Efficiency Insight - October 2020
Efficiency Insight is the Energy Efficiency Council's monthly energy management update for members, partners and stakeholders.
Video update from the Council's CEO, Luke Menzel
Chief Executive Officer
Energy Efficiency Council
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Rob Murray-Leach, Head of Policy, Energy Efficiency Council
COVID and the energy efficiency sector
With COVID-19 cases declining in Victoria, the Victorian Government has started to reduce restrictions on business activities. The Victorian government has released guidelines for Small Scale Construction that cover energy efficiency upgrades, including:
- Upgrades to commercial buildings are now permitted as long as the site is not occupied at the time of the upgrade (e.g. upgrades take place outside business hours); and
- Upgrades to residential buildings are currently only permitted if the site is vacant (i.e. there is no-one currently living at the site). Doorknocking remains forbidden.
Restrictions in Victoria are expected to be further lifted in mid-to-late October, subject to further reductions in new COVID-19 cases.
A range of organisations are starting to release more detailed assessments on the likely impacts of COVID-19 on the Australian economy. We’d encourage members to treat projections with even more cautions than usual – we really are in uncharted territory at the moment.
While housing sales are currently recovering outside Victoria, the Housing Industry Association’s (HIA) chief economist Tim Reardon has projected that dwelling construction will drop rapidly over the next three years, due to a reductions in immigration and spending power. This impact will vary dramatically between detached houses and apartments – HIA projects that the number of detached houses that will start being constructed in 2021/22 (‘starts’) will only be about 9 per cent lower than in 2019/20, but the number of apartment starts will be 45 per cent lower in 2021/22 than in 2019/20. The difference in the projections for detached houses and apartments is partly due to the faster fall-off for demand in city centres and increased demand for larger dwellings that include home offices.
The Energy Efficiency Council continues to advise governments that increasing demand for retrofitting existing homes to make them safer and more energy efficient could provide work for many of the people that will have less opportunities in new construction. Data from the International Energy Agency and International Monetary Fund (see below) highlights that energy efficiency retrofits is one of the most jobs-intensive areas for stimulus spending. However, we do caution that governments will also need to invest in upskilling to roll out retrofits at scale.
Construction and manufacturing jobs created per million dollars of capital investment in the Sustainable Recovery Plan
A range of think tanks and industry bodies have continued to call for stimulus to be focussed on energy efficiency. Recently, Clean State, a Western Australian non-profit organisation for action on climate change released a plan to create 200,000 jobs in Western Australia. Two major contributors to jobs are:
- Building 15,000 new low-carbon social housing homes (59,660 jobs); and
- Repowering and retrofitting WA’s existing 44,000 social housing homes (3,830 jobs).
Energy efficiency schemes
The South Australian Government has released a consultation paper on the Retailer Energy Productivity Scheme (REPS) that will replace the Retailer Energy Efficiency Scheme (REES). The EEC has significant concerns about the timeline for finalising the details of the REPS and the lack of a transition period between the REES and REPS. We met with South Australian Energy Minister Dan van Holst Pellekaan on 1 October and will continue to engage with the South Australian Government to address this issue. Submission on the REPS are due by this Friday 9 October.
Activity under the he Victorian Energy Upgrades (VEU) Program remains subdued due to restrictions associated with COVID-19. The Victorian Government has also released a paper setting out its final decision to wind back incentives for lighting. The Government received strong feedback from industry that the original timeline for reducing incentives for lighting was too aggressive, and will now stage the reduction of incentives over several years. The Essential Services Commission also released a report on the performance of the VEU in 2019
The next stage of consultation on the NSW Energy Saving Scheme is expected later in 2020.
On 17 September the Australian Government and NSW Government released their joint Liddell Taskforce’s final report. The Liddell Taskforce was asked to identify issues and potential solutions associated with the closure of the Liddell Power Station in 2022.
