Large enterprises required to have regular mandatory audits but that policy is still not a game changer

For many organisations it was merely a box-ticking exercise required under the 2012 EU Energy Efficiency Directive. In Britain it was called the Energy Saving Opportunity Scheme and there were hopes it would really make a difference and drive energy efficiency investments. Andrew Warren, chairman of the British Energy Efficiency Federation and a friend of EiD, questions in the April issue of Energy in Buildings & Industry what more needs to be done to make ESOS the game changer many hoped it could be? It would be good to hear from others throughout Europe what their experience has been.

The slow route to changing the game

When the Energy Saving Opportunity Scheme (ESOS) was launched, I headlined my column : “Is this a game changer, or is it just the same old game?”

Now two rounds of the scheme have been completed, I think sufficient evidence is emerging  that  enables that question to be answered.

Involvement with ESOS makes it mandatory for all larger enterprises- both private and non-profit  – to have a detailed energy audit covering every aspect of its activities

The first set of audits had to be completed by December 2015. But ESOS was deliberately designed not as a one-off box ticketing exercise. The requirement is that such audits must be repeated every four years. So the second  round was completed last December- and the third round is due before the end of 2023.

The philosophy behind the repetition is simple. It is not only that pertinent technologies, and techniques, change radically across a 4-year period. Legislators had obviously learned from the foolishness of building audits (the Energy Performance Certificate) being valid for an entire decade.

It is also that an energy audit, like a financial audit, should be undertaken regularly, so that the information used is as up-to-date as possible. For the benefit both of management and all other stakeholders in the enterprise.

Incidentally, the continuing use of the word “enterprise” in this context is deliberate, and not just an apparent literalistic translation from the French word for business ; ESOS originated from requirements to comply with Article 8 of the 2012 European Energy Efficiency Directive.

Because whilst the scheme does apply to every single business employing more than 250 people or turning over above £250m a year, it also covers the entire “third sector” as well. Any not-for-profits or charities that fulfil these two characteristics must comply.

ESOS was launched by then Climate Change Minister Greg (now Lord) Barker. He christened it the Energy Saving Opportunity Scheme , because he maintained that implementing it “will help drive the take-up of cost-effective energy efficiency measures by participants.” Doing so would, he argued, be “benefitting their competitiveness and contributing to the wider growth agenda”.

Barker stated that an average larger enterprise  taking up identified recommendations from energy saving assessments could, by investing £15,000 per year in  measures enjoy lower annual bills of £56,400.

The potential benefits to the economy were estimated to be up to £3bn in Net Present Value between 2015 and 2030.

Subsequently the government  set an aim in its 2017 Clean Growth Strategy to reduce corporate energy use by 20 per cent by 2030.

The present Energy and Clean Growth Minister Kwasi Kwarteng is now saying that  reaching the 2030 goal could save firms as much as £6bn a year in costs, while also reducing CO2 by 22 million tonnes, roughly equivalent to the annual emissions of 4.6 million cars.

“Evidence shows that reporting energy use saves businesses on their bills, can boost productivity and attract increasingly green-minded customers by showing they are committed to fighting climate change,” he states.

His Department has undertaken detailed evaluations of the actual impact of ESOS activities to date. The aim has been to understand how effectively it is being implemented, how both enterprises and auditors are responding to it (503 separate interviews have been undertaken), and to reveal any unexpected burdens and costs.

It is clear that the benefits of ESOS have usually been as part of a larger programme of energy efficiency action: only 6% of enterprises reported that they had undertaken any investment entirely because of the audits. But 38% maintained that the audit had led to some energy efficiency investment, and critically over one-quarter (29%) reckoned that a more comprehensive investment package had been undertaken stimulated at least in part by ESOS. Of these, the investments most attributed to ESOs were in process-related measures (48%) and lighting(46%)

Internal admin costs are proving on the whole rather  lower than anticipated. But external survey costs soared for those who waited until the last few weeks before final December deadlines to comply: supply and demand in action!

One of the main criticisms of ESOS has been the lack of compulsion to implement a single one of the recommendations made. The fact remains that the majority of participants still seem to be ignoring all information. That said, those that are opting to comply just by signing up with ISO 50001 are finding that this international scheme  certainly now mandates recommended investments.

But  many second time round auditors were seeking explanations as to why  of their predecessors’ recommendations – all will  have been cost-effective- have been ignored. After all, that is precisely what financial auditors require.

Equally there really should be greater transparency with the audit. Perhaps with recognition and prizes for those who deliver the greatest (audited) savings?

So is ESOS the “game changer” Greg Barker claimed it would be? Set in isolation, a truthful answer would have today to be rather negative. Too many still regard it as simply a bureaucratic burden. But there are undoubtedly some  enterprises that have really prospered from implementing  their audit recommendations.

I really do think that with purposeful implementation co-ordinated with other related public policy initiatives – together with serious compliance checking – the ESOS may yet eventually merit that proud  “game-checking” epithet.