What do net-zero and the energy cost crisis mean for ESOS?

Last week, edie hosted a 45-minute masterclass to help businesses stay ahead of the curve with the third phase of the Energy Savings Opportunity Scheme (ESOS). But how will compliance impact net-zero transitions and businesses currently battling the energy cost crisis?

What do net-zero and the energy cost crisis mean for ESOS?

The masterclass is available to watch on-demand

The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment and savings scheme for organisations in the UK which qualify for it. The scheme was originally developed by the Department of Energy and Climate Change – which is now the Department for Business, Energy, and Industrial Strategy (BEIS).

ESOS operates through a series of compliance phases. Each phase runs in a cycle which lasts for four years, and we are currently in Phase 3. There are two key dates in each phase – a qualification date and a compliance date. The qualification date for Phase 1 was to 31 December 2014. For Phase 2, the qualification date was 31 December 2018, and for Phase 3 the qualification date is 31 December 2022.

As part of this consultation, policymakers are looking into a raft of changes to the Scheme. These changes broadly include stronger standards, improved reporting quality, reporting and disclosure. The changes included helping businesses take action to reduce emissions, and ensuring that the ESOS recommendations are supportive of the UK’s overarching net-zero goals.

edie’s latest 45-minute masterclass, sponsored by JRP Solutions aimed to equip energy and sustainability professionals with the insights and inspiration they need to get ahead of the curve with ESOS Phase and an understanding of how this can fit into a broader net-zero corporate strategy.

Click here to watch the masterclass on demand.

JRP Solutions’ principal sustainability and energy consultant Owen Jones opened the session with an overview of the ESOS Phase 3 consultation and what that could mean for businesses moving forward.

ESOS is still largely focused on Scope 1 and 2 emissions, Jones noted. Under the new proposal the “de minimis” for the energy a business will need to audit will increase from 90% of the overall to 95%. This means that as well as auditing electricity and gas usage, some transport emissions may also be covered by ESOS, marking its first real venture into the big net-zero challenge of Scope 3 emissions.

One of the other key proposals, Jones added, was that the Government is trying to introduce a requirement for energy suppliers to provide half-hourly data for electricity and one-hour data for gas moving forward, which will improve the granularity of the data that businesses can use for auditing.

While this is still subject to Parliamentary approval, it is clear that those changes will improve the quality of data businesses can gain to get their own house in order. But, with Scope 3 emissions often accounting for more than 80% of a company’s carbon footprint, how will ESOS evolve to assist businesses on the road to net-zero?

“[BEIS] is very keen to have net-zero as part of ESOS,” Jones said. “It will be optional but recommended for phase 3 but will likely be a compulsory element for phase 4 which won’t be for another 4-5 years so there’s time to prepare for that.

“the consultation has thrown up a lot of things but a lot of decisions are still to be made and mot much is set in stone. We want to include behaviour change, for example, which we believe is really important to carbon reduction, but not much has been included on that other than staff training.

“You can act now, although the compliance date isn’t until the end of the year you can get ahead of the game and get audits done.”

Energy efficiency catalyst

A key message from Jones during the masterclass was that the consultation is trying the “stimulate” the energy-saving methods outlined in the process, rather than simply identifying them, complying and then moving.

Through the lens of the current energy cost crisis, it makes sense that more businesses would seek to uncover and act upon energy-saving methods. Given that ESOS requires board sign-off, this cost-saving approach could then open the door to the boardroom for bigger discussions around net-zero.

Indeed, last year, 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.

JRP Solutions’ director George Richards noted that the opportunities uncovered by ESOS were “no brainers” for businesses, but that many organisations felt held back by resources and spending constraints. However, Richards noted that the current rising energy costs would enable ESOS and future decarbonisation plans to resonate more due to the huge savings that could be introduced.

“Where these energy-saving opportunities are determined, it’s an absolute no-brainer,” Richards said. “It’s easier said than done and there conflicting ideas internally sometimes and a lack of resources.

“ESOS should give people a clear action plan to implement opportunities and articulate to the decision makers that a business might be throwing away money. This isn’t just above technical processes but behaviours too.”

Richards also noted that the data gathering aspect of ESOS would help businesses map out net-zero trajectories in the long-run. Most businesses complying with ESOS will complete “gap analysis” which, according to Richards, “outlines your current state of play” and shows you how far away you are from the end goal of net-zero across your sites and operations.

Several audience members asked questions about how ESOS compliance fits in with other mandatory and voluntary energy measurement and reporting schemes, voicing frustration that these can feel like box-ticking exercises and that, in some cases, actions that save energy are recommended over those that reduce carbon.

Richards pointed out that some of the data that would be collected through site energy environmental audits would deliver the same data used for Streamlined Energy and Carbon Reporting (SECR), allowing firms to tick off multiple reporting requirements with the same set of data.

The speakers also highlighted that ESOS could complement ISO50001 accreditation, noting that even when working with a firm that already had that accreditation, they uncovered more than £1m in potential savings. In short, these frameworks shouldn’t be competing for your time and resources, but rather complementing each other to allow firms to save as much energy as possible and build a strong foundation for when net-zero gets enveloped into the ESOS requirements in the coming years.

“With the energy crisis, even if you were to achieve a 10% reduction, it’s a significant number and for some organisations this is a question of survival,” Richards added. “There’s lot’s that can be done.”

Click here to watch the masterclass.

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