`SETTING FUTURE VICTORIAN ENERGY EFFICIENCY TARGETS’
CONSULTATION PAPER
Submission
May 2015
© Copyright Municipal Association of Victoria, 2015.
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The MAV welcomes the opportunity to provide feedback to the April 2015 `Setting future
Victorian Energy Efficiency Targets’ consultation paper. Due to the short amount of time given
to respond to the paper, this submission has not benefited from full, wide-ranging and in-depth
input from our members.
The MAV and councils commend the Government’s decision to continue and strengthen the
Victorian Energy Efficiency Target (VEET) scheme. Victorian councils have a strong track
record of supporting and implementing measures that improve energy efficiency within their own
operations and within their local communities. It is imperative that the VEET recognises and
builds upon the efforts of Victorian local government.
The MAV considers the VEET scheme to be an important State initiative to:
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reduce greenhouse gas emissions;
offer low income and vulnerable households access to energy efficiency information,
products and services; and
provide incentives for investment and innovation in energy-efficient technologies.
In our view the primary purpose of the VEET scheme should be to address market failures that
hinder or prevent the Victorian government from achieving the three objectives of the VEET Act,
namely: to reduce greenhouse gas emissions; to encourage the efficient use of electricity and
gas; and to encourage investment, employment and technology development in industries that
supply goods and services which reduce the use of electricity and gas by consumers.
1. What should the new VEET target be?
As noted below (under question 2), the MAV would like to see the costs and benefits of the
VEET scheme modelled without the inclusion of large businesses. There is also a need to
model the costs and benefits of the VEET targets for the other two greenhouse coefficient
options canvassed in the paper.
Care must be taken to choose a target that doesn't risk excessive certificate prices, thereby
making it very costly to achieve the target, or the imposition of shortfall penalties which would
mean high costs to energy users without any efficiency or greenhouse benefits.
The consultation paper notes that the VEET scheme is `just one part of the Victorian
Government’s commitment’ to energy efficiency. We understand that the Government is
preparing an energy efficiency and productivity growth strategy for release by the end of the
year. This strategy will, we expect, provide critical context for identifying the most appropriate
form and focus of the VEET scheme.
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2. The modelling approach used to determine the costs and benefits of the VEET
scheme
The consultation paper refers to a number of assumptions that underlie the business energy
efficiency model, including the removal of restrictions on large businesses. In the absence of
evidence of a market failure preventing or deterring large businesses from undertaking energy
efficiency activities, the MAV questions the merit of including large businesses in the scheme.
The costs and benefits of the VEET scheme should also be modelled without the inclusion of
large businesses. Such modelling may highlight that alternative targets and scheme lengths
would better address market failures in achieving energy efficiency in low income households.
As stated in the consultation paper, the inclusion of large businesses might result in a fall in
certificate prices. Low certificate prices may in turn make some activities that target low income
and vulnerable energy users marginal or unviable which would then undermine a key objective
and benefit of the scheme.
3. Which greenhouse coefficient should be used to quantify the reduction in
greenhouse gas emissions achieved by the VEET scheme?
Councils have advised that they support the use of an average coefficient as published in the
National Greenhouse Accounts. The greenhouse gas emission coefficients used to quantify the
reduction in greenhouse gas emissions achieve by the VEET scheme should be brought into
line with national methodologies for quantifying greenhouse gas emissions reductions. A
number of councils already monitor and report on greenhouse gas emissions using the National
Greenhouse Accounts Factors. A different methodology would mean that comparison and
benchmarking data from the VEET scheme would not be possible. Using an alternative
emissions coefficient to that of the federal and local governments creates confusion and
uncertainty when communicating energy efficiency targets with the community.
4. Valuing greenhouse gas emissions
Councils have advised that the approach adopted in the consultation paper to value greenhouse
gas emissions reductions is appropriate.
5. Is there a case to exclude any business sector(s) for participation in the VEET?
Victorian energy users should not be subsidising large businesses for measures that they would
otherwise undertake in the absence of the VEET scheme. If large businesses are to be included
it will be incumbent upon the government to ensure that any activities they undertake to
generate certificates are genuinely additional actions. Determining how to assess and then
effectively monitor additionality is likely to be a difficult and costly task for the government. The
regulatory burden for businesses and administrative costs for government of such monitoring
should be included in the modelling.
