11 November 2015
Energy Saver Incentive Team
Department of Economic Development, Jobs, Transport and Resources
Via email: energysaver.incentive@ecodev.vic.gov.au
Proposed VEET Activity Regulation Changes October 2015
Australian Gas Networks Limited (AGN), is one of Australia’s largest natural gas distribution companies.
AGN owns approximately 23,000 kilometres of natural gas distribution networks and 1,100 kilometres of
transmission pipelines, serving over 1.2 million consumers in South Australia, Victoria, Queensland, New
South Wales and the Northern Territory.
AGN’s Victorian gas distribution network has its origins dating back many decades in the form of the Gas
and Fuel Corporation of Victoria. Today, we facilitate the safe and reliable supply of distributed natural
gas to around 620,000 Victorian customers.
AGN welcomes the opportunity to make a submission to the Energy Saver Incentive Team within the
Department of Economic Development, Jobs, Transport and Resources (the Department) regarding the
Victorian Energy Efficiency Target (VEET) “Proposed Activity Regulation Changes October 2015” (the
Paper). AGN understands that following this consultation period, the Energy Saver Incentive Team is
seeking to change the VEET regulations to help facilitate improved access to existing energy savings
activities and to ensure activities are correctly rewarded.
As outlined in our submission attached to this letter, distributed natural gas is a low cost, low carbon
energy choice for Victoria. Our network delivers safe and reliable energy that is a fraction of the carbon
intensity of Victorian mains electricity as evidenced by the proposed values of the “greenhouse gas
abatement coefficients”. The availability of natural gas provides a more diversified energy mix, thereby
increasing the security of energy supply to customers.
Importantly, there are multiple opportunities for Victoria’s gas distribution network to evolve beyond
providing supply to traditional appliances in areas already reticulated, resulting in additional carbon
savings as well as efficiencies for existing customers. These initiatives are explained further in our
submission.
Please contact either Kristin Raman (08 8418 1117) or myself (08 8418 1129) if you would like to discuss
the matters raised in this submission further.
Yours sincerely
Craig de Laine
General Manager – Regulation
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Attachment – Detailed Response to Proposed VEET Activity Regulation Changes October 2015
Background
Natural gas has long played an important role in the energy mix for Victoria and Australia, driven by its
favourable characteristics of being an abundant local resource which is low cost, low carbon intensity and
a preferred energy source for cooking and heating. These characteristics continue to make natural gas
an important part of Victoria’s future energy mix. More specifically, distributed natural gas:
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Provides reliable, base load energy supply to homes and businesses with our Victorian customers
experiencing, on average, one supply interruption every 36 years.
Is base load in the nature of its supply, and as such, is an important complement to the more
intermittent nature of renewable energy sources.
Delivers energy which is one quarter to one sixth of the carbon intensity of mains electricity.1 Even
at times of increasing renewable energy generation, as long as coal remains part of the electricity
generation mix, distributed natural gas will continue to be preferential in terms of emissions. There
are further opportunities to reduce emissions associated with distributed natural gas through the
injection of renewable gas (biomethane from biogas plants) and/or synthesised natural gas (excess
renewable power efficiently stored in the gas grid for future use).
Offers a more cost-effective solution to Victorian consumers as the price of gas is lower than
electricity2, and in many locations, gas prices are stable or falling3. This reflects the significant
reduction in network charges, which account for around 50% of the retail gas price. 4 These
reductions more than offset any forecast increase in wholesale gas costs.
Helps to mitigate peak electricity demand, limiting the need for further costly investment in the
electricity network, therefore helping to minimise electricity prices. For example, the Energy
Networks Association (ENA) estimates that infrastructure required for peak electricity demand is
used for the equivalent of four or five days per year, with one network alone indicating that
augmentation for peak demand cost $11 billion.5 By way of comparison, the total value of gas
distribution networks in Victoria is $3.5 billion.6
Represents the more efficient utilisation of historic investment in natural gas networks, which in-turn
will lead to lower prices.
Is an essential input to certain commercial and industrial applications.
Is evolving past the traditional uses of heating (homes and water) and cooking to transport, gaspowered air conditioning, gas dryers and distributed generation.
Provides diversity and balance in energy supply, which is vital for ensuring the ongoing energy
security for Victorian homes and businesses.
Supports jobs growth and economic investment in Victoria’s economy, through the utilisation of the
state’s natural resources.
Given the above, distributed natural gas has an important role to play in assisting the Victorian economy’s
transition to a low carbon future. To this effect, AGN encourages the Department to actively consider the
1
Page 13 and 19, National Greenhouse Account Factors, Department of Environment, December 2014.
2
For example, AGN analysis indicates that the annual retail bill associated with powering a gas hot water service, gas cooker and gas ducted heater is
less (~$1,000) than powering equivalent electric appliances (~$1,400).
3
For example, in New South Wales over the next five years, Jemena’s New South Wales customers will see an average saving of $118 per year due to
a 34% reduction in network charges, whilst In South Australia, we (AGN) have proposed an 11% reduction in residential network charges in 2016
equivalent to a $46 saving on the annual bill.
4
Energy and Water Ombudsman Victoria, https://www.ewov.com.au/publications-and-media/news-hot-topics/hot-topic-archive/how-is-the-price-ofelectricity-and-gas-calculated-in-victoria
5
ENA 2014, “Electricity prices and networks costs”.
6
Australian Energy Regulator, “State of the Energy Market Report 2014”, page 113.
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role of distributed natural gas in a low carbon future. Further details on how we can achieve this in
collaboration with the Victorian state government are provided in the following responses to the changes
proposed in the consultation paper.
Schedule 7: High Efficiency Ducted Air to Air Heat Pump Replacing a Ducted Air to Air Heat
Pump
Do you have any comment on the proposed amendments?
AGN acknowledges the Paper’s comments about the improvement in Ducted Air to Air Heat Pump energy
efficiency performance since 2008, and further, that this improvement should provide a higher level of
greenhouse emissions abatement per unit when compared to the lower efficiency units that may currently
exist in natural gas areas.
AGN supports open access to all appliance types to actively compete within the VEET scheme, on their
respective emissions abatement merits. However, AGN also raises a concern about the potential of these
amendments on growth in peak demand on the Victorian electricity network. Although it is difficult to
model appliance uptake, summer peak air-conditioning load from space cooling is a key contributor to
peak demand on the Victorian electricity network. Additionally, the Australian Energy Market Operator
continues to forecast increasing peak demand in Victoria.7
In the recent consultation in regard to the Review of the New South Wales Energy Savings Scheme
(ESS), the review was particularly conscious of inadvertently rewarding appliances that could increase
peak demand in the state.8 This is evident in the following excerpt from the Options Paper released as
part of the Review9:
In summary, AGN encourages the Department to be cautious about supporting the broad uptake of
demand sensitive electric-powered devices to achieve emissions reduction objectives, in isolation from
other key market developments. Otherwise, even with the best of intentions, Victorian electricity
customers could experience further electricity price rises.
As an example of this point, ducted heat pump units similar to those encouraged for heating cycles are
currently discouraged in relation to cooling under the VEET program’s “Activity 23-Ducted Evaporative
Cooler Replacing of Refrigerative Air Conditioner”. By way of background, the worked example on this
heating activity provided 12.9 certificates. Coincidentally, using the VEET website calculator for Activity
23 (with parameters similar to those replacing the appliance installed in the above example), would
generate twelve certificates of similar benefit.10 Accordingly, the VEET assistance for installation of
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10
Australian Energy Market Operator, “National Electricity Forecasting Report Overview 2015”, June 2015.
Review of the NSW Energy Savings Scheme – Part 2:Options Paper – April 2015 – page 65
Ibid.
Parameters used are: EER=14, System size= 24kW, in Regional Victoria Cold changing out for an Evaporative unit.
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Electric Ducted Air to Air Heat Pumps may assist the abatement target on the heating cycle but equally
detract from the cooling cycle compared to other appliance options that may be appropriate for the
situation.
Are any other changes warranted? Please provide details?
The Schedule does not define which types of Ducted Air to Air Heat Pumps are within the scope of the
activity and would like to make the Energy Saver Incentive Team aware that there are Gas Powered AirConditioning (GPAC) products unable to participate in the schemes, given that abatement factor tables
in the regulation, have been based solely on electric units Coefficient of Performance (CoP) data.
This is an area for potential improvement in the VEET scheme and as such it is AGN’s intention to lodge
a submission in the third opportunity for comment on the VEET consultation program, due 11 December
2015. In this future submission, AGN will encourage the Victorian government to include GPAC in the
amended VEET scheme and highlight the current gap in product coverage for this activity.
General Comments in relation to Schedules 8, 9 and 10
The remainder of this submission consolidates comments in relation to the following Schedules:
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Schedule 8: High Efficiency Ducted Air to Air Heat Pump Replacing Central Electric Resistance
Heater
Schedule 9: Gas or Liquefied Petroleum Gas Space Heater
Schedule 10: Space Air to Air Heat Pump
In relation to these Schedules (and similar to that mentioned above), AGN encourages the Department
to consider GPAC products that have been unintentionally excluded from the VEET scheme, due to
abatement factor tables based solely on CoP data of electric units. AGN considers it important that natural
gas appliances have an equal opportunity to participate in the VEET scheme for the reasons outlined
earlier in this submission.
Furthermore, AGN expects to prepare a submission to the Department in relation to the third consultation
activity of this program, in order to highlight this gap in product coverage.
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