Energy Savings Opportunity Scheme (ESOS) Understanding, Implementing and Complying with ESOSJo Scully – Environment Agency ESOS Project Manager

Facilities Management and Property Summit – Global Business EventsCeltic Manor, Newport. 30 April 2015

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What is ESOS?

Energy Savings Opportunity Scheme (ESOS)New UK regulation to comply with Article 8 (4) of the European Energy Efficiency Directive Requires all large undertakings in the UK to do energy efficiency audits by 5 December 2015 and thereafter at least once every four years

~10,000 UK organisations

Key Dates

Qualification Date 31/12/14Don’t need to register or tell us you qualify

Compliance Date 05/12/2015Tell us you have complied online via webpage

And every 4 years thereafter

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What are ‘large undertakings’?Large undertaking is organisation that is: Registered in the UK and

has at least 250 employees; or has an annual turnover in excess of 50 million euro (£38,937,777), and an annual balance sheet total in excess of 43

million euro (£33,486,489)

An overseas company with a UK registered establishment which has 250 or more UK employees (paying income tax in the UK)

Is part of a corporate group which includes an undertaking which meets the above criteria

Employees

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Employees = anyone with a contract of employment regardless of hours

find the number of persons employed under contracts of service by the company for each month of the financial year (whether for the whole month or part of it)add together the monthly totalsdivide by the number of months in the financial year

It’s not the number on the 31 Dec, it’s the number based on the average for the accounts ending on or in the 12 months preceding that date.

Balance Sheet Total

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“The aggregate of the amounts shown as assets in the company’s balance sheet” (that is before deducting both current and long-term liabilities).

Where an undertaking is not required under the Companies Act 2006 to produce individual accounts they must estimate the annual turnover and annual balance sheet total for the undertaking for a 12 month period including the qualification date, to determine their balance sheet total.    

From accounts required under Section 394 or 395 of the Companies Act 2006 (Duty to prepare individual accounts or Individual Accounts: application accounting framework)

Organisational Status

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“Where, in any accounting period, an undertaking is a large undertaking (or a small or medium undertaking), it retains that status until it falls within the definition of a small or medium undertaking (or a large undertaking, as the case may be) for two consecutive accounting periods.”

2010 2011 2012 2013 2014 In ESOS?

Company A Over threshold NoUnder threshold

Company B Over threshold YesUnder threshold

Disaggregation and aggregation

Groups can allow subsidiaries (or groups of subsidiaries) to participate separately ‘disaggregate’

Keep written agreement

More than 1 highest UK parent = separate participants

Unless they choose to participate together ‘aggregate’Keep written agreement

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Who isn’t in ESOSOrganisations subject to insolvency proceduresOrganisations defined as a contracting authority in the Public Contracts Regulations 2006

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Requirements

1. Conduct ESOS assessment Where not fully covered by ISO50001 certification

2. Conduct energy audits Where not covered by ISO50001 certification, Green Deal

Assessments (GDAs) or Display Energy Certificates (DECs) (partial or full coverage)

3. Identify energy savings opportunities

4. Use a lead assessor to either do or review points 1 to 3 above (unless fully covered by ISO50001)

5. Get a director to sign off that they have seen the recommendations of the work

6. Notify the Environment Agency of ESOS compliance

1. Conduct an ESOS assessment

Identify total energy consumption (buildings, installations, transport)Common units (either cost or energy measurement unit)For a 12 month reference period covering the qualification date

90% of your total energy consumption = Areas of Significant Energy Consumption

Determine coverage by ISO50001, GDAs, DECs, existing audits which meet the ESOS criteria

Determine additional ESOS audits that need to be undertaken prior to 5/12/2015

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2. Conduct ESOS audits

Compliant audits:

Use12 months’ verifiable dataAnalyse your energy consumption and energy efficiencyIdentify practicable ways in which you can improve energy efficiencyRecommend cost effective ‘energy saving opportunities’Identify the estimated costs and benefits of the ‘energy saving opportunities’ recommended

Where 12 months data is not used or consumption profiling is not undertaken justification must be provided.

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3. Identifying savings opportunities from ESOS audits

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Use life-cycle cost analysis to determine cost effectiveness rather than simple pay back period where possible

Identify recommendations within your control

No requirement in the regulations to implement the identified savings

4. ESOS Lead assessors

Individuals that belong to an ‘approved register’ = lead assessors

Approved bodies/registers on ESOS webpage

Lead assessors can be internal or external

Lead assessor reviews the assessment

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5. Director Sign off

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Show recommendations of the assessment to a board level director

2 directors if lead assessor is internal

No specific format required

Director confirms they have reviewed the findings

6. Notifying the EA

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Online notification form accessed from ESOS page on GOV.UK

Provide basic organisation details – not energy data or improvements identified

Needs to be submitted by 5 Dec 2015 to be compliant.

