What is an energy audit?
An energy audit provides a thorough examination of all the energy your business uses.
Once the audit is complete, you’ll get a report explaining the findings with recommendations on ways your business can be more energy efficient to cut emissions and save money.
When followed, these recommendations can help your business save an average of 18% of the total amount of energy used. Energy audits are therefore regarded as a crucial step (and often the first step) towards decarbonisation for businesses.
Small and medium enterprises (SMEs) make up 99.9% of all businesses in the UK. While SME emissions at an individual level are low, they are noticeably high when considered as a whole.
For example, SMEs produce 33% (160 million tonnes) of total carbon emissions (490 million tonnes) in the UK in 2021. This is where energy audits become useful. Audits can help SMEs identify opportunities to save energy and lessen their environmental impact.
Our energy experts have been enhancing the discussion around energy efficiency in SMEs by building a national level observatory.
This includes bringing together a diverse group of stakeholders through the project, LEAP4SME.
Funded by the European Union, the project aims to support member states and the UK to establish or enhance policies that encourage SMEs to conduct energy audits and carry out cost-effective energy-saving solutions.
Under Article 8 of the European Energy Efficiency Directive, all member states are required to develop programmes encouraging SMEs to conduct energy audits. Since the UK’s exit from the European Union, the UK is not required to follow the Energy Efficiency Directive. However, while the UK was a member state, it implemented the Energy Saving Opportunities Scheme (ESOS), to comply with the requirements of Article 8.
ESOS mandates all organisations with more than 250 employees, or with an annual turnover of more than £42m and a balance sheet of £36.5m, to conduct an energy audit every four years. But, this excludes SMEs.
In 2021, as part of a national government consultation, there was a discussion to extend ESOS to SMEs. This was put on hold because of the resource constraints associated with implementing an extension that would increase the demand for energy auditors four-fold.
The current landscape of SME energy audits in the UK
There are different initiatives that have developed their own process for SME energy audits.
In Scotland, for example, the government has its Business Energy Scotland programme. This offers SMEs an energy audit that can be delivered over the phone or through a site visit.
The structure of this audit process means SMEs can take steps to make their businesses more energy efficient, including accessing finance through the Scottish Government’s £100,000 SME zero interest loan. This model allows SMEs to gather the information they need apply for the loan programme to access funds for energy efficient upgrades.
There’s a growing number of telephone audits being offered by several private and public support bodies but they lack consistency. For instance, many of the programmes under the European Regional Development Fund (ERDF) have developed their own audit approaches with their own set of tools, while others have opted for Energy Performance Certificate assessments or assessors. Using different types of audits and approaching them in different ways means that there isn’t consistency in results.
Having a standardised audit process will allow for comparisons between programmes that are being delivered across the country, as well as for international comparisons.
Energy audit standards
There are two standards that can guide energy audits in SMEs: EN 16247 and ISO 50002.
Both standards define the requirements for conducting a high-quality energy audit for organisations of all sizes. The main difference is that EN 16247 is a European standard and ISO 50002 is an international standard. Because these two are similar to each other, by the rules of the European Committee for Standardisation (CEN), CEN would withdraw its standard in favour of ISO if CEN and ISO have a similar or conflicting standard.
This would mean that if energy audits for SMEs are standardised in the UK, EN 16247 would be withdrawn in favour of ISO 50002. Currently, there is no set mandate for auditors to use either of these standards while conducting energy audits, because of which audits in SMEs often lack consistency.
A third option to implement energy audit standards for SMEs is to implement ISO 50005. While this is not specifically for energy audits, it is a standard which lays down practical guidance for SMEs to set up an energy management system. This framework breakdown the process to achieve energy efficiency improvements in SMEs with their limited internal resources. The Department for Business, Energy & Industrial Strategy (now replaced by the Department for Energy Security and Net Zero), as part of their commitment to support SMEs to manage their energy performance and help the UK to meet Net Zero, has sponsored 100,000 copies of this standard. Read this BIS guide for more information.
Should the UK standardise energy audits?
During our discussions with stakeholders, the need for a uniform standard for energy audits and the requirement to employ an established, internationally acknowledged standard frequently came up. However, only if the following steps are implemented by the government would mandatory energy audit standards be successful:
- Make energy audit standards more accessible to SMEs. This means the standards used should be easy enough for SMEs to complete themselves.
- Increase the understanding of standards. Many SMEs are not aware that auditing standards are available. It’s key to boost education campaigns aimed at increasing SME awareness of available advice.
- Offer subsidies to SMEs. In the UK, SMEs employ less than 49 people in 99% of cases. Since they operate on a much smaller scale, imposing the mandate of conducting audits to these small enterprises would only result in additional burden for SMEs and a possible policy failure. In contrast, providing subsidies or incentives to perform audits would motivate SMEs to take action.
- Follow-up after energy audits to ensure that SMEs have the support and knowledge required to implement the recommended energy saving measures.
- Regulate the energy audit market at the national level as opposed to the local level to ensure that the support accessible to SMEs is not contingent on making it to the local government’s priority intervention areas.
The ideas shared in this blog post are the result of our research and interviews with influential players in the SME energy efficiency market.
The LEAP4SME project will end in August 2023, but we’ll continue to work with key stakeholders to exchange knowledge and advance the conversation on SME energy efficiency in the UK. To learn more about the LEAP4SME project and relevant events and research, visit the LEAP4SME website.