The UK Energy Savings Opportunity Scheme: Phase 3 Deadline Approaches

The deadline for organisations to complete and submit their UK Energy Savings Opportunity Scheme ("ESOS") reports for Phase 3 of the scheme is 5 December 2023.

What is ESOS?

ESOS is a mandatory energy assessment scheme aimed at encouraging qualifying organisations to reduce energy consumption and save on energy costs, thereby assisting the wider UK effort to reduce carbon emissions and tackle climate change. The Energy Savings Opportunity Scheme Regulations 2014 require large UK organisations to carry out energy saving assessments. Qualification is assessed on four yearly cycles, with the most recent qualification date of 31 December 2022 having just passed. Participants must calculate their total energy consumption, carry out energy audits and identify where energy savings can be made. Failure to comply can lead to penalties. 

Are You in Scope for Phase 3 of the Scheme? 

If your organisation counted as a "large undertaking" on 31 December 2022, it is in scope. A "large undertaking" is any UK corporate body, partnership, or an unincorporated association carrying on a trade or business, with or without a view to profit, that meets either or both of the following tests:

  • It employs 250 people or more; and/or
  • It has an annual turnover in excess of £44 million and an annual balance sheet in excess of £38 million.

You must take part in ESOS if your undertaking is part of a corporate group which includes another UK undertaking or UK establishment that meets these criteria. Where a corporate group participates in ESOS, unless otherwise agreed, the highest UK parent will act as a "responsible undertaking" and be responsible for ensuring the group as a whole complies.

"Undertakings" include companies, partnerships, limited liability partnerships, joint ventures and in many cases, charities. Many organisations that might not have qualified under earlier phases of the scheme (the previous qualification date being 31 December 2018) may now have grown to a size whereby they are in scope.

How to Comply with Phase 3

Most participants will need to undertake an ESOS assessment, which includes:

  • Measuring total energy consumption for operations in the United Kingdom. For example, heating and lighting of buildings, fuel for travel, and energy for any operational processes; 
  • Conducting detailed energy audits to identify cost-effective energy efficiency solutions for high consumption areas; and
  • Notifying the regulator (in England, the Environment Agency) of your compliance and keeping records of how you complied.

Any ESOS assessment must be reviewed by an appointed ESOS "Lead Assessor" and reviewed by the directors or equivalent prior to reporting compliance to the Environment Agency.

The deadline for submitting ESOS reporting for Phase 3 is 5 December 2023.

If 100% of your organisation's energy use is covered by ISO 50001 or the total annual energy consumption is below 40,000kWh, you do not need to carry out an ESOS assessment but must still notify the regulator that you are compliant. 

Failing to comply with ESOS can result in financial penalties being issued ranging between £5,000 and £50,000, and a "publication penalty" being issued whereby the name of the organisation in breach may be published on the regulator's website. As such, failure to comply with ESOS may give rise to reputational repercussions as well as financial penalties. 

It may be helpful to consult with outside counsel when considering ESOS Phase 3 compliance.

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