Keep an evidence pack Cost Effective Energy Savings Opportunities Identified

Details of your ESOS assessment and audits (where applicable)

Certifications for alternative compliance routes

Details of any areas where you are not fully compliant with the rules

Record of your lead assessor review and director sign off

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There is no prescribed

format for this

Site visits

It is not necessary to visit every site.Regardless of the number of site visits, organisations need to ensure they have collected and analysed data for all their areas of significant energy consumption.% of site visits required is not prescribed in legislation or guidance; it is up to your organisation and lead assessor to agree what is appropriate for your organisation.

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ESOS WEBPAGE: https://www.gov.uk/energy-savings-opportunity-scheme-esos

ESOS Guidance: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323307/ESOS_Guide_FINAL.pdf

ESOS Regulations:http://www.legislation.gov.uk/uksi/2014/1643/contents/made

ESOS Helpdeskesos@environment-agency.gov.uk

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Further Detail on ESOS

Changes to structure after qualification

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Changes to organisation size/structure etc after the qualification date do not affect qualification.

Once you are in you are in for the compliance period

Any organisation sold by a qualifying organisation between 31 Dec 2014 and 5 Dec 2015 needs to comply with ESOS (either with old owner, new owner or on its own)

Trust Provisions

Supply contract agreement is crucial to the determination of whether the trust assets are in ESOS.

Is the supply contract with an undertaking that qualifies for ESOS?

Yes – the asset supplies will be in ESOS (see the guidance)No – the asset supplies will not be in ESOS.

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Data time periods

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Total energy consumption data 12 months data covering 31/12/14Supplies for all assets covering a specified 12 month period Can use £ or common energy unitPurpose: To determine which assets will need to be covered by audits or alternative routes to compliance

Data for audits 12 months data starting from as far back as 6 Dec 2010Audits can have been undertaken between 6 Dec 2011 and 5 Dec 2015Assets don’t need to have been audited at the same timebegin no more than 24 months before the start of the energy auditUse energy units for analysisPurpose: To determine energy savings opportunities

Areas of significant energy consumption and audits

Flexibility about which energy is in the 90%Could exclude all of one fuel type; orCertain assets/activities; orA combination

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Verifiable data

Data you can proveInvoices, meter readings, stock records, AMR readings

If you can’t obtain verifiable data of energy use or spend you should:

explain why in your evidence packuse a reasonable estimate derived through calculation (based on other verifiable data, if possible), and show how you got this figurekeep records in your evidence pack

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Alternative compliance routes

DEC/GDA/ISO 50001 coverage mean that you don’t have to meet articles 26 and 27 of the regs

Energy use covered by one of these three schemes is fully compliantYou don’t have to do a cost benefit analysis for the energy saving opportunities for that energy use (great if you want to though!)

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Unconsumed suppliesUnconsumed supply rule can apply if

Energy is supplied by a participant to another organisationThe energy can be measured or reasonably estimated.

Ultimately we want the organisation with the control of the energy look for energy saving opportunities

Doesn’t matter who does the audit as long as it covers all ESOS supplies

– (i.e. 2 or more qualifying participants could be compliant using the same audit. They just reference the energy saving opportunities relevant to them in their evidence pack)

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TransportShould include fuel used in:

company cars on business usefleet vehicles which you operate on business usepersonal cars on business useprivate jets, fleet aircraft, trains, ships, or drilling platforms which you operate

Fuel not included:Fuel associated with train travel/flights/taxi journeys of your employees where you do not operate the train/aircraft/taxiFuel associated with transportation of goods where you subcontract a firm or self employed individual to undertake this work for you (this fuel would be included in the subcontractor's total energy consumption calculation if they have qualified).

 

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Lead Assessors

If you are an energy manager we would encourage you to become a lead assessorLead assessors must review participant’s ESOS complianceParticipant is liable for compliance

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Non-compliance ESOS Regulation Penalties

Failure to notify Regulation 43 A fixed penalty of up to £5,000

An additional £500 for each working day starting on the day after service of the penalty notice until the notification is completed, subject to a maximum of 80 days

Publication

Failure to maintain records

Regulation 44 A fixed penalty of up to £5,000

The cost to the compliance body for undertaking sufficient auditing activity to confirm that an organisation has complied with ESOS

Publication

The penalty notice may specify steps to remedy the breach.

Failure to undertake an energy audit

Regulation 45 A fixed penalty of up to £50,000

An additional £500 for each working day starting on the day after service of the compliance notice, until the breach is remedied, subject to a maximum of 80 days

Publication

The penalty notice may specify a requirement to undertake an ESOS Assessment.

Failure to comply with a compliance notice, an enforcement notice or a penalty notice

Regulation 46 A fixed penalty of up to £5,000

An additional £500 for each working day starting on the day after service of the penalty notice, until the breach is remedied, subject to a maximum of 80 days

Publication

False or misleading statement

Regulation 47 A fixed penalty of up to £50,000

Publication