New energy audit requirement for large organisations

New energy audit requirement for large organisations


Author: Sophie Wilkinson

Larger companies and non-public sector organisations will be required to carry out mandatory energy saving assessments under the new Energy Savings Opportunity Scheme (ESOS) introduced on 17 July by the Energy Savings Opportunity Scheme Regulations 2014.

Organisations must establish if they are affected by phase I of ESOS by 31 December 2014 and if so, must comply with the ESOS requirements by 5 December 2015.

ESOS regulations

ESOS will be administrated by the Environment Agency and is part of the UK's implementation of the EU Energy Efficiency Directive 2012 (EED) (for further information on the EED see our article).

Who is affected?

All organisations with 250 or more employees have to participate in ESOS. Organisations with fewer than 250 employees will also be included if annual turnover exceeds 50 million euros and annual balance sheet total exceeds 43 million euros.

Participation is on a group basis, with an option to disaggregate.

Public sector organisations and companies in insolvency are excluded from ESOS.

What is required?

Participants need to:

  • measure the organisation's total energy consumption (from buildings, transport and industrial processes) over a 12 month reference period
  • undertake an energy audit of at least 90% of the organisation's energy consumption
  • identify cost-effective recommendations to improve energy efficiency

Compliance can be achieved through a combination of methods including:

  • undergoing an ESOS energy audit carried out by an approved ESOS assessor
  • where an ISO 5001 certified energy management system is in place covering the energy consumption
  • having a valid display energy certificate in place or
  • demonstrating that a green deal assessment has been carried out for the building

There is no current requirement to implement the energy efficiency recommendations identified but this may change in the future.

Compliance periods

There are four compliance periods or 'phases' under ESOS. Each phase has:

  • a qualification date, by which organisations must establish if they are affected by the phase, and
  • a compliance date by which it must comply with the ESOS requirements

Phase I runs from 17 July 2014 to 5 December 2015. The qualification date is 31 December 2014 and the compliance date is 5 December 2015.

For each phase participants can choose the 12 month reference period over which their energy consumption is measured. This flexibility allows dates to be aligned with other schemes, e.g. CRC. However the reference period must overlap with the qualification date and end before the compliance date (i.e. for Phase I it must be a 12 month period starting before 31 December 2014 and ending before 5 December 2015).

The energy audits will be carried out by approved ESOS assessors.

Reporting on compliance with ESOS

Organisations must provide notification to the Environment Agency by the compliance date for the phase, confirming that they are affected and have conducted an ESOS assessment. A compliance confirmation from a director or other responsible officer must be provided confirming that the energy audit has been reviewed and its recommendations considered.

There is no requirement to report the findings of the ESOS assessment, but participants will be invited to disclose these voluntarily. A list of participants will be published which will include any voluntary information provided.

Enforcement and penalties

An enforcement notice can be served. There are also civil penalties for failing to provide information to the Environment Agency, failing to maintain records, failing to undertake an energy audit, failing to comply with an enforcement notice and making a false or misleading statement.

Financial penalties vary according to the breach, and range from a fixed penalty of up to £5,000 (e.g. for failing to maintain records) to a penalty of up to £50,000 (for failing to carry out an energy audit). There can also be additional penalties of £500 per day of non-compliance.

In addition the Environment Agency can issue a penalty notice on its website.