When the Hazelwood Power Station closed in 2017, the rapid reduction in generation capacity resulted in an increase in energy prices. The Taskforce concluded that the closure of Liddell Power Station will likely have a much smaller impact on prices than Hazelwood, as there will be more excess capacity in NSW in 2022 than there was in Victoria in 2017. The Taskforce estimated that the wholesale electricity price in NSW would rise from about $60/MWh to around $75/MWh after the closure of Liddell, although it cautions that any estimate of price modelling could be inaccurate.
The Energy Efficiency Council and Australian Industry Group provided a joint submission to the Taskforce, and it appears they took our views on board. Of particular relevance for energy management, the Taskforce modelled that unspecified energy efficiency programs would deliver 240MW of firm supply by 2023/24, and the Taskforce recommended that:
“Governments could focus on developing demand-side measures as one part of the solution, through promoting uptake of demand response, distributed energy resources integration, and energy efficiency as a low-cost, short-term response to a Liddell exit, and to facilitate the longer-term transition.”
Post-2025 Energy Market Design
On 7 September the Energy Security Board (ESB) released a consultation paper on potentially major shifts to the design of the National Electricity Market. Submissions on the consultation paper are due on 19 October.
The EEC’s cousin in the US, the American Council for an Energy Efficient Economy (ACEEE), is an absolute powerhouse of great research on energy efficiency. I highly recommend that people check out their research page, but I wanted to summarise two great reports.
First, a report on the impact of energy efficiency ratings on homes when they are advertised for sale online. The authors conducted an experiment with online real-estate listings, and found that when potential buyers were presented with information on the energy efficiency of properties, they clicked on the most efficient homes 14 per cent more often than if no information on efficiency was presented, and buyers clicked on the least efficient homes 23 per cent less often. This shows that energy efficiency ratings can have a real impact on purchasing decisions.
The authors also tested four ways of displaying energy efficiency information: a rating on a continuous line (from inefficient to efficient); a score (1-10); an estimate of the annual energy bills; or a ‘voluntary scheme’ that just showed scores for the best rated homes. Interestingly, out of the ‘mandatory options’, the line-rating way the most impactful, the score less impactful, the estimate of the annual bills the least impactful. This makes sense, because energy efficiency ratings also communicate comfort and quality information which is completely lost in a display that is just the energy costs. The voluntary option was the least impactful of all the options, and clear evidence that we need to move rapidly from voluntary to mandatory ratings for home efficiency.
A second report that I think is particularly critical for Australia is using health funding to drive energy efficiency upgrades for low income households. Research from New Zealand has found that retrofitting low-income housing delivers massive benefits for health, with every dollar of government investment in its Warmer Kiwi Homes program delivering $6 of benefits, largely in reduced public health costs. While the focus of this report is squarely focussed on the US, it highlights the potential opportunities for Australia.
Rob Murray-Leach and Katie Bartrop break down the Federal budget and what it means for the energy management sector.
Energy announcements and the Low Emissions Technology Statement – Rob Murray-Leach
The last month has seen a raft of new spending measures announced by the Australian Government, much of it underpinned by the First Low Emissions Technology Statement, which was released on 22 September. This is the first edition of a planned annual statement that will act as a rolling outline of priorities for R&D investment in low emissions technologies to guide the activity of government bodies.
Let’s cut to the chase. There’s a genuine need for investment in research and development of low carbon technologies - but this needs to be a complement to, not a substitute for, deploying mature technologies. However, the Ministerial foreword states ‘the Government’s emissions reduction strategy is focussed on technology not taxes’, which means that the Morrison Government still doesn’t have a real strategy to reduce emissions.
This lack of broader policy drivers remains a profound problem. However, it is worth considering the Low Emissions Technology Statement, on its own terms, as a framework for research and development spending. The Statement identifies five ‘priority technologies’ for - hydrogen, energy storage, low-carbon materials (steel and aluminium), soil carbon and carbon capture and storage (CCS). Four of these are pretty reasonable, but there are significant omissions, and the billions spent on CCS research over the last three decades have delivered very little return on investment; hopefully this new research is carefully targeted at hard to abate industrial emissions where it is actually justified.
