Monday 16th March

The Energy Savings

Opportunity Scheme

London Workshop

Objectives

To build awareness of the Energy Savings

Opportunity Scheme (ESOS).

To gather feedback to inform the Environment

Agency’s guidance.

An opportunity for you to share learning and best

practice.

What we’ll cover

• The ESOS policy background and context • Presentation by DECC

• An overview of ESOS, and technical details on

qualification, compliance and notification

• Presentation by the EA, Q&A

• The approaches businesses are taking to ESOS

compliance • Table discussion and plenary

Working

agreement

Please turn electronic devices off during sessions

If you need to leave it on, please answer your phone

outside of the room. And put it on silent setting.

Raise your hand to let us know you want to speak

There are many of you, we’ll keep track of who wants

to speak, and try to ensure as many as possible get to

speak.

Use the microphone please, it’s a big room and we

want to make sure everyone can hear.

Help us with our note taking in the discussion

sessions, someone will keep a record of the

discussion - help them ensure it’s accurate.

Martin Adams

ESOS Team Leader, DECC

Energy Savings Opportunity

Scheme: Context

Martin Adams, ESOS Team Leader

“Cost-effective energy efficiency has

the potential to deliver a triple win for

businesses, the environment and the

wider economy […] As part of a

supportive policy framework, ESOS

can support businesses in realising

their energy efficiency potential” – CBI

7 Energy Savings Opportunity Scheme - Emerging Thinking

8 Introduction to the business energy efficiency policy landscape

The current policy package is on track through to 2020 but additional

action is needed to maintain progress after 2020.

Carbon Plan scenarios require energy

efficiency to contribute a reduction in

final energy consumption per capita

between 2011 and 2050 of 21-47%

9 Introduction to the business energy efficiency policy landscape

“We estimate that through socially cost-effective

investment in energy efficiency we could be

saving 196TWh in 2020, equivalent to 22 power

stations”

EU Energy Efficiency Directive • Intended to put EU back on track to meet target to reduce primary energy

consumption by 20% by 2020 compared to business-as-usual projection.

• The Directive became EU law in November 2012. UK completed

transposition in June 2014.

Energy Audits (Article 8)

• Requires all member states to introduce mandatory energy auditing

programmes for large enterprises…

10 Energy Savings Opportunity Scheme

Key facts about ESOS What is ESOS?

• UK-wide mandatory energy measurement and auditing scheme

• Introduced in response to EU Energy Efficiency Directive – aims to help achieve latent cost-effective energy efficiency potential

Who must comply?

• Large undertakings and large corporate groups across the UK.

• Target highest UK-parent but allow disaggregation

And by when?

• Qualification date - 31 December 2014

• Compliance date – 5 December 2015

• Audits must be repeated every four years (i.e. second phase ends 2019)

11 Energy Savings Opportunity Scheme - Emerging Thinking

The consultation

12 Energy Savings Opportunity Scheme: Emerging Policy Thinking

500 300

150

Met with over 500

stakeholders (and given presentations &

webinars to many more)

From over 300

organisations Received 150

written consultation

responses

Key messages from consultation Keep it simple, and understandable yet make it meaningful

• Respondents want the scheme to provide outputs that are relevant to each business

• Respondents want ESOS to add value and identify real measures that can be

implemented

Avoid duplication in existing regulation and requirements

• There a range of energy efficiency policies operating in the UK – ESOS needs to fit

• Take advantage of alternative routes to compliance – e.g. ISO50001

Minimise costs

• Allow discretion on the number of site visits required within audits

• Using internal team members for their knowledge and skills

• Only having lead auditor requiring accreditation under the scheme – but need for

whole audit team to be of sufficient quality to ensure that output is meaningful

13 Energy Savings Opportunity Scheme - Emerging Thinking

14 Energy Savings Opportunity Scheme

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Estimated energy bill savings (£m) for ESOS participants, split by sector

Other Transport Industrial Commercial 1real 2014 prices

ESOS is estimated to have a £1.6bn net benefit to the UK. This will

primarily be felt by business through lower bills

Thank you

Jo Scully

ESOS Project Manager,

Environment Agency

ESOS Overview

Key Dates

Qualification Date 31/12/14 Don’t need to register or tell us you qualify

Compliance Date 05/12/2015 Tell us you have complied online via webpage

And every 4 years thereafter

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What are ‘large undertakings’?

