Comment, Efficiency, Policy

Ambitious energy efficiency targets needed

Setting ambitious energy efficiency targets that are measured annually and linked to electricity and gas sales could significantly sharpen focus on demand-side energy policy, helping to offset the current supply-side-heavy imbalance, writes Hamish McGovern.

Victoria’s opportunity

We’ve put the challenge to the Victorian Government to continue to strengthen its energy savings  scheme by converting from an emissions reduction target to a percentage of electricity and gas sales from 2021 with a progressive increase to 10% of electricity and gas consumption by 2030.

This would be an increase from the current 2020 target of 6.5 million tonnes of carbon dioxide emissions avoided which is estimated to equate to approximately 6.2% of electricity and gas consumption.

The Victorian Energy Upgrades (VEU) program is the most significant policy driver for energy efficiency in Victoria. A review to determine VEU targets to be set from 2021-2025 commenced on October 15, 2018, with a target scheduled to be announced in March 2020 by the Department of Environment, Land, Water and Planning.

The Energy Savings Industry Association (ESIA) has requested that the announcement date be brought forward to Sept 2019 to allow time for industry to transition so momentum of energy upgrades can be maintained.

Conversion of the target from greenhouse gas emissions to an energy metric is recommended as:

  • emissions intensity of electricity consumption can vary considerably from year to year and can be dependent upon the levels of imports and exports from other jurisdictions. This makes planning for new investment more difficult
  • consumers will be able to more easily relate upgrades to saving energy and lowering energy bills.

The ESIA recommends that megawatt hours (MWh) be used as the metric as it is more commonly used and readily understood by stakeholders than gigajoules (GJ).

The 10% target recommended by the ESIA is based upon increasing the target at the same rate during the 2021 to 2030 period as for the 2016 to 2020 period and using facts and assumptions provided in Table 1.

To date, the VEU has been tracking well ahead of targets for 2016 to 2020, which is a positive indication for continuing the target increase trajectory. The ESIA advocates that this is readily achievable given the other measures and changes that we have recommended to improve the operation of the scheme.

The VEU target for 2020 of 6.5 million tonnes CO2-e converted to 5,936GWh is equivalent to 6.2% of total energy consumption. It is assumed that this amount would increase on a linear basis to arrive at 10% of total energy consumption by 2030. Actual energy consumption will be lower than baseline energy consumption due to activities installed under the VEU.

Proposed VEU target: 10% by 2030 – trajectory in GWh equiv. The target would increase from 4,932 GWh in 2016 to 8,821 GWh in 2030, the latter factoring in a reduction in baseline energy consumption as explained above.

Post code analysis of upgrades

The ESIA commissioned analysis of the level of uptake of various types of energy-savings upgrades directly attributable to the VEU since its inception in 2009 to 31 December 2017. It was determined using very conservative parameters that on average 1.5 upgrades per dwelling have occurred across the state.

Uptake averages have been comparable between metropolitan and regional areas, with slightly higher uptake in areas with average lower incomes in comparison to higher average income postcodes.

It could be assumed that lower-than-average uptake in various inner-city areas could be due to barriers such as rental properties (tenants don’t tend to do upgrades) and older housing stock. Whereas a slight increase in outer suburbs could be due to significantly more opportunity for upgrades of larger homes with for example, many more downlights and other appliances due to larger land and building sizes.

Key high efficiency upgrade types have included:

  • for businesses: commercial lighting, refrigeration display cabinets and fan motor upgrades; and
  • for households: high efficiency pool pumps, lighting, destruction of pre-1996 fridges and freezers and upgrades, clothes dryers and televisions.

While statistics from the Victorian Government and separately from the ESIA estimate average annual bill savings of a participating household to be around $150-175, households that have undertaken multiple upgrades will be saving much more. For example, according to ESIA research: per year a pool pump upgrade can save $225, a high efficiency clothes dryer $110, removing a pre-1996 fridge of freezer $125, upgrading lighting $160 and a television could save $27.

NSW ambition

The NSW Government has a 16,000GWh energy savings target to 2020 which overarches its Energy Savings Scheme (ESS) that has its own annual targets which are currently 8.5% of electricity sales from 2019-2025. The 16,000GWh energy savings target includes a suite of measures including NSW Climate Change Fund programs, the ESS, building standards and initiatives and Commonwealth programs.

This illustration of the NSW approach shows at a glance the suite of energy-saving initiatives being measured in that state. In this scenario published in 2016, the ESS would be the third largest contributor by 2020. Current actual figures may reflect that the ESS is delivering a larger portion of actual energy savings, given that the scheme has exceeded its target comfortably by 10 to 15% since 2017, based on analysis by Green Energy Markets to the end of November 2018.

The latest ESS Annual Report for 2017 published in 2018 by the NSW Independent Pricing and Regulatory Tribunal (IPART) stated that since the ESS commenced in July 2009, a total of 23,776,877 certificates that have been created for activities implemented under the scheme represent 22,363,865MWh of electricity savings and 176,780 MWh of gas savings.

In 2015, the NSW Government strengthened its ESS by: expanding the program to include gas savings; supporting energy savings made by regional customers; and extending the scheme to 2025 and increasing the targets incrementally from 5% in 2015 to 7% in 2016, 8% in 2018 and 8.5 % from 2019-2025.

Nationwide opportunities

The ESIA continues to advocate for a National Energy Savings Scheme (NESS) by 2025 which would complement existing schemes in Victoria, NSW, South Australia and the Australian Capital Territory and any others that may be established in the meantime.

A NESS could provide incentives for upgrade activity types that may not be available through various existing schemes, and would enable all households and businesses across Australia to participate, which is obviously currently not possible at the moment for Queenslanders, West Australians, Northern Territorians and Tasmanians.

There is an opportunity to further adapt the Commonwealth Government’s Emissions Reduction Fund (ERF) to enable more energy efficiency projects to be implemented through that mechanism, using methodologies proven in the existing energy savings schemes. However, the ERF is reliant upon the provision of funds for projects (and most of that has been committed), whereas a NESS would have no net cost to government.

There is already a lot of work going on in the background between the various governments and industry to ‘harmonise’ these schemes. For example, both SA and the ACT use the approved product registry established by NSW, and methodologies for calculating energy savings of particular types of energy upgrade are periodically being adjusted and shared for consideration between scheme administrators in each jurisdiction. This harmonising process continually sharpens the opportunity for industry to innovate more efficient products that can be marketed across Australia, and for governments to reduce ‘ red tape’ which can stymy roll outs unnecessarily.

Case Studies – Energy Upgrades

A greater scale of innovation, job creation and skill-building can be stimulated in the energy savings industry in Australia in lighting, air conditioning and insulation technologies to name a few. Commercial building management system upgrades can revolutionise building efficiency ratings (like NABERS) and industry boilers, gas burners and electric motors present major energy-saving opportunities. An energy efficiency upgrade is the logical leading partner of any renewable energy upgrade.

Hamish McGovern is the president of ESIA and managing director of Wattly.
With thanks to ESIA members for contributions to this article.

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