One of the first questions I usually get when I sit down to talk with clients about ESOS (European Savings Opportunity Scheme) involves a completely different government scheme – the CRC energy efficiency scheme. It seems that any mention of new legislation like ESOS dredges up memories of the financial burden of the CRC. It comes as no surprise, then, that many organisations are hesitant at best to welcome ESOS.
Rightly so, the large costs associated with CRC compliance has left somewhat of a sour taste in the mouth of many companies, and has arguably done little to encourage as much energy efficiency as the government thought it would.
ESOS compared with CRC
- Though ESOS does not replace the CRC, ESOS is perhaps better placed to encourage energy efficiency than the CRC in that it simply mandates energy audits and reporting on any opportunities found to save energy.
- ESOS falls short of actually ensuring energy efficiency, however, in that it does not require any specific measures to be implemented. In taking this new approach toward improving energy efficiency in UK commercial buildings, the government is assuming businesses will see ESOS as an opportunity for future savings, and thus be motivated to implement the findings from the required energy audits.
Though it is still early in the Scheme’s rollout, I have yet to come across many businesses and organisations who are working from the understanding that ESOS is anything but a burden. When reconciling this stance of businesses toward ESOS with the Department of Energy and Climate Change (DECC)’s intentions, two clear approaches to the scheme are apparent:
- They can be called the ‘tick box’ approach, and the ‘blueprint to savings’ approach, with the former being the predominant approach among businesses and the latter the approach the government is hoping everyone will take.
- In these early days of ESOS, it is crucial for organisations and businesses to objectively evaluate and understand these approaches to ESOS, since doing so can greatly alter the actions carried out during the assessment, as well as amount of energy and money saved. While each approach has its merits, it may be a mistake for businesses to automatically approach ESOS with a ‘tick box’ mentality. Read on to understand more about each approach, and why the ‘blueprint’ approach could be the best way to maximise the value of an ESOS assessment.
The Tick Box Approach
Under this approach, the core goal of carrying out an ESOS assessment is to ‘tick the box’ that the assessment is complete. The focus here is doing the minimum required in order to comply. Consequently, organisations under this mind-set are likely going to aim for quicker, shallower energy audits, and will thus be provided with more generic types of energy saving opportunities.
The Blueprint to Savings Approach
Under this approach, the core goal of carrying out an ESOS assessment is to identify key projects that will have lucrative payback periods. The aim here is to move forward with the implementation of some of the projects identified in ESOS energy audits. Conducting energy audits under this approach are seen to be the key step toward reducing energy use within an organisation.
One of the most commonly used justifications for aiming for bare minimum compliance (tick-box mentality) I hear from businesses is the cost of the Scheme. Concern for keeping costs of compliance low is fair enough, as ESOS audits comes with a cost and an ESOS assessment in general require:
- Technical advice
- Detailed analysis
- Energy expertise
This point is not lost on those taking the blueprint approach. Rather, saving money is also the key justification given by those who approach ESOS with a mind to create a blueprint for savings. Since money, and saving it in particular, appears to be at the centre of both approaches to ESOS it is interesting to consider that in most cases, taking the blueprint approach to ESOS is actually the approach most likely to save the most money in the long run.
In this sense, then, the blueprint approach is clearly the smarter option.
Why Choose the Blueprint approach?
The key reason the blueprint approach may save the most money is that this approach works around the goal of actually saving energy. The blueprint approach actively chases reductions in operational costs, as saving energy saves money. This approach understands that one of the only ways to recover the cost of an ESOS assessment is to actually implement some of the energy saving projects identified in the ESOS energy audits. The fact that reducing energy consumption has the potential to reduce the burden of other policies such as CRC is not lost on those taking the blueprint approach.
ESOS has been designed to make sure that, where possible, any recommendations are cost-effective, which means that energy saving options are going to come with a strong business case. Approaching ESOS from a tick box approach would mean that:
(1) Fewer strong business cases will be identified with lower quality audits
(2) Any business cases made – strong or weak – are likely to be ignored, as the report may just end up in a drawer.
Moving Past Just Ticking the Box
With just over a year to comply, it is understandable that an organisation may automatically approach ESOS from a tick box mentality for this first phase of compliance. Be that as it may, if saving money and keeping operational costs low are of paramount importance to an organisation, as I hear over and over again they are, it is important for an organisation to consider taking a step back from seeing ESOS purely as an imposition.
Approaching ESOS with the aim to produce a blueprint to future savings has clear financial advantages. Make no mistake, ESOS audits, and an ESOS assessment is not going to be free, but ESOS is not like the CRC. ESOS does not require blindly paying money to the government as CRC does. There are clear ways to see a return on your investment into a quality ESOS Assessment, and these will become more apparent if you approach ESOS with the aim to produce a blueprint to future savings.
This is part two of a three-part series of blog surrounding ESOS, running up to our ESOS (and Energy Contract Training) workshop on 2nd December. Part one of the series, which can be found by clicking here, was aimed at establishing a solid foundation of understanding about ESOS by discussing seven key fundamentals of the scheme.