1. Energy Savings Opportunity Scheme Key issues for consultation Martin Adams Energy Savings Opportunity Scheme Team Leader 31 July 2013

2. -Total energy consumption in 2050 needs to be no higher than it was in 2011 as part of meeting the 2050 carbon target, requiring a significant increase in energy efficiency -This ambition is driven by an understanding of the economic as well as environmental benefits of energy efficiency Context: The UK has ambitious plans on energy efficiency

3. Our goal: Overcoming barriers to Energy Efficiency Embryonic Markets Misaligned financial incentives Information Under- valuing energy efficiency Energy Efficiency Audits of large companies could help overcome 3 of the 4 key barriers to energy efficiency identified in our UK energy efficiency strategy: By driving action, helping to accelerate the embryonic market for energy efficiency products and services By raising the profile of targeted energy efficiency opportunities with the Board, helping to reduce uncertainty and thereby improve valuation of energy efficiency By investigating and highlighting key energy efficiency opportunities, targeting directly the information barrier, to raise awareness of scope for cost saving

4. EE audits could yield valuable user-friendly information “Our worst property is 13 times less energy efficient than the best” -Major UK retailer “You should be pleased if you have the measurement systems in place to know that” -Response from another retail company From Carbon Trust workshop hosted by the Confederation of British Industry

5. The audits requirement of the EU Energy Efficiency Directive There is a new requirement - at EU EED Article 8(4) – for enterprises that are not SMEs to undertake an energy audit by 5 December 2015, and at least every 4 years This requirement targets a policy gap. Existing UK schemes (e.g. CRC, EU ETS, CCAs) require accurate energy measurement from large companies. However, this goes only part of the way to satisfying the EU EE Directive The following key principles will inform our implementation approach: –ensuring coherence with existing policy instruments, to identify and drive uptake of further cost-effective EE opportunities –ensuring compliance with the Directive and the UK’s obligations under EU law –minimising administrative burdens on business

6. Key issues we are considering: What organisations should be in scope? What do audits need to cover as a minimum? What are the competencies required to conduct an audit (and how should auditors be assessed)? Who should oversee compliance with the scheme? We are consulting on a UK-wide basis, with agreement of devolved administrations Overview of proposed approach to consultation

7. Our emerging thinking is to propose: –As initial default setting: Use of Companies Act 2006 to target highest parent organisation including any subsidiaries –BUT… allow disaggregation of corporate groups –Corporate groups in scope if they include one ‘large enterprise’ (i.e. exempt if all entities in group are SMEs) –Do not force “grouping” of franchisees with their franchisors Key consultation issues: –Options for qualification date: should organisations check if in scope annually or every four years? What organisations should be in scope?

8. Annex VI to Directive sets out minimum requirements We propose: –Broad legislative framework supported by good practice guidance Key consultation issues: –Should we set a specific de minimis for energy spend? –Site based energy consumption profiles and organisation based energy intensity ratio –Should audits only cover energy directly paid for by organisations? –Alternative routes to compliance: ISO50001, ISO14001 (plus audit), other (e.g. Carbon Trust Standard)? What must audits cover? Principles

9. Buildings –Allow auditors discretion as to no. of site visits? –Exclude sites with DECs or Green Deal assessments? Transport –Should “grey fleet” be included as a minimum requirement or in good practice guidance? –Allow compliance via an Energy Saving Trust Green Fleet Review? –How to approach international aviation/shipping – energy purchased in the UK or all UK departures? Industrial processes –Consider connection to district heating or cooling network? What must audits cover? Buildings, Transport & industrial processes

10. Directive requires suitably qualified/accredited auditors We intend to develop a PAS standard setting out minimum standards for ESOS assessors (i.e. qualifications / competence) Key consultation issue: Routes for accreditation: –UKAS Certification Bodies v. Scheme Administrator approved registers (submitted by professional bodies) Who can conduct an audit?

11. We propose to appoint a UK-wide scheme administrator to oversee scheme’s operation and ensure compliance Key consultation issues: –Who should administer the scheme – Environment Agency, Trading Standards, National Measurement Office, other? –How to target scheme enforcement activity and be able to report numbers of audits back to the EC? (options include notification by organisations to the scheme administrator / public disclosure by organisations in annual reports / ex- post survey)? Scheme administration

12. Consultation runs from 11 July – 3 October 2013. For follow up, please contact: ESOS@decc.gsi.gov.ukESOS@decc.gsi.gov.uk Keen to engage with a wide variety of organisations during the consultation process, ahead of reading formal consultation responses Questions and comments