Public sector exemptions
Public sector organizations are generally exempt from ESOS requirements 1.
This includes central government departments, local authorities, NHS trusts, educational institutions, and other public bodies funded primarily through taxation.
However, publicly-owned commercial entities operating in competitive markets may still be subject to ESOS depending on their structure, funding sources, and commercial activities.
Mixed public-private arrangements require case-by-case assessment.
Low energy consumption exemptions
Regulation 21(3) of the Energy Savings Opportunity Scheme Regulations 2014, inserted by SI 2023/1182 3, disapplies the duty to appoint a lead assessor for a participant whose total energy consumption is less than 40,000 kWh of energy 2. The test is exclusive: a participant at exactly 40,000 kWh must still appoint one.
This threshold applies to total consumption including electricity, gas, transport fuels, and other energy sources, and regulation 21(3) carries no territorial limb — energy consumed outside the UK counts towards it. Do not read the SECR figure across: the SECR low-energy relief is “40,000 kWh of energy or less in the United Kingdom”, which is inclusive and UK-only, so a company sitting at exactly 40,000 kWh must appoint an ESOS lead assessor and may still rely on the SECR relief.
It removes the lead assessor, not the assessment. The ESOS assessment and audit duties stand, and regulation 30(3A) then requires two responsible officers to be nominated rather than one. Organisations near this threshold should monitor consumption carefully.
Low Consumption Threshold
Total energy consumption below which the duty to appoint a lead assessor does not apply — reg 21(3), and the test is ‘less than’, not ‘or less’
ISO 50001 certification exemptions
Where a certified ISO 50001 energy management system covers total energy consumption, or significant energy consumption — the areas comprising at least 95% of the total — the participant is deemed to have complied with the duties to appoint a lead assessor, carry out an ESOS energy audit and produce an ESOS report 7 2. Certification does not have to reach 100% of energy use, and a notification of compliance is still required.
The ISO 50001:2018 standard provides the energy management system framework 4 accepted by the Environment Agency as a compliance route.
ISO 50001 provides equivalent energy assessment and efficiency identification through systematic energy management processes.
Where certification covers only part of consumption, the exemption applies only to the certified portion — the remainder must still be audited and a lead assessor appointed to reach the 95% threshold.
New exclusions under SI 2026/701
The Energy Savings Opportunity Scheme (Amendment) Regulations 2026 (SI 2026/701) came into force on 22 July 2026 and added two exclusions that matter for Phase 4. None of these amendments has yet been applied to the consolidated text of the 2014 Regulations, so the amending instrument is the one to read.
Regulation 33A — zero energy consumption. Where the responsible undertaking has calculated the participant’s total energy consumption as zero kWh, the participant is deemed to have complied with regulations 20, 21 and 21A(2)(b), Chapters 2A to 4 of Part 4, and Part 6A — so there is no ESOS assessment, no lead assessor, and no action plan or progress updates at all 8.
A notification of compliance is still required, and because no lead assessor is appointed two responsible officers must be nominated to confirm it.
The insolvency exclusion is wider. Regulation 6 of SI 2026/701 amends regulation 16 of the 2014 Regulations so that undertakings in insolvency proceedings at any point between the qualification date and the compliance date are excluded 8.
Group undertakings of an insolvent large undertaking are excluded too — unless another large undertaking in the group is solvent.
Sub-threshold qualification rules
Organisations that fall below ESOS qualification thresholds (at least 250 employees, or turnover in excess of £44m AND a balance sheet total in excess of £38m) must fail to qualify for two consecutive accounting periods before losing their ESOS obligations — the retention rule at paragraph 11 of Schedule 1 to the ESOS Regulations 2014, where the size test itself sits at paragraphs 1 and 1A 2. Note the drafting: employees is “at least” 250, but the money limbs are “in excess of”, so exactly £44m does not qualify.
This rule provides stability for compliance planning and prevents frequent changes in ESOS status for organizations operating near qualification boundaries.
Organizations should plan compliance activities assuming continued obligations until confirmed exemption.
Group exemption arrangements
ESOS operates group-wide qualification rules where single qualifying entity triggers obligations for entire UK group 2.
Conversely, if the qualifying entity becomes exempt, this can affect group-wide obligations, subject to the two-consecutive-period rule 1.
Group exemptions require careful coordination across corporate structures to ensure accurate qualification assessment and compliance planning.
Parent companies should monitor subsidiary qualification status for group-wide impact.
Deemed compliance routes
Even qualifying organisations have routes that reduce the audit work. SI 2026/701 renamed Part 6 of the 2014 Regulations from “Alternative routes to compliance” to “Deemed compliance with Scheme requirements”, which is a different legal idea: the duty is treated as discharged, not replaced.
