“Energy Audit” is a frequently used term in legal practice, but we’ve noticed that companies often have questions about it. This blog explains what an Energy Audit is, which enterprises are obliged to have one carried out – and which are not – and how this obligation can be enforced by the competent authority.
What is an Energy Audit?
An Energy Audit is a systematic procedure, carried out every four years, with in any case three clear objectives:
- to obtain adequate knowledge of the existing energy consumption profile of:
- a building or group of buildings;
- an industrial or commercial operation or installation; or
- private and public services;
- to identify and quantify opportunities for cost-effective energy saving;
- to produce a report setting out the results of (i) and (ii).
One of the minimum criteria for an Energy Audit is that it must be proportionate and sufficiently representative to provide a reliable picture of overall energy performance, while allowing for reliable identification of the most significant oppertunities for improvement. To achieve this, the Energy Audit surveys all existing energy flows within an enterprise.
It doesn’t only clarify the enterprise’s current energy consumption and energy performance; it also offers the enterprise the opportunity to discover ways of achieving savings and sustainability. By carrying out an Energy Audit, an enterprise can reduce its energy costs. And as we’ll see below, an Energy Audit is mandatory for some enterprises.
Why conduct an Energy Audit?
The Energy Efficiency Directive (Directive 2012/27/EU) (the “EED”) is one of the means by which the EU can achieve its core climate targets as regards energy efficiency: 20% greater energy efficiency by 2020 and at least 32.5% by 2030. In that context, Article 8(4) of the EED requires Member States to ensure that large enterprises undergo an Energy Audit (independent and cost-efficient) every four years. In order for them to take effect, however, directives must be implemented in national regulations. The Netherlands therefore implemented the EED and the Energy Audit obligation in 2015 by means of a temporary ministerial regulation, the “Temporary Regulation Implementing Articles 8 and 14 of the Energy Efficiency Directive” (or “Treed” for short).
The audit report
An “Audit Report” must be drawn up on the Energy Audit. Section 2a of the Treed specifies the minimum information that has to be included in that report. This includes, for example, a systematic overview of all the existing energy flows (processes, installations, buildings, and transport), an overview of the enterprise’s total measured energy consumption for the most recent financial year, other consumption data, and a description of all the potential cost-effective energy-saving options. The Audit Report must be sent to the Minister of Economic Affairs and Climate Policy within four weeks after it has been drawn up. The Minister then sends a copy of reports that meet the requirements to the competent authority that supervises the establishments that are part of the enterprise.
Which enterprises are required to conduct an Energy Audit?
It follows from Article 1(j) of the Treed – read in conjunction with Article 2(26) of the EED – that the Energy Audit is required by law for environmental establishments within the meaning of Section 1.1 of the (Dutch) Environmental Management Act [Wet milieubeheer] (the “Wm”) which are to be regarded as large enterprises, i.e. enterprises without SME status. The audit obligation applies to large enterprises because the energy savings achieved can be significant at such enterprises.
Specifically, this means that an Energy Audit is required by law for environmental establishments within the meaning of Section 1.1 of the Environmental Management Act which meet the following conditions:
- they have 250 or more employees (FTEs) (including within shareholdings); or
- they have an annual turnover of more than EUR 50 million and/or an annual balance sheet total of more than EUR 43 million, including within shareholdings.
The Digital Government website has an “Energy-Saving Legislation Checker” [Wetchecker energiebesparing] that allows you to determine whether your company is subject to an Energy Audit obligation.
It should be noted that under certain conditions an enterprise may be exempted from the Energy Audit obligation. One of the exemptions that we currently consider relevant is set out in Section 3 of the Treed. The enterprise must operate an energy management system – within the meaning of Article 2(11) of the EED – certified according to European or international standards and including an Energy Audit that meets the minimum criteria set out in Annex VI to the Directive.
Assessment, supervision, and enforcement
Prior to 1 July 2019, assessment and enforcement of the Energy Audit obligation was the responsibility of the competent authority for the establishment within the meaning of the Environmental Management Act (i.e. a “Wm establishment”). Since 1 July 2019, the task of assessing audits (Section 6(1) of the Treed) has been transferred to the Minister of Economic Affairs and Climate Policy. This centralisation of the assessment of audit obligations ensures that an enterprise only has to deal with a single point of contact instead of various separate competent authorities for the different establishments within the enterprise. The Minister of Economic Affairs and Climate Policy sends a copy of reports that meet the requirements set out in Sections 2 and 3 of the Treed to the competent authority that supervises the establishments that are part of the enterprise. In practice, we note that the Netherlands Enterprise Agency (RVO) has taken over the Minister’s aforementioned tasks.
The legal basis for the Act is the Environmental Management Act. Supervision and enforcement are therefore carried out by the competent authority pursuant to the Environmental Law (General Provisions) Act [Wet algemene bepalingen omgevingsrecht] (the “Wabo”) and the Environmental Management Act. The competent authority is empowered to impose administrative coercion [last onder bestuursdwang] and a penalty for non-compliance [last onder dwangsom].
It should be noted that there is no obligation in the Treed to actually carry out the selected measures. After all, the Act only provides for the obligation to conduct an Energy Audit. This means that supervision and enforcement of the actual implementation of energy conservation measures is not carried out on the basis of the Act itself but on the basis of Section 2.15 of the Activities (Environmental Management) Decree [Activiteitenbesluit milieubeheer].
As its name makes clear, the Treed is a temporary regulation and a number of its points are already obsolete. Towards the end of 2019, the Government announced that it would introduce a bill before 2020 to give the Energy Audit obligation a legal basis in the existing Energy Efficiency (Implementation of EC Directives) Act [Wet implementatie EU-richtlijnen energie-efficiëntie]. The responsible ministers have also indicated that the Energy Audit will not form part of the system of the forthcoming Environment and Planning Act [Omgevingswet]. That is because the focus of the Energy Audit, i.e. large enterprises, does not correspond to the system of the latter Act or the Living Environment (Activities) Decree [Besluit activiteiten leefomgeving]. At the point when this blog was produced, no parliamentary bill as referred to above had actually been introduced. We hope that a future bill will clarify matters. At the moment, Section 2.15(2) of the Activities (Environmental Management) Decree alongside the Treed may cause confusion for enterprises that operate one or more establishments. It is not entirely clear, for example, for every establishment or enterprise whether it is sufficient for energy-saving measures to be put in place and reported, or whether an Energy Audit obligation may apply pursuant to the Treed.