What do I need to know about… The Energy Saving Opportunities Scheme?

Many large companies are still in the dark about the government’s Energy Savings Opportunity Scheme (ESOS) and risk individual penalties of up to £90,000 if they fail to comply, according to certification body BM TRADA. Chief operating officer Vic Bowen explains.

Vic Bowen

The Energy Savings Opportunity Scheme (ESOS), which is mandatory, requires organisations to conduct energy assessments of their buildings, industrial processes and transportation methods to identify whether improvements can be made.

ESOS came into force on 17 July, 2014 in response to the European Commission’s Energy Efficiency Directive (EED), which requires all 28 member states to introduce corporate regular energy audits.

Its aim is to cut Europe’s total energy consumption by 20% within four years by improving efficiency in major corporations.

Businesses and organisations that qualify for ESOS, of which there are approximately 9,000 across the UK, must carry out ESOS assessments every four years.

Qualifying organisations must then notify the Environment Agency by set deadlines that they have complied with their ESOS obligations.

Who qualifies for ESOS?

ESOS applies to “large undertakings” – corporations with more than 250 employees, or with an annual turnover and annual balance sheet of over 50 million and €43m respectively. Corporate groups qualify if at least one UK group member meets the same definition.

To assess if they meet the qualification criteria, large enterprises need to take their employee numbers, turnover and balance sheet totals from the accounts:

• for the financial year ending on the qualification date of 31 December 2014; or
• in the 12 months immediately preceding the qualification date of 31 December 2014

Public bodies and other organisations that are required to comply with the Public Contracts Regulations 2006 or the Public Contracts Regulations (Scotland) 2012 are exempt from the scheme.

ESOS requires qualifying organisations to:

1. Measure their total energy consumption.
2. Conduct energy audits to identify cost-effective energy-efficiency recommendations.
3. Report compliance to the Environment Agency (the scheme administrator) by 5 December 2015, and do so every four years thereafter. 

The audit must identify areas of “significant energy consumption” and cover at least 90% of an organisation’s total energy usage. The audit must include site visits and document the estimated costs and benefits of implementing the energy-saving recommendations.

Qualifying participants are required to appoint a “lead assessor” to carry out, oversee or review the energy audits and overall ESOS assessment. Lead assessors can be either employees or external contractors, as long as they are members of an approved professional body register.

The ESOS assessment must be reviewed by a board-level director and approved by the lead assessor before the Environment Agency is notified. Records of how ESOS has been complied with must be retained in an evidence pack.

Though an energy audit is obligatory, there is no requirement to implement the energy efficiency recommendations identified through the ESOS assessments. 

Qualifying companies that fail to comply with ESOS or carry out audits can be fined up to £90,000. They also risk reputational damage by being “named and shamed” by the Environmental Agency, the UK scheme administrator.

Exemption from ESOS

Though the scheme is mandatory, organisations that qualify for ESOS and are fully covered by UKAS accredited ISO 50001:2011 Energy Management Systems certification are deemed to meet the requirements of ESOS, and don’t need to carry out an ESOS assessment, but do need to notify the Environment Agency of compliance.

Those organisations that qualify for ESOS but which are not fully covered by ISO 50001 certification will still need to carry out an ESOS assessment to determine what needs to be done to comply with the ESOS regulations.

All qualifying organisations must notify the Environment Agency by 5 December 2015.

Certification to ISO 50001 brings with it a number of benefits, which include reinforcing good energy management practice throughout the business with an associated reduction in energy costs through better energy efficiency.

ISO 50001 certification will require organisations to develop a management system that drives energy improvements, and is tailored to their business and operating methods. A management system will adapt more quickly to changes in the business, and as it is reviewed annually, may represent additional savings each year.

Certification will also help increase stakeholder confidence, brand reputation and new business opportunities.

Vic Bowen is chief operating officer at BM TRADA – Certification UK. For further information about ESOS and about ISO 50001:2011 Energy Management Systems certification, go to www.bmtrada.com