

There are five stages to the process:

1. Measure your company’s energy consumption. This should be completed over a 12-month period and needs to include energy consumed in your sites, your processes and transportation.
2. Identify areas of significant energy consumption. You can choose to exclude some of your energy consumption under the 5% “de-minimis” category.
3. Analyse the data. This should audit your energy consumption and how energy-efficient your organisation is. It should outline ways that you could become more energy efficient. Detailing the benefits of these measures and the costs associated with adopting them.
4. The report must be checked by an approved lead assessor. There are a few exceptions to this rule, but generally, a lead assessor must review the report before the company directors sign it off.
5. Notify the applicable agency. The Environment Agency in England, the Northern Ireland Environment Agency, the Scottish Environment Protection Agency, or Natural Resources Wales.

The benefits of ESOS Phase 3

The benefits of compliance activity aren’t always easy to see. Regulation, compliance and corporate red tape are often seen as “just do it” activities that businesses may not immediately realise the benefits of. But acting on your ESOS survey recommendations can turn your compliance activity into real savings. Surveys will identify practical and cost-effective ways to save energy – and in turn money. So at a time when organisations are facing increasing energy prices, acting on your audits ahead of the deadline can save your organisation a lot of money. It’s more important than ever to reduce your energy costs and consumption as much as possible. The faster you start your ESOS Phase 3 compliance, the more time you have to take advantage of the energy-saving recommendations and giving your bottom line a boost whilst energy prices are high.

Beyond ESOS Phase 3

With the volatility of the energy market, marking ESOS Phase 3 a priority for your business could give your business real cost saving. And the most recent announcements about Phase 4 have given clear indication that the government intends to get even tougher. They are going to want businesses to take more action on their ESOS recommendations. Asking for explanations when businesses choose not to complete recommendations suggested in their reports. But more than anything your ESOS compliance gives your organisation a real opportunity for setting a strategy in reaching Net Zero – something that the government will surely be using the ESOS compliance to track in future phases.

Using an Energy Consultancy

An energy consultancy can provide invaluable advice and support to help you understand your obligations and meet the compliance requirements. They can help you understand the different routes that you can take to comply. They can carry out an ESOS audit and provide energy efficiency advice to help you understand your energy usage and identify areas of energy wastage. They can also help to develop a tailored energy efficiency plan to help you meet your compliance obligations and reduce your organisation’s carbon emissions.

Organisations should also consider the potential of renewable energy sources and the benefits of investing in renewable energy sources such as solar, wind, hydro and biomass. An energy consultancy can provide real advice and guidance on the best renewable energy options for your business. Ultimately, the ESOS scheme is an effective way for organisations to save money, reduce their carbon emissions and improve their energy efficiency. An energy consultancy can provide expert advice to help your business meet the ESOS compliance requirements and take advantage of the savings and benefits that energy efficiency measures can bring.

How we can help

It’s official, the phase 3 deadline is upon us and without proper preparation, you are in danger of missing it. Compiling and submitting your energy audit is a complicated process and it’s critical that businesses operating in the UK take steps to ensure their compliance. If you need help with energy consultancy, or ESOS phase 3, then we can help. Working with us we will ensure an effective energy audit and support you in implementing the recommended changes. We can be with you during all steps of your compliance. Driving energy efficiencies and saving your business money. It’s possible to implement these measures to save money while complying with legislation. What do you expect from the UK’s best energy consultancy? Get in touch with us today.