Potential ESOS changes following Government response to Consultation

In July 2021, the Government launched a Consultation aimed at finding ways to strengthen the Energy Savings Opportunity Scheme (ESOS).

Following the closure of the Consultation in September 2021, the Government began to analyse comments from consultees.

The Government has now published its responses, which give an indication of the changes we can expect to see introduced to the Energy Savings Opportunity Scheme Regulations SI 2014/1643 (as a reminder of what the Consultation was proposing, a brief summary can be found here).

We've summarised the key points to arise from the Government's response below. For now, it is important to note that nothing has changed! These responses only show the Government's intent to change ESOS and until legislation is published in the future to make official changes to the scheme, businesses should comply with the Energy Savings Opportunity Scheme Regulations SI 2014/1643 as they currently stand.

Setting stronger standards for ESOS

The Consultation looked at how the standard and quality of ESOS audits could be improved by strengthening the requirements for audits and standardising them.

In their response, the Government set out:

• ESOS reports will be standardised in Phase 3, meaning some ESOS reports already compiled may need to be altered;
• the current de minimis exemption of 10% (which allows you to exclude up to 10% of your total energy consumption from any audit) will be reduced to 5%;
• it is possible that an energy consumption threshold will be introduced for individual groups, sites, processes or fuel types to be excluded within the de minimis exemption from Phase 4;
• ESOS reports will have to use an existing auditing standard, such as ISO 50002, from Phase 4 onwards;
• Display Energy Certificates and Green Deal Assessments will be removed as compliance routes for ESOS.

Further changes to improve ESOS report quality

The Government also looked at other ways in which ESOS reports could be improved. In response:

• ESOS assessors will have to be appropriately trained and monitored moving forward;
• organisations will be encouraged to engage an ESOS assessor with appropriate skills and experience;
• staggered phases for different sectors will not be introduced.

ESOS and Net Zero

The Consultation contained some interesting proposals about how ESOS can address the net zero challenges. Following responses, the Government has decided:

• ESOS will be refocussed, from Phase 4 onwards, to cover both energy efficiency and net zero, with net zero assessments requiring confirmation that ESOS recommendations are aligned to net zero goals. Whilst the scope of the net zero elements is under consideration, a new Publicly Available Specification (PAS) is expected on the net zero requirements for an ESOS audit by early 2023;
• the net zero assessments will mean ESOS provides information to help organisations put together a net zero plan or to help them meet existing plans;
• it will consider how useful additional methodologies might be for businesses that want to consider the wider impacts of climate change and net zero, but ESOS will remain focused on direct energy use.

Reporting and disclosure

Chapter 4 of the Consultation considered how public disclosure of ESOS data could increase the uptake of ESOS recommendations. Following the Consultation, it has been decided that:

• forward-looking targets and action plans will be introduced and participants will be required to report progress on targets annually via Streamlined Energy and Carbon Reports (SECR);
• those companies who are not in scope of SECR will have to report via an ESOS web portal;
• meeting targets will not be mandatory for Phase 3 but will become mandatory from Phase 4 onwards;
• where a goal has not been met, participants must provide an explanation as to why it has not been met;
• additional data will have to be collected for the purpose of monitoring and enforcement;
• Regulations will be made to set out public disclosure requirements, whilst ensuring that future public disclosure requirements do not significantly duplicate reporting required under existing schemes;
• the ESOS qualification thresholds will be lowered so that they align with the thresholds for SECR, bringing more businesses under scope - i.e. to be in scope, they must have one of the following:
  • 250 or more employees,
  • a balance sheet of £18 million or more,
  • a turnover of £36 million or more.

Widening participation in ESOS

The Government considered whether ESOS should be extended to all medium-sized enterprises. This was not a central consultation proposal and the main aim of consulting on it was to gather evidence when considering changes for future phases.

In response to this part of the Consultation, the Government decided it will consider further whether the scope should be extended to all medium-sized enterprises in future phases. Additional consultations will therefore be held regarding how this might be managed, including by introducing energy thresholds to ensure that low energy businesses can take a light and proportionate approach.

Stimulating action bases on ESOS reports

ESOS has long been criticised for the fact that effort and money is poured into energy audits to produce a report containing recommendations which do not, by law, have to be implemented. The Consultation considered the possibility of mandating ESOS participants to take action.

Again, this was not a central consultation proposal, and the responses received will inform future developments. The responses to the Consultation set out a number of issues and concerns that would need to be addressed before mandatory action on ESOS recommendations was implemented.

The Government has therefore signalled an intent to work with stakeholders to address those concerns and consider implementation of mandatory action in future consultations.

Next steps

Now that the Government has set out its responses to the Consultation, it will look to introduce Regulations to deliver the decisions made.

Keep an eye on our In Focus and News stories for any future ESOS developments, and be sure to follow us on LinkedIN and Twitter.