The Statement categorises energy efficiency and digitisation as ‘enabling technologies’, which are necessary for large-scale deployment of priority and emerging technologies. While this means that energy efficiency won’t receive as much attention as the five priority technologies, the government will support energy efficiency through some technology investments, and there is the prospect that specific energy efficiency technologies get elevated to priority technologies in future statements.
Accordingly, energy efficiency will continue to be supported by the Clean Energy Finance Corporation (CEFC), and the Australian Government will widen the mandate of the Australian Renewable Energy Agency (ARENA) to cover energy efficiency. The Government will also continue to pursue enabling policies such as minimum standards, building codes and benchmarking.
On 16 September, to support the launch of the Statement, the Morrison Government announced $1.4 billion in core funding for ARENA, $52 million for energy efficiency and $94 million for a Technology Co-Investment Fund. On 6 October the Australian Government released its Budget for 2020-21, which did not announce any significant additional measures for energy, but confirmed the amounts and timing of funding.
Looking across several documents, we know that the Government has allocated $1.4 billion in core funding for ARENA, but it’s over a very long 12-year period. The Government has also announced roughly $200 million of additional funding for specific programs that ARENA will administer. Even taking this into account, it looks like the annual funding for ARENA will drop by over 50 per cent compared to the last eight years. The Government has flagged that ARENA will likely receive top-up funding for specific initiatives in future years allocated through normal budget processes.
For energy efficiency, the Government has allocated $52.2 million over 5 years. This appears to include:
- $12 million in grants to upgrade the energy efficiency of small hotels and pubs;
- $12 million in grants to upgrade the energy efficiency of community facilities; and
- $28 million for a range of unspecified measures. We understand that this will include funding measures such as the ongoing operation and expansion of the NABERS program and the Low Emission Trajectory for buildings.
The Government has committed $95.4 million over six years to the Technology Co-Investment Fund, to help businesses in the agriculture, manufacturing, industrial and transport sectors to adopt technologies that increase productivity and reduce emissions. It appears that $68 million of this funding will be spent via ARENA and $27.4 million through other routes. The nature of the Technology Co-Investment Fund is currently unclear, but it’s possible that it might be used to support innovative practices such as heat pumps in industry.
There is no more information currently available on these measures, but we have engaged with the relevant departments and will update members as soon as further information is available.
General business support in the Federal budget – Katie Bartrop
The budget also included a range of general business measures that will directly support companies in the energy management sector, and in some cases will support businesses to invest in energy efficiency upgrades.
- Extension of the existing instant asset write-off scheme until 30 June 2021.
- businesses with a turnover of up to $500 million able to immediately deduct several assets, including new and secondhand, worth up to $150,000 each.
This extension allows businesses already holding assets under the scheme an additional six months to first use or install eligible assets. However, the big news is that this program is being transitioned to a much more generous program from today:
- Immediate expensing from 6 October until 30 June 2022
- businesses with a turnover of up to $5 billion will be able to:
- immediately deduct the full cost of a new, eligible asset installed or ready for use by 30 June 2022, with no limit on asset value.
- immediately deduct the full cost of improvements made to existing depreciable assets by 30 June 2022.
- SMEs with a turnover up to $50 million will be able to immediately deduct the cost of all secondhand assets installed or ready for use by 30 June 2022;
- businesses with a turnover of up to $5 billion will be able to:
Importantly, these measures can help build the case for companies that wish to invest in energy productivity enhancing equipment.
Other general measures include:
- Loss carry-back means that businesses with a turnover of up to $5 billion will receive a cash refund of taxes paid on previous profits if they post a loss; and
- JobMaker scheme provides incentives to hire employees, apprentices and trainees
- JobMaker Hiring Credit scheme provides up to $10,400 per employee aged 35 years old or younger, hired from 7 October 2020 to 6 October 2021;
- There are no turnover limits on employer eligibility, however there must be an increase in employee headcount. An employer claiming JobKeeper does not qualify;
- The new employee must be working an average of 20+ hours per week over each quarter, and have received JobSeeker, youth allowance or parenting payment in at least one of the three months before being hired; and
- Expansion of the wage subsidy scheme for apprentices and trainees until 30 September 2021, where employers will receive a 50% subsidy (max $7K per quarter) of the first year of a new apprentice or trainee’s wages.
