Mandatory energy efficiency audits: an opportunity for business

It sounds like a riddle, or the start of a bad joke. When is a business taking advantage of energy efficiency like children learning to cook? But the simple answer is that the government is making both compulsory for the good of the country.

Earlier this year the UK government announced that cookery lessons would be made part of the curriculum in schools for children aged seven to fourteen, teaching them about nutrition and how to prepare healthy food. Similarly, the government’s new Energy Savings Opportunity Scheme (ESOS) is giving businesses the recipes they need to take advantage of the benefits of energy efficiency.

Before 5 December 2015 every large enterprise in the UK will, by law, have to undertake an energy audit. This audit will then have to be repeated every four years. The law itself is the UK bringing into force Article 8 of the EU Energy Efficiency Directive.

But this should not be seen a compliance issue, just another box to be ticked that puts an unnecessary burden on British business. On the contrary, the “Opportunity” in ESOS is a big one, both for individual businesses and the UK as a whole.

The intention is that every audit will recommend cost-effective measures that will save organisations energy and money. Saving money on escalating energy bills will make business operations more efficient and increase competitiveness. Cutting down on energy waste will help ease the strain on Britain’s energy infrastructure and contribute to meeting greenhouse gas reduction targets.

Only businesses with more than 250 employees or an annual turnover of more than €50 million will be covered by the scheme: organisations that tend to have a not insignificant energy spend. There may also be exemptions put in place for businesses that can demonstrate that they already have a robust approach to reducing energy use, for example if they have achieved the Carbon Trust Standard.

The net benefit of the policy to the UK is estimated to be around £1.9 billion between 2015 and 2030. That calculation is based on a very conservative (and hopefully very pessimistic) prediction of only 6% of potential energy saving opportunities identified actually being implemented. Or, to put it another way, the ESOS energy audits are expected to identify energy cost saving opportunities worth in excess of £31 billion.

The Carbon Trust has a lot of experience when it comes to business energy efficiency. We have been doing energy audits for well over ten years in the private and public sectors, as well as providing more than 4,500 businesses with £185 million in energy efficiency loans. But our experience tells us that there is a big gap between seeing an opportunity and taking advantage of it.

For those businesses yet to embrace energy efficiency, the mandating of energy audits provides an excellent catalyst to a smarter way of working. The first step to taking action is knowing what your opportunities actually are, and we continue to find that many organisations still don’t realise just how financially attractive energy efficiency projects can be.

In our experience approximately three out of every five cost-effective, technically viable energy efficiency recommendations go unimplemented. Upgrading lighting, heating and industrial processes can transform a business, but these opportunities are often overlooked by executive teams more focused on revenue generation than cutting costs.

So is ESOS a recipe for success? If executed well, it is certainly a big step in the right direction, but it is only one piece of the pie. Going back to the cookery analogy, even when you have a recipe you still have to buy your ingredients. Two of the biggest barriers to implementation of identified energy efficiency opportunities are access to reliable suppliers and access to finance – in other words you need to know where to buy your ingredients and have enough money in the kitty to do so.

At the Carbon Trust we have worked to overcome these barriers. We have made £550m of specialist financing available through our Energy Efficiency Financing partnership with Siemens Financial Services. We also run a Supplier Accreditation scheme recognising good quality suppliers of energy efficient equipment and renewable technologies. Businesses can search for Accredited Suppliers that match their requirements on our Green Business Directory.

When the three elements of opportunity identification, supplier selection and finance are effectively combined, businesses will be able to enjoy the mouth-watering three-course meal of reducing energy consumption, saving money and cutting carbon.