Large undertaking is organisation that is:

Registered in the UK and has at least 250 employees; or

has an annual turnover in excess of 50 million euro (£38,937,777), and an annual balance sheet total in excess of 43 million euro (£33,486,489)

An overseas company with a UK registered establishment which has 250 or more UK employees (paying income tax in the UK).

Is part of a corporate group which includes an undertaking which meets the above criteria

Who isn’t in ESOS Organisations which are subject to insolvency procedures

Organisations defined as a contracting authority in the Public Contracts Regulations 2006

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Contracting Authority

• E.g.

• Government Departments

• Councils

• Fire

• Police

Organisation not having an industrial or commercial character, and

• financed wholly or mainly by another contracting authority;

• subject to management supervision by another contracting authority; or

• more than half of the board of directors or members of which, or, in the case of a group of individuals, more than half of those individuals, are appointed by another contracting authority;

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Requirements

1. Conduct ESOS assessment

Where not fully covered by ISO50001 certification

2. Conduct energy audits

Where not covered by ISO50001 certification, Green Deal

Assessments (GDAs) or Display Energy Certificates (DECs)

(partial or full coverage)

3. Identify energy savings opportunities

4. Use a lead assessor to either do or review points 1 to 3 above

(unless fully covered by ISO50001)

5. Get a director to sign off that they have seen the recommendations

of the work

6. Notify the Environment Agency of ESOS compliance

1. Conduct an ESOS assessment

Identify total energy consumption (buildings, installations, transport)

Common units (either cost or energy measurement unit)

For a 12 month reference period covering the qualification date

90% of your total energy consumption = Areas of Significant Energy Consumption

Determine coverage by ISO50001, GDAs, DECs, existing audits which meet the ESOS criteria

Determine additional ESOS audits that need to be undertaken prior to 5/12/2015

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2. Conduct ESOS audits

Compliant audits:

Use12 months’ verifiable data

Analyse your energy consumption and energy efficiency

Identify practicable ways in which you can improve energy efficiency

Recommend cost effective ‘energy saving opportunities’

Identify the estimated costs and benefits of the ‘energy saving opportunities’ recommended

Where 12 months data is not used or consumption profiling is not undertaken justification must be provided.

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3. Identifying savings opportunities from ESOS audits

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Use life-cycle cost analysis to determine cost effectiveness rather than simple pay back period where possible

Identify recommendations within your control

No requirement in the regulations to implement the identified savings

4. ESOS Lead assessors

Individuals that belong to an ‘approved register’ = lead assessors

Approved bodies/registers on ESOS webpage

Lead assessors can be internal or external

Lead assessor reviews the work but can use analysis from others.

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5. Director Sign off

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Show recommendations of the assessment to a board level director

2 directors if lead assessor is internal

No specific format required

Director confirms they have reviewed the findings

6. Notifying the EA

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Online notification form accessed from ESOS page on GOV.UK

Provide basic organisation details – not energy data or improvements identified

Needs to be submitted by 5 Dec 2015 to be compliant.

Keep an evidence pack

Cost Effective Energy Savings Opportunities

Identified

Details of your ESOS assessment and audits

(where applicable)

Certifications for alternative compliance routes

Details of any areas where you are not fully

compliant with the rules

Record of your directors & lead assessors sign off

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There is no

prescribed

format for this

Further Detail on ESOS

Employees

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Employees = anyone with a contract of employment regardless of hours

find the number of persons employed under contracts of service by the company for each month of the financial year (whether for the whole month or part of it)

add together the monthly totals

divide by the number of months in the financial year

It’s not the number on the 31 Dec, it’s the number based on the average for the accounts ending on or in the 12 months preceding that date.

Business Type

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Trade/business of organisation is irrelevant

Amount of energy the organisation uses is irrelevant

If you meet the criteria of an undertaking and you meet the ESOS qualification criteria you are in ESOS

a body corporate or partnership, or

an unincorporated association carrying on a trade or business, with or without a view to profit.

Balance Sheet Total

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Called up share

capital not paid

Fixed assets

Current assets

Pre-payments

and accrued income

“The aggregate of the amounts shown as

assets in the company’s balance sheet”

(that is before deducting both current and

long-term liabilities).

