NEF’s views on the Energy Savings Opportunities Scheme (ESOS)

3rd October 2013

The National Energy Foundation has provided a detailed response to DECC's consultation into compulsory energy audits for large companies, implementing Article 8 of the EU Energy Efficiency Directive, which DECC has named ESOS (Energy Savings Opportunities Scheme).

Our full response to ESOS can be downloaded but it follows the prescribed format requested by DECC, so it might be difficult to understand without reference to the consultation documents. The main points are, however, summarised below:

In general, we welcome the introduction of mandatory energy audits, though note that many of the companies that will be affected already operate excellent energy management systems. In time, we hope that mandatory audits for large companies will encourage more small and medium enterprises to undertake similar audits as a way of identifying energy savings.

We also note that the Directive requires a life-cycle cost assessment (LCCA). This would typically allow companies to calculate financial savings based on the initial capital cost, less any annual savings discounted by a suitable interest rate. This will help companies find the most financially advantageous measures, which will improve the chance of them taking action. However, the consultation turns this into an energy-based life cycle assessment, which although it may produce a more accurate energy balance over time, fails to identify the most cost-effective work that could be done. Consequently, we recommend moving back to the LCCA approach expected by the Directive.

The ESOS proposals suggest using a simple energy intensity ratio as an alternative to a more sophisticated profiling of the energy consumption. We believe that this relatively crude approach will lead to missed opportunities in larger and more complex organisations, although it is adequate for simpler operations such as those only using offices. The profiling should also include benchmarking of facilities where possible, either within the company or with similar third party organisations, potentially drawing on public benchmarks.

We also have reservations about the concept of using a de minimis percentage expenditure. Although there is no need to look at every building or plant in each audit cycle, relatively small energy uses in a very large energy user (such as a steel work or chemical plant) could be greater than total energy use in a financial sector or retail company. We therefore recommend an absolute energy consumption threshold as well as a percentage limit above which facilities should be audited.

The Government has accepted that there are possible alternatives to a specific audit for companies currently undertaking other activities. We agree that externally certified ISO 50001 systems, using the international energy management standard, should avoid the need for a separate ESOS audit. However, we do not believe that an ISO 14001 (environmental management standard) audit should be regarded as equivalent, without additional energy-specific work that will - in effect - take it back to an ESOS audit. We would expect that Carbon Trust Standard (CTS) certification would also exempt companies from ESOS audits, providing that there were energy saving recommendations in addition, and a suitable LCCA energy metric was used.

Our response also contains detailed comments on how the scheme should be administered, including a suggestion that introduction could be phased over 12 months based on companies’ financial year-ends, and ways of ensuring that there are enough (but not too many) suitably qualified assessors able to sign off on ESOS audits.

More information about the Government’s proposals on ESOS can be found on its consultation page.