Policy background Part 11: Energy Savings Opportunity Schemes
The Act includes provisions which will give the Secretary of State the power to make changes to the existing Energy Savings Opportunity Scheme (ESOS). ESOS currently requires large undertakings (businesses) as defined under the Companies Act 2006, and small or medium undertakings that are in the same corporate group as a large undertaking, to carry out an energy audit at least once every four years. This audit must cover the energy used in their buildings, transport and industrial processes. Following the audit, recommendations must be made on cost-effective energy saving measures which will enable the undertaking to improve its energy efficiency. Audits must be either carried out or reviewed by approved assessors who meet the competence requirements in Publicly Available Specification 51215.
	ESOS is important to the UK’s plans to meet net zero targets and reduce energy costs for businesses. The scheme helps businesses by providing information on cost-effective actions they can take to improve their energy efficiency; information having been identified as a key barrier to business energy efficiency. The existing scheme’s net benefit is estimated at £1.6 billion; with the costs of audits expected to be significantly outweighed by the savings from the proposed recommendations.
	The requirements for the current ESOS scheme are set out in the Energy Savings Opportunity Scheme Regulations 2014. As part of the EU Exit, the European Communities Act 1972, which provided the primary powers to amend the 2014 ESOS regulations, was repealed. This means no changes to the regulations can currently be made. The new powers in the Act will provide replacement powers, enabling the Government to amend or replace the existing ESOS regulations, subject to any consultation requirements, to ensure the ESOS scheme continues to meet UK-specific objectives.
	An independent evaluation and post-implementation review of the scheme in 2020 and a Business, Energy and Industrial Strategy (BEIS) select committee report in 2019 both identified opportunities to improve the scheme, and the scheme also needs updating to reflect changes such as the UK’s 2050 net zero target.
	The government consulted29 in 2021 on making changes to strengthen ESOS and in the 2022 government response30 committed to implementing four core options to:
Strengthen requirements for audits and make them more standardised,
Improve the quality of ESOS audits,
Add a mandatory net zero element to the audits in future phases, and
Require public disclosure of high-level recommendations by participants.
	The government also committed to consulting again before introducing any secondary legislation to cover two longer-term options to:
Extend the scheme to Medium-Sized Enterprises, and
Mandate action to improve energy efficiency.
	The powers set out in these sections will allow regulations to be made to cover both changes the government has announced following the consultation via amendment of the existing scheme, as well as enable the current scheme to be maintained. The estimated total discounted energy bill savings to businesses from the announced changes over the period 2024 to 2037 is £1.5 billion.