The Energy Savings Opportunity Scheme (ESOS) scheme requires large undertakings to undergo energy efficiency audits. Large undertakings must calculate their total energy use, which must be assessed and/or signed off by an approved assessor. The ESOS report is required to identify reasonably practicable and cost effective ways to improve the undertaking’s energy efficiency.

These regulations implement Article 8(4), (5) and (6) of the Energy Efficiency Directive (2012/27/EU). The Environment Agency administrates the ESOS scheme across the UK, and specific regulators are in place for each state and offshore.

The Energy Savings Opportunity Scheme (Amendment) Regulations 2023 significantly amended the ESOS scheme from phase 3 onwards. These changes are integrated to this summary. Schedule 3 records information that must be included in ESOS reports, that must be notified to the scheme administrator and information that is to be published by the scheme administrator.

Scope

All large undertakings (and any small or medium undertakings within the same corporate group as a large undertaking) must participate in ESOS. A “large undertaking” has:

• 250 or more UK employees; and/or
• an annual turnover over £44 million and annual balance sheet total exceeding £38 million.

Group undertakings are required to participate in ESOS as a group by default, although individual undertakings may participate individually if agreed in writing.

Exemptions

Public sector bodies and insolvent undertakings.

Compliance Periods

A notification of compliance must be submitted to the regulator by 5 June 2024 in phase 3.

For phase 4 a deadline of 5 December 2027 applies. Subsequent deadlines will fall on 5 December every four years.

Ensuring Compliance

Compliance can be achieved via:

• an ESOS audit, which must be approved by a Lead Assessor if total energy consumption equals or exceeds 40 MWh;
• ISO 50,001 certification from a UK-accredited body;
• a valid display energy certificate (DEC); or
• green deal assessments.

The compliance route must account for 95% of the organisation's energy use. The remaining 5% may be excluded from the audit, certification or assessment as 'de-minimis'.

ESOS Audits: Required Evidence

Undertakings subject to ESOS must compile “evidence packs”, including any data required to calculate total energy consumption and facilitate an energy audit. Data must be:

• Reflective of at least 95% of the undertaking’s energy consumption, including all energy supplied, consumed by assets held or used in activities carried out.
• Reflective of all usage by buildings, industrial process and transport;
• Converted to kWh;
• Verifiable and cover a 12 month consecutive period no more than 24 months prior to the commencement of the energy audit; and
• Where estimates are used, this must be clearly stated alongside the estimation method used.

Energy audits must specifically include site visits to representative locations.

Evidence packs must also include:

• Records of previous ESOS audits;
• Evidence of the certification of any energy management system, display energy certificate or qualifying green deal assessment (as relevant);
• Records of previous notifications to the Environment Agency by lead assessors concerning prior ESOS audits; and
• Any written agreements for individual group undertakings to carry out ESOS assessments independently.

Evidence packs must be retained for at least two of the four year compliance periods after they were first used.

ESOS Reports: Audits

Undertakings subject to ESOS must arrange an ESOS assessment, which must be undertaken or reviewed and signed off by at least one approved lead assessor, unless total energy consumption is below 40 MWh.

The assessor is required to:

• Analyse the participating undertaking’s energy consumption and efficiency;
• Identify and recommend reasonably practicable and cost effective means to improve efficiency; and
• Energy saving opportunities identified must be analysed with respect to relevant organisational purposes and category, relevant considerations and provide estimated financial and non-financial costs and benefits, alongside a programme providing details of impacts, payback periods and timescales.

ESOS reports must include all information in Chapter 3A. This includes an estimate of energy savings since the preceding ESOS compliance date. Reports must identify the proportion of energy consumption relating to transport, industrial processes, buildings or other uses and at least one energy intensity radio must be calculated for each of these purposes.

Notification of Compliance

Following completion of the ESOS report, the lead assessor is required to notify the Environment Agency that the participating undertaking’s duties have been met. Where a lead assessor is not required to be appointed and has not been appointed, two “responsible officers” must be appointed and make the notification.

Notifications must include confirmation that a “responsible officer” from the undertaking is satisfied they have complied with the scheme and information to be notified is correct.

ESOS Action Plans

After an ESOS compliance notification, ESOS action plans must be produced. These plans must record:

• Measures to improve energy efficiency during the next compliance period;
• Whether measures were recommended by an energy audit;
• The timescales for the measures; and
• Estimates of total energy savings for each measure and the estimation method used.

If no measures to improve efficiency are possible, the action plan must consist of a statement that no improvements are proposed for implementation in the next compliance period.

The action plan must be notified to the scheme administrator by 5 December 2024 (in phase 3) or by 4 December in the first year of each subsequent compliance period (e.g., 4 December 2028 for phase 4).

ESOS Progress Updates

Progress updates must be prepared, including information such as details of action taken to improve the participant’s energy efficiency, estimated impacts on energy consumption and whether the timescales in the last action plan were met.

Progress updates must be notified to the scheme administrator as follows:

• Initial progress update: due within the one year period starting one year and a day after the last compliance deadline; and
• Further progress update: due within the one year period starting two years and a day after the last compliance deadline.

Lead Assessors

Lead assessors under ESOS are listed on an Environment Agency approved register. Approvals are reviewed at least every four years.

The Environment Agency is to determine whether persons qualify for approval based on the competence requirements in PAS 51215 standard (Energy efficiency assessment – Competency of a lead energy assessor).

Enforcement

Enforcement notices and financial penalties may be issued against undertakings should they fail to meet their duties under these regulations.

Brexit Implications

A 2018 amendment ensures ESOS continues to function. Financial thresholds triggering obligations under ESOS are set in pounds rather than euros. 

GUIDANCE

• Environment Agency - Complying with ESOS