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Monday, 21st October 2019

The Energy Savings Opportunity Scheme (ESOS): Frequently Asked Questions

The Energy Advice Hub is powered by BiU, the UK’s leading energy and utility consultancy.

We’ve put together the most frequently asked questions on ESOS, to help you meet compliance.

Got a question that we’ve not covered? Give BiU’s ESOS team a call on 01253 785409 or email [email protected]

1. What is ESOS?

ESOS (the Energy Savings Opportunity Scheme) is a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria.

ESOS requires companies to carry out audits of the energy used by their buildings, industrial processes and transport every 4 years, to identify cost-effective energy saving measures.

2. Who qualifies for ESOS?

ESOS applies to large UK undertakings and their corporate groups. A large undertaking is defined as:

  • any UK company that either:
    • employs 250 or more people, or
    • has an annual turnover in excess of 50 million euro (£38,937,777), and an annual balance sheet total in excess of 43 million euro (£33,486,489)
  • an overseas company with a UK registered establishment which has 250 or more UK employees (paying income tax in the UK).

3. What is the deadline for ESOS phase 2?

Phase 2 of ESOS is underway and the deadline for notification of compliance is 5th December 2019.

4. When can we start ESOS phase 2?

You can start now. Indeed, if you haven’t already started, you really should start now! If you are taking the Energy Consumption Measurement route to compliance, you need to measure total energy consumption for a 12-month period which includes the Qualification Date, which is 31 December 2018 for ESOS Phase 2.

5. Which government agency runs ESOS?

The Environment Agency is the administrator for ESOS for the whole of the UK. Responsibility for compliance and enforcement in England also rests with the Environment Agency.

Compliance and enforcement for the other countries in the UK is as follows:

  • Scotland – the Scottish Environment Protection Agency
  • Wales – Natural Resources Wales
  • Northern Ireland – Northern Ireland Environment Agency

And for organisations with wholly or mainly offshore activities it is the Secretary of State for BEIS.

6. Is there any risk in non-compliance with ESOS?

There is a risk that the authority responsible for compliance and enforcement in your part of the UK will take action against you. This might take the form of an enforcement notice and could include a fine.

At the time of writing, the amount of fines issued for non-compliance with phase 1 totalled £244,320.

7. What are the routes to ESOS compliance?

There are several routes towards ESOS compliance:

  1. ISO50001 – If your organisation is fully covered by ISO50001, you simply need to advise the appropriate compliance agency that you are ESOS compliant.
  2. Display Energy Certificates (DECs) – If your organisation has a DEC which covers over 90% of its energy use then no further compliance routes are required (although you still need a lead assessor to review your compliance). If the DEC covers less than 90%, then the remaining energy consumption (transport and industrial processes, for example) will need to be covered by another route to compliance.

ESOS Energy Audit – if you don’t have ISO50001 in full across your whole organisation, or if your DEC does not cover 90% of your energy use, you will need to complete an audit of your total energy consumption. This includes energy consumed by buildings, industrial processes and transport.

8. Should I consider ISO 50001 as a route to ESOS compliance?

The ISO 50001 standard supports organisations to become more energy efficient through the development of an energy management system.

Not only does it provide a robust framework for energy management, it also helps you to comply with ESOS: If you are fully covered by ISO 50001, you don’t need to carry out an ESOS assessment.

