New energy efficiency drive would allow businesses to save money on their energy bills, says expert

Out-Law News | 12 Jul 2013 | 1:50 pm | 2 min. read

A proposed new scheme that would require larger firms to carry out energy saving assessments could allow businesses to save money on their energy bills by identifying potential savings, an expert has said.

The UK Government's proposed Energy Savings Opportunity Scheme (ESOS), which is being developed as part of its responsibilities under the EU's Energy Efficiency Directive, would require businesses to identify cost-effective energy efficiency opportunities in their buildings and industrial processes. Those that carry out the recommendations of an ESOS assessment would benefit from average bill savings of £56,400 per year from an investment of around £15,000 per year, according to Government figures.

Energy expert Simon Hobday of Pinsent Masons, the law firm behind Out-Law.com, said that the Government's draft proposals were a "significant step" in its drive to encourage energy efficiency alongside reforms to encourage cleaner generation.

"Correctly identified energy efficiency measures allow a business to save money, and at current energy prices often pay for themselves within a two to three year timeframe," he said. "With the prospect of higher energy prices over the next decade, return on the investment could be quicker and higher."

"While the assessments proposed in the consultation will have a cost associated with them, they should serve to highlight to major energy users the savings in both energy and carbon which can be achieved. The assessments may also serve as a baseline for energy performance contracting approaches, where the cost of the intervention is met out of the savings achieved – but we will need to see how the detail of the proposals develop," he said.

The ESOS scheme is aimed at all "large enterprises" with 250 employees or more; or those with fewer employees which meet certain annual turnover and profit requirements. It will apply to large commercial businesses and charities but not to public sector bodies, as these are subject to different energy efficiency requirements under the Energy Efficiency Directive.

Firms will be required to carry out an ESOS assessment by 5 December 2015, although the consultation document suggests that some existing UK schemes such as the Carbon Trust Standard could meet the requirements on a transitional basis. They will then need to be re-assessed every four years. Assessments would be carried out at firms' own expense, but they will not be legally required to take up the recommendations of an assessment.

"Effective energy efficiency means cutting out waste and increasing profits," said Energy and Climate Change Minister Greg Barker. "These new energy saving assessments will help our largest firms identify where money can be saved by installing energy efficiency measures."

The potential benefits of cutting down on energy waste are significant - £56,400 savings per year on the energy bills of the average large business, and £1.9 billion benefits to the UK as a whole," he said.

According to Government figures, net social benefits to the UK worth £1.9bn could be achieved even if only 6% of the potential energy savings identified through assessments are implemented. The scheme will also complement other Government initiatives aimed at improving business energy efficiency such as the non-domestic Green Deal, additional tax breaks for energy-saving plant and machinery and the Electricity Demand Reduction scheme, which will be introduced by the upcoming Energy Bill.

The Energy Efficiency Directive imposes various measures on EU member states to reduce their primary energy consumption by 20% of their 2007 business as usual projections by 2020. It must be transposed into national laws and fully implemented by spring 2014.