How to make ESOS pay
The forthcoming mandatory Energy Savings Opportunity Scheme (ESOS) is beginning to hit the business radar, as the qualification date of 31 December 2014 is fast approaching. Certainly, we had record attendance at our ESOS webinar last week, and despite allowing 20 minutes Q&A time, we still didn’t manage to get through all participant queries.
Martin Adams, the ESOS Team Leader from DECC, joined us to provide an overview of the key points of the scheme. He was keen to emphasis the opportunities it can provide: “ESOS is designed to be a framework to support UK businesses to achieve more of their energy efficiency potential, to achieve greater savings, to achieve greater emissions reductions,” he said.
At least £1.6bn in savings
According to DECC, if businesses can reduce consumption by just 0.7% as a result of implementing some of the efficiencies highlighted by their ESOS audit, it will deliver more than £250m in savings a year. And where businesses are prepared to invest in measures with a payback period of two years or less, this increases to £1.6bn a year.
At npower, we believe the potential for savings is far greater. We ourselves have saved almost 30% on our own energy consumption over the past five years, providing a net gain of more than £750k. We’ve achieved this simply by implementing the same energy and efficiency management measures we promote to our customers, which we expect an ESOS audit would also identify.
Can you afford to stand still?
With government policy costs set to add between 31% and 71% to energy bills for major energy users by 2030, according to DECC forecasts, the impact on business overheads is significant.
My colleague Grant Barr, who also participated in the ESOS webinar, modeled a scenario of a business consuming 10 GWh in 2013, costing around £850k. If that business did nothing to alter consumption, by 2020 its energy bill would be £1.16m, gobbling up an extra £50k in profit each year just to stand still. However, if that business reduced consumption by 10% through increased efficiencies, it would save £116k in 2020 alone – and double that with a 20% consumption reduction.
Are you ready for the challenge?
All large enterprises – employing 250+ staff with turnover of more than €50m and an annual balance sheet of more than €43m, or large groups where one UK office fulfills this criteria – must complete an ESOS audit by 5 December 2015, and then every four years thereafter.
While DECC has done its best to simplify the process and be flexible with allowing data gathered for other energy-related schemes, we appreciate complying with ESOS requirements can be challenging for many businesses. Making the most of the opportunities it presents also requires a clear understanding of how best to structure a holistic strategy that delivers the maximum savings.
A solution to ESOS
That’s why after talking to many of our customers, we have created a new proposition to offer businesses a solution to ESOS. Firstly, by providing end-to-end support – from establishing eligibility to collecting data, auditing and ensuring compliance requirements are met, then advising on audit findings implementation.
After taking care of the short-term ESOS requirements, we can then lead customers onto ISO 50001 accreditation, exempting their portfolio from future ESOS requirements.
As the first UK energy company to achieve ISO 50001 accreditation with an award-winning record of carbon reduction, we are able to share our own expertise with customers on the same journey. This international standard in energy management provides a robust framework from which to drive ongoing efficiencies and energy savings, really helping your business to make the most of optimising costs effectively.
Financing options to reduce the initial cost
Our ESOS proposition also includes financing options to help spread the cost of audits, and to fund efficiency projects requiring capital investment via Energy Performance Contracts (EPCs), whereby cost is offset against future savings.
Energy is often one of the least optimised costs in a business but reducing consumption now reduces future risk exposure and can have a positive impact on EBIT. That’s why ESOS presents a key opportunity for businesses today. Can you afford to waste it?