ESOS: The concise guide to achieving compliance. savills.co.uk/energy

Transcription

1 ESOS: The concise guide to achieving compliance

2 1 ESOS: An introduction 2 What is ESOS? 3 Why Savills Energy? 4 Does ESOS apply to my business? 5 Key calculations 6 What are my compliance responsibilities? 7 How to comply 8 Next steps 9 The audit process 10 About Savills Energy 11 Meet the Savills Energy ESOS team

3 1 ESOS: An introduction ESOS, the Energy Savings Opportunity Scheme, is a new compulsory energy assessment programme that will affect up to 15,000 businesses across the UK. The ESOS audit process is designed to help businesses identify opportunities to reduce energy consumption across company buildings, transport and industrial activities. This guide has been created to provide a quick overview of ESOS and a concise outline on how businesses affected can best navigate the road to compliance.

4 2 What is ESOS? Administered by the Environment Agency, ESOS is the UK s response to Article 8 of the European Commission s Efficiency Directive, which aims to cut carbon emissions by ensuring that all large businesses in the UK have energy reduction and energy savings plans in place. It is a mandatory scheme that will require thousands of organisations to undertake an energy audit assessing 90% of business-wide energy consumption every four years. The first deadline for audit submission is 5th December Each audit will look at the energy consumed by a business relating to: Buildings Transport Industrial processes The principle behind ESOS is to identify energy saving opportunities to help companies reduce consumption and thus cut costs. Indeed, the improvements the audit will highlight can certainly impact positively on a business bottom line if implemented. Any business that has to carry out an ESOS assessment will have to use an approved assessor to achieve compliance (please see Next Steps).

5 3 Why Savills Energy? At Savills Energy, we believe ESOS presents businesses with a significant opportunity to make environmental and financial savings. It is compulsory for businesses to invest in the audit process, so we encourage them to use the findings to their advantage, and reap the financial rewards available from identifying and implementing business-wide savings. Indeed, proactive businesses could recover the costs of ESOS recommended investments within two years. To help businesses navigate the route to compliance and reap maximum benefit from the process, Savills Energy has a dedicated ESOS consultation service. The service will put in place a structured approach to compliance which will ensure legal requirements and deadlines are met but also work with businesses to help them realise their energy saving opportunities effectively. ESOS is not the only environmental regulation businesses must comply with, so Savills Energy will take a holistic approach to compliance and also support organisations with requirements for the Minimum Energy Efficiency Standards (MEES) and the Heat Network (Metering and Billing) Regulations. MEES compliance is particularly crucial for landlords. From 1 April 2018, these regulations will make it illegal for a landlord to let out an F or G EPC (Energy Performance Certificate) property. F and G rated properties comprise an estimated 18% of the UK s building stock.

6 4 Does ESOS apply to my business? The EU directive states that any large enterprise has to undertake an ESOS assessment. This means your business or organisation will have to be ESOS compliant if it answers yes to any of the following three criteria: It has more than 250 employees It has an annual turnover of more than 50 million ( 38.9 million) and a balance sheet exceeding 43 million ( 33.5 million) It is part of a corporate group that has at least one large UK-based organisation within it According to the criteria, charities, notfor-profit organisations, partnerships, and even some universities depending on how they are funded could also be included in the ESOS assessment requirements. NB: Public sector organisations, SMEs, franchisees of organisations (if they are not large businesses in their own right) will not have to take part in the ESOS assessment. If your business has operations across the EU, check the ESOS requirements of each member state to ensure that each site meets local legislation for compliance.

7 5 Key calculations: Employee numbers: To determine if a business is applicable in terms of employee numbers, you must calculate the annual average number of employees present in the organisation in the most recently completed financial accounting period. Their contracted hours and status (full time / part time) are irrelevant to their classification as an employee. To do this, add all the employee numbers for each month and divide by 12. Qualification threshold: The pound sterling qualification threshold was calculated using the Bank of England spot exchange rate on 31st December 2014 ( = 1). You must use your most recently completed financial accounting period and use the same exchange rate to find the balance sheet and annual turnover figures. Meeting the threshold: Businesses must examine their two most recent consecutive accounting periods an organisation has to be over or under the threshold for two consecutive years to meet the threshold for ESOS assessment.

8 6 What are my compliance responsibilities? ESOS audit data can be collected in a number of different ways, particularly when it comes to assessing the buildings in your property portfolio. You may only have to include a sample of your whole portfolio if you have multiple sites that perform the same role, an assessor will not have to visit every property. If your lead assessor is satisfied that the sample you have selected accurately reflects your whole portfolio, then you will be considered to be compliant. If your business qualifies for ESOS but fails to send the necessary documentation to the Environment Agency by the deadline of 5th December 2015, you could be liable for a fine of up to 50,000, plus 500 a day for every day that you fail to comply fully with the scheme. Failure to comply with the Environment Agency s enforcement action or penalty notices could also result in a further fixed penalty of fee of 5,000 plus 500 for each day. The maximum fine that can be imposed is 90,000. Businesses also risk a 5,000 penalty fee if they fail to maintain accurate records as part of the ESOS evidence pack, and may have to pay for any additional work that the Environment Agency deems necessary to achieve full ESOS compliance. False or misleading statements about your business compliance status could also lead to a penalty fee of up to 50,000. The Environment Agency also reserves the right to publish details of any business that has failed to comply with ESOS. Businesses should be aware that the reputational damage that may be wrought in the event of any resulting negative media coverage can be considerable. Once your business is compliant, you will need to complete an updated ESOS audit every four years.

