In today’s competitive landscape, compliance with regulatory frameworks like the Energy Savings Opportunity Scheme (ESOS) is more than just a legal obligation – it’s an opportunity for businesses to unlock significant cost savings, enhance their operational efficiency and contribute to environmental sustainability.
For large organisations, especially those with complex energy needs, understanding the intricacies of ESOS and ensuring compliance can be daunting. Yet, with the right guidance, ESOS compliance can serve as a strategic tool to boost bottom-line performance and brand reputation. This guide will walk you through everything you need to know about ESOS assessments, the ESOS reporting process and the key benefits of ESOS audits, helping you navigate this essential initiative with confidence.
What is the Energy Savings Opportunity Scheme (ESOS)?
The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment initiative in the UK, targeting large organisations to promote energy efficiency. Administered by the Environment Agency, ESOS requires qualifying businesses to conduct comprehensive audits of their energy consumption across buildings, industrial processes and transport every four years. These audits aim to identify cost-effective measures to enhance energy efficiency and reduce overall energy usage.
What is ESOS Compliance?
To comply with ESOS, the following assessment steps must be taken:
- Determine Eligibility – Assess if your organisation meets the ESOS qualification criteria (outlined below).
- Calculate your Total Energy Consumption – Evaluate energy consumption across buildings, processes and transport.
- Identify Significant Energy Consumption – Focus on areas making up at least 95% of total energy use.
- Calculate your Energy Intensity Ratios – Calculate ratios for energy intensity across buildings, transport, industrial processes and other energy uses.
- Decide on your route(s) to compliance – Select one or more routes to compliance (i.e. ISO 50001, Display Energy Certificates (DECs), Green Deal Assessments or an Energy Audit – the most common route for ESOS compliance). You must ensure all areas of significant energy consumption are covered by the route(s) you choose.
- Carry out any necessary ESOS audits – An ESOS compliant energy audit must meet these criteria:
- It must be based on 12 months’ of verifiable data, starting no earlier than 6th December 2018, for the Phase 3 compliance period;
- It must analyse the organisation’s energy consumption and efficiency;
- It must identify opportunities for energy savings;
- It must include on-site visits.
- Appoint a Lead Assessor – A lead assessor must sign off your ESOS Assessment unless 100% of your energy supply is covered by ISO 50001 or your total energy consumption is less than 40,000 kWh.
Three Key Benefits of ESOS Compliance
By adhering to ESOS compliance requirements, organisations not only comply with legal obligations but also position themselves for achieving the following long-term economic and environmental benefits:
- Cost Savings: Implementing the energy-saving measures identified during ESOS audits can lead to substantial reductions in energy bills, enhancing overall profitability.
- Enhanced Competitiveness: By optimising energy use, businesses can improve operational efficiency, giving them a competitive edge in the market.
- Environmental Responsibility: Reducing energy consumption contributes to lower greenhouse gas emissions, aligning organisations with the UK’s commitment to achieving net-zero emissions by 2050.
Who Qualifies for ESOS?
The Energy Savings Opportunity Scheme (ESOS) applies to large UK organisations that meet at least one of the following criteria:
- 250 or more employees;
- an annual turnover exceeding £44 million;
- a balance sheet total over £38 million.
This includes businesses, non-profits and some public sector bodies. Small and medium-sized enterprises (SMEs) are generally exempt unless they are part of a larger corporate group that meets the qualification threshold.
ESOS operates in four-year compliance phases, meaning organisations must reassess eligibility for each period. If an organisation qualifies, it must conduct an energy audit and report findings to the Environment Agency.
Public sector bodies are largely exempt, but some universities, charities and trusts may need to comply.
The Four Phases of ESOS
ESOS was introduced by the UK Government in 2014 in response to the EU Energy Efficiency Directive (2012/27/EU) to improve energy efficiency in large organisations. Since its inception, the ESOS assessment process has been implemented in four distinct phases, each with specific compliance deadlines that businesses must meet to avoid penalties and maximise energy-saving opportunities.
The four phases include:
Phase 1 (2014-2015):
- Organisations meeting the ESOS qualification criteria had to complete their first energy audit.
- The deadline for reporting was 5th December 2015.
Phase 2 (2018-2019):
- Businesses reassessed their eligibility and conducted new energy audits, with updated measures.
- The submission deadline was 5th December 2019.
Phase 3 (2022-2023) – Current phase:
- Companies are required to continue with energy audits and execute energy saving initiatives outlined in an ESOS Action Plan.
- The deadline for submitting a notification of compliance was initially 5th December 2023, but was extended to 5th June 2024.
Phase 4 (2026-2027):
- The next compliance period is underway, with assessments based on 31st December 2026 qualification criteria.
- The submission deadline is expected to be 5th December 2027.
Key Requirements for ESOS Reporting
To comply with ESOS reporting, organisations must follow these key steps:
- Complete an ESOS Report – Document the audit findings, information on the compliance route selected and what is covered, energy saving opportunities identified as well as energy savings achieved since the previous compliance date.
- Share the ESOS report within the Corporate Group – Organisations that are part of a corporate group must provide relevant information from the ESOS report to all members of their corporate group.
- Submit Compliance Notification – Once you are compliant with your obligations, you must notify the Environment Agency before the deadline for each ESOS phase.
- Maintain Records in an ‘Evidence Pack’ – Keep records of how you have complied with ESOS for future audits.
