New EU Energy Efficiency Costs and Savings Potential

EUROPEAN Union (EU) proposals requiring large companies to undertake mandatory energy efficiency assessments will end up as a major cost burden for business unless lessons are learned from the CRC scheme.

That’s the warning from Ricardo-AEA knowledge leader Christine St John Cox, who points out that although the proposed Energy Savings Opportunity Scheme (ESOS) will require businesses to undertake energy efficiency audits every four years, it won’t compel them to act upon any of the potential savings they identify.

According to Ms St John Cox, experience of business engagement with the UK’s CRC scheme shows that the 7300 companies affected by ESOS could spend more than £100 million over 15 years on complying without generating any significant benefits.

Evidence from the first CRC league table published in 2011 demonstrates that less than 25% of participating companies took full advantage of the scheme by covering a high percentage of emissions with accreditation for carbon reduction and automatic metering.

“Unless businesses embrace ESOS it could have even less impact than CRC as ESOS carries no ‘carbon tax’,” said Ms St John Cox. “We’re therefore concerned that companies taking a ‘make do’ approach to the legislation will incur the scheme costs, estimated to average £10,000-17,000 for each business audit cycle, without any financial gain.

“In our experience of working with companies on CRC, preparation in advance is the key to compliance and unlocking savings in the long run. The UK is likely to offer several routes to ESOS compliance so it is important for a business to explore the options that will minimise cost while still optimising impact. For example, a company could investigate getting accredited under ISO14001 or ISO50001. Similarly, a business should consider its internal skills and how it intends to undertake the audits.”

In St John Cox’s view, the new rules present an opportunity for companies to take a strategic approach to energy efficiency by following up on the audits and investing in appropriate measures. It is estimated that this could help businesses make significant cost savings, potentially worth £1.9 billion in total to the UK.

“Other practical steps that companies can start to think about now include how they address their transport activities,” said Ms St John Cox. “They may feel confident about covering energy consumption, having done so under CRC or other regulatory requirements, but transport may not be something that has been looked at before.

“In addition, while ESOS is being introduced in the UK, all European Member States will also be implementing similar legislation. It is therefore important for businesses operating in Europe to look at compliance routes in other countries. In some cases approaches covered in the BSI standard ISO50001 could offer a joined up route to compliance.”

Picture of London by Diliff (Own work) [GFDL or CC-BY-3.0], via Wikimedia Commons

Tuesday 1st April 2014

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