New energy regulations provide 'much-needed wake-up call' for British business
The business benefits of the Energy Savings Opportunity Scheme (ESOS) have been massively underestimated according to the Carbon Trust, which believes firms could be in line to save billions on their energy bills.
The new EU directive will oblige more than 7,000 large companies in the UK to produce detailed reports on their energy use, including the energy efficiency of their organisation. It is expected to help reduce energy bills for large enterprises by £300m in 2016.
But the actual benefits for business, based on Carbon Trust analysis, are likely to be two or three times higher than those estimates suggest; if business act now and implement cost-effective measures.
"The scheme is a much-needed wake-up call for businesses that haven't already benefitted from the significant cost savings that can be achieved through energy efficiency," said the Carbon Trust's director of implementation Myles McCarthy.
"But identifying the opportunity is only half the battle. If recommendations go unimplemented then businesses will needlessly be paying over the odds on their energy bills."
The Esos regulations bring into force Article 8 of the EU Energy Efficiency Directive, with compliance due before 5 December 2015. The Government estimates that the net benefit of the policy to the UK will be around £1.9bn between 2015 and 2030. But this is based on a conservative prediction that only 6% by value of potential energy saving opportunities identified will be implemented.
The Carbon Trust has provided over 200,000 fully-costed energy saving recommendations to more than 35,000 UK businesses. This experience suggests that around four in ten simple recommendations with quick paybacks are implemented, while around two in ten of the more complex or long-term recommendations are taken forward.
Energy Management Forum
There have been concerns that companies taking a 'make-do' approach to the legislation will incur the scheme costs - estimated to average £10,000-17,000 for each business audit cycle - without any financial gain. But at the Energy Management Forum held in Birmingham last month, it was made clear that the potential benefits will undoubtedly offset those concerns.
"Esos is fantastic," said the Energy Managers Association's (EMA) CEO Lord Redesdale, who believes Esos is going to pump billions of pounds' worth of investment in retrofit across the country.
The EMA, which represents energy managers, is outside of the scope of Esos as the organisation doesn't have over 250 employees. But Lore Redesdale said it will give qualifying businesses the push that they need to become more energy efficient.
"The age of subsidy is dead and that's why Esos is fantastic," he added. "It basically gives large companies a wish list of all the things they want to do to reduce their energy costs and they can then take it forward. And it actually forces them to do that - I actually wish it went further."
Large businesses can cost-effectively save around 15 per cent from energy bills through efficiency measures, with an average internal rate of return of 48% and payback within three years. In many cases, savings can be even higher. According to the Trust, it is not uncommon to see reductions of as much as 25%.