Most will by now be familiar with the obligation in Irish energy efficiency legislation that large enterprises and public sector bodies must carry out an energy audit by 5 December 2015. As the deadline fast approaches, this note summarises some of the key principles applicable to energy audits under the legislation
The European Union (Energy Efficiency) Regulations 2014 (the “Regulations”) came into force on 4 December 2014. The Regulations transpose Directive 2012/27/EU on energy efficiency (the “Directive”) and give effect in Irish law to the energy efficiency requirements set out in the Directive.
As the measures in the Regulations are driven by EU requirements, large enterprises with businesses in more than one EU jurisdiction will, under the national laws of each EU Member State, be required to carry out an energy audit in each relevant jurisdiction by the December deadline.
What is an energy audit?
An energy audit is a procedure intended to identify the energy consumption profile of particular buildings, industrial and commercial operations or installations and public and private services with a view to identifying cost effective energy savings opportunities. Energy includes all commercially available energy such as electricity, natural gas, liquefied petroleum gas, fuel for heating and cooling, coal, peat, transport fuels and biomass.
Who is required to carry out an energy audit?
All Irish registered companies that are not SMEs must carry out an energy audit. briefing There is some ambiguity regarding the Irish definition of SME and what data is to be considered in calculating whether a company exceeds the SME threshold.
The Regulations define SME as:
- companies with less than 250 employees; and
- an annual turnover not greater than €50,000,000 or an annual balance sheet total not exceeding €43,000,000.
Guidelines issued by the Sustainable Energy Authority of Ireland (the “SEAI”), the body responsible for administering and enforcing the legislation, state that a company will be required to comply with the Regulations if it has:
- 250 or more employees (on payroll); or
- regardless of the amount of employees, an annual turnover in excess of €50,000,000 and an annual balance sheet total in excess of €43,000,000.
In its guidelines on the Directive, the European Commission has indicated that a company must aggregate the data of certain “partner” and “linked” enterprises (including those outside the EU) when assessing whether it exceeds the SME thresholds. “Partner” and “linked” enterprises are defined in a 2003 European Commission Recommendation concerning the definition of micro, small and medium sized enterprises.
The Regulations and the SEAI’s guidelines do not refer expressly to partner and linked enterprises. The SEAI’s guidelines indicate that even where a company is part of a larger enterprise, the data taken into account in assessing whether the SME threshold is exceeded is based on each legal entity’s status.
For now, it appears that the SEAI considers that a simple approach to the SME definition is appropriate. It remains to be seen whether further guidance on this assessment may issue in due course.
The Regulations require that public bodies fulfil an exemplary role in adopting energy efficiency measures.
Public bodies which of themselves are Irish registered companies and are not SMEs will be required to carry out an energy audit.
Additionally, any public body (as that term is defined in the Regulations) that has individual buildings with a total useful floor area of more than 500m2 or who spends more than €35,000 per annum on energy must conduct an energy audit. Audit obligations will apply to government departments, local authorities, certain schools and colleges and many commercial and non-commercial semi-state bodies. The SEAI has indicated that the energy audit obligation for these public bodies will be introduced on a phased basis. As no details of such phased approach have yet been published, it seems that the SEAI does not require that these public bodies carry out an audit by the 5 December 2015 deadline.
An Action Plan for Energy Efficiency in the Public Sector is expected to be published before year end. Once published, it will set out details regarding eligibility thresholds and timescales for public bodies in respect of the audit obligations.
What exemptions apply?
Parties may be exempt from energy audit requirements under the Regulations if they:
- are already implementing a sufficiently certified energy or environmental management system. For example, companies that hold an ISO 5001 or an ISO 14001 certificate will not be subject to an audit (provided that certain conditions are met); or
- hold a greenhouse gas emissions permit.
If a party has carried out an energy audit that meets the requirements of the Regulations in the last 14 months (ie since September 2014), this will satisfy the requirement to undergo an energy audit under the Regulations.
Energy audit requirements
Parties that are subject to the audit requirements must carry out an energy audit before 5 December 2015. The next and all subsequent audits must be undertaken within four years of the previous audit. Everything that consumes energy must be audited.
Audits must be carried out by independent registered energy auditors or in-house energy auditors that are registered under the Irish energy audit scheme. The SEAI has published a list of registered energy auditors on its website.
The requirements for energy audits under the Regulations are derived from the Directive and include:
- the audits must be based on up-to-date, measured and traceable operational data on energy consumption and (for electricity) load profiles;
- the audits should comprise an in-depth review of all the energy consumption profile of buildings, industrial operations/installations and transport;
- where possible the audits should build on life-cycle cost analysis (instead of simple payback periods) to take account of longtime savings, residual values of long term investments and discount rates;
- the audits must be proportionate and sufficiently representative to give an overall picture of performance; and
- the audits should provide detailed and validated calculations for any suggested measures so that information on potential savings is clear.
Once a compliant energy audit is carried out by large enterprises, there is no legal requirement that the findings of the audit be implemented by those parties.
Audits carried out by public bodies must form part of their exemplary energy efficiency measures. Public bodies are required to publish an annual statement describing the actions it has taken or is taking to improve its energy efficiency and an assessment of savings arising from those actions. In practice, therefore, there will be some impetus for public bodies to implement the recommendations of their energy audits.
Failure to carry out an energy audit
Failure to carry out an energy audit, when required to do so, is an offence under the Regulations. Offenders are subject to a maximum fine of €5,000 on prosecution.
The SEAI has indicated that no fines are planned for 2015. However, compliance assessment will commence in 2016 and fines will be introduced at that time.
The date for compliance with the Regulations is fast approaching. Companies and public bodies which have not already done so should take steps now to identify whether they need to carry out an energy audit.