Staying in the loop with new energy legislation

New government energy legislation to ensure businesses identify energy efficiencies and report on their carbon footprint its coming into effect this year. Requiring rigorous recording of energy consumption and compliance to reporting obligations.

New legislation is often perceived as creating more work for businesses but offer opportunities for decision makers and financial controllers to make significant savings, whilst also becoming more energy efficient in their gas, electricity and water use.

Streamlined Energy and Carbon Reporting (SECR)

The new Streamlined Energy and Carbon Reporting (SECR) framework will launch in April 2019 to support efforts to reduce energy consumption and CO2 emissions by 20% by 2030, replacing the current Carbon Reduction Commitment (CRC).

While initiatives like SECR are broadly welcomed and will have a significant impact on the UK’s wider carbon footprint, in the short term the implementation of SECR may create more work for organisations, in particular smaller ones.

Full governmental guidance has now been published, the framework will broaden the number of organisations that need to comply, from roughly 6,000 with the existing Carbon Reduction Commitment (CRC) reporting requirement to nearly 12,000 under the SECR.

SECR requires businesses to report not just upon electricity and gas consumption, but also energy used by business-related transportation – introducing a whole new set of challenges - and will impact all businesses meet two of the three following criteria that employ 250 people or more, who have a turnover in excess of £36m, who have a balance sheet in excess of £18m.

Many participants won’t currently have the necessary structures in place to capture and report the mandated information, so it will be a steep learning curve and interesting to see how the longer-term benefits stack up against the additional administrative requirements.

Energy Savings Opportunity Scheme (ESOS) Phase Two

ESOS was introduced in 2015 as mandatory UK legislation in response to the Energy Efficiency Directive (EED). Many of those organisations required to comply are now benefiting from the energy, carbon and cost reductions identified as a result.

Repeating every four years, businesses need to ensure that they are ESOS Phase 2 compliant before 5th December 2019, to avoid a potential shortage of accredited professionals the sector experienced in Phase 1. Even those that complied four years ago will need to reassess the extent of their operations in the UK from top level down and ascertain whether they will need to comply with Phase 2 – most will.

If you employ 250 staff or more or have a turnover in excess of €50m and a balance sheet of more than €43m, you need to calculate your total energy consumption for a 12-month period, including transportation and subject at least 90% of that energy consumption to representative energy audits.

The sum of the total energy consumption and the results of the audit need to be presented at board level within the organisation and compliance needs to be lodged with the Environment Agency by 5th December this year.

Energy cost reductions go straight to the bottom line, whilst the associated reduction in CO2 emissions brings with it significant reputational benefit. Given that forecasts for both non-commodity and commodity costs show continued increases, the most effective way to make savings is to reduce consumption and mitigate exposure.

Be warned, if you’re considering taking shortcuts in your approach to complying with the new framework, those that do could miss out on cost-saving benefits, or even face a financial penalty.

ESOS and SECR may outwardly be viewed as costly and time-consuming administration but can deliver real value. By identifying and implementing the energy saving opportunities that result, your business can benefit at a time of rising energy costs and increased external scrutiny around corporate sustainability. 

Adam Pigott

Energy Engineer, Kinect Energy