Navigating ESOS phase 3: a New Year's resolution for energy efficiency and corporate sustainability

It’s a new year and ESOS phase 3 should already be a distant memory.

The deadline was 5 December 2023. However, amendments to the ESOS regulations were only enacted into law on 29 November 2023, leading to a 6-month extension due to these delays. The new deadline is now 5 June 2024.

These delays have, until recently, led to confusion among organisations seeking compliance. Many businesses may have let out a collective sigh of relief and considered this a problem for after Christmas.

However, whilst 6 months sounds like a long time, in the context of ESOS it can disappear very quickly. If you haven’t done so already, your New Year’s resolution should be to get your ESOS audit complete as soon as possible to avoid bottlenecks and potential penalties.

The headlines changes to ESOS phase 3 are:

• Audit coverage threshold increased to 95% - only 5% of energy can be excluded as de minimis. For most businesses, this will include sampling methodology to be adapted and potentially more audits.
• Any data estimations made where actual data is unavailable must be justified and documented.
• Where a representative sample has been selected, the methodology and rationale for the selection must be recorded for quality assurance purposes.
• Requirement to state energy consumption sources, end-uses and intensity ratios for a more meaningful contextual report.
• Greater scrutiny of overlapping recommendations (e.g. behavioural change and controls) – where two different initiatives achieve similar savings but are double-counting.
• New requirement to publish a ‘Programme of Implementation’, based on the findings of the ESOS audit, due by December 2024. However, there is no legal requirement to actually fulfil any of the actions.
• Organisations are expected to stipulate energy-saving initiatives they have implemented since phase 2 in 2019.
• ESOS reports should state available grants and incentives in line with the recommendations. However, these are few and far between, especially for non-SMEs - which the vast majority of ESOS participants are, other than SMEs caught up in ESOS by being part of a wider corporate group.

There is no requirement for a Net-Zero plan to be introduced as part of ESOS until phase 4 (2027 onwards). However, any good quality ESOS energy audit should provide greenhouse gas (GHG) emissions calculations and decarbonisation recommendations as standard.

When done properly, ESOS is a key tool in any business’s corporate Net-Zero arsenal. Most businesses can achieve energy savings of 10-20% through energy conservation and renewable and alternative energy sources. This generates savings and revenue which can be applied to other areas of decarbonisation.

The best approach is to ensure that your ESOS lead assessor also has knowledge and experience of practical implementation of energy management actions – or has access to colleagues/patterns who do. Someone who understands the potential trade-offs between actions, the positive and negative impacts on operations, unintended consequences, etc.

ESOS is a gateway to energy resilience, increased profitability and sustainability – but only with the right partner who understands you and your business.