Any organisation that qualifies for Phase 3 of ESOS and fails to submit a notification of compliance can be at risk of enforcement action, and should therefore contact the Environment Agency at the earliest opportunity.
Understanding the ESOS Assessment Process
The ESOS assessment process involves a detailed analysis of your organisation’s energy use, which is carried out through comprehensive ESOS audits by a Lead Assessor.
Conducting ESOS Audits
The ESOS assessment process begins with a comprehensive review of an organisation’s energy consumption data, typically spanning the previous 12 months. The auditor will gather detailed data on all energy usage, including electricity, heating, transportation and other energy-intensive processes. Using this data, the auditor will conduct a thorough analysis to identify inefficiencies across different areas of the business.
A crucial component of the audit is identifying where energy is being used unnecessarily or inefficiently. The auditor will look for patterns of high energy consumption, out-of-date equipment or poorly managed systems that could be leading to wastage. They will also assess the energy performance of buildings, machinery and manufacturing processes, ensuring they are operating at optimal efficiency.
Beyond pinpointing inefficiencies, the audit will also explore and recommend practical, actionable energy-saving opportunities. These might include upgrades to more energy-efficient technologies, changes to operational practices or improvements to building insulation. The auditor will focus on providing recommendations that offer both short-term cost reductions and long-term savings, taking into account the payback period for any proposed changes.
Role of Qualified Assessors
Qualified assessors are essential to the ESOS assessment process, responsible for conducting energy audits and ensuring compliance. They are qualified and experienced in energy management, often holding certifications from professional bodies, such the Chartered Institution of Building Services Engineers (CIBSE) or similar institutes. They evaluate an organisation’s energy usage, identify inefficiencies and recommend practical energy-saving measures.
Assessors must also ensure the audit aligns with ESOS guidelines, preparing a detailed report that includes audit findings and an action plan for improvements. Their expertise helps businesses understand the potential benefits of recommended actions, ensuring both cost savings and sustainability goals are met, while ensuring compliance with regulatory requirements.
For an approved list of Lead Assessors, please visit: https://www.gov.uk/guidance/energy-savings-opportunity-scheme-esos
How Cube Controls Can Help With Your ESOS Compliance Journey
Cube Controls specialises in energy usage analysis and energy reduction strategies, helping businesses meet ESOS compliance efficiently. Our expert team conducts thorough energy audits, identifying key areas for improvement and cost-saving opportunities.
With tailored energy management solutions, we assist in implementing effective measures to reduce consumption, lower carbon footprints and support regulatory compliance.
ESOS Non-Compliance: Risks and Penalties
Failure to comply with ESOS regulations can lead to significant risks and penalties for businesses. The Environment Agency enforces compliance and if a company does not submit its ESOS report on time or fails to meet the required standards, penalties can be severe.
Businesses may face fines of up to £50,000 for non-compliance, with additional daily fines of £500 for continued non-submission. Aside from financial penalties, non-compliance can damage a company’s reputation and credibility, potentially affecting relationships with clients, investors and other stakeholders. Moreover, failing to take energy-saving actions could result in missed opportunities for cost savings, reducing a company’s long-term efficiency and sustainability efforts. It’s crucial for businesses to understand the ESOS requirements and ensure compliance to avoid these risks and maximise the benefits of energy efficiency initiatives.
Start Your ESOS Journey Today<
Complying with ESOS is not just about avoiding penalties – it’s an opportunity to enhance energy efficiency, reduce costs and contribute to sustainability goals. By understanding the ESOS assessment process and meeting ESOS compliance requirements, businesses not only meet regulatory obligations but also gain long-term benefits.
FAQs About ESOS
Who carries out the energy audit?
An ESOS energy audit is typically carried out by a qualified lead assessor. Lead assessors are accredited professionals with expertise in energy management and efficiency. They are responsible for evaluating your energy consumption, identifying inefficiencies and recommending energy-saving measures. You can find a qualified lead assessor through professional directories or energy consultancy services.
What is an ESOS Action Plan and do I need one?
An ESOS Action Plan outlines the steps your business should take to improve energy efficiency based on the findings of your ESOS audit. While not mandatory, creating an action plan is highly recommended. It helps ensure that you are not only compliant with the regulations but also actively working towards reducing your energy consumption, improving sustainability and saving costs. The action plan will highlight key energy-saving opportunities, prioritise them and provide a clear roadmap for implementation, offering long-term benefits for your business and the environment.
What are the different routes to ESOS compliance and how do I choose the right one?
There are several routes to ESOS compliance, allowing businesses to select the best fit for their energy needs and operations. These include conducting a full energy audit, obtaining certification through ISO 50001 (Energy Management Systems) or using a combination of methods. For example, businesses with ISO 50001 certification may use this to meet their ESOS requirements without needing a separate audit.
When selecting your compliance route, consider factors like your company’s energy consumption, the availability of certified systems and the complexity of your operations. A Lead Assessor can help guide you in choosing the best path to ensure compliance.
Cube Controls is an established and experienced supplier of Building Management Systems, specialising in the design and set up of bespoke environmental and energy control programmes for commercial buildings and property.
To find out how Cube Controls can support you at all stages of design and consultancy, installation and modification and maintenance of your building management systems contact our expert and friendly team on 01903 694279 or sales@cubecontrols.co.uk.