Where an undertaking is not required under the Companies Act 2006 to produce

individual accounts they must estimate the annual turnover and annual balance

sheet total for the undertaking for a 12 month period including the qualification

date, to determine their balance sheet total.

From accounts required under Section 394

or 395 of the Companies Act 2006 (Duty to

prepare individual accounts or Individual

Accounts: application accounting

framework)

Organisational Status

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“Where, in any accounting period, an undertaking is a large

undertaking (or a small or medium undertaking), it retains that

status until it falls within the definition of a small or medium

undertaking (or a large undertaking, as the case may be) for

two consecutive accounting periods.”

2010 2011 2012 2013 2014 In ESOS?

Company A Over threshold

No Under

threshold Company B Over threshold

Yes Under

threshold

Public Contracts Regulations

Only undertakings subject to these regs are out of ESOS i.e. a contracting authority

If there are other undertakings in the group which are not subject to these regs and one of them meets the qualification thresholds they will be required to participate in ESOS

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Insolvency proceedings

Undertakings subject to insolvency procedures are out of ESOS

If there are other undertakings in the group which are not subject to insolvency procedures and one of them meets the qualification thresholds they will be required to participate in ESOS

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Changes to structure after qualification

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Changes to organisation size/structure etc after the qualification date do not affect qualification.

Once you are in you are in

Any organisation sold by a qualifying organisation between 31 Dec 2014 and 5 Dec 2015 needs to comply with ESOS (either with old owner, new owner or on its own)

Trust Provisions

Supply contract agreement is crucial to the determination of whether the trust assets are in ESOS.

Is the supply contract with an undertaking that qualifies for ESOS?

Yes – the asset supplies will be in ESOS (see the

guidance)

No – the asset supplies will not be in ESOS.

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Joint Ventures

If they are a true JV they assess their own qualification and participate separately

True JV =

no organisation holds a majority of the voting rights in the undertaking, or

no organisation is a member of the undertaking and has the right to appoint or remove a majority of its board of directors, or

no organisations has the right to exercise a dominant influence over the undertaking—

(i) by virtue of provisions contained in the undertaking's articles, or

(ii) by virtue of a control contract, or

no organisation is a member of the undertaking and controls alone, pursuant to an agreement with other shareholders or members, a majority of the voting rights in the undertaking

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Disaggregation and aggregation

Groups can allow subsidiaries (or groups of subsidiaries) to participate separately ‘disaggregate’

Keep written agreement

>1 highest UK parent = separate participants Unless they choose to participate together ‘aggregate’

Keep written agreement

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Data time periods

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Total energy consumption data 12 months data covering 31/12/14

Supplies for all assets covering a specified 12 month period

Can use £ or common energy unit

Purpose: To determine which assets will need to be covered by audits or alternative routes to compliance

Data for audits 12 months data starting from as far back as 6 Dec 2010

Audits can have been undertaken between 6 Dec 2011 and 5 Dec 2015

Assets don’t need to have been audited at the same time

begin no more than 24 months before the start of the energy audit

Use energy units for analysis

Purpose: To determine energy savings opportunities

Total Energy Consumption

Include all assets/activities held on 31 Dec 2014

Except if selling assets between 31 Dec 2014 and 5 Dec 2015 they do not need to be included in total energy consumption calculation or consequently be audited.

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Areas of significant energy consumption and audits

Flexibility about which energy is in the 90%

Could exclude all of one fuel type; or

Certain assets/activities; or

A combination

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Verifiable data

Data you can prove Invoices, meter readings, stock records, AMR readings

If you can’t obtain verifiable data of energy use or spend you should:

explain why in your evidence pack

use a reasonable estimate derived through calculation (based on other verifiable data, if possible), and show how you got this figure

keep records in your evidence pack

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Alternative compliance routes

DEC/GDA/ISO 50001 coverage mean that you don’t have to meet articles 26 and 27 of the regs

Energy use covered by one of these three schemes is fully compliant

You don’t have to do a cost benefit analysis for the energy saving opportunities for that energy use (great if you want to though!)

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Unconsumed supplies

Unconsumed supply rule can apply if Energy is supplied by a participant to another organisation

The energy can be measured or reasonably estimated.