- JobMaker Hiring Credit scheme provides up to $10,400 per employee aged 35 years old or younger, hired from 7 October 2020 to 6 October 2021;
The above is not exhaustive and is provided as guidance only. Online guidance from the Government beyond the budget itself is currently limited – for further details we strongly recommend consulting your financial advisor.
The National Energy Efficiency Conference 2020 program is now available!
Taking place at the start of a critical decade for Australia’s energy transition, the Conference is a must attend event for anyone with an interest in building an affordable, reliable and sustainable energy system for Australia.
Early bird registrations for the National Energy Efficiency Conference 2020 close COB Sunday 11 October!
Click the links below to view registration options and secure your early bird tickets now. Early bird rates won’t hang around for long, so book now!
We are delighted to announce some of the national and international experts that will be speaking at the Conference. Stay tuned for more announcements coming over the next few weeks!
By Julianne Tice
Winter 2020 was uncomfortable for many of us who were stuck at home in a cold, inefficient home. For many, it was the first time spending the entire day at home, running the heater constantly. If you were lucky, running the heater wasn’t a financial issue. For some, this became an issue for the first time due to job loss. For others, this was not a new phenomenon.
Australia has poor quality housing stock
As a recent transplant to Australia, I continue to be shocked by the quality, or lack thereof, of the housing stock in a country which is far more advanced in many other areas. In my experience in the US, though the housing stock is far from perfect, well-sealed and insulated is the norm. It is unusual to be in a building and feel cold. In Australia, on the other hand, the norm seems to be to accept the cold indoor temperatures and numb extremities and mostly wait for the winter to pass, or else rack up the heating bill. And live the exact opposite in summer. This option doesn’t work for everyone; many people are forced to skip meals in order to afford to heat their home. Otherwise, people ration heating in order to avoid exorbitant bills – in fact, too many older Australians die in their own home from too-cold temperatures because they ration heating.
It is estimated that around 3,000 Australians die during periods of hot and cold weather each year, and Melbourne, Sydney and Brisbane have higher cold-associated mortality rates than Stockholm, Sweden.
Renters and those on low incomes lack the power to make significant improvements
No one wants to suffer in a cold home, and not everyone can afford to or has the power to do something about it. Renters are at the mercy of landlords to get efficient heaters installed, which are not even a legal requirement in rental properties. Sure, there are some small steps we can take to improve the efficiency and comfort of our homes – like fill gaps and cracks with caulk and put bubble wrap on windows – but we can’t make more substantial upgrades like installing insulation or doing more comprehensive draught sealing. Plus, I like seeing out of my windows.
Regardless of their employment status or whether they rent, own, or live in public or social housing, no one should have to suffer in a cold home. And in the coming months, no one should have to suffer in a hot home, either. The good news is, there is something that can be done about it.
Australians have historically cared more about marble benchtops than well-insulated walls, but as we build the demand for affordable, comfortable and healthy homes, that will change.
How to make homes healthier and more comfortable in three steps
First, we need mandatory disclosure of energy performance ratings in existing buildings, including rental properties. This would mean that potential renters and buyers would know what level of comfort and energy bill expense to expect before they move in. As has been pointed out, this will require a qualified pool of assessors and ideally, a nationally unified energy rating system, like NatHERS, which currently rates only new buildings.
Next, we need minimum energy performance standards for existing buildings and homes. Right now, the minimum standard does not exist. That’s right, a landlord can rent out a house with no insulation to speak of and as draughty as can be while leaving the renter to deal with single-digit indoor temperatures in winter. This has been my experience. These properties are essentially glorified tents.
