The changing energy regulations landscape in the UK appears to be balancing short-term costs with long-term gains. You would be forgiven for finding the terrain tricky to navigate. There have been a range of measures launched over the past few years and keeping up with the changes is demanding.

But it's useful to know how the regulations can affect a hotel business and which new rules are thankfully ignored. This article takes a look at three of them – The Energy Savings Opportunity Scheme (ESOS), the Carbon Reduction Commitment (CRC) scheme and the Energy Demand Reduction (EDR) scheme to outline any actions needed, together with any consequences for non-compliance.

The most pressing for larger businesses in the hospitality sector is the Energy Saving Opportunities Scheme (ESOS). This is the UK government's response to Article Eight of the EU's Energy Efficiency Directive that requires measures to encourage private businesses to improve energy efficiency.

The scheme was launched in July last year and the deadline for companies is December – and companies that fail to act if required could face civil action with fines imposed for non-compliance.

The scheme is managed by the Environment Agency and the government hopes that it will help to reduce energy bills for large enterprises by at least £300 million next year. The net benefit, according to government estimates, will be conservatively around £1.9 billion between now and 2030.

Energy audits

ESOS regulations affect more than 7,000 large organisations in the UK who will need to carry out energy audits of buildings, industrial processes and transport, thereby identifying cost-effective energy saving measures.

The scheme is targeted at "large undertakings" – those companies with least 250 staff or who turnover over €50 million annually, with a balance sheet in excess of €43 million.

Hotels that fall under the scheme's remit have until December 5th to comply by first calculating total energy consumption then auditing 90% of it, along with current energy efficiency.

ESOS audit data would cover a period of 12 months, starting no earlier than December 6th 2010 for the first reporting cycle.

The full audit using energy consumption profiling should be completed across buildings, transport and industrial processes but it may be that hotel groups are already fully covered by a quality mark such as ISO50001, having implemented a full energy management system.

In these cases, hotel groups would not need to carry out a full audit but simply notify the Environment Agency of this and confirm that it is fully compliant with ESOS.

Energy consumption

The scheme's regulations also allow for other energy-saving proof points such as Display Energy Certificates or Green Deal Assessments, which would reduce the amount of auditing needed.

The business would identify whether its quality marks and other certification covered all or just some of the areas of significant energy consumption and then move to compliance if needed by appointing an approved, knowledgeable and competent Lead Assessor internally or from outside.

It's important to bear in mind that with Display Energy Certificates, a hotel group would still need to audit transport and industrial processes.

The ESOS process will need to be repeated every four years with organisations always notifying the Environment Agency by a set deadline that they have complied with their ESOS obligations. The regulations require that good records of the audit process are kept on file as evidence.

The scheme clearly is aimed at encouraging a much more proactive attitude among larger businesses, many of whom do not have effective energy monitoring policies but the burden in many cases will be heavy.

But the short-term pain should be leavened with the very significant commercial benefits in the longer term. Companies that invest in going green by cutting energy and water consumption will be the ones most likely to survive and thrive in the long term.

Beyond the benefit to the bottom line, a company that is seen to be taking steps to reduce energy consumption would send out a highly positive message to customers and business partners.

Carbon levy

The 'ESOS elephant' is in addition to in addition to the Carbon Reduction Commitment (CRC) that currently requires the UK's largest 1,000 companies to report on emissions and cover a carbon levy.

Phase 2 of the CRC will run until March 31st 2019 and the qualification year was between 1 April 2012 and 31 March 2013 with companies that fell under the criteria now registered with the Environment Agency. These groups would have demonstrated that they used 6,000 megawatt hours (MWh) or more of qualifying electricity supplied through "settled half hourly meters" (sHHM).

Those registered companies and organisations are required to collate energy supply data, generate and submit a report on these and keep full records. They are also required to purchase offsetting allowances that are equivalent to their total CO2 emissions in the reporting period.

Another recent and significant move by government was the introduction of the Electricity Demand Reduction (EDR) pilot that aims to provide financial support to businesses and organisations that can cut electricity use during peak hours through installation of more efficient equipment or boosting existing electrical systems.

LED lighting

The scheme is intended to measure the efficacy of energy-saving solutions like LED lighting and more effective motors and pumps to deliver lasting electricity savings at peak times. EDR should identify whether these types of solutions could compete with other efficiency improvements in energy generation, demand side response and storage in the UK Capacity Market.

In January, the government held the first EDR Pilot auction which allocated £1.28 million to 18 lead organisations covering 22 individual projects win funding. The winners have been contracted to install energy-saving measures by October 15th and then deliver the promised savings over a period from this November 1st to February 29th 2016 with a final report being submitted by December 1st 2016.

The winning bids offered the lowest price for each kW saved and winners will receive payments when they have provided full supporting evidence of savings delivered.

It will certainly be worth keeping an eye on the scheme and think about participation in the EDR if the pilot is successful, which by all accounts it should be. Further information about the next phase of the pilot scheme will be published early this summer.

Scheme crossover

It seems fairly certain that the regulations outlined here will provide the level of energy efficiencies needed to not only reduce the commercial pressures of rising utility bills but, equally important, help to meet carbon reduction targets.

It seems pretty likely, too, that there will be areas of crossover in the types of energy efficiencies identified. One of the positive elements in the EDR Pilot is the simplicity of the solutions being put forward and the benefits of replacing traditional lighting and making pumps and motors more efficient are clearly recognised by the government.

Our work with hotel groups in the UK can provide ample evidence of energy demand reduction through retrofitting LED lighting as well as the installation of variable speed drives on motors and pumps together as well as intelligent HVAC controls.

The ESOS scheme has a broad remit, covering transport and processes beyond building energy use but there should also be benefits from the adoption of straightforward, effective solutions with immediate results.

It is likely that the next government will be focused on further regulatory changes that promote and support energy saving strategies. The hotel sector is an area where even greater efficiencies in consumption of utilities can be quickly and sustainably achieved.

Tim Greenhalgh
Head of PR and Social Media Strategy
SaveMoneyCutCarbon