Real Insights

Opportunity knocks?
Real Insights

Real Insights - Property Update

Lucy Smith
03 November 2015

The government has recently introduced ESOS - the Energy Savings Opportunity Scheme.

Opportunity knocks?

The government has recently introduced ESOS - the Energy Savings Opportunity Scheme. This is a new energy reporting programme requiring certain organisations to audit their energy consumption every four years. The first such assessment must be carried out by 5 December 2015.

The scheme has been introduced to implement an EU Directive with the aim of improving energy efficiency. The Government hopes ESOS will bring £1.6bn net benefit to the UK through energy cost savings.

ESOS applies to any UK undertaking which:

  • employs at least 250 people; or
  • has an annual turnover over €50m (£38.9m at current rates) AND a balance sheet total in excess of €43m (£33.4m); or
  • is part of a corporate group where at least one UK member satisfies either of the tests set out above. This means that if you have a large group structure but none of the companies on its own satisfies either of these tests, then none of the group companies is caught by ESOS.

Companies, trusts, partnerships, LLPs and private equity companies can all fall within ESOS. Public sector organisations are exempt.

In order to comply, you must carry out your first energy assessment and notify the Environment Agency that you have done so by 5 December 2015. This involves:

  • calculating your total energy consumption over a 12 month reference period. (N.B. energy supplied to a tenant can be excluded, provided it can be measured or reasonably estimated); and
  • carrying out an energy audit of at least 90% of your energy consumption to analyse energy efficiency and identify where savings can be made.

The audit must be reviewed by an approved ESOS lead assessor and then be signed off by a director (or two directors where the lead assessor is in-house). There is, however, no statutory obligation to implement any of the recommendations identified in the audit.

The maximum penalty for non-compliance is £50,000, plus an additional £500 for each day you continue to be in breach (up to an additional penalty of £40,000).  Your details may also be published in a "name and shame" register.

Some have questioned whether ESOS will make businesses more energy efficient in practice, or whether it's just yet more red tape. There is no obligation (yet) to implement the recommendations, but the EU hopes organisations will do so voluntarily. 

There is some overlap between ESOS and other schemes such as the Carbon Reduction Commitment. The Government is consulting on plans to combine these into a single reporting framework.

Please contact Lucy Smith if you have any further queries or would like advice on these issues.