Energy Savings
Opportunity
Scheme (ESOS)

ESOS is an energy auditing and assessment scheme introduced by the UK government, intended to encourage large enterprises in the UK to focus on being more energy efficient. It is mandatory for those organisations which meet the qualification criteria.

If your company qualifies for the Energy Savings Opportunity Scheme (ESOS), it must undertake an energy assessment and audit every four years and to identify ways to save energy.

The Energy Savings Opportunity Scheme (ESOS) reports are submitted every four years and look ahead to identify potential opportunities to improve energy efficiency in an organisation. ESOS reports should quantify the potential energy saving, as well as the financial implications of any potential opportunities to implement energy efficiency measures.

Streamlined Energy and Carbon Reporting is annual and looks backwards and details any energy efficient actions that have been implemented during the reporting year, with the idea that the benefits of such actions will show in the organisation’s Intensity Ratio (when compared to previous years’ ratios). If energy efficient actions have been put in place due to recommendations in previous ESOS reports, it is recommended that the ESOS report is referenced within the SECR section of the organisation’s annual report.

The qualification date for ESOS Phase 3 is the 31^st of December 2022. The qualification date for ESOS Phase 2 was the 31^st of December 2018. The Energy Savings Opportunity Scheme (ESOS) applies to all non-SME (small and medium enterprises) with:

As stated within the 2022 Strengthening the Energy Savings Opportunity Scheme (ESOS): Government Response, the requirements for Phase 4 ESOS have now changed.

The main purpose of these changes is to strengthen the regulations of the scheme to ensure a level of standardisation and quality in ESOS reports going forward.

Some of the main changes set out by the government are as follows:

• A summary template which includes compliance information must be included within the ESOS report.
• Additional information as stated by the Environment Agency must be included within the compliance notification.
• It is now compulsory to include energy intensity metrics within reports.
• The de minimis exemption has now changed from 10% to 5%, which means that a participant’s report must cover at least 95% of their total energy consumption.
• Where an ESOS participant is part of a corporate group, the ESOS report must now be shared with subsidiaries.
• Participants must create an action plan or set targets following the Phase 3 compliance deadline, however this must be reported against within the participant’s Phase 4 ESOS report.
• Reports must provide greater details on how and when recommendations should be implemented.

It is important to note that these proposed changes are subject to legislative scrutiny and timetable, as the enabling primary legislation (The Energy Bill) is currently passing through Parliament.

Once the bill has received Royal Assent, further government guidance will be published on these changes.

However, the draft regulations which encompass these changes have been published, to allow for participants to prepare for their enforcement.

Has the compliance deadline for Phase 3 ESOS changed?

Yes, the compliance deadline for Phase 3 ESOS has changed. The original deadline was the 5^th of December 2023; however, this has now been postponed until the 5^th of June 2024.

This extension has been granted to allow for necessary time for participants to meet the new ESOS Phase 3 requirements.

Under the regulations, it is mandatory that a notification of compliance is submitted to the Environment Agency to prove that you have complied with the regulations.

You can submit a notification via the government’s online notification system.

However, notifications of compliance cannot yet be submitted until the Phase 3 legislation changes have been finalised, as the online system will need to be updated to incorporate these changes.

As of January 2021, UK installations are no longer in the EU ETS. They are in the UK ETS, which abides by very similar rules and principles.

For more details visit https://www.gov.uk/guidance/energy-savings-opportunity-scheme-esos.

It is expected that as the government aims to align ESOS with the SECR, the qualification thresholds for Phase 4 ESOS are due to change, to match the SECR thresholds.

The new thresholds are expected to be:

• 250 or more employees
• A balance sheet of at least £18 million
• Or a turnover of at least £36 million.

This will result in a greater number of participants within the ESOS scheme.

There are further plans to also incorporate a greater focus of net zero within the scheme. 

The compliance period for Phase 4 will begin on the 6^th of December 2023 with a qualification date of the 31^st of December 2026 and a compliance deadline on the 5^th of December 2027.