On 28 July 2022, the UK Government published its response to the 2021 consultation by the Department for Business, Energy and Industrial Strategy (BEIS) seeking views on proposed measures to strengthen the Energy Savings Opportunity Scheme (ESOS). The consultation invited feedback on, inter alia, improving the quality of ESOS audits and reports, mandating audit recommendations and extending the scope of the scheme (including considerations for the UK’s Net Zero 2050 targets).

ESOS is a mandatory energy assessment scheme which requires larger companies and non-public sector organisations in the UK to carry out assessments to identify energy efficiency savings and enhance good energy management. The scheme has been in force in the UK since 17 July 2014 pursuant to the Energy Savings Opportunity Scheme Regulations 2014 (SI 2014/1643) (as amended) and continues to operate following Brexit pursuant to the Energy Savings Opportunity Scheme (Amendment) (EU Exit) Regulations 2018 (SI 2018/1342).

Under ESOS, qualifying organisations must carry out assessments in four-year compliance phases. Phase 3 relates to the period 6 December 2019 to 5 December 2023 and organisations must (i) determine qualification status for the scheme by 31 December 2022 and (ii) complete assessments and notify the Environment Agency of compliance by 5 December 2023. ESOS assessments comprise organisations measuring and auditing the energy consumption of their buildings, industrial processes and transport to identify cost-effective recommendations to improve energy efficiency. Organisations are not currently obligated to implement the energy efficiency recommendations identified by the ESOS assessments.

The changes outlined by the Government in its response primarily impact Phase 3 however organisations should take note of the changes outlined for Phase 4 and beyond.

Key changes to Phase 3 include:

  • introducing standardised reporting templates;
  • sharing of ESOS reports with subsidiaries;
  • reduction of the 10% de minimis exemption to up to 5% of total energy consumption;
  • additional data requirements for compliance, monitoring and enforcement;
  • new guidance on site sampling (with mandatory thresholds to be introduced in Phase 4);
  • the addition of an energy intensity metric in reports; and
  • the requirement to set a target or action plan (to be submitted after Phase 3 and reported on in Phase 4).

A key change to the scheme signposted for Phase 4 is the support of the UK Government’s Net Zero targets, which may see a new Net Zero assessment required to be carried out to identify potential risks that could hinder an organisation’s ability to achieve Net Zero and to make sure investment in energy efficiency does not negatively impact Net Zero trajectories. Other changes outlined for Phase 4 include extending the scope of ESOS to medium-sized organisations and mandating action on ESOS audit recommendations.

While certain significant changes are yet to be implemented, qualifying organisations must ensure they are familiar with the changes and guidance for both Phase 3 and Phase 4 in order to ensure compliance and future compliance with the fast-changing ESOS scheme and its forward-looking focus on both energy efficiency and Net Zero targets.

We regularly advise clients on qualification and ongoing compliance with the ESOS scheme.  If you need any support with this scheme please get in touch with Michael Barlow, Andrew Parmar-Yee or any other member of the environment team.

Written by Andrew Parmar-Yee