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Review of ESOS Phase 2

The Energy Savings Opportunity Scheme (ESOS) is nearing the end of its second compliance phase (Phase 2). On 5 December 2019, thousands of qualifying organisations in the UK are expected to have completed audits of their energy usage that identify energy savings opportunities across their enterprises. ESOS is the UK implementation of the 2012 EU Energy Efficiency Directive – intended to lower EU total primary energy consumption by 20% from its projected consumption in 2020. Its first phase ended in 2015, and the next will end in 2023 – regardless of the UK’s future relationship with the EU.

The Environment Agency (EA) expects a higher standard of compliance from participants in ESOS Phase 2. Around 1,500 organisations failed to comply with Phase 1, with 300 enforcement notices given in the two years after the deadline. Sampling of Phase 1 reports by auditors and assessors found that as few as 16% were compliant without requiring remedial action. In Phase 1, the EA permitted late compliance (by nearly two months) if participants submitted a written notice before the original compliance date. In Phase 2, the EA is not granting extensions and is expected to expand the scope of its audits of compliance.

The energy savings recommendations in ESOS audit reports are usually presented as low, medium, and higher-cost options. They are also split into type, such as technological (e.g. installing solar panels), operational (e.g. adjusting thermostat settings), and managerial ones (e.g. beginning formal internal management of energy data or setting targets). Phase 2 audit reports are also expected to make behaviour change recommendations more prominent in its reports. These comprised a minority of the recommendations found in Phase 1 reports yet are among the lower-cost and more effective methods for reducing energy demand (up to half of the UK’s 2030 energy efficiency targets could be met through behaviour change).

If ESOS is to contribute to the EU Energy Efficiency Directive, implementation of the energy savings opportunities it identifies will become key. No aspect of ESOS mandates that implementation action be taken, only that the financial benefits of doing so are identified. However, the opportunities identified during ESOS have the potential to produce cost savings that greatly exceed the cost of compliance.

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Nick Fedson MEng MSc

Carbon Compliance Analyst at Alfa Energy
Nick is an analyst with an interest in energy, climate, and sustainability. Nick maintains both technical and policy interest in these areas, with an undergraduate background in mechanical engineering from the University of Bristol and a recently completed Master’s degree in Global Energy and Climate Policy from SOAS, University of London. He has completed internships in a solar energy consultancy in Brighton, a not-for-profit independent think tank in New Delhi, and in data analysis at a software company in Cambridge.

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Nick Fedson MEng MSc

Nick is an analyst with an interest in energy, climate, and sustainability. Nick maintains both technical and policy interest in these areas, with an undergraduate background in mechanical engineering from the University of Bristol and a recently completed Master’s degree in Global Energy and Climate Policy from SOAS, University of London. He has completed internships in a solar energy consultancy in Brighton, a not-for-profit independent think tank in New Delhi, and in data analysis at a software company in Cambridge.