CARBON LEGISLATION & BUSINESS: A FOCUS ON ESOS ANTHONY MAYALL DIRECTOR

UK Carbon Target: 80% by 2050 EU Target 20% reduction by environmental energy schemes Yes. Political uncertainty is on the horizon but that should not stop businesses reducing their energy consumption "Climate change is one of the greatest wealth-generating opportunities of our generation” - Sir Richard Branson WHY ARE WE HERE?

196 TWh savings in the UK* 41 MtCO2 Carbon abatement UK plc 10% Saving £6bn per annum *DECC THE SIZE OF THE ENERGY EFFICIENCY PRIZE

Mandatory energy audits Launched by DECC 26 June 2014 Applies to Large UK Enterprises Mandatory under secondary legislation ESOS IS THE NEWEST SCHEME, BUT WHAT IS IT? Fines for non-compliance Fines are higher than the cost of compliance Requirements can be met by – An ESOS Audit – ISO certification Sign off by statutory director required UK scheme to satisfy the EU Energy Efficiency Directive (Article 8 – Energy Audits)

WHAT IS AN ESOS AUDIT? Audits are to be: ‘Proportionate and sufficiently representative to permit – the drawing of a reliable picture of overall energy performance – the reliable identification of the most significant opportunities for improvement’ Therefore surveys of all sites not required. A sampling approach is acceptable Audit of Energy Use and Energy Efficiency. Audits cover: – Building energy use – Industrial processes – Transport energy use

*DECC

WHO DOES ESOS APPLY TO? Large UK enterprises Applies to all UK incorporated large enterprises SMEs and the public sector exempt Applied to groups at the highest UK parent company level SMEs within groups containing a large enterprise require assessment Not applicable to non-UK companies with no UK legal entity which is a large enterprise

WHAT IS A SME? The EU legislation defines a SME, rather than a large business. The inversion of that definition gives a definition for large enterprise. You are a large enterprise if you have EITHER : – >250 employees; – OR >€50M turnover AND €43M assets”

ESOS MILESTONES EU Directive effective – November 2012 UK ESOS Consultation open – July 2013 Consultation closed – October 2013 Consultation response – 26 June 2014 Legislation passed – July 2014 Qualification date – 31 December 2014 Audit Compliance deadline – 5 December Organisations need to be compliant per month Arguably more than UK ‘quality’ experts available

BUSINESS BENEFITS Cost savings! Typical audits cost less than 1% of annual energy spend (often much less) Government estimates then identified savings will be more than 13.5 times greater than the audit costs. It’s a benefit, not a burden! We are already actively engaged with 500 organisations

DECC’S ESTIMATED COSTS TO COMPLY ESTIMATED COST OF FIRST ROUND OF ASSESSMENTS PER ORGANISATION Distribution company with 5 large warehouses and a small fleet of vehicles £23,000 Estate Agent with 50 small offices£15,000 High Street Retailer with 100 small shops£16,000 Manufacturer with one large site£25,000 Road haulage business running a large fleet of vehicles £23,000 DECC Impact Assessment

COSTS FOR NON-COMPLIANCE £50,000 +

OPTIONS Undertake the work in-house +ve intimate knowledge of estate and processes -ve additional resource required Go ISO ve Embedded process for life -ve Not much time left for Phase 1 Use a consultant +ve Minimum impact on business - ve You have to pay someone

RESOURCES TO HELP Dedicated ESOS Information Hub Call the team: