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22.02.2017 | KPMG Law Insights

Energy Services Act requires energy audits to be carried out by December 5, 2015

Energy Services Act requires energy audits to be carried out by December 5, 2015

With the new version of the Energy Services Act, the legislator obliges large companies to conduct site-specific energy audits by December 5, 2015, and every four years thereafter. A significant challenge. Especially for companies with many locations. A transition period is granted for the establishment of complete energy or environmental management systems.

The energy transition poses major challenges for the German economy. Through a variety of policy instruments, all companies are successively involved. The most recent example is the introduction of mandatory energy audits for all non-SME companies, i.e. all companies that have more than 250 employees or annual sales of at least 50 million euros and total assets of at least 43 million euros.

Amendment of the Energy Services Act

On April 22, 2015, an amendment to the Energy Services and Other Energy Efficiency Measures Act (EDL-G) came into force, which serves to transpose the European Energy Efficiency Directive into German law.

As a contribution to the European Union’s goal of increasing energy efficiency by 20 percent by 2020, all companies will be required to conduct site-based energy audits by December 5, 2015. The companies affected are those that, according to the EU Commission’s definition, do not fall under the designation of small and medium-sized enterprises (SMEs), as well as their partners and related companies.

Furthermore, they are required to repeat this test after four years at the latest. This obligation is a significant innovation that complements similar incentives for efficient energy use. Failure to provide timely or proper proof that the required energy audits have been performed may result in fines of up to 50,000 euros.

Scope of application of the EDL-G

All non-SMEs fall within the scope of the EDL-G. In addition, all companies are included that are above the above-mentioned thresholds in the calculation with a “partner or affiliated company”. Likewise, all municipal enterprises, provided that the municipality that owns them has more than 5,000 inhabitants. Apart from SMEs, only companies that already operate an energy management system in accordance with ISO 50001 or an environmental management system in accordance with EMAS are exempt from the regulation.

Effects for affected companies

The German government expects that about 50,000 companies will be affected by the new law. The obligation to conduct energy audits affects all industries, but with priority:

  • Property and real estate management
  • Construction
  • Wholesale and retail
  • Hotel industry, gastronomy, event centers, cinemas, sports facilities, amusement parks
  • Health care industry (hospitals, nursing homes, health insurance companies)
  • Education (museums, libraries, universities)
  • Banks and insurances
  • Supplier industry
  • Forwarding agencies
  • Publisher
  • Other service providers (waste disposal companies, workshops, data centers, telecommunications, facility services, etc.)
  • Nonprofit organizations

Due to the mandatory effect, the implementation effort is considerable. The legislator assumes an average cost for an energy audit of approx. 4,000 EUR. Depending on the size and complexity of the company, this ranges from a minimum of two person-days (for small companies) to 50 person-days or more (for complex and large companies).

High time pressure for preparations

Due to the requirements of European law, the deadline of December 5, 2015 will not change. This does not leave much time to perform the initial energy audits. To alleviate the pressure to implement, the EDL-G provides for a similar regulation to the Energy and Electricity Tax Act: Between December 5, 2015, and the end of 2016, it will be sufficient to provide evidence that the introduction of an energy or environmental management system has begun. During this transition period, companies can establish a complete energy or environmental management system.

Nevertheless, the challenge is particularly great for companies with many locations – such as in retail or banking. The German Federal Ministry of Economics and Export Control therefore recommends the use of so-called sampling (multi-site) procedures for these cases in its “Code of Practice for Energy Audits” (as of May 13, 2015). As with the certification of energy management systems, a representative number of sites are audited.

Energy audits bring benefits

Energy audits are used to systematically evaluate energy use and consumption and are intended to recommend measures for optimizing energy consumption. The European standard DIN EN 16247-1 provides the methodological framework for this. It prescribes to check which energies are used and how.

For this purpose, the current energy situation is recorded, the energy flows are recorded and presented in an energy balance. Energy performance indicators are to be established to evaluate the energy situation. Based on this initial assessment, potential savings can then be identified and analyzed. Here, the possible measures for improving energy-related performance must also be evaluated financially.

The European Commission estimates that energy savings of up to 20 percent can be achieved over three to five years, depending on the degree of implementation of existing measures. Such an energy audit therefore also makes good business sense. The necessary effort must be compared to the expected savings. In a final step, the measures are then to be prioritized.

Energy audits help to identify efficiency potentials in companies and thus make an important contribution to the energy transition. They provide a basis for evaluating energy use and allow comparison with similar organizations. At the same time, they serve to estimate changes and identify investment needs. This enables concrete options for action to be developed and the achievement of energy targets to be effectively managed.

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