Policy update September 2021 02 September 2021
By Rob Murray-Leach
The lockdowns in Australia are causing significant disruption to energy efficiency projects. In addition to general restrictions on business activities, programs like the Victorian Energy Upgrades (VEU) Program have had to put in place specific restrictions on activities. I’d like to acknowledge both the hurdles that many of our members are facing right now, and the incredible work that they have put in over the last year to pivot and safeguard their businesses.
While projects have been hampered, work on energy policy has been continuing apace, even in programs like the VEU, which has:
- Released the details of its new cold-room activities; and
- Published two sets of VEU specifications, the general specifications version 9.0 and Measurement and Verification specifications version 6.0. The specifications can be found here.
This month's policy update looks not only at some major policy announcements, but also two separate reports submitted to parliaments in Victoria and NSW highlighting the importance of energy efficiency. While these reports may take some time to bear fruit, they show the rapidly growing awareness among politicians and bureaucrats about the importance of energy efficiency.
National Construction Code
The National Construction Code (NCC) sets out the key technical design and constructions requirements for new buildings in Australia, setting minimum required levels for safety, health, amenity, accessibility and energy efficiency. Each state and territory government enacts the NCC in its own territory using legislation, and there are some variations between jurisdictions. It is important to note that NSW does not use the NCC to set energy efficiency standards for homes (NSW uses BASIX for this purpose).
The Australian Building Codes Board (ABCB) updates the NCC every three years - in 2019 the energy efficiency requirements for commercial buildings (Section J) were significantly enhanced. On 30 August the ABCB opened its consultation on raising the energy efficiency standards for new residential buildings (houses and apartments), which would take effect in 2022.
The ABCB is proposing a number of changes compared to previous standards:
- The standard for the thermal performance of new homes would be raised from the equivalent of 6 Star NatHERS to 7 Star NatHERS;
- Enhanced condensation management provisions, including additional ventilation and wall vapour permeability requirements;
- A whole-of-home annual