ESOS Phase 1 is now a distant memory for those who complied ahead of the 5th December 2015 compliance deadline. Indeed, given that ESOS operates in four-year cycles, many businesses have already switched their attention to Phase 2.
Research suggests, however, that 74% of businesses failed to install at least one measure identified during Phase 1 (see figure 1). Whilst the sampling approach that most participants took during Phase 1 does mean that sites not audited in 2015 can be audited in 2019, the fact remains that many businesses will be auditing the same sites for Phase 2 as they did for Phase 1.
If this is the case, and no improvements have been made since pre-2015, one question that many organisations are asking is ‘is it acceptable to use the same opportunities for Phase 2 as we did in 2015 for Phase 1?’. The reality, however, is that whilst the areas that need to be addressed may not have changed (i.e. those areas responsible for significant energy consumption), the specific recommendations auditors outline have evolved.
Here we explore how technological advancements, the regulatory landscape and wider public perceptions and expectations have driven that evolution.
Source: Department for Business, Energy & Industrial Strategy – ‘Evaluation of the Energy Savings Opportunity Scheme: Interim process and early impact evaluation report’
The obvious place to begin is the technologies which formed the basis of most of the energy-saving opportunities identified during Phase 1. Most technologies, such as lighting, IT equipment and process machinery, have continued to evolve, becoming both more efficient and cheaper to purchase over the past few years. For example, LED lighting, which was generally the recommended replacement technology for lighting opportunities, is anticipated to fall in price by at least 41% from 2015 to 2020. Even if opportunities are replicated in Phase 2 therefore, it is likely that opportunities focused in these areas will at the very least result in greater energy savings and/or a lower upfront implementation cost – both of which are likely to have a positive impact on the overall payback period.
In a similar vein, some measures which were relatively new in 2015, have now reached a point of maturity where they will be viable options for a greater number of businesses in 2018/19.
One such measure is Demand Side Response (DSR), which has seen increased uptake from businesses since it became an area of focus for the National Grid, from 2015/16 onwards, to smooth out the peaks and troughs in energy consumption.
Finally, some innovations will result in similar, but fundamentally different opportunities. For example, whilst in 2015 you could have received two recommendations; (1) install double glazing to improve thermal efficiency and (2) install solar PV, in 2019 these two opportunities may instead be rolled up into one recommendation to install solar glass which simultaneously addresses the buildings thermal properties and generates renewable energy. Building-integrated photovoltaics, solar panels that are deliberately designed to replace existing building materials such as glazing or roof tiles, are increasing in popularity due to their obvious aesthetic benefits, improving efficiency and falling installation costs. Even if therefore your building has not changed significantly since 2015, the recommended technologies and measures identified as part of ESOS Phase 2 has moved forward.
If you’ve had your head in the sustainability world since 2015, you’ll have noticed that quite a lot has occurred. From the landmark Paris Agreement being drafted in late 2015 through to political uncertainty that 2016’s Brexit vote ushered in, the regulatory picture has shifted since 2015.
The scale, and impact, of this shift, however, is likely to vary based on the opportunity in question. Whilst the ‘bigger picture’ shifts, including the Brexit process and the Government’s ongoing consultation on the UK’s environmental reporting obligations, are likely to fundamentally change the landscape (and could even result in the scrapping of ESOS ahead of Phase 3 in 2023), both are yet to conclude. This has had no real tangible impact, in a regulatory sense (aside from the scrapping of the CRC Scheme), thus far.
On the other hand, many policy mechanisms (some of which are technology-specific) have evolved since 2015. For example, Feed-in tariffs (FiTs), the financial incentive paid per kWh generated to increase uptake of various renewable technologies, have generally fallen significantly from 2015 to 2018.
Whereas a business with a modest 20kW solar installation could take advantage of a FiT of 12.21 pence per kWh generated in December 2015, the same solar array installed in June 2018 would only qualify for a FiT of 4.25 pence per kWh – a drop of 65%.
This income stream forms an integral part of the business case for solar installations and whilst the decrease will be somewhat offset by falling installation costs, there is a still risk that opportunities identified in 2015, will now actually have a greater payback period in 2018/19.
In most instances, it is unlikely that the regulatory landscape has evolved sufficiently to materially impact ESOS opportunities, however all indications point towards an increase in the ambition of targets and regulations. In May 2018, Theresa May vowed to halve energy use from new buildings by 2030, whilst the World Green Building Council (WGBC) called for the built environment sector to eliminate carbon emissions from buildings by 2030. Similarly, it looks increasingly likely that the EU Withdrawal Bill will be amended to ensure environmental standards are maintained post-Brexit.
It is highly likely therefore that, at a minimum, further regulations will increase operational costs (through energy-related taxes) for businesses, which creates an added incentive to implement any opportunities identified through ESOS Phase 2 as a matter of urgency.
Aside from the mandatory regulations imposed upon businesses, the expectations on businesses around energy efficiency and broader environmental considerations continue to increase. From one-off localised events which inspire people, such as the airing of Blue Planet 2 in late 2017, to global, investor-led initiatives, such as the publication of the Task Force for Climate-Related Disclosures (TCFD) recommendations, it will soon be insufficient for businesses to simply pay lip service to environmental matters.
Employees too are beginning to demand more of their employers. Based on research by Cone Communications, 76% of Millennials factor in a business’s social and environmental efforts when deciding where to work, whilst 64% stated unwillingness to take a job if they consider those efforts to be insufficient. Indeed, the trend of employees demanding more of their employers is evident across a range of areas, including general workplace conditions.
Government research suggests that an improvement in wellbeing results in improved performance, therefore more and more organisations are beginning to address these issues by making improvements to the workplace. The NHS, in particular, have put a major emphasis on this area and have published the results of a number of trials online.
Wellbeing in the workplace and the environmental performance of a building are intrinsically linked therefore these are not issues that should be explored in isolation.
For example, a scheme focused on getting workers to use the stairs rather than lifts may have the primary benefit of improving employee health but why shouldn’t the energy savings of reduced lift use be measured and included as a secondary benefit of the scheme?
Both external and internal perceptions, which have moved on since 2015, have the potential to strengthen the business case for the opportunities identified through ESOS Phase, and should thus be factored into decision making.
All of which brings us back to original question of whether ‘reusing’ your Phase 1 opportunities is acceptable for Phase 2. The four years that will have elapsed between ESOS Phase 1 and Phase 2 have seen such drastic developments from a technological, regulatory and public perception perspective, that whilst the overarching theme of any recommendations may remain similar, the fine details of the business case for any recommendation will be significantly different.
we get it.