The time and costs involved in achieving the standard will factor in your decision. Read our guide to ISO 50001 and ESOS to help you decide

9. What should we do to meet the ESOS requirements?

If your business qualifies for ESOS, you will need to carry out an ESOS assessment to find out exactly what you need to do to meet the requirements. The steps for the assessment are as follows:

  1. Calculate your organisation’s total energy consumption
  2. Identify the significant areas of energy expenditure: that is, which assets or activities account for at least 90% of your total energy consumption? This will usually be connected with the core purpose of your business.
  3. Appoint a lead assessor to review your ESOS assessment. You can also appoint them to actually carry out the assessment for your organisation.
  4. Get one or more board level directors to review the findings of the assessment.
  5. Notify the Environment Agency of compliance – this is the body responsible for administering the ESOS scheme in the UK.
  6. Keep records

10. How do I calculate my organisation’s energy consumption for ESOS?

Your energy consumption calculation should include all energy used by buildings, industrial processes and company-related transport. You can calculate it using an energy unit such as kWh or in financial terms by giving your energy spend in pounds sterling. (However, it’s not acceptable to report your energy consumption in terms of CO2 because this is not an energy unit.)

You don’t actually need to provide the figure in your ESOS notification, but you should note the figure and how you calculated it in your company records, in case you get audited.

11. What reference period should I use when calculating Total Energy Consumption?

You must calculate your Total Energy Consumption over a reference period of 12 consecutive months. The reference period must include the qualification date and end before the compliance date.

So – for ESOS phase 2 – the period must include the qualification date of 31st December 2018, and end before the compliance date of 5th December 2019.

12. What reference period should I use when calculating Significant Energy Consumption?

Your Significant Energy Consumption can be calculated using a year’s data from any time between 6 December 2014 and 5th December 2019. Different energy streams can be audited at different times, so the workload can be better spread to suit your business needs.

13. Do I need to survey all of my sites to comply with ESOS?

No. You must carry out site visits as part of your ESOS energy audit, but you don’t have to visit every site in your organisation.

You can instead take a sampling approach – whereby you split your portfolio into different building types, e.g. office, warehouse, retail etc. – and visit one of each. You can apply the findings to the rest of the sites that are identical or very similar.

Your lead assessor can help you determine a suitable site visit sampling approach.

14. Do I need to appoint a lead assessor for my ESOS audits, or can I do everything in house?

You will need to appoint a qualified lead assessor to check that your assessment meets ESOS requirements (unless 100% of your energy use is covered by ISO 50001 certification).

Your lead assessor can either:

  • carry out your ESOS assessment and audits themselves
  • check that the assessment and audits done by people who aren’t lead assessors meet the requirements.

15. How do I find an approved ESOS lead assessor?

Your lead assessor must be a member of an approved ESOS lead assessor register. You can find the list of approved registers on the gov.uk website.

At BiU we have a team of qualified and certified ESOS lead assessors, accredited by the Association of Energy Engineers, the Energy Institute and CIBSE.

16. How long does it take to comply with ESOS?

BEIS’ interim evaluation of ESOS Phase 1 found that companies spent an average of 15 days on the process. It makes more business sense to spread that over several months rather than cramming it into a couple of weeks when you may have other business priorities.

17. Under ESOS, how is ‘energy’ defined?

Under ESOS, energy is defined as all forms of energy products, including:

  • combustible fuels
  • heat (excluding your organisation’s surplus heat from industrial processes)
  • renewable energy
  • electricity
  • fuel used in transport

There are no fuel type exemptions in ESOS, although some consumption may be deemed de minimis and therefore excluded from the report.

18. What transport consumption data do I need to report through ESOS?

You only need to include data on transport that your company operates, e.g:

  • Fuel used in company cars on business use
  • Fuel used in fleet vehicles which you operate on business use
  • Fuel used in personal/hire cars on business use
  • Fuel used in private jets, fleet aircraft, trains, ships, or drilling platforms which YOU operate.

If your employees take trains, flights or taxis for business use, that are not operated by the company, then you don’t need to report on these. You also don’t need to report on fuel used by subcontractors in transporting goods.

For advice on how to start gathering transport data, read our guide.

19. Are landlords responsible for the energy consumption of tenanted properties under ESOS?

Where the landlord supplies energy to a tenant, the tenant is responsible for the energy it consumes. I.e. this energy should form part of the tenant’s total energy consumption.

