Energy Savings Opportunities Scheme

ESOS Phase 3 Compliance Deadline has been extended to 5 June 2024

The Energy Saving Opportunities Scheme (ESOS) is a mandatory energy assessment scheme for organisations in the United Kingdom that are regarded as a ‘large undertaking’.

The scheme was established to implement Article 8(4, 5 and 6) of the EU Energy Efficiency Directive (2012/27/EU). We are now nearing the third compliance phase of the Regulations and the rules for Phase III of ESOS will continue to apply regardless of the terms of exit from the EU via the Energy Savings Opportunity Scheme (Amendment) (EU Exit) Regulations 2018.

What’s involved in ESOS?

In simple terms, an ESOS assessment requires participants to do three things:

1. Measure your total energy consumption

Qualifying businesses are required to calculate their total energy consumption, including all the energy used in buildings, industrial processes and transport.

2. Conduct energy audits to identify cost-effective energy efficiency recommendations

After the total energy consumption is calculated, businesses must identify assets and activities that amount to at least 95% of the total energy consumption and include recommendations for cost-effective energy efficiency improvements. An ESOS Assessment Standards has been developed to help you to improve your ESOS outputs to help avoid non-compliance.

A lead assessor will need to be appointed to check that the assessment meets ESOS requirements. The lead assessor must be a member of an approved ESOS lead assessor register.

The assessment must then be signed off by senior management

3. Report compliance to the scheme administrator

Compliance for Phase III should be notified to the Scheme Administrator by 5 December 2023. SEPA continues to work with the Scheme Administrator (Environment Agency) to ensure Scottish operators have complied.

Who does ESOS apply to?

ESOS applies to large UK undertakings and their corporate groups. It mainly affects businesses, but can also apply to not-for-profit bodies and any other non-public sector undertakings that are large enough to meet the qualification criteria.

For the qualification date for the third compliance period (31 December 2022) a large undertaking is any UK company that either:

employs 250 or more people
has an annual turnover in excess of £44 million, and an annual balance sheet total in excess of £38 million

If you have an ISO50001 Energy Management System (certified by an approved certification body) covering all your energy use this shall be sufficient to constitute an ESOS Assessment. However, you will still need to notify the Scheme Administrator of your compliance.

Does my business qualify?

Your organisation qualifies if, on 31 December 2022, it meets the ESOS definition of a large undertaking.

You must take part in ESOS if your undertaking is part of a corporate group which indicates another UK undertaking or UK establishment which meets these criteria.

Where a corporate group participates in ESOS, unless otherwise agreed, the highest UK parent will as a "responsible undertaking" and be responsible for ensuring the group as a whole complies.

If you are very close to the qualification threshold or have substantially increased or decreased in size in recent years read the full ESOS guidance, which includes additional information on how to assess if you qualify.

Organisations that qualify for ESOS must carry out ESOS assessments every four years. These assessments are audits of the energy used by their buildings, industrial processes and transport to identify cost-effective energy saving measures.

What are the penalties for non-compliance?

As the regulator for businesses registered in Scotland, we have the power to issue civil sanctions, including financial penalties, if an organisation does not meet the scheme’s obligations.

Notes on ESOS Phase 3 compliance and deadline extension

Qualifying participants are required to comply with Phase 3 of ESOS. The Government still intends to make the changes announced in its response to the ESOS consultation Strengthening the Energy Savings Opportunity Scheme (ESOS). To ensure there is reasonable time for participants to meet the new requirements and for assessors to carry out assessments, ESOS participants will not be required to comply until 5 June 2024 (currently 5 December 2023), the revised deadline for when they will be required to notify compliance. This extension is in line with requests from stakeholders.

Whilst the compliance date has been extended, the qualification thresholds and date remain unchanged. ESOS still applies to all organisations (and their corporate groups) that were classed as large undertakings on 31 December 2022. See the UK Government Energy Savings Opportunity Scheme (ESOS) for information on which undertakings are classed as large for ESOS.

Participants are reminded that notifications cannot be submitted until the Phase 3 requirements have been finalised in legislation and the updated IT system, which is currently being developed, has been appropriately tested. The system will be made available in time to enable participants to meet notification requirements ahead of this extended compliance date. If you have any queries in relation to the Department of Energy Security and Net Zero update, please email businessenergyuse@beis.gov.uk.

Implementing energy saving opportunities

ESOS legislation was developed to help large businesses recognise the business and financial benefits of implementing energy saving measures. Compliance with ESOS should not be seen as a regulatory ‘tick box’ exercise, but an opportunity to reduce risks while improving efficiency and profitability by implementing energy saving improvements.

SEPA’s Regulatory Strategy, One Planet Prosperity, outlines our new statutory purpose to play a role in sustainable economic growth for Scotland. Our aim is to encourage more businesses to go beyond compliance by recognising the opportunities for profitability through resource efficiency and innovation.

It is not a mandatory requirement to implement the energy saving measures identified through your ESOS compliance audit process, instead, it is anticipated that the assessment will provide a strong, business case for action and implementation of the most feasible options. However, it is recognised that you may still need additional support to take these actions forward.

These organisations provide a wide range of support and information on resource efficiency for businesses, most of which is free.

A summary of the support already available is provided below:

Energy Saving Trust (EST)

Scottish Enterprise (SE)

Funding and support for sustainable growth opportunities
Business efficiency support
Innovation

Highlands and Islands Enterprise (HIE)

Support from the Enterprise Bodies cannot be guaranteed and applications for assistance will be assessed individually

Scottish Manufacturing Advisory Service (SMAS) (An SE / HIE service)

Process improvement, lean manufacturing
Resource efficiencies and innovation
Eligibility for this service is any business that has a process

Business Energy Scotland

Online Guidance on raw materials, waste, energy and water, developing a business case for your resource efficiency projects
Tools: Lighting and boiler replacement calculators
Staff awareness, engagement and training
Due to funding criteria, tailored advice is only available to SME’s. However, large businesses are able to access online guidance and attend event and webinars

Carbon Trust

Implementation advice for specific energy saving projects for companies with 250-1000 employees

SEPA

Advice and guidance on environmental regulation
NetRegs – free online environmental guidance and best practise
Support for innovation and measures to go beyond compliance

Further information

Contact us

If you have any questions or require any further information or advice on any aspect of ESOS, please contact us.