Efficiency, Policy, Renewables, State Policy

A national energy savings and peak reduction scheme must target gas

The Federal Government’s consultation on a national energy performance strategy must include a national energy savings scheme to drive down emissions from gas, and include a peak demand reduction component, writes Rod Woolley, president of the Energy Savings Industry Association (ESIA).

In 2023, the Federal Government is consulting on a national energy performance strategy, and a national energy savings scheme (NESS) and peak demand reduction scheme (PDRS) combination with ambitious 2025 and 2030 targets that will deliver what existing mechanisms have not achieved for decades: to address National Electricity Market (NEM) failures to reduce electricity costs and greenhouse gas emissions.

In Australia, we have a situation where the electricity market does not reward suppliers or end users to:

  • Choose cleaner energy sources due to no emissions trading scheme.
  • Use less energy during peak times of the day because the national wholesale demand response mechanism isn’t working.
  • Reduce electricity network costs due to regulated network charges comprising 47 per cent of a typical customer’s energy bill, and options that deliver lower demand on networks don’t get compensated for the benefits they deliver (network businesses have been able to recover costs to implement demand reduction activities instead of network expansion options, but this has failed to deliver anything notable).

A NESS will support electricity and gas customers to consume cleaner energy more efficiently by installing energy efficient appliances sooner than they otherwise would. Take lighting upgrades, where large commercial buildings may refurbish every 15 years, and other building types may refurbish after more than 20 years. Evaluations show existing schemes have driven upgrades much sooner, shaving billions off energy bills and emissions, and driving technology transformation. For example, LED lighting saves at least 70 per cent of energy compared to old technology.

Rod Woolley is president of the Energy Savings Industry Association (ESIA), the national peak body representing and self-regulating businesses that create and trade energy efficiency certificates under schemes in Australia, including energy experts, product developers, manufacturers and installers. Photo: Supplied.

A PDRS component to NESS – such as the recently launched NSW PDRS – can support uptake of equipment that reduces electricity consumption during the peak time from 2.30pm to 8.30pm Australian Eastern Standard Time. The first tranche of eligible activities in the NSW PDRS includes air-conditioning, refrigeration and hot water heat pumps, which are 70 per cent more efficient than the old technology they are replacing.

A NSW energy consumer can ‘stack’ financial incentives that make an upgrade affordable now. This addresses the greatest barrier to efficiency upgrades: upfront capital at the time of installation.

A national scheme can be designed to dovetail with state schemes in NSW, Victoria, South Australia and ACT, and provide upfront financial incentives – reduced installation costs – for the first time for energy consumers in Queensland, Western Australia, Northern Territory and Tasmania.

Equitable access is a fundamental benefit of a national scheme and will enable industry to deliver upgrades at lowest abatement cost at scale sooner. Refer to the table below where Australian energy savings activities can respond to a carbon price signal by sector and fuel type. Note the NSW PDRS provides an added layer of opportunity for the state.

Getting off gas

Victoria is leading the charge to move away from gas with its Gas Substitution Roadmap updated in mid-2022. The state has high gas usage for winter heating of more than two million households. The recently re-elected Labor Government under Dan Andrews has its work cut out to realign its Victorian Energy Upgrades program as a key lever promoted to deliver significant gas savings to 2030. Additionally, Andrews made an election promise to increase Victoria’s emissions reduction target to 75-80 per cent by 2035.

This year is shaping up to be the most significant for new and ambitious national policy settings and targets, perhaps since 2000 when the Renewable Energy Target (RET) was legislated. Modifications to RET need to be on the table to support reduced demand behind-the-meter by including batteries with savings factored in beyond the current 2030 end date.

The Energy Savings Industry Association is advocating for the Federal Government to scope a NESS during 2023 and at least open upgrade opportunities across Australia by 2024 for a handful of activities proven to be commercially viable for rollout at scale by skilled technicians and engineers. High industry competence developed during the past decade under the successful state schemes, as well as robust compliance, enforcement and consumer protection guardrails, provide a low-risk pathway for government to drive change.

Rising energy prices, temperatures and health issues will be tackled head-on with well targeted energy efficiency upgrades. The time for federal leadership is now as Australia locks in commitments to showcase at COP28 in Dubai, United Arab Emirates, in November and December 2023, and it demonstrates how the nation will deliver on its freshly legislated 43 per cent emissions reduction target by 2030.

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