These include combined approaches mixing energy audits with ISO 50001 certification to achieve required 95% coverage.
Organizations should evaluate which compliance routes best suit their operations, existing energy management systems, and strategic objectives.
Early planning allows optimal route selection and resource allocation.
Compliance Routes
≥95% energy consumption coverage
Energy management system certification
Mixed audit and ISO 50001 coverage
Exemption verification and evidence
Organizations claiming ESOS exemptions must maintain evidence supporting exemption status including energy consumption records, public sector classification, ISO 50001 certificates, or qualification threshold calculations, per the Environment Agency’s Phase 4 guidance, published 30 July 2026 3.
The Environment Agency 6 may request exemption verification as part of compliance monitoring.
Organizations should document exemption basis clearly and retain supporting evidence for inspection purposes in line with the Environment Agency’s Phase 4 guidance, published 30 July 2026 7.
Are public sector organizations exempt from ESOS?
Public sector organizations are generally exempt from ESOS requirements.
This includes central government departments, local authorities, NHS trusts, and other public bodies.
However, publicly-owned commercial entities operating in competitive markets may still be subject to ESOS depending on their structure and activities.
What is the 40,000 kWh lead-assessor threshold?
Regulation 21(3) disapplies the duty to appoint a lead assessor for a participant whose total energy consumption is less than 40,000 kWh of energy.
The test is exclusive — a participant at exactly 40,000 kWh must still appoint one — and it carries no territorial limb, so energy consumed outside the UK counts towards it.
It applies to total consumption including electricity, gas, transport fuels and other energy sources.
It removes the lead assessor, not the assessment: regulation 30(3A) then requires two responsible officers rather than one, and a notification of compliance is still required.
How does ISO 50001 certification provide ESOS exemption?
Where a certified ISO 50001 energy management system covers total energy consumption, or significant energy consumption — the areas comprising at least 95% of the total — the participant is deemed to have complied with the duties to appoint a lead assessor, carry out an ESOS energy audit and produce an ESOS report.
Certification does not have to reach 100%.
Where coverage is partial, the exemption applies only to the certified consumption; the rest must still be audited with a lead assessor appointed.
A notification of compliance is required either way.
What happens if an undertaking has zero energy consumption?
New regulation 33A, inserted by SI 2026/701, applies where the responsible undertaking has calculated the participant’s total energy consumption as zero kWh.
The participant is then deemed to have complied with regulations 20, 21 and 21A(2)(b), Chapters 2A to 4 of Part 4 and Part 6A — so there is no ESOS assessment, no lead assessor, and no action plan or progress updates at all.
A notification of compliance is still required, and because no lead assessor is appointed two responsible officers must be nominated.
Does insolvency remove an ESOS obligation?
SI 2026/701 widened the insolvency exclusion.
Undertakings in insolvency proceedings at any point between the qualification date and the compliance date are excluded, as are group undertakings of an insolvent large undertaking — unless another large undertaking in the group is solvent.
What are the sub-threshold qualification rules?
Organisations that fall below ESOS qualification thresholds (at least 250 employees, or turnover of more than £44m AND a balance sheet total of more than £38m) must fail to qualify for two consecutive accounting periods before losing their ESOS obligations.
This provides stability for compliance planning around threshold boundaries.
How do group exemptions work under ESOS?
If any single UK entity within a corporate group meets ESOS qualification criteria, the entire UK group becomes subject to ESOS.
Conversely, if the qualifying entity becomes exempt, this can affect group-wide obligations, though the two-consecutive-period rule still applies to prevent frequent status changes.
Related guides & references
ESOS: the UK’s energy assessment scheme
Complete overview including qualification criteria and group aggregation rules
ESOS Phase 4 compliance guide
Phase 4 qualification criteria and exemption thresholds in detail
ESOS lead assessor requirements
When lead assessors are required and exemption circumstances
ESOS Requirements: The 7 Compliance Steps
Full compliance process including alternative routes and exemptions
ISO 50001 vs ESOS — which compliance route
The certification route that removes the lead-assessor review for covered energy use
ESOS legislation — SI 2014/1643 and SI 2023/1182
Where the exemption categories come from in the regulations
Authority Sources
- Energy Savings Opportunity Scheme (ESOS) — Overview
- Energy Savings Opportunity Scheme Regulations 2014
- ESOS (Amendment) Regulations 2023
- ISO 50001:2018 — Energy Management Systems
- ESOS Phase 3 Guidance for Participants
- Comply with the Energy Savings Opportunity Scheme (ESOS) phase 4
- ESOS (Amendment) Regulations 2026
- Environment Agency — ESOS enforcer
Last verified: 21 August 2026 — Facts cross-checked against SI 2026/701 and the Environment Agency’s ESOS phase 4 guidance (30 July 2026)