An introduction to ESOS (Energy Savings Opportunity Scheme)

Overview - What is ESOS?● The Energy Savings Opportunity Scheme has been established

to implement parts of EU Energy Efficiency Scheme.● ESOS is mandatory for all organisations that meet the criteria.● It requires businesses to audit the energy used by their

buildings, processes and transport. This information must then be used to identify cost-effective energy saving measures.

● ESOS assessments must be carried out during every 4 year compliance period.

● Organisations must notify the Environment Agency of their compliance by a set deadline. The first compliance deadline is 5th December 2015.

Who does ESOS affect?● Large UK undertakings and their corporate groups.● ESOS Mainly covers businesses, but it may also affect some

not-for-profit and large non-public sector organisations.● Corporate groups meet the criteria if they have at least one

large undertaking ● Large undertakings are defined as those with:

● 250 or more employees.● fewer than 250 employees but an annual turnover > 50m euros and an annual

balance sheet > 43m euros.● If a parent group is covered, then all subsidiaries and

organisations (regardless of size) must comply with the ESOS regulations.

● Public sector organisations aren't in the scope of ESOS.

ESOS Timetable

31st December 2014 – Initial qualification date ● Businesses are required to assess whether they meet the ESOS criteria prior to this

date.

5th December 2015 – First compliance deadline.● Organisations must have completed their first full ESOS assessment by this date.● Energy audits can be completed at any time during a phase (the 4 years preceding

the compliance date). ● For the first compliance date, this means 6th December 2011 → 5th December 2015.

5th December 2019 – Second compliance deadline.

Minimum requirements for ESOS data

All data used for your ESOS compliance must confirm with the following criteria

● Data must describe 12 consecutive months of energy consumption.● Data cannot be earlier than 12 months prior to the start of the four year

compliance period (e.g. 6th Dec 2010 for the current compliance period). ● Data used for one compliance period cannot be used to support compliance

in another period.● The data must be used to produce cost-effective energy-saving

recommendations.● The final ESOS data must be overseen, conducted or reviewed by a Lead

Assessor.

ESOS compliance the first steps

To determine what energy audit activity you may need to undertake to comply with ESOS, you first need to:

● Consider any energy management systems already in place e.g. ISO 50001.

or

● Use one of the alternative routes to compliance if you do not have the required ISO 50001 certificate

Routes to Compliance – ISO 50001

Do you have an ISO 50001 certificate from a UKAS accredited certification body?● Has your system been certified during the current compliance period?

● Will the certification be valid on the compliance date?

● Does it cover all assets held and activities carried out by your organisation on the qualification date? (31st December 2014 for current period)

If the answer to all of the above questions is ‘yes’, then compliance with the scheme can be reported to the EA.

Routes to Compliance without ISO 50001

Most business will not have an energy management system in place meeting all of the previous criteria.

In these instances, the organisation will need to;

● Measure its total energy consumption.

● Identify areas of significant energy usage.

● Ensure that the above areas are covered by one of the routes to compliance.

The organisation will need to have a lead assessor undertake some parts of this process. For example a Lead Assessor will have to sign-off your overall ESOS Assessment once complete and you will need to submit the details of this Lead Assessor to the Environment Agency when reporting.

Measuring your total energy consumption

Participants must measure their total energy consumption as part of their ESOS assessment. This can be submitted in either:

● Energy units e.g. kWh

Or

● Expenditure terms e.g. £

Whichever metric is used, it must be applied consistently to all energy use.

In measuring your total energy consumption, you must include all energy used in buildings, industrial processes and transportation.

Identifying areas of significant energy consumption.

Once you have determined your total energy consumption, you are required to audit assets and activities which amount to 90% of this value.

You can exclude up to 10% of your total energy consumption from the requirement to undertake an energy audit.

The organisation will however need to retain records within the ESOS evidence pack that clearly describes which assets and activities have been identified as areas of significant energy use.

The organisation must also describe the audits or alternative routes to compliance that have been undertaken in respect of each area of significant energy consumption.

Purpose of a lead assessor.

As stated previously, if your organisation does not have a UKAS accredited ISO 50001 certificate, you will need to involve a lead assessor.

In these instances a lead assessor will be required to either undertake, oversee or review your ESOS energy audits and any other auditing activities used to meet your ESOS obligations e.g. DECs etc.

