Posted on: 21/02/2019
The December 2019 Energy Savings Opportunity Scheme (ESOS) deadline is looming, so is your business on track? Michael Watts, I&C Strategic Manager, reviews the lessons learned in Phase 1, how your business can prepare for Phase 2, and the actions needed to reach your full energy potential.
With the ESOS Phase 2 deadline less than a year away – 5th December 2019 – now is the time to identify and realise the energy saving opportunities in your operations. With approximately 10,000 UK businesses now obligated, there’s a good chance your business needs to be making headway.
What is ESOS?
ESOS is a mandatory Government run scheme first launched in 2014 and overseen by the Environment Agency (EA). It gives effect to article 8 of the EU Efficiency Directive, which obligates relevant businesses to both assess their energy use and identify energy efficiency opportunities once every four years.
How do you know if you qualify?
You qualify if you are:
1. A large UK undertaking, which employs 250 or more people, or has an annual turnover in excess of €50 million (£44,845,000) and an annual balance sheet total in excess of €43 million (£38,566,700).
2. An overseas company, which has a UK registered establishment and employs at least 250 people (paying income tax in the UK).
ESOS so far
It’s fair to say that Phase 1 had limited success. Low engagement saw only 4,000 businesses meet the initial deadline - despite conservative estimates which suggested a collective saving of £1 billion if all qualifying businesses had complied in full.
It's also difficult to establish exactly why Phase 1 engagement was so low, although in many cases it appears as though late adoption played a key part, leading to many businesses simply running out of time as the first deadline approached. With many of those businesses who failed to comply in Phase 1 now ‘named and shamed’ by the EA’s online non-compliance list, as well as receiving hefty cumulative fines of up to £40,000 per un-met regulation, a much healthier uptake of ESOS phase 2 is expected.
A mandatory element in your ESOS compliance assessment is sign off from a Lead Assessor. The time to engage with your Lead Assessor is running out, and as was the case for many during Phase 1, a delay in engaging a relevant Assessor could see you paired with someone outside of your business sector. For example, while a Retail Lead Assessor is able to sign off on your ESOS assessment, they may not be as familiar with your industrial operational requirements as an industrial Lead Assessor. Equally, a Lead assessor with an industrial background, may not be best suited to add value to your Retail ESOS assessment. This could see you miss out on valuable efficiency insight, so it is worth engaging with a Lead Assessor now.
Using ESOS to your advantage
Energy is no longer just a utility. How we use energy is changing and consumers are becoming more responsible. Electricity is being used more flexibly and purchased more strategically, taking advantage of the increasingly complex and volatile energy market.
While some businesses will see the rapidly changing market as an external, uncontrollable threat to their company, smart businesses are looking at creative ways to adapt to the new energy system and turn challenges into economic opportunities.
Finding value in ESOS Phase 2 is not only about making small changes for quick energy efficiency wins, or avoiding non-compliance fines – there is value in considering your energy usage holistically and identifying changes that will have a lasting impact. Forward-thinking businesses are already using this assessment to evaluate their entire procurement and energy strategy. So ask yourself:
- Does my current energy contract accommodate efficiency measures?
- Does it cope with changes to my demand shape and power load?
- Can my product work in harmony with measures made aware to me by ESOS?
In our recently published guide, ‘Becoming a Smarter Energy User’, we explore how smart businesses can use the right energy supply contract to support active energy management.
It is important to consider not only your operational capabilities when completing your ESOS evaluations, but your wider relationship with energy too:
- Are you currently using, or planning to use, renewable electricity?
- Could this boost not only your corporate social responsibility (CSR) targets but also your ESOS compliance?
- Do you understand how non-commodity costs will impact your energy strategy, and are you able to explore new revenue opportunities through demand side response (DSR)?
You could reduce your energy bill considerably by actively running your business operations to enable Triad management, as well as reducing non-commodity cost charges, such as Demand Use of System (DUoS) and Capacity Market charges. These types of changes can be explored by reviewing your operations and capabilities as part of your ESOS assessment.
By using the 2019 ESOS deadline as a springboard to get you in the energy efficiency mindset, you could start your journey towards flexibility. And once you’re aware of and comfortable with your flexible capabilities, you can join the other smart UK business already optimising their assets and generating additional revenue – all while achieving ESOS 2019 compliance.