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The MAV appreciates that the government may seek the inclusion of large businesses in the
scheme to encourage investment, employment and technology development in the energy
efficiency service sector, however the government has not provided any evidence that the VEET
scheme is the most efficient means of achieving this aim. The government should consider
other policy alternatives to meet this objective that do not involve providing cross-subsidies from
energy users to large businesses.
Certainly any decision to include large business into the VEET scheme should not be to the
detriment of vulnerable households and small and medium enterprises (SMEs). One council has
suggested that a separate pool of certificates be made available for large businesses if they are
to be included.
6. Should the VEET scheme be amended to better ensure support for low income
households?
Significant market failures exist that prevent low income households from attaining certain levels
of energy efficiency. These market failures usually take the form of either the inability to afford
the upfront costs of energy efficiency measures or the inability to access knowledge that would
allow them to make their own upgrades. The scheme should address these areas of market
failure. The MAV considers it important that the focus, design and objectives of the VEET
scheme are intended to assist low-income households achieve energy efficient outcomes.
The Oakley Greenwood impact analysis of the VEET 2009-2012 demonstrates that energy
customers who don’t participate in the VEET scheme experience net costs overall from the
scheme. The analysis notes that `this is because the increases in their bills due to increased
network unit prices and increased retail charges to recover the costs of complying with the
VEET outweigh the impact of the reductions in wholesale electricity prices engendered by the
scheme’ (p.4). This further highlights the importance of the scheme targeting low income
households so as not to make them more vulnerable and consigned to subsidising other energy
users’ energy efficiency upgrades, including those of large businesses.
In relation to ensuring low income households benefit from the scheme, we do not consider that
a monitoring-only approach would be adequate as it provides no assurance that any action will
be taken to achieve the desired result. We believe the two other options mentioned in the paper
– the South Australian Retailer Energy Efficiency Scheme (REES) “priority group” requirements
and the use of certificate revenue generated from low income households to extend the reach of
the program – merit further investigation. It may be that the provision of energy efficiency
measures to low income households would be more efficiently achieved through schemes and
programs other than the VEET scheme, however this option is not explored in the paper
therefore it also merits further investigation.
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7. In addition to expanding the range of energy efficiency activities available in
VEET, should any other action be taken to target participation by certain groups?
See question 9 below.
8. Activities that should be prioritised for revision or introduction to the VEET
scheme
Councils are very keen to see the inclusion of energy efficient street lighting included in the
VEET scheme. Enabling councils to generate certificates for lighting upgrades will provide a
much-needed incentive to take on the next tranche of work and investment required to upgrade
lights on major roads. Based on conservative estimates, there is around 726,000 tonnes of
emissions reductions to be achieved by changing to energy efficient hardware for major road
lighting in Victoria. Councils will prioritise these upgrades if provided with an adequate incentive
to do so.
Victorian councils already have a strong track record of achieving significant savings and
emissions reductions through adopting energy efficient street lighting in residential streets.
Through the MAV’s Energy Efficient Street Lighting Program, and with funding assistance from
the now defunct Federal Government Community Energy Efficiency Program (CEEP), a little
more than 232,000 residential street lights have been, or are in the process of being, changed
to more efficient alternatives. This will reduce greenhouse gas emissions by an estimated 1.56
million tonnes over the life of the upgraded lights.
Councils would also like to see control improvements on heating, ventilation and air conditioning
(HVAC) systems, eg. economy cycle retrofits on packaged (PAC) units, included in the scheme.
9. Possible improvements to the VEET scheme
Possible improvements to the scheme nominated by councils include:
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Investigate the use of data from smart meters to verify savings and scheme assumptions
Improved education campaigns and communications materials to inform households
(especially vulnerable households) and SMEs of the benefits of the scheme
Development of a mechanism within the scheme that quality assures VEET accredited
energy efficiency products.
Councils have also noted the following issues with the current scheme:
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Inability to ensure that assumed savings are realised
Disuse and disconnection of energy efficiency products by residents
Inappropriate and intrusive cold calling and door knocking
Dishonest service providers that claim to be representing the State Government
The scheme should include design measures to discourage the above.
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The consultation paper notes that there will be further opportunity to provide input in relation to
issues such as the inclusion of large businesses within the scheme and the introduction of new
activities. The MAV looks forward to further discussion between Victorian local government and
the State Government regarding the VEET scheme. In order to ensure proper engagement and
consultation with our members, we request that a minimum of four weeks be provided to
respond to any future discussion / issues papers.
The MAV contact person is Claire Dunn, Manager – Environment & Regulatory Services, ph
9667 5533.
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