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ESOS Phase 2: Getting Ahead of Compliance & Savings

The European Union (EU) has set an ambitious goal of improving energy efficiency at least 27 percent by 2030.

And that target is the driving force behind various legislation, starting with the Energy Efficiency Directive (EED), a set of binding measures to help the EU reach its efficiency and broader sustainability objectives. It has also cascaded to country-level policy. The U.K. Parliament, in particular, drafted and enacted Energy Savings Opportunity Scheme (ESOS) regulations in response to EED. In July 2014, ESOS went into effect and companies in the U.K. that met qualification criteria — 250 employees, or an annual turnover in excess of 50 million euro and an annual balance sheet total in excess of 43 million euro — were required to submit energy assessments to comply with the scheme.

That was the end of the first phase of the regulations, which call for assessment to be submitted every four years. So qualifying organisations now have until 5 December 2019, to complete and provide the next round of audit results. Plenty of time, right?

Technically, yes — two years is a fairly long horizon.

However, there are compelling reasons to start the process and move forward soon. Companies that are proactive will have several advantages.

ESOS Phase 2 – Compliance Essentials

Parts of EED and ESOS alike are designed to help organisations identify initiatives with the greatest efficiency-boosting potential, prioritise related investments and access available incentives. Key measures include conducting energy audits, designing a data monitoring system and installing smart meters.

In the U.K., compliance requires measuring total energy consumption across a 12 month ‘reference period’, determining areas of significant energy consumption and ensuring a suitable audit is carried out to identify cost-effective energy saving measures. For the second phase of ESOS, an entire organisational group, including parent companies and subsidiary companies, will have to participate if one or more group members meet the scheme definition (see above) as of December 2018.

ESOS Phase 2 – The Time Is Right

If a firm knows it will qualify for Phase 2, there is no reason to wait. By starting the process rapidly, the lower the risk of enforcement for non-compliance or running into a situation where the outside-and-often-limited resources necessary to complete audits come at a premium as the deadline gets close. There is also a greater opportunity to integrate the savings identified into a larger energy efficiency strategy that includes budgets and resources to implement improvements with a strong business case.

For those companies that have obtained ISO 50001 certification, Display Energy Certificates, Green Deal Assessments or ESOS-compliant energy audits within the current phase (December 2015 to December 2019), the data can also be counted toward compliance.

>> Learn more about ISO 50001 and other energy-saving practices.

Capitalizing on the Opportunity

Critics of the scheme have deemed it another tick-box exercise, while others pointed out that it at least raised the issue of energy efficiency with people who have the most influence. Whatever the view, ESOS does equip a company with essential tools for capitalizing on savings from improved energy efficiency:

- A full understanding of company-level energy performance, including areas of significant spend

- A list of specific recommendations, including payback and costs, which can be implemented to reduce operational costs

- Board-level signoff on and awareness of the potential benefits energy efficiency can deliver

Organizations with an energy management system like ISO 50001 already in place will understand that even getting to this point is only half the challenge. Justifying outlay on efficiency improvements requires an assessment of the current state, a target future state, and a map for the time and resources it will take to bridge the two. For companies obliged to meet ESOS Phase 2 requirements, it’s arguably a waste of financial and staff investment to not act on the data and information captured.

Whether you are looking to understand Phase 2 obligations for ESOS and EED, interpret obligations under the new NFR Directive, or implement ISO 50001, Schneider Electric has the expertise and experience to assist. Contact us for more information.