An outline of qualification under and key requirements of the Energy Savings Opportunities Regulations 2014.
Your organisation may recently have been made aware of a possible need to comply with the Energy Savings Opportunity Scheme Regulations 2014 ("ESOS Regulations").
What are the ESOS Regulations?
The ESOS Regulations, which implemented a 2012 European Union Directive, aim to improve energy efficiency of organisations in the UK through the establishment of a mandatory energy assessment scheme for qualifying organisations.
ESOS compliance bodies
The ESOS Regulations are administered in four-year phases, known as "compliance periods", and compliance bodies are in place to ensure that qualifying organisations are meeting their obligations. We understand steps are being taken to enforce the most recent compliance period ("phase 3"), which ended on 5 June this year.
Compliance bodies vary across the UK depending on location. For organisations registered in Scotland, the compliance body is the Scottish Environment Protection Agency. In England, the compliance body is the Environment Agency. For organisations that engage wholly or mainly in offshore activities, the compliance body is the Secretary of State for the Department for Energy Security and Net Zero.
Qualification under ESOS
Compliance periods run from 6 December immediately following the end of the previous ESOS phase and end on 5 December four years later (the "compliance date").
Organisations are captured by the ESOS Regulations if they meet the definition of a "relevant undertaking" on the "qualification date" for a compliance period (normally 31 December immediately before the compliance date).
An organisation qualifies as a "relevant undertaking" during phase 3 if, on 31 December 2022, it was a UK body corporate, partnership, or unincorporated association carrying on trade/ business which was:
- a "large undertaking", meaning an undertaking which:
- employs at least 250 persons; or
- has an annual turnover in excess of £44 million and an annual balance sheet total of £38 million; or
- a "small or medium undertaking", meaning an
undertaking which employs fewer than 250 persons and:
- has an annual turnover not exceeding £44 million; or
- an annual balance sheet total not exceeding £38 million; and
- is a group undertaking in respect of a large undertaking.
If your organisation met these thresholds on 31 December 2022, and steps have not been taken to comply with ESOS, it may be subject to enforcement action.
Key requirements
To comply with ESOS, qualifying organisations must, within specified timeframes:
- carry out an ESOS assessment, which includes (among other
matters):
- a calculation of the organisation's energy consumption;
- an energy audit analysing the organisation's energy consumption and energy efficiency, and identifying and recommending measures for improving energy efficiency;
- an "ESOS Report", which includes an estimate of energy savings in comparison to previous compliance periods.
- prepare an ESOS action plan, including measures proposed to improve energy efficiency to be implemented before the end of the relevant compliance period; and
- provide annual ESOS progress updates.
Organisations must notify once they have complied with ESOS Regulations using an online notification system developed by the Environment Agency (called "MESOS").
There are alternative pathways to compliance with some of the key ESOS requirements, for example where an organisation's energy management system is certified within the compliance period as complying with ISO 50001, or where a participant has a display energy certificate or a qualifying Green Deal assessment.
Enforcement
Compliance bodies under the ESOS Regulations have enforcement powers, including the ability to issue penalty notices for certain breaches (for example, failure to notify of compliance with the scheme, failure to maintain records, failure to undertake an energy audit).
The maximum penalty for an initial breach is £50,000, and for certain breaches a daily penalty of up to £500 (for up to 80 days) may be applied. Breaches are also subject to a "publication penalty", in which case the name of the organisation and details relating to the breach will be published.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
