Continuing Professional Development: Energy Savings Opportunity Scheme

The government’s Energy Saving Opportunity Scheme is both a stick and a carrot for large contractors to reduce their onsite energy use and carbon emissions, as Iain Fraser of Greengage explains.

The government’s Energy Savings Opportunity Scheme (ESOS) has turned the spotlight on energy use on construction sites in 2015, with many sites undergoing mandatory audits. ESOS requires organisations to conduct energy assessments of their buildings, industrial processes and transportation to identify whether improvements can be made. Around 9,000 businesses across the UK that qualify as “large undertakings” must carry out ESOS assessments every four years, and submit an ESOS report to the Environment Agency.

First, a company-wide audit must identify areas of “significant energy consumption”. For a construction business, that audit will embrace site visits and monitoring. Companies must appoint a “lead assessor” to carry out or review site energy audits and the overall ESOS assessment. Assessors can be staff or external contractors, but they must be members of an approved professional body. The completed ESOS assessment must then be reviewed and signed off by a board-level director before the Environment Agency is notified.

So how does site energy use fit into corporate and industry-wide ESOS reporting, and what can construction managers do to reduce energy use, costs and carbon emissions?

Every time fossil fuels such as gas, coal, or oil are burned, carbon dioxide is released into the atmosphere. Carbon dioxide – or CO2 – emissions can be categorised as direct or indirect. Direct emissions occur when a fossil fuel is burned – for example, diesel in a generator on site. Indirect emissions occur when a company or person buys electricity, heating or cooling from an organisation that burns fossil fuels to provide that service – for example, electricity from a temporary site supply that is invoiced by the utility provider.

In the context of the design, construction, operation, refurbishment and demolition of buildings, the management of energy is covered by BS EN 15978: 2011. This is derived from another standard, BS EN 15804. The guidance views the building as a product and sets out “stages”– preconstruction, construction, in-use stage and end-of-life – for use in life-cycle analysis or carbon-footprint reporting.

Quick win

For site practices, BS EN 15804 focuses on energy used for, and emissions from, site transportation and site activities. Quantifying these in comparison with the overall energy/emissions of a building was part of the government’s Innovation and Growth Team report in 2010 (table, opposite). It found that 83% of emissions occur after practical completion, and only 2% during construction. This may seem an insignificant amount, but construction still presents a great business and environmental opportunity to the contracting organisation, and the wider industry because:

• Energy use and emissions at the construction phase occur within a relatively short timescale (less than two years) compared with the 40-plus years of a building’s operation. So cutting energy and emissions during construction is an achievable task for a single person within an organisation, whereas an operational programme could involve multiple people and organisations over decades.
• Given that energy costs for the commercial sector are likely to rise by 2020, there is an opportunity to build operational resilience and perhaps even to offer a competitive advantage to businesses that manage their energy costs. For instance, a recent case study carried out by Greengage attributed the scale of energy costs for a large UK contractor as 15% of its pretax profits.

The first thing that site energy managers should do is monitor and record energy used. A site or business could perform exceptionally well against industry benchmarks but, unless the data is captured to demonstrate this performance, any public or even internal claims will not bear scrutiny. In addition, even if data is not going to be processed and analysed at an organisational level, recording information will still allow for the figures to be analysed at a later date.

Innovation and Growth Team’s analysis of building’s emissions

The key information to be recorded is both the quantity and units of energy used at site, alongside a reference period (month, quarter or year). It should be noted that not all units are equal – for example, meter readings on an incoming gas meter are likely to measure volume in cubic metres, whereas an energy bill may quantify gas in kWh (kilo-Watt hours).

Consideration of units of energy also uncovers exactly how site managers can reduce energy use. The most commonly used kWh units of energy describe the simple product, or multiplication, of power (or load) and time. This gives two options to reduce energy use:

• Option1: Reduce the power required to provide a service, or
• Option 2: Reduce the operation time of the service.

An example of option 1 is to require a subcontractor to design a more efficient temporary external lighting system using LEDs. An example of option 2 might be to specify passive infra-red (PIR) sensors for the lighting within site accommodation.

In the past, site reporting might have been voluntary, or linked to the need to secure a BREEAM credit. Now, however, ESOS requires all large organisations to report on energy use within their business, identify cost-effective investment opportunities and formally notify government of their compliance with the scheme by 5 December 2015.

While there are no charges to submit notification to the government’s scheme administrator, the Environment Agency, it is suspected that the agency’s ESOS work will be funded through fines charged to organisations after the deadline. What this means is that businesses that have not met their obligations will be fined and will continue to accrue fines until they have met their ESOS responsibilities.

Audit trail

One of the first tasks for organisations is to define the extent of the “auditable assets”. This appears simple:

• Business transport – in effect mileage claims for diesel or petrol for journeys undertaken on behalf of the business. Subcontracted transport or transport services such as train tickets are excluded.
• Construction projects – although this is only projects on site over the qualification period and only where the contractor is paying for the energy used, so many refurbishment projects could be excluded.
• Corporate offices.

In reality many contracting groups need to factor in subsidiary and joint-venture organisations that might be required to participate within ESOS as part of the parent corporate group. A useful part of the Environment Agency 2015 update Complying with the Energy Savings Opportunity Scheme, version 3.0 was how joint venture and subsidiary businesses would be tackled within ESOS.

A further point to note is that an organisation – or some parts of a business group – that operates within the UK may be registered out with the EU (for example, a company registered on the Isle of Man) and would therefore be exempt from the ESOS regulations.

In terms of scoping the work involved in managing the corporate response to the ESOS legislation, there are three stages that should be recommended by the nominated ESOS lead assessor:

• Scoping the energy use/participation of the organisation
• Conducting the ESOS audit programme and review previous audits; and,
• Compiling the ESOS evidence pack for submission to the board.

Opportunity knocks

One of the main things to appreciate about ESOS is that, although compliance with the regulations will avoid fines being applied, there is an enormous opportunity for businesses to use the information generated for compliance to drive energy efficiency within their organisation. In fact the costs for compliance are likely to be quickly recouped if the organisation realises the opportunities presented.

The ESOS guidance recognises two financial appraisal metrics that present opportunities: simplified payback periods (SPP) and life-cycle cost analysis (LCCA), also known as “whole life costing”.

SPP indicates the time taken (in months or years) for the energy and cost savings to recoup the initial cost of the energy-saving proposal. LCCA, on the other hand, calculates the current cash benefit, or net present value, to the organisation as a result of the proposal being installed.

An example of how an SPP appraisal could be used in construction would be for the procurement of site accommodation for a project. Option A is for a traditional site office cabin (£250 up front and £50/week/unit) using 150 kWh/week of electricity. Option B is for an energy-efficient site office cabin (£350 up front and £64/week/unit) using 30 kWh/week of electricity.

Taking electricity costs at 14p/kWh, the payback – or, more accurately, the break-even point – for the higher initial costs of the green solution, is 36 wee