Government confirms plans to strengthen ESOS scheme: what’s changing?

The government has published plans to set stronger standards for the Energy Savings Opportunity Scheme (ESOS), aligning it more closely with the UK’s net zero target. It follows a consultation on changes to the scheme, which ran last year. Some changes will be made in advance of the current Phase 3 compliance deadline (5 December 2023), and others, such as adding a net zero audit element, will come into force in Phase 4. Here is a summary of the key changes.

Current phase changes (ESOS Phase 3):

• A standardised template for including compliance information in the ESOS report. This will generally comprise ESOS information that participants will already have available, such as corporate group structure, reasons for qualifying for ESOS, and details of the audit. A template is not available yet and will be developed with stakeholders.
• A reduction of the 10% de minimis exemption to up to 5%. This is to allow organisations to identify further ways to reduce energy consumption, encourage greater coverage of the scheme and improve data quality.
• The addition of an energy intensity metric in ESOS reports. Reports will need to include an overall energy intensity metric within the overview section of the report in terms of kWh/m2 for buildings, kWh/unit output for industry and kWh/miles travelled for transport. Intensity metrics are already required under SECR, so this brings the two schemes more in line with each other.
• A requirement to share ESOS reports with subsidiaries. This is because a review of the scheme found there was poor dissemination of information to subsidiaries from parent organisations, which became a barrier to action on energy efficiency.
• A requirement for ESOS reports to provide more information on next steps for implementing recommendations.
• A requirement for participants to set a target or action plan following the Phase 3 compliance deadline. Participants will need to report progress annually via the energy efficiency section narrative in SECR reports, or via the ESOS web portal. Meeting the target or completing an action plan will not be mandatory for the Phase 3 compliance deadline, but from Phase 4 onwards a requirement will be introduced that if the goal has not been met, the participant must explain why.
• Collection of additional data for compliance monitoring and enforcement. This will cover data including corporate structure, details of energy consumption and emissions, and energy intensity metrics.

ESOS Phase 4 changes:

• Net zero assessments. This would include an assessment of actions needed to meet future net zero commitments. It would identify potential risks to the business of moving to net zero and well as possible emission reduction trajectories and ensure that investment in energy efficiency now does not prejudice those net zero trajectories. The government is currently working with BSI on the production of a new net zero audit PAS standard to facilitate this. ESOS participants can introduce this voluntarily in Phase 3, but it won’t be mandatory until Phase 4.
• Changing the ESOS balance sheet and turnover thresholds to align with SECR. This means businesses would be in scope of ESOS if they meet at least one of the following criteria: they have a) at least 250 employees b) a balance sheet of at least £18 million c) turnover of at least £36 million.
• Mandating action on audit recommendations. From Phase 4 onwards a requirement will be introduced that if the goal has not been met, the participant must explain why.
• A requirement that ESOS reports use an existing auditing standard such as ISO 50002 or EN 16247.
• Removing DECs and GDAs as compliance routes for ESOS.

Future changes

There are a few other changes being considered for future phases, including extending the scope of the scheme to include medium-sized businesses. If you’d like advice on the changes to ESOS in this current phase or further down the line, get in touch on energy-hub@biu.com.