ESOS Phase 3 – everything you need to know

Posted in Net Zero Carbon

With the closing date for the consultation process for ESOS Phase 3 now expired, here’s a reminder about the scheme and who is eligible.

What is ESOS?

ESOS stands for the Energy Savings Opportunity Scheme and was introduced by the UK government’s Department of Energy and Climate Change (DECC) on 17 July 2014 to help promote business energy efficiency.

It is a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria and is administered in the UK by the Environment Agency.

Eligible companies must undergo an assessment of energy use and energy efficiency opportunities and submit an energy report to the Environment Agency every four years.

Who is eligible?

You must take part in ESOS if your organisation, or any UK undertakings in your group, qualifies as a large undertaking on the qualification date.

The ESOS definition of a ‘large undertaking’ is:

  • You have over 250 members of staff, or
  • A turnover of over £44.1m, or
  • An annual balance sheet of over 43 million Euros (£37.9m), or
  • You are an overseas organisation with over 250 employees in the UK, or
  • Your company is part of a larger organisation, which falls into any of the above.

What are the benefits?

The scheme is estimated to lead to £1.6 billion net benefits to the UK (ESOS Impact Assessment DECC0142, 24 November 2014), with the majority of these being directly felt by businesses as a result of energy savings.

There are also many other business benefits to improving energy efficiency, such as improved working conditions for staff, improved customer experience, more efficient processes, reduced maintenance costs, and improved business image.

Energy efficiency is also a key measure for the UK in meeting interim carbon budget targets. BEIS’s head of business and industrial energy efficiency, tax and reporting, Gary Shanahan, noted that ESOS has helped UK businesses collectively save 3TWh of energy each year, on average, since Phase 1 commenced in 2014.

What was the aim of the recent consultation?

The Department for Business, Energy and Industrial Strategy (BEIS) ran a consultation process to seek views on government proposals to update and improve the Energy Savings Opportunities Scheme (ESOS).

Depending on the outcome, come net-zero targeting might be incorporated into the scheme, and the scheme might also apply to medium-sized businesses.

What are the penalties for failing to comply?

Fines for non-compliance can be up to £90,000. The Environment Agency has handed out hundreds of enforcement notices in the first two phases with the names of the companies falling foul of the deadline named on a list. So as well as a financial cost, there is reputational damage to consider as well.

When is the ESOS 3 deadline?

The 5 December 2023 deadline may seem distant but gathering energy consumption data can be time-consuming, especially for companies spread over a number of sites or those who have undergone a number of significant changes between phases.

If entering ESOS as a first-time company, it is also wise to start the process early.

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