The latest update from the Department of Energy Security and Net Zero (DESNZ) tells us that the government will go ahead with previously announced plans to make the ESOS scheme more robust. The Phase 3 compliance deadline has been extended to 5 June 2024, to give participants time to meet the scheme’s new requirements. Here’s what you need to be aware of before the deadline.
New template on the way
The government has been developing a template for the submission of ESOS compliance information. When this is ready, businesses will be expected to submit their ESOS reporting in a way that aligns with the template. The Behavioural Insights Team contributed to the development of the draft template and have stated that one of their goals is to “make it easy for assessors”. For most organisations, having a clear template for ESOS reporting is likely to make the whole task more straightforward.
Additional data needed
Phase 3 will require companies to submit information that was not required in Phases 1 and 2, including but not limited to:
• Your Standard Industrial Classification (SIC)
• Your reasons for qualification (e.g. turnover or employee count)
• Categorising the energy-saving opportunities in your report so they are broken down by organisation, use category and type of opportunity (e.g. smart controls, behavioural change, short-term ROI opportunities).
The full list of information required that is new for Phase 3 can be found in Annex A from DESNZ. This list also requires organisations to retrospectively dig out information from Phases 1 and 2 (if your organisation was in scope for them). You will need to offer total energy consumption, significant energy consumption and total estimated savings for those phases, ideally broken down by use category.
A change to de minimis
The de minimis exemption allowing you to exclude certain sources of energy-consuming activity covered up to 10% in Phase 2, but for Phase 3 the maximum is 5%. This means that your Significant Energy Consumption figure has to equal at least 95% of your Total Energy Consumption.
Energy intensity metric required
Energy intensity metrics put your energy consumption in context by linking them to other measurable outcomes of your business. ESOS reports will now need to include at least one energy intensity metric in the overview section. These should be expressed in different ways depending on the context.
- Buildings: kWh/m2 of Gross Internal Area (GIA)
- Industry: kWh/unit of output. If possible this should be in terms of mass, i.e. kWh/tonne, but it depends on what you’re making. kWh/litre or kWh/unit are also acceptable.
- Transport: kWh/miles travelled for passenger transport and kWh/tonne mile for freight.
Sharing with subsidiaries
A review of the scheme found that most parent organisations were not properly sharing information about their ESOS report findings with subsidiaries. The changes to Phase 3 mean that this is now an explicit requirement. The parent company in the role of “responsible undertaking” is now required to share, as an absolute minimum, details of any site visits, data gathered and energy consumption profiles specifically for that subsidiary. It should also share any energy-saving opportunities connected to the subsidiary, plus the costs and benefits and implementation considerations.
Ideally the parent company would go beyond this and share the entirety of its ESOS information with subsidiaries.
Needing a plan
Businesses in scope of ESOS need to provide more information on their possible next steps, as identified by their ESOS report. If the report does not suggest implementing a measure straight away, you will need to suggest a possible timescale for this. The report should also cover possible ways to finance any measures and how existing leases could affect the financial viability of a measure. Setting out the options in the way required by ESOS is likely to be a very helpful exercise for many businesses.
Timescales
The primary legislation allowing the government to implement its planned changes to Phase 3 will be the Energy Bill, currently making its way through Parliament. The plan is for the changes to come in well before the new 5 June 2024 deadline. When the Bill has received Royal Assent, the government will put out more information and update the official ESOS guidance to reflect the changes.
In the meantime, it’s always good to talk to an expert to make sure you are staying ahead of your compliance obligations. If you need any advice on your ESOS reporting, get in touch with our specialist team on hello@sefirst.com
