ESOS Phase 3: Understanding the latest amendments and their impact on businesses

These amendments are designed to improve the quality of the ESOS audits, as well as incorporate commitments for net-zero and climate change audits, and increase the accountability and visibility of the ESOS data through public disclosure.

In this EnergyIntel we’ll be highlighting the amendments from the latest guidance and what this will mean for businesses that need to be ESOS compliant.

What are the amendments? 

In short, the ESOS phase 3 amendments are as follows:

Deadline Extension

The deadline for reports to be submitted for Phase 3 has been extended to June 5th 2024. This is due to the legislation and guidance only being put in place at the end of November 2023, which would not have given organisations enough time to complete new audits or compile the reports to include the new data. It should be noted that ESOS notifications cannot be submitted to the Environmental Agency until the requirements have been set into law and the ESOS notification system (see below) has been updated accordingly. The qualification criteria and period for qualification remain unchanged. 

Section 6 – Calculation of Energy Intensity Ratios 

Energy intensity metrics help businesses understand their relative energy use rather than simply the absolute amount of energy being used. The consultation found that including this would be valuable and therefore included this for phase 3. For businesses, this means there will be additional data collection and analysis required to create these metrics. 

The third compliance period will act as the baseline for future comparisons. You will be able to calculate an energy intensity ratio from the first and second periods and include this in the ESOS report if the relevant data is available. This will help in future reporting as you can work out the energy intensity ratio and assess what has changed and what still needs to be done to keep up with energy savings opportunities. 

Choosing from the various intensity metrics can be a challenge, and be careful, as there are some intensity metrics that might not work for your business. You should ask your ESOS lead assessor for their recommendations, and we would always recommend carrying out a regression analysis to outline correlations on data sets and therefore check the suitability of something to be used as a good measure of intensity now and going forward. 

Section 8 – Carrying out an ESOS audit 

There have been three changes made in Section 8 of ESOS regulations.

1. Looking for and dealing with the energy savings opportunities that are already out there and those that might be added in the future. This will require a simple addition to the reporting system that will not greatly impact those reporting. 
2. The requirement to look for funding and support that an organisation might be eligible for. Due to being an organisation that is eligible for ESOS, there might not be anything else that you are currently allowed to apply for – however, there could be some opportunities that come up in the future or where the relevant criteria may change. If this happens we’ll provide support and links to these. 
3. A suggested programme for implementation, which has been discussed in previous consultations. This is not so much a new change, but it is always worth reminding businesses that this should be looked at regularly for budget as well as profit/loss purposes. 

Section 10 – Complete the ESOS Report 

The report must now include the details of the assessor as well as anyone completing a large portion of the ESOS audit, including but not limited to; any site visits, any data collection, and the drafting of the report. It has also been noted that assessors creating and/or contributing to reports should be appropriately trained and monitored to ensure they continue to meet the required standards.

As part of section 10, you also now need to include an estimate of energy savings achieved since the end of the previous ESOS compliance period. This can be done by including a statement within the ESOS report to show the savings or declare that no savings have been made since the previous phase.

Section 11 – Notification of compliance, sign-off and publication of data 

The scheme has introduced a new online compliance system, due to be live at the end of January 2024, but as of writing, the system is still in development. 

We do know businesses will be asked to make sure that the ESOS report has been signed off by a board-level director or their equivalent. At each stage that needs a signature, there will be a chance to save the report, download, and print it so it can be signed before you confirm that sign-offs have been completed. The evidence pack should show that the director has seen, reviewed and signed off the report. 

Businesses will also be able to save, download, and print off the report at certain points during submission, and the report will also be available for download once it has been submitted. 

At the moment, it’s unknown what format you’ll be asked to report in or what will be required for a successful submission. But once we have the right information we will update this section.

Section 12 – ESOS Action Plan 

An action plan must be produced which includes the intentions you have in terms of reducing energy consumption, as well as whether you intend to do it and whether this action was recommended through the ESOS assessment. The action plan must also advise what energy savings are expected to be achieved and how these savings were estimated. 

Once the action plan has been submitted, businesses now need to provide progress updates that must be submitted 12 months after the action plan deadline and then updated again 12 months later. 

It’s important to note that the action plan must be in place and formalised before 31st December 2024. 

Section 13 – Annual Progress Updates 

The annual progress updates will need to be uploaded to the new ESOS IT system. Delivery requirements will be discussed further once this has been finalised. 

Uploading these progress updates is designed to encourage other participants to take on the energy savings that they originally committed to and to ensure that businesses stay on track with their action plans. 

The annual progress update must include the following things: 

• All the energy-saving actions from the action plan that have been introduced and whether they were handled by the date set in the action plan. 
• Any of the action plan points that were not implemented during the 12 months of the action plan.
• An estimate of the total savings that you expect to have achieved from the actions implemented over the 12 months up to the deadline for the progress update, plus the source of this data. 
• Finally, it should also include a combined estimate of the total energy savings you expect to save (from those that have been implemented as well as those not yet complete). 

Staying on top of these progress updates will help you understand the potential savings that can be achieved. 

Section 15 – Compliance and Enforcement

There will be no penalty or enforcement action for those who do not submit an action plan or progress update. However, it will be noted that there was a failure to submit. The enforcement and penalties relate only to ESOS requirements needing to be completed by the compliance date.