Game changer or the same old game?

The UK Energy Efficiency Deployment Office (EEDO) came into being in March 2012. The European Energy Efficiency Directive came into force in November 2012. Over eighteen months later we are beginning to see the first fruits of both entities, both intended to revolutionise the effectiveness of “the fifth fuel.”

As the summer break began, the EEDO launched a lengthy public consultation exercise, setting out ideas for implementing one of the key Articles of this Directive. Put simply, Article 8 requires each government in the European Union to introduce a programme of regular energy audits in every large enterprise. These audits cover every aspect of any business that consumes energy. That means any production or manufacturing facilities. That means any buildings occupied. And that means any transport run directly by the enterprise.

The first set of audits must be completed by December 2015. But this will not be a one-off exercise. The requirement is that it must be repeated every four years.

The philosophy behind the repetition is simple. It is not only that pertinent technologies, and techniques, change radically across a four-year period. European legislators had obviously learned from the foolishness of building audits (the energy performance certificate) being valid for an entire decade.

It is also that an energy audit, like a financial audit, should be undertaken regularly, so that the information used is as up-to-date as possible, for the benefit both of management and all other stakeholders in the enterprise.

Incidentally, the continuing use of the word “enterprise” is deliberate and not just an apparent literalistic translation from the French word for business. Because while the directive does apply to every single business employing more than 250 people or turning over above €50m a year, it also covers the entire “third sector” as well. Any not-for-profits or charities that fulfil these two characteristics must comply. Indeed, it is really only those exclusively working within the public sector that are excluded. Don’t worry: there is another – rather more dirigiste – Article in this Directive which sets targets for those funded by the public purse.

It was the EEDO minister, Greg Barker, who christened it the Energy Savings Opportunity Scheme (ESOS), because the government rightly believes that implementing it “will help drive the take-up of cost-effective energy efficiency measures by participants.” Doing so will, the government argues, be “benefitting their competitiveness and contributing to the wider growth agenda.”

The potential benefits to the economy are estimated to be considerable: up to £3bn Net Present Value between 2015 and 2030.

The minimum criteria for energy audits are clearly specified. It requires a review of all energy and energy efficiency within the enterprise. This includes basic measures like an energy intensity ratio (covering energy use per employee, or per item produced). And considering the variation in energy use between buildings, industrial operations, and transport activities.

Crucially, with the latter, excluded is all sub-contracted, as opposed to in-house, haulage, the former being responsible for 64 per cent of freight transport. As three-quarters of turnover in road haulage companies are via smaller companies, the consequence is that one very significant part of business energy use is not to fall under the ESOS remit.

But the directive text does acknowledge this potential shortfall, by stating that the audits must be sufficiently representative to “permit the drawing of a reliable picture of the overall energy performance” of the organisation. Excluding so much haulage clearly fails that test.

Clear information on potential savings must be provided by the auditors, identifying and quantifying cost-effective energy saving opportunities based on life-cycle measurements rather than simple payback periods.

Sensibly the EEDO are going out of their way to ensure that the reporting mechanisms used can dovetail with those already in force, to avoid unnecessary duplication for participating enterprises. The official impact assessment has a detailed rundown regarding how the ESOS can utilise information acquired via schemes like the Carbon Reduction Commitment, the Climate Change Agreements and mandatory greenhouse gas reporting.

It has to be acknowledged that the text of the Directive does not mandate any enterprise to implement a single one of the various energy saving recommendations made. Terrified of being accused of “gold plating” of directives, little attempt is being made to ensure implementation.

Less doctrinaire administrations to be found elsewhere in Europe – which do not begin with the presumption that the entire EU is a conspiracy to do them down – are prepared to build sensibly upon the minimum requirements. That way, they can achieve more cost-effective fuel savings, with advantages to both economy and environment.

I suspect, even whilst sticking to these petty rules, greater opportunities could be made of that four year-cycle. For instance, why should the second time round auditors be provided not just with details of their predecessors’ recommendations, but also explanations as to what had been implemented? And what had not. And why not. After all, that is precisely what financial auditors require. Equally there should be great transparency with the audit. Perhaps with prizes for those who deliver the greatest (audited) savings in consequence?

There has been a great capacity to describe any number of energy saving initiatives as “game changers.” All too frequently the end result is all too much business-as –usual. Strangely enough, I really do think that with purposeful implementation and compliance checking, the ESOS may yet deserve that “game-changing” epithet.