Of course, you can buy a house in the same condition, but owner-occupiers have the power to make upgrades to a home. And even if you do make an arrangement with your landlord, you can’t be certain that you won’t have to move the following year. If you own your home, you should add insulation and draught seal – not only is retrofitting your home cost-effective, but the increases in thermal comfort you will experience will be priceless.
Finally, we need to retrofit Australia’s existing housing stock to a level that is healthy, comfortable and affordable for its inhabitants. Here’s more good news: retrofitting homes to make them more energy efficient is an excellent economic stimulus measure because it’s a ‘jobs machine’. Groups have been calling for energy efficiency in the economic recovery – an ‘efficient recovery’ – for months. In addition to creating jobs, energy efficiency eases energy bill stress, makes businesses more productive and resilient, and is a source of low-cost emissions reductions.
So what’s next?
Insulation is essential to making buildings healthy and comfortable, and it can be installed safely through energy efficiency retrofits. However, the only energy efficiency scheme that currently incentivises insulation is the ACT’s Energy Efficiency Improvement Scheme. Insulation is safe, and people without it in their home are suffering health consequences and energy bill stress.
Though insulation is required in new buildings, it is not widely installed in existing buildings. That’s why the Energy Efficiency Council and the Australian Built Environment Council (ASBEC) have developed a consultation paper on developing an industry-led roadmap for quality control and safety in the installation of insulation in buildings. Through consultation with industry, governments and other invested organisations, the roadmap will enable insulation to deliver comfortable, healthy buildings to Australians.
The EEC and ASBEC will be holding a public webinar on 12 October from 3:30-5pm AEDT to review the consultation paper and to take questions and allow attendees to participate in facilitated discussion. After consultation, recommendations will be made to governments and industry to ensure that we can reap the benefits of affordable and comfortable buildings.
Please join us on 12 October for the informational webinar. The consultation paper is currently available for public comment until 30 October. For more information, email email@example.com.
Julianne Tice is Project Officer at the Energy Efficiency Council.
In August the Energy Efficiency Council and the NSW Department of Planning, Industry and Environment piloted the delivery of a new Energy management systems advisor training program. This pilot enabled us to get feedback on the course, and with overwhelmingly positive feedback, we have made a few minor tweaks and are running the program again on Monday 16 through Wednesday 18 November 2020.
Dates: Monday 16 – Wednesday 18 November 2020
Times: 10am – 1pm and 2pm – 5pm AEDT (one-hour break)
Participants: 16 class members (max.)
CPD: 18 contact hours (approx. 3.6 AEE credits)
Registrations close: 6 November 2020
Investment: Standard fee = $1,500 + GST / EEC member fee = $1,200 + GST
To learn more about the course, click here.
The Energy Efficiency Council delivers and supports a range of certification, professional development and training programs and masterclasses designed to raise professional standards in the sector, support certifications through CPD opportunities, and to assist businesses on their energy efficiency journey.
The Energy Efficiency Council is pleased to announce that the Hon. Matt Kean MP, NSW Minister for Energy and Environment will open the Navigating a dynamic energy landscape session at the Energy Efficiency Expo Virtual Conference on Tuesday 20 October.
This session will launch the third edition of Navigating a dynamic energy landscape: a briefing for Australian businesses, and will be followed by the launch of two sector spotlights for manufacturers and office-based businesses later that day and on Tuesday 27 October.
Navigating a dynamic energy landscape: a briefing for Australian businesses is an executive-level briefing designed to cut through the noise and help businesses confidently navigate Australia’s dynamic energy landscape.
The Navigating a dynamic energy landscape session will feature:
- The Hon. Matt Kean MP, NSW Minister for Energy and Environment
- Bridgette Carter, Manager Energy Sourcing & Utilisation, BlueScope
- Tony Wood, Energy Program Director, Grattan Institute
With more speakers covering energy and climate market analysis and energy management and climate mitigation opportunities to be announced!
You can learn more about Navigating a dynamic energy landscape, and the Energy Efficiency Council's wider business engagement program at energybriefing.org.au.