What’s next for ESOS?

By Jason Plent, Managing Director, Minimise Solutions

I think it’s fair to say that the initial notification process alone appears to have been a big ask as in November less than 10 per cent of organisations identified as falling under ESOS regulations had taken that first step. It would seem that more than 9,000 had been unaware of their need to comply with ESOS or were unable or unwilling to do so.

I’m dubious that organisations have been left in the dark. By its own admission, the EA hasn’t embarked on a multi-channel awareness campaign about ESOS (the trade media has done this for them), instead preferring a more direct letter writing approach. Regardless, all organisations will have received an instruction that they need to comply. Pleading ignorance simply doesn’t wash.

There is more sympathy and a relaxation of the full compliance deadline for those that have found it difficult to comply. The EA has acknowledged that the number of qualified Lead Assessors available was insufficient to get everyone past the original deadline (tomorrow) and even the extended deadline (29 January 2016).

But on the question of willingness to comply, they are intransigent. The message is clear; if you haven’t notified them of your intention to comply they will start to issue penalty notices which could result in a £50,000 fine. Needless to say, the cost of non-compliance is far greater that that of compliance. Often to the order of 90%. 

If you’re at risk of non-compliance you need to act now. Notify the EA of your intention to comply, and liaise with them to negotiate a compliance date. They haven’t been unreasonable and will be working during the first half of 2016 to clear the backlog.

Realistically, and dependent on the size of the organisation and availability/suitability of past energy data, audits can be prepared over an eight week period. With Lead Assessors now able to review audits through the first half of 2016, the situation should ease. Although we would advise that booking your Lead Assessor should still remain a high priority.

If you’re on schedule to comply, you need to understand that this is just the beginning. Phase 2 of ESOS starts on Sunday, 6 December 2015, and runs until 5 December 2019. During this period you will be expected to re-run your audits, collecting further data for comparison against this year’s benchmarking period.

Your initial data will have identified where efficiencies are possible and while there is currently no requirement under ESOS for these to be implemented, at the very minimum we expect activity against these to be questioned at the 2019 review.

During this time organisations’ business data will change, hopefully through growth but potentially for many other reasons. There is, however, a tacit expectation from the EA and the government that an organisation’s energy consumption will have reduced as it will have implemented the energy efficiencies identified under ESOS.

There is no carrot (other than cost and carbon reduction) and there is no stick (other than the very real threat of energy shortages and consumption curbs at peak times). It’s clear that phase 1 ESOS is reliant on an organisation’s directors acknowledging to government that they understand what they are doing in terms of energy and are able to recognise efficiency opportunities and implement them.

I hope the ESOS requirement for energy audits to be signed off at director level will succeed where others have failed – in highlighting the cost benefits of energy efficiency at the very highest organisational level. With the cost benefit analysis understood and signed off by those that hold the purse strings, I believe we will see implementation and behaviour change. And that change will provide a far quicker and far more sustainable energy sticking plaster than the future construction of new fossil fuel or nuclear power stations.

But what if the efficiency opportunities continue to be ignored? Through ESOS auditing, the government now holds the information it needs to put pressure on organisations to change energy behaviours. It’s not by chance that it is currently consulting on what to do next in terms of CRC and climate change and there are suggestions that these will be pulled into one ESOS-led programme.

Now, under a Conservative regime, it is very possible that the light touch of phase 1 ESOS will be usurped by a mandatory scheme whereby organisations have to make the identified efficiencies (or a proportion thereof) in the first four years. Indeed, this is likely to be critical to achieving our COP 21 targets.

Those that say this is just a further, unnecessary regulation are missing the point. Those large organisations that have had to comply with CRC regulations really don’t need to worry about ESOS. For them it is easy. But ESOS addresses so many more businesses, and that’s important for driving down energy consumption.

ESOS is also easier to understand – it’s not about a carbon number, it’s about reducing consumption and cost. The benefits are laid out for all to see – as are the required actions.

It’s also important to recognise that what while ESOS will really make a difference in large to medium sized organisations, it doesn’t address big energy hungry public entities. We believe these will be next and are already seeing an influx of enquiries from this sector.