Maximising the benefits of ESOS

Europe’s Energy Savings Opportunity Scheme enters phase II. Keith Beattie, life science lead at EECO2, explains what companies can do to seize the opportunity and comply by the 2019 deadline

The UK’s response to the European Energy Efficiency Directive Article 8 requirements – the Energy Savings Opportunity Scheme (ESOS) – is now entering Phase II. Approximately 6,870 organisations participated in Phase I and most of those will now be planning or have started to plan Phase II compliance.

If your business has more than 250 employees, or an annual turnover in excess of €50 million (£44.2m) and a balance sheet in excess of €43m (£38m), then you will likely need to comply with this scheme.

The ESOS is a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria. The Environment Agency (EA) is the UK scheme administrator, SEPA is Scotland’s, NIEA is Northern Ireland’s and NRW is Wales’.

The aim of the scheme is to cut carbon emissions by requiring large businesses to identify energy reduction measures and make energy savings.

Every four years, organisations that qualify for the ESOS must:

  • 1. measure and document their annual energy consumption for buildings, industrial processes and transport
  • 2. carry out audits to identify cost-effective energy efficiency opportunities for areas of significant energy consumption
  • 3. report compliance with the scheme to their national scheme administrator by the next compliance date (05.12.19)

If an organisation fails to submit the compliance assessments on time and becomes non-compliant, it can incur a penalty. The penalties can range from publication of non-compliance on the EA’s website, to a £50,000 fixed penalty plus £500 per day.

It may seem easy enough, but like most compliance schemes, the devil is in the detail. One of the most complex aspects for large multinational businesses is figuring out what the legal structure of the company is, where and how much energy is used. This should be simpler second time around, but things can change. A major success of the Phase I of the ESOS was to force organisations to get on top of their energy consumption and start measuring it, an adage known as Goodhart’s law.

The objective of the ESOS is to raise awareness of the opportunities for energy efficiency improvement within organisations and to highlight this to senior managers. It is not (yet) mandated to implement any of the opportunities identified – and has been a carrot, not stick approach, so far.

It remains to be seen if this continues in subsequent phases and a review of UK energy efficiency policy and regulatory framework is currently being undertaken. This is certainly to be welcomed if it results in a simplification and standardisation of the regulatory framework – currently it is unduly complicated with the ESOS, CRC (formerly known as the Carbon Reduction Commitment) and the EU Emissions Trading System (EU ETS), as well as added uncertainty around the impact of Brexit on these schemes.

Cleanrooms are exactly the spaces to look for significant energy reduction with cost-effective solutions being available – precisely the type of opportunities that ESOS was aimed at helping organisations identify

Key achievements

The Department for Business, Energy and Industrial Strategy (BEIS) published an Evaluation of the ESOS in October 2017, which stated that by 5 December 2015, the EA had received approximately 4,000 compliance notifications, 2,500 intent to comply late notifications and 400 ‘do not qualify’ notifications.

The evaluation of Phase I reported that many organisations delayed their compliance activity until close to the deadline, resulting in higher costs for assessor services as the demand rapidly increased towards the end of 2015.

The lesson for companies looking to the next compliance period is to plan audits with plenty of time and to not leave it until the few weeks before, when costs are at their peak.

The BEIS evaluation states that the information acquired through the ESOS process was found to be of a satisfactory standard, “over 70% of obligated parties were satisfied with their report and trusted the recommendations made”. The level of information to come out of each report did differ depending on the type of organisation, certain cultural barriers and board level engagement.

Four in five of the organisations that had submitted a compliance or ‘intend to comply’ notice, reported “some form of energy efficiency improvement in the 18 months prior to mid-2016”. In turn, a third of the organisations reported the ESOS to have been influential in their decision to implement at least one of their improvements.

The EA has reported that 711 Enforcement Notices (ENs) have been served on organisations, which the agency believe qualified for Phase I, but had failed to notify the EA of their compliance. Further to this, it issued 11 Civil Penalties – a figure that will increase as the enforcement work continues. The details of the civil penalties will be published on the gov.uk webpages “after the relevant appeal time periods have elapsed”.

Organisations reached compliance mainly through energy audits. It was also reported that although the notification process was quite straightforward, some organisations made errors when recording their subsidiaries, which seems to point to a misinterpretation of the information requested regarding how to report on differing organisational structures.

Get your energy data and organisation structure identified and documented

What is next?

We are now in Phase II of the ESOS scheme. Large UK organisations must fulfil Phase II before the compliance date of 5 December 2019. Planning early for Phase II will help to avoid the bottlenecks and challenges seen during Phase I. Many organisations are planning now to complete their site audits – the earlier the better is the recommendation, so that benefits can be realised sooner.

Sadly, it is expected that a lot of organisations will be evaluating the same opportunities for improvement that they found four years ago, except the cost savings will be larger as energy costs have increased. But the lost opportunity cost is huge. Implementation is not mandatory, so organisations that have done the compliance minimum – having a basic audit at least cost – without implementing any recommendations, are losing out to their competitors. By contrast, there are many organisations that have seized this opportunity and used it to best effect to precipitate action and will make major cost savings as a result.

The lesson for companies looking to the next compliance period is to plan audits with plenty of time and to not leave it until the few weeks before, when costs are at their peak

Cleanroom operators will already be aware of the high energy intensity of these spaces being more than 10 times as energy intensive as an office space of equivalent size. While energy consumption is significant, many organisations (both operators and energy efficiency consultants) steer clear of improving efficiency in cleanroom spaces, due to the perceived risks of affecting product quality or in the regulated industry of affecting GMP compliance. This is overlooking what can be substantial and significant opportunities to improve efficiency, reduce costs and maintain, and in some cases improve environments to be fit for purpose.

Often cleanrooms are exactly the spaces to look for significant energy reduction with cost-effective solutions being available; precisely the type of opportunities that ESOS was aimed at helping organisations identify. It is because energy efficiency in most cleanrooms has not been aggressively pursued that many cost-effective opportunities exist.

The soon to be published ISO 14644-16 guideline for energy efficiency in cleanrooms and clean air devices aims to be a catalyst to promote more activity in this area. The continuing development of motor and fan technology, for example high-efficiency permanent magnet AC motors and electronically commutated DC motors, have major implications for improving efficiency, as does adaptive control of ventilation rates through sensing cleanroom contamination levels.

Companies should be starting preparations for the Phase II of the ESOS now and identifying a competent and industry experienced lead assessor who is familiar with cleanroom operations specifically, as this is where the majority of significant and cost-effective energy reduction opportunities exist.

Get your energy data and organisation structure identified and documented. Review your previous ESOS audit reports, and ask yourself these questions:

  • Did I make the most of the opportunities highlighted to me in the last four years?
  • Did I maximise the value of the investment in the audit?
  • Do I want the same outcome this time around?

If you answer 'no' to these, then don't repeat what you did in Phase I. Look for a better solution.

As a final note, holding ISO 50001 accreditation is also a route to compliance and avoids the need to carry out energy audits, although measuring and reporting of energy consumption of building, process and transport energy is still required.

Editor's note: This article is featured in the August issue of Cleanroom Technology.

Companies