Important update on amendments to Phase 3 of the Energy Savings Opportunity Scheme
Update (13 June) Environment Agency (EA) announce extension to the Phase 3 ESOS deadline
On 13 June 2023 the Environment Agency announced an extension to the Phase 3 ESOS compliance deadline. This is to allow customers time to comply with the changes for Phase 3 announced in response to the Consultation (see update from 7 June below).
To ensure there is reasonable time for participants to meet the new requirements and for assessors to carry out assessments, ESOS participants will not be required to comply until 5 June 2024 (currently 5 December 2023), the revised deadline for when they will be required to notify compliance. This extension is in line with requests from stakeholders.
We are working with current and prospect customers to implement the changes in all Phase 3 reports.
(7 June) Additional requirements announced for Phase 3 of the Energy Saving Opportunity Scheme
On 28 July 2022, the Department of Environment, Food and Rural Affairs (DEFRA) responded to the Energy Saving Opportunity Scheme Consultation which closed on the 28 September 2021. You can read about what the consultation proposal encompassed in our full news story published at the time of consultation launch here.
DEFRA consulted on proposals to strengthen and improve the Energy Savings Opportunity Scheme (ESOS). The main aims of this consultation were:
- To increase the number of ESOS participants that take action to reduce energy use by raising the quality of their ESOS audit
- To increase the carbon and cost savings from ESOS by increasing the number and scope of ESOS recommendations taken up by participants
- To ensure that ESOS recommendations are consistent with the UK’s net zero commitments
The consultation responses were published in July 2022. You can find detailed information on these in full here.
Changes for Phase 3 of the scheme
Given the proximity of the consultation, to the compliance deadline for Phase 3 of the scheme (5th December 2023) the Government made the decision to delay some of the proposed changes until phase 4. There are however going to be some changes for Phase 3 of the scheme. Guidance regarding expectations of obligated companies is being released via Environment Agency Newsletters. The latest was released in late May 2023. The document provides further detail on requirements for organisations looking to comply with Phase 3.
“The changes will be subject to legislative scrutiny and timetable, with the enabling primary legislation (The Energy Bill) currently passing through Parliament. Government will update participants when the Energy Bill has received Royal Assent, and the draft regulations are introduced to ensure there is a reasonable amount of time to meet the new requirements.” EA May 2023.
Below we summarise the main points, we highlight those which are new/significantly changed from the previous update (December 2022) below.
- NEW/Significant change: An energy intensity ratio for each of buildings, transport and industrial processes and information on estimates used. For example: kWh per tonne mile for freight, kWh per gross internal area, kWh per production output. This is not the same as the intensity metric for SECR which is emissions, rather than energy. An additional metric kWh against turnover to be reported for all businesses. These metrics are to be consistent going forward into future phases.
- NEW/Significant change: Total estimated savings in kWh achieved by the organisation during Phase 3 (i.e. since the previous ESOS compliance deadline). Historic information covering energy consumption in Phase 1 and Phase 2 (where applicable).
- NEW/Significant change: Information to be included in reports – breakdown of opportunities. For group reports, where possible opportunities to be broken down by organisation, category (e.g., fleet, buildings) or time.
- NEW/Significant change: Details of government support received in relation to investments in energy efficiency and/or carbon emissions.
- Requirement for ESOS reports to provide more information on next steps for implementing recommendations
- A change to the de minimis exemption so that participants’ Significant Energy Consumption covers at least 95% of their Total Energy Consumption (as compared to 90% in Phase 2)
- Requirement to share ESOS reports with subsidiaries.
We will be working with customers to gather any additional information we require, with regards to historic energy use data from previous ESOS compliance periods and values for production output, turnover and other metrics required to calculation intensity ratios.
Until the changes have been legislated, we may see further amendments to requirements from the EA.
Action plans – Provisional Deadline December 2024
- Requirement for participants to set a target or action plan following the Phase 3 compliance deadline, on which they will be required to report against annually
- This is in addition to ESOS compliance and not included in Phase 3 compliance proposals. We await more information from the government on the nature and content of these action plans: “The details on how to complete the action plan will be published in final guidance on gov.uk once the new ESOS regulations have been laid in Parliament in advance of the Phase 3 compliance deadline.”
Notification Portal for Phase 3
We are not currently able to make notifications for organisations for Phase 3: “Notification cannot be submitted until the Phase 3 requirements have been finalised in legislation and the updated IT system which is currently being developed has been appropriately tested. The system will be made available in time to enable participants to meet notification requirements.” EA Newsletter late May 2023.