Upcoming changes to ESOS: What you need to know
As we edge closer to 2050, the UK Government needs to take drastic action if we are to deliver our Net Zero Carbon commitments. With the pressure on, many policies and procedures are under scrutiny to ensure they achieve optimum results, including the Energy Savings Opportunities Scheme (ESOS). Changes to the Scheme came into force at the end of 2023 - we take a look at what you need to know.
What is ESOS?
ESOS is a UK legislation which mandates organisations to audit their estates and establish opportunities for saving energy.
Who does ESOS apply to?
ESOS applies to your organisation if:
- You employ more than 250 employees
- You are within a corporate group where an organisation within the group qualifies for ESOS
- You have an annual balance sheet total in excess of £38 million and turnover in excess of £44 million (Phase 3)
- You have a balance sheet of at least £18 million, or turnover of at least £36 million (Phase 4)
Why are these changes being made?
Changes to Phase 3 of ESOS have been introduced by the Department for Business, Energy and Industrial Strategy (BEIS) following a consultation on proposals to strengthen and improve ESOS.
The consultation aimed to make the scheme work for UK businesses and focused on seeking ways to improve the quality of ESOS audits by strengthening the minimum requirements and standardising the process. Aligning ESOS with Net Zero Carbon target requirements has also been addressed.
Changes to ESOS
The majority of changes are suggested for implementation in Phase 4 with a qualification date of 2026. However, there are a number of changes that will apply from Phase 3 onwards that businesses will be required to follow.
What’s changing in Phase 3?
- The de minimus limit (The limit for exemption from reporting) will reduce to 5% of total energy consumption (previously 10%). Reducing the de minimus limit will bring more energy uses under the scope, force smaller sites into the audit process and will increase the potential energy savings.
- ESOS reports should include an overall energy intensity metric within the overview section of the report in terms of kWh/m2 for buildings kWh/unit out for industry and kWh/miles for transport.
- DECs (Display Energy Certificates) and Green Deal Assessments will no longer be a compliance route in Phase 4 but are also not encouraged for use in Phase 3 as they do not meet ESOS best practise standards.
- A standardised template for including compliance information in the ESOS report will be available.
- ESOS reports will need to provide more information on next steps for implementing recommendations.
- Collecting additional data for compliance monitoring and enforcement will be required.
What’s changing in Phase 4 onwards?
- ESOS balance sheet and turnover thresholds will be updated to align with Streamlined Energy and Carbon Reporting.
- A new Net Zero Carbon element for the energy audits will be introduced. BSI is working on producing a Publicly Available Specification (PAS), setting out the net zero requirements for an ESOS audit. ESOS assessments will be expected to include recommendations that look to reduce GHG emissions even where these do not currently generate a direct energy cost saving.
- A requirement will be introduced that if the audit recommendations have not been met, the participant must explain why.
- Display Energy Certificates (DECs) and GDAs will be removed as compliance routes for ESOS.
What’s changing in Phase 5 onwards?
- The government is also considering extending the scope of the scheme to include medium-sized businesses which is expected to be introduced at a later phase.
Impact of ESOS changes
By including a Net Zero Carbon element and measuring GHG emissions, recommendations that may not have fallen under ESOS scope before, will now be incorporated and their implementation will be monitored. For example the elimination of fossil fuels such as a gas boiler, or on-site renewable energy generation might not have previously been ESOS recommendations, but they will be considered now. This, as well as including medium-sized organisations down the line, will help the UK reach its 2050 Net Zero carbon targets.
Compliance with such policies will entail CAPEX costs for businesses. With this in mind, Government-led financial incentives to support this transition would be welcomed. Also, the huge cost savings that can be gained from ESOS would provide much needed help to tackle current rising energy costs.
What does this mean for businesses?
Tackling compliance earlier on in the process is always recommended, the earlier you engage with the process, the more likely you are to achieve success and identify potential cost savings.
Our team have extensive experience in carrying out both ESOS and Net Zero Carbon audits and strategy advice. We can help you comply with ESOS, implement robust energy management systems, create action plans and set targets for energy efficiency.
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