9 7 How to comply If your organisation has an existing energy management system that covers all the company s assets and activities (including transport) and is certified to ISO50001 standards, it already meets ESOS requirements. However, this must have been carried out during the compliance period of 6th December 2011 and 5th December 2015 and must still be valid on or after 5th December If this is the case, you will need to notify the Environment Agency that you meet ESOS standards. If the ISO50001 certified energy management system covers some, but not all, of your activities and assets, additional audits on those aspects not covered must be undertaken. Any energy management systems that are in place but not certified to ISO50001 standards can still be used as part of the ESOS audit but the business will have to complete an assessment. In achieving ESOS compliance, businesses can identify where they do not meet Minimum Energy Efficiency Standards (MEES), and the Heat Network (Metering and Billing) Regulations and the ESOS recommendations can include measures to allow compliance with both where possible. To support compliance, a business will need: Energy auditing activity dating back to December 2011, including BS EN or ESOS Compliant Energy Audits ISO Display Energy Certificates for buildings Non-domestic Green Deal Assessments or ISO Energy Management Systems Any organisation that does not have up-to-date and acceptable data will have to compete an ESOS audit. Compliance assessments can take up to three months to complete, so it is essential that businesses are prepared.

10 8 Next Steps Any business or organisation that has to undertake an energy audit must employ an approved lead assessor to collect and identify the amount of energy consumed across their buildings, transport and processes. You should look to employ a fully qualified and experienced assessor who is a member of one of the 12 professional bodies that are approved by the Environment Agency. These include the Association of Energy Engineers (AEE) or the Energy Institute or CIBSE (Chartered Institution of Building Services Engineers). It s also a good idea to hire someone who understands or has some knowledge of your business sector to ensure they have a full grasp of how your company can achieve compliance. The assessor will work with key members of the business to identify opportunities for energy reduction across the organisation and will prepare the ESOS report before the deadline of 5th December The audit will comprise a detailed investigation into how your business uses energy across its operations in its buildings, transport, and industrial operations using site survey evidence and energy data. The assessor will review your organisation s existing energy audits to see if they meet the ESOS Energy Audit requirements, and can thus be used towards the final report. Lead assessors can undertake part or all of the ESOS assessment, but it is recommended that they are involved in the planning. They MUST review and approve all sections once it is complete. Once that is done, a board-level director must sign off the audit, to confirm that the audit has been read and reviewed, and that the organisation is ESOS compliant. However, if the lead assessor is an in-house member of staff, two directors will need to sign it off. The final ESOS compliance audit you intend to submit must also be signed off by a lead assessor.

11 9 The audit process Buildings and Industrial processes Your assessor will look at the energy supplied to and used by your business and any generated energy but not recycled heat. Transport Your assessor will look at the fuel that is bought by transport; any journeys that begin or end in the UK; company cars (but not personal mileage), and grey fleet vehicles (cars used by staff for business). It will not include commuting costs, third-party logistics, shipping, flights or railway travel, unless your business operates its own ships, planes and trains.

12 10 About Savills Energy Savills Energy is a dedicated real estate and capital advisory service. Its expert team assists with the inception, planning, development and continued operation of assets and infrastructure connected to the energy production and storage sector. Savills Energy s Compliance team can help businesses with the best advice to achieve their ESOS compliance effectively and efficiently. Indeed, Savills Energy has the capability to work with businesses to provide everything from full compliance to consultancy on aspects of the process to ensure compliance is guaranteed.

13 11 Meet the Savills Energy ESOS team Stuart Campbell is a director at Savills Energy specialising in launching renewable energy development projects, as well as fundraising and commercial and financial advisory in the renewable and cleantech markets. With a pedigree including experience with Ernst & Young and BT, Campbell has more than a decade s experience in the international renewable energy sector. A graduate of history at Manchester University, he went on to complete his MBA at Cass Business School. Key areas of focus for Campbell include ground mount and commercial rooftop solar, energy optimisation (ESOS, MEES and Energy Performance Contracting), gas to grid anaerobic digestion, biomass, energy efficiency and energy storage. David Thomas is Savills Energy s inhouse ESOS lead assessor. Secretary of the AEE, David also oversees the body s ESOS professional register. With strong credentials in the field of energy efficiency, David has a wealth of experience in helping businesses to identify and implement business-wide savings and improvements. The three-year investment programme David recently managed for the Ministry of Defence, which spanned 1,400 energy efficiency projects across 223 defence sites, has saved the MoD 55m each year.

14 David Thomas ESOS Lead Assessor +44 (0) Stuart Campbell Director +44 (0) Tim Mockridge Consultant +44 (0)