Ultimately we want the organisation with the control of the energy look for energy saving opportunities

Doesn’t matter who does the audit as long as it covers all ESOS supplies

– (i.e. 2 or more qualifying participants could be compliant using the same audit. They just reference the energy saving opportunities relevant to them in their evidence pack)

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Site visits

It is not necessary to visit every site.

Regardless of the number of site visits, organisations need to ensure they have collected and analysed data for all their areas of significant energy consumption.

% of site visits required is not prescribed in legislation or guidance; it is up to your organisation and lead assessor to agree what is appropriate for your organisation.

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Transport

Should include fuel used in:

company cars on business use

fleet vehicles which you operate on business use

personal cars on business use

private jets, fleet aircraft, trains, ships, or drilling platforms which you operate

Fuel not included:

Fuel associated with train travel/flights/taxi journeys of your employees where you do not operate the train/aircraft/taxi

Fuel associated with transportation of goods where you subcontract a firm or self employed individual to undertake this work for you (this fuel would be included in the subcontractor's total energy consumption calculation if they have qualified).

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Auditing Methodologies

No prescribed methodology has to be used to comply with ESOS

No specific reporting templates you have to use

Best practice methodologies BS EN 16247 and the accompanying series

ISO 50002 and the accompanying series

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Lead Assessors

If you are an energy manager we would encourage you to become a lead assessor

Lead assessors must review a participant’s ESOS compliance

Participant is liable for compliance

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Director Sign off

Director can be from any of the undertakings in the participant group

Keep written evidence (e.g. the email).

They don’t have to be an expert in energy themselves.

No specific format for the information to be provided to them (e.g. could be a presentation, report, summary briefing whatever suits)

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Do I qualify?

Work out whether you meet the employee and financial thresholds using accounts

prepared in accordance with 394 and 395 of Companies Act

What assets do I need to audit

?

Calculate total energy consumption calculation and deduce significant energy

consumption (90% of total) to deduce assets which need to be compliant

What work have I already done towards

my compliance?

Existing audits completed 6 Dec 2011 or after

DECs, ISO50001, GDAs

What new work do I need to do

towards compliance?

New ESOS audits (analyse data from no more than 24 months ago).

Jo Scully

ESOS Project Manager,

Environment Agency

Martin Adams

ESOS Team Leader, DECC

Q&A

PLEASE

BE BACK

HERE IN

FIFTEEN

MINUTES

•Coffee

Notification process

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www.gov.uk/energy-savings-opportunity-scheme-esos

ESOS WEBPAGE: https://www.gov.uk/energy-savings-opportunity-scheme-esos ESOS Guidance: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323307/ESOS_Guide_FINAL.pdf ESOS Regulations: http://www.legislation.gov.uk/uksi/2014/1643/contents/made ESOS Helpdesk esos@environment-agency.gov.uk

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Non-compliance ESOS Regulation Penalties

Failure to notify Regulation 43 A fixed penalty of up to £5,000

An additional £500 for each working day starting on the day after service of the

penalty notice until the notification is completed, subject to a maximum of 80 days

Publication

Failure to maintain

records

Regulation 44 A fixed penalty of up to £5,000

The cost to the compliance body for undertaking sufficient auditing activity to confirm

that an organisation has complied with ESOS

Publication

The penalty notice may specify steps to remedy the breach.

Failure to undertake an

energy audit

Regulation 45 A fixed penalty of up to £50,000

An additional £500 for each working day starting on the day after service of the

compliance notice, until the breach is remedied, subject to a maximum of 80 days

Publication

The penalty notice may specify a requirement to undertake an ESOS Assessment.

Failure to comply with a

compliance notice, an

enforcement notice or a

penalty notice

Regulation 46 A fixed penalty of up to £5,000

An additional £500 for each working day starting on the day after service of the

penalty notice, until the breach is remedied, subject to a maximum of 80 days

Publication

False or misleading

statement

Regulation 47 A fixed penalty of up to £50,000

Publication

Table discussions

Table discussion

At your tables:

• agree a discussion manager/leader

• agree a recorder/time keeper

• introduce each other

Use the information sheets provided to answer

the questions on the worksheet

You have 45minutes

We’ll share key questions with the panel

afterwards

They will also be circulating among you to clarify

issues

Questions

•What’s your approach to

compliance?

•What challenges do you

anticipate in complying?

•What advice would you give

others who are working towards

compliance?

Plenary

Thank you