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Energy Savings Opportunity Scheme

7 January 2015

What is it?

In order to comply with the UK’s European-led climate change mitigation targets, the government has brought in the Energy Savings Opportunity Scheme (“ESOS”). It is a mandatory energy assessment and energy saving identification scheme for large undertakings (which are explained below), which applies throughout the UK.

ESOS is intended to provide high quality and targeted information on cost-effective energy efficiency opportunities for those organisations which are caught by it, which would ultimately also bring financial savings to those affected.

The Scheme was brought in by the Energy Savings Opportunity Scheme Regulations 2014, in July 2014.

Those Affected

ESOS applies to large undertakings, including all organisations:

  • with 250 or more employees. or
  • whose annual turnover exceeds €50 million and balance sheet exceeds €43 million, or
  • which are part of a group, where another member would be included.

The number of employees is the average during the organisation’s previous financial year to each phase. Employees also include partners, owner–managers and those engaged in the business of the organisation.

An undertaking would include a body corporate or partnership, or an unincorporated association carrying on a trade or business, with or without a view to profit. These cover limited and public companies, trusts and not-for-profit bodies. Some charities could fall within the scope of ESOS, if their activities constituted trade or business activities.

Public bodies, which must comply with the Public Contracts Regulations 2006, are not included in the Scheme. Some universities are, however, included, the test being how they are funded.

Where a university derives over half of its income from private sources, such as fee paying students, it may not need to comply with the above Regulations. It would therefore participate in the Scheme, if it were a large undertaking. 

In a group situation, where the entire UK operations of the group must participate, the highest member would be expected to complete the ESOS Assessment on behalf of itself and the members below it.

Compliance Dates

ESOS operates in four-yearly compliance phases. Undertakings must assess whether or not they must participate, on the qualification date for each phase. By the last day of each phase they must have undertaken their ESOS Assessments, over a 12-month period, and notified the Environment Agency (“EA”) appropriately.

For Phase 1, the qualification date is 31 December 2014 and the compliance phase is 6 December 2011 to 5 December 2015, with the compliance date being 5 December 2015.

ESOS Assessment

There are four types of ESOS qualifying assessments:

  • ESOS Energy Audits, which may include audit work undertaken during the compliance period under other schemes, provided it meets the standards required
  • ISO50001 certified Energy Management Systems;
  • Display Energy Certificates, and
  • Green Deal assessments.

A Lead Assessor must be appointed to carry out or review each ESOS Assessment, who could be a suitably qualified in-house expert or an external consultant.

The scope of the Assessment is wide, as it covers all of the organisation’s energy consumption – in buildings, transport and activities carried out. Once an undertaking has measured its total energy consumption, it may identify areas of significant energy consumption, accounting for at least 90% of total consumption.

It is the organisation's legal responsibility to ensure that all of such areas either of significant energy consumption or total consumption are audited for the 12-month period. It must identify energy efficiency recommendations for those areas and assess the cost effectiveness of each recommendation.

Penalties and enforcement

The EA can apply civil penalties of fines up to £50,000 and an additional £500 per day, for non-compliance. It could also publish the participant’s name, details of the failure and the penalty amount, on its website.

What organisations should do now

Organisations must have worked out by the end of December 2014 if they are included in this Scheme. If so, they should then appoint a Lead Assessor who may use energy information compiled over the last three years or carry out another form of Assessment over the next year, to be submitted to the EA before 5 December 2015.

This article was written by Helen Hutton.

For more information please contact Helen on +44 (0)20 7203 5314 or helen.hutton@crsblaw.com.