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Energy Savings Opportunity Scheme Strengthening – An Overview of Key Changes to Phase 3

Energy Savings Opportunity Scheme Strengthening – An Overview of Key Changes to Phase 3


By now, most large UK organisations will be familiar with the Energy Savings Opportunity Scheme ("ESOS"), which is the UK's implementation of Article 8 of the EU Energy Efficiency Directive, requiring those in scope to measure and audit their energy use.  In anticipation of ESOS reporting deadline later this year, we outline the main changes to Phase 3, and how they may impact an organisation's energy reporting.

The UK Government announced several changes to ESOS to help align the regime with the UK's wider decarbonisation goals and make it a greater driver for energy efficiency improvements. Phase 3 reporting, which applies to organisations that met the qualification criteria on 31 December 2022, will require notification to the Environment Agency of ESOS compliance by 5 December 2023. To recap, UK organisations in scope must (i) have 250 or more employees, or (ii) have annual turnover in excess of £44 million and an annual balance sheet total in excess of £38 million. Overseas companies with a UK registered establishment which have 250 or more UK employees (paying income tax in the UK) are also required to comply.


The key proposed changes to Phase 3 reporting include:

  • The reduction of the 10% de minimis exemption to up to 5% to help participants “realise more significant energy saving benefits from areas of the organisation that may not previously have been considered”.
  • The addition of an energy intensity metric in ESOS reports.
  • A standardised template (which is still being developed) for including compliance information in the ESOS report. This is intended to generally comprise ESOS information that participants will already have available.
  • The requirement to share ESOS reports with subsidiaries.
  • The requirement for ESOS reports to provide more information on next steps for implementing recommendations.
  • The 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 for Phase 4.

The last of these changes, in particular, will underline the fact that ESOS is expected to be more than just a checkbox exercise, and perhaps an acknowledgement that merely measuring energy consumption without actively working to reduce it will not support the Government's net zero goals.

Government guidance for in-scope organisations is anticipated in the coming months, with all changes subject to Parliamentary scrutiny. BEIS acknowledges that for organisations who have already started working on ESOS, these changes may mean some reports need to be “redrafted to meet revised requirements”, although it says: “we do not expect this to be a significant undertaking”.

Nonetheless, in preparation of such changes, it will be important for organisations to review their business structures and have a clear view of how such proposals may impact their energy auditing and reporting. There can be some challenges in accurately drawing the boundaries of a "group" for reporting purposes, with particular nuances for asset managers and their portfolio companies.

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