The Environment Agency (EA) has just published Issue 13 of its ESOS Newsletter, in which it has announced a 6-month extension to ESOS Phase 3, making the new deadline 5th June 2024. But what does this mean for your business? Frances Stones, Lead IMS Auditor at MAYER ENVIRONMENTAL LTD, tells us more.
What is ESOS?
The Energy Savings Opportunities Scheme Regulations 2014 (ESOS) apply across England, Scotland, Wales, and Northern Ireland and require obligated businesses to:
- Measure your total energy consumption;
- Conduct energy audits to identify your areas of significant energy consumption and identify cost-effective energy efficiency recommendations; and
- Report compliance to the Environment Agency (as scheme administrator) every 4 years
In general, businesses that met either of the following criteria on 31st December 2022 are obligated to complete an ESOS Assessment:
- Employed 250 or more people, OR
- Had an annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million
In 2021, BEIS (now Department for Energy Security and Net Zero) consulted on proposals to strengthen and improve ESOS. The results of the consultation were published in July 2022, and an Energy Bill was drafted by the government. This has successfully passed its third reading in the House of Lords and is currently going through the Committee stage in the House of Commons.
The Energy Bill is still in draft, so is still subject to change, but the government intend to implement several amendments to ESOS Phase 3, including:
- Strengthening the requirements for energy audits: improving quality and standardisation
- Requiring ESOS reports to include information on the next steps for implementing recommendations
- Adding a net-zero element to the audits (potentially still voluntary for Phase 3)
The Energy Bill also includes potential future powers to extend ESOS to medium-sized enterprises and to make it mandatory to implement identified energy efficiency improvement actions – which is currently optional.
What does this mean for your organisation?
The biggest impact for most organisations is the new change to the de minimis exemption. This means that now 95% (not 90%) of your total energy consumption must be covered by your ESOS Assessment. You will also have to share your ESOS reports with your subsidiaries and will have to report annually on progress against your published energy improvement action plans from December 2024. There are several changes that your ESOS Lead Assessor will also have to add into your Phase 3 ESOS Assessment Report, including energy intensity metrics and additional compliance information.
Submissions for Phase 3 cannot be made until the new requirements have been finalised in legislation and the Environment Agency portal has been updated.
Is there an alternative to ESOS Assessment?
There are four mechanisms which obligated companies can use, alone or in combination, to demonstrate ESOS compliance:
- ESOS Assessment carried out by a registered ESOS Lead Assessor
- Certification to the Energy Management System standard ISO 50001:2018
- Display Energy Certificate (DEC)
- Green Deal Assessments (GDA)
Each avenue has different requirements and different benefits, but your ESOS Lead Assessor should be able to guide you towards the right options for your business.
What do you need to do now?
Final guidance will be published on gov.uk once the new ESOS regulations have been laid in Parliament, but right now, you need to consider whether or not you are obligated and, if so, how much the 95% de minimis exemption will impact your figures. You should also be discussing the implications of these changes with your ESOS Lead Assessor.
With the deadline now 12 months away, you should also consider the option of gaining certification to ISO 50001:2018 as an alternative route to ESOS compliance.
Mayer can support you in achieving compliance, no matter which path you choose, how much input you need, and whether this is your first time or your third.
Frances Stones BSc, LLM, CEnv, MIEMA
IEMA Registered Principal Auditor
Registered ESOS Lead Assessor BJ80-0001