Get ready for ESOS

The introduction of Energy Savings Opportunity Scheme (ESOS) is the UK’s approach to implementing Article 8 of the 2012 EU Energy Efficiency Directive which mandates a programme of regular energy audits for “large undertakings”.

Essentially, ESOS requires participants to measure the total energy consumption of buildings, transport and industrial processes, and to identify cost-effective energy efficiency opportunities which can help the UK meet its carbon reduction commitments. This in turn will contribute to the EU hopefully reaching its 20% energy efficiency target by 2020.

A large undertaking is defined as a body, corporate partnership, unincorporated association or business - profit making or not - which employs 250 or more people in the UK, or employs fewer than 250 people but has an annual turnover greater than approximately £42.5m and total assets on the balance sheet over approximately £36.5m.

A smaller organisation which is a part of a group that includes at least one large undertaking (as defined above) in the UK will also be subject to ESOS, with the most recent annual financial statements ending on or before 30 December 2014 used to determine qualification.

Failing to undertake an energy audit is punishable by a £50,000 fine. Despite this, only 32 out of 14,000 participants have declared compliance

ESOS will operate in four-yearly compliance phases, within which there are a series of dates to be met. For the first phase, activity to support your ESOS assessment must be undertaken by 5 December 2015.

Penalties for non-compliance are steep: an immediate fixed penalty of £5,000 for failing to meet the deadline, followed by a £500 fine per day for up to 80 days. Failing to undertake an energy audit, or submitting a false statement, is punishable by a £50,000 fine, with again a £500 fee for every day of non-compliance up to 80 days. Despite this, by the end of June 2015, only 32 out of 14,000 participants had declared compliance to the Environment Agency (which is administering the scheme), while 65% of participants had not yet appointed an Environment Agency-approved lead assessor.

So, how do you comply with ESOS?  The first step is to appoint a lead assessor, then measure total energy consumption by buildings, transport and industrial processes over a 12-month period. This must include the qualification date for the phase and end before the compliance date: in this phase these dates are 31 December 2014 and 5 December 2015 respectively.

From this, determine any areas of significant energy consumption and have these audited, which will require a sample number of site visits overseen by the lead assessor. Then choose routes to make these areas compliant: either ESOS energy audits; ISO 50001 certified energy management systems; display energy certificates and accompanying advisory reports (which must have been undertaken after December 2011); or Green Deal assessments.

Finally, you need to maintain records and submit them by the December deadline. They must be signed off by a director or senior manager in the organisation irrespective of the compliance route taken.

With compliance taking around four months to complete, and the final quarter of 2015 rapidly approaching, if you haven’t acted yet and believe you may be affected, you need to make a start immediately in order to avoid receiving a penalty fine.

Even if you do not fall within the definition of a “large undertaking” at this time, you may still need to comply with future phases. Phase two compliance is required by 5 December 2019 and phase three by 5 December 2023: put the dates in your diary now.

Jennifer Lemen is an associate in the lease consultancy team at property and planning consultancy Rapleys