A lead assessor will also be required to sign off your overall ESOS assessment to confirm that it meets the ESOS requirements before submission to the EA.

The following table describes the journey to ESOS compliance and the tasks which must be completed by the Lead assessor.

The selected lead assessor must be a member of an EA approved register.

The journey to ESOS compliance

ESOS routes to compliance overview

ESOS provides participants with multiple routes to compliance, below is a list of the options available to participants.

Participants can also use a combination of the available options (listed below) to cover the required 90% of their energy consumption:● ESOS specific energy audits

● ISO 50001 certification

● Display energy certificates

● Green deal assessments (domestic and non-domestic)

The participant can use any combination of the above options to achieve ESOS compliance. The organisation must ensure that all of the required areas are covered by at least one of the above options for compliance.

Identifying energy saving opportunities

ESOS energy audits are required to include recommendations for cost-effective energy efficiency improvements, where opportunities exist.

The recommendations should directly save energy or lead to an indirect energy saving.

The ESOS energy audit should also:

● Identify practicable energy saving opportunities

● assess and report on the cost-effectiveness of each opportunity

● use appropriate calculations to determine potential savings, in terms of energy and monetary value.

The financial benefit of energy saving opportunities should be demonstrated using Life-Cycle Cost Analyses (LCCA) as opposed to the Simple Payback Period (SPP) method.

ESOS evidence packEach ESOS particpant is required to maintain an ESOS evidence pack detailing certain aspects of their compliance with ESOS.

The ESOS evidence pack should include:● Details of the responsible undertaking.

● Details of the responsible Director(s) or equivalents who have taken the lead on signing-off your ESOS report.

● Details of your appointed Lead Assessor.

● The methodology used and calculation of your total energy consumption.

● A list of your identified areas of significant energy consumption.

● Details of the routes to compliance used to cover each area of significant energy consumption.

● Your reasons, where applicable, for using less than 12 months of data to measure total energy consumption.

● Your reasons, where applicable, for using less than 12 months of data to support an ESOS Energy Audit.

● Details of the methodology used in your ESOS Energy Audits.

● Your reasons, where applicable, for being unable to use verifiable data on energy use or energy expenditure to support your calculation of total energy use and the methodology of any estimation made.

● Justification, where applicable, where your auditor does not consider an energy consumption profile in their audit of an area of significant energy use.

Confirming compliance with the EAEvery ESOS participant will be required to submit a formal notification to the Environment Agency on or before the compliance date, confirming their compliance with the ESOS requirements.

The online notification system will be available in 2015, further details will be published on the official ESOS website.

As part of this notification, the EA will request information on the following aspects:

- The Participant.

- Any aggregation / disaggregation that has taken place.

- The appointed lead assessor.

- The submitted ESOS assessment.

Implementing audit recommendations

ESOS is intended to provide high quality advice on cost effective energy efficiency opportunities that will ultimately lead to financial savings.

The final ESOS assessment must be signed off by a board representative, however there is no legal requirement to implement the identified energy efficiency measures.

There is a wide variety of government finance schemes available to help implement energy saving opportunities. These can be used to help overcome barriers to implementing the identified energy saving measures.

Penalties and enforcementFor all non-compliances, the EA will have the power to publicly disclose the following information:● Name of the ESOS participant

● Details of the failure, in respect of which a civil penalty is levied

● The penalty amount

For specific non-compliances, the following penalties will be applied.

* Failure to submit notification of compliance by the compliance deadline – up to £5,000 plus an additional £500 for each day, up to a maximum of 80 days (£40,000).

* Failure to maintain adequate records that demonstrate compliance – fixed penalty up to £5,000 plus the cost to the compliance body for undertaking sufficient audit activity to verify compliance.

* Failure to undertake an ESOS assessment – requirement to complete an assessment by a stated date, fixed penalty up to £5,000 plus £500 for each day the organisation remains non-compliant (maximum of 80 days, £40,000).

Penalties and enforcement* Failure to comply with an enforcement or penalty – a fixed penalty of up to £5,000 plus an additional £500 for each day until the notification is completed, up to a maximum of 80 days (£40,000).

* For making a statement which is false and/or misleading – A financial penalty up to a maximum of £50,000, this penalty will be levied according to the nature of the misdemeanour.

If you require any further information relating to ESOS please don’t hesitate to contact me by email (khaled.belgasmi@loreus.com) or telephone (078 280 97245).