The second phase of the UK Government’s Energy Savings Opportunity Scheme (ESOS), which requires all large businesses to produce reports on energy use and efficiency every four years, is now underway. There had been some speculation that ESOS would be discontinued after the UK general election, having been placed under consideration by the previous Government’s 2015 energy efficiency tax landscape review. Brexit had also led businesses to question ESOS, as the scheme was brought in as part of the UK’s implementation of Article 8 of the EU’s Energy Efficiency Directive which aims to reduce EU energy consumption by 20% by 2020. However, the ESOS regulations were transposed to UK law so, unless repealed, the scheme is mandatory for UK businesses.
The confusion lies in the understanding of the Great Repeal Bill which will revoke the European Communities Act and convert EU law, as it applies in the UK, into domestic law on the day we leave. This means that, as far as possible, the same laws and rules will apply immediately before and after our departure.
Environmental concerns are of the utmost importance and the Government has reiterated its commitment to ensuring that we are the first generation to leave the environment in a better state than we found it.
The Environment Agency’s latest newsletter confirms the expectation that the scheme will continue into its second phase as planned and are actively encouraging participant large organisations to begin carrying out energy audits before the Phase 2 compliance deadline of 5 December 2019.
Large organisations are classified as those with:
- More than 250 employees or
- A turnover of more than €50,000,000 and
- An annual balance sheet total of more than €43,000,000
Public bodies are not affected.
All organisations that undertook an energy audit as the compliance route for ESOS Phase 1 will have to repeat the exercise before the end of 2019. At least 7,000 businesses need to comply with the deadline and the Environment Agency is actively encouraging businesses to take early action to start completing energy assessments now. The ESOS audit needs to be based on at least one year’s energy measurement – which can be taken from any year-long period between 6 December 2014 and 5 December 2019 – but this cannot be the same data that was used for Phase 1. Whilst the assessments will not be able to include the organisation’s total energy usage, as this has to include the qualification date of 31 December 2018, the audit work can be completed spreading both the cost and the work needed over a greater period.
Compliance is vitally important if fines are to be avoided. The Environment Agency has revealed that hundreds of organisations will be hit with large fines for failing to comply with Phase 1 of the mandatory scheme. A newsletter sent out by the Environment Agency this week revealed that it has already issued more than 300 enforcement notices, will issue around 200 penalties and hundreds more organisations could be fined up to £50,000 after incorrectly claiming that they did not qualify for the scheme in time for the Phase 1 deadline of 29th April 2016.
As with Phase 1 of the scheme, any qualifying organisation can become automatically compliant with ESOS by achieving certification to ISO 50001 energy management system, and providing evidence that they have done so and there is still time to achieve this by the deadline.
Taking early action to comply with ESOS can help participant organisations unlock significant financial savings brought about by greater energy efficiency. Cost-effective measures could cut energy costs in buildings, transport fleets and industrial processes by about 20%. The earlier the opportunities are identified, the sooner energy saving projects can be implemented. So, getting moving on ESOS Phase 2 today will help organisations to minimise the risk of disruption during the compliance process and realise the benefit of savings sooner.
ESOS should not be seen as a burden. It provides a fantastic opportunity to improve the energy efficiency of your business, lower costs and reduce carbon emissions. By acting ahead of the deadline, organisations can secure maximum financial value from cost-effective energy efficiencies which will also offset the cost of compliance. ESOS is a win-win opportunity.
If you would like to find out more about ESOS compliance please complete the contact form, send an email to compliance@carbon2018.com or call 01252 878722.