This is easily determined if the energy is measured, e.g. by a sub meter.

However, where a landlord provides energy to shared parts of a building, the landlord must include that in calculating its total energy consumption.

20. Is there an ESOS assessment template?

The Environment Agency and the other regulators don’t need ESOS data to be collated or recorded in particular formats, and so do not provide templates for these activities or the presentation of findings to directors. As long as the ESOS assessment has been conducted, 90% of the total energy consumption is compliant via ESOS audits or an alternative route to compliance, and the data to evidence this work and its findings is recorded, this will be sufficient.

The only standardised element is the notification of compliance. This is available on the government’s ESOS webpage.

21. What should I keep in my ESOS evidence pack?

You must keep an evidence pack that includes where relevant to your organisation:

  • contact details of the participating undertakings and the responsible undertaking
  • details of any board level directors or equivalents who’ve reviewed the ESOS assessment findings
  • written confirmation from the director(s) to evidence that they reviewed the ESOS assessment
  • contact details of your lead assessor and the name of the approved register which they are a member of
  • written confirmation from the lead assessor to evidence that they reviewed the ESOS assessment
  • the calculation for your total energy consumption
  • a list of your identified areas of significant energy consumption
  • details of the energy audits undertaken including the audit methodology used in your ESOS energy audits
  • details of the energy saving opportunities identified
  • details of the routes to compliance used to cover each area of significant energy consumption and where applicable evidence (e.g. certificates) of the alternative routes to compliance
  • written agreements to support any disaggregation or aggregation of group members • written agreements to support any alternative responsible undertaking chosen (other than the default highest UK parent)
  • reasons for using less than 12 months of data for the measurement of total energy consumption, if you couldn’t do this
  • reasons for using less than 12 months of data to support an ESOS energy audit, if you couldn’t do this
  • reasons for being unable to use verifiable data on energy use or energy expenditure to support your calculation of total energy use
  • the methodology you used for any estimates you’ve made for energy use or energy expenditure
  • justification, where applicable, where your lead assessor has not used an energy consumption profile in your audit of an area of significant energy use

You must keep the evidence pack for the compliance period to which it relates and the two subsequent compliance periods.

22. Will my lead assessor also implement projects identified through ESOS?

Yes. To gain financial value from the audit, it’s a good idea to select an ESOS lead assessor who is also capable of helping you to implement the identified energy saving measures.

At BiU, we can help you to build a cost-effective carbon reduction strategy and gain a return on investment from your ESOS audits.

23. Are there opportunities to implement ESOS recommendations on a ‘share of savings’ basis?

Some companies offer a ‘shared savings’ energy efficiency scheme, whereby the upfront cost of an energy saving project is covered by the supplier or a third party financing company. The customer then repays the cost through an agreed percentage of the energy savings achieved. The idea is that energy efficiency projects can be cost neutral for an organisation in the short term, and in the long term they benefit from lower energy bills. Your Lead Assessor may have a similar offer or be able to recommend a company that offers such a scheme.

24. Does ESOS deliver benefits to my company?

The point of ESOS is to assist your business to identify and implement cost-effective energy savings. The ESOS scheme has only been in place since 2015, so it is still early days. However, the interim evaluation of ESOS reports that four in five complier organisations reported some form of energy efficiency improvements in the 18 months prior to mid-2016 and one third of these reported that ESOS had been influential in their decision to implement at least one of these improvements.

25. Will some firms need to report under both SECR and ESOS?

Yes! BEIS’s impact assessment suggests around 25% of companies affected by the reporting regimes will end up falling under both.

The compliance team at BiU can help you to transition easily from ESOS data reporting to SECR data reporting, as well as building the strategies required to reduce your carbon output and gain return on investment.

The Energy Advice Hub is powered by BiU, the UK’s leading energy and utility consultancy.

Got a question that we’ve not covered? Give BiU’s ESOS team a call on 01253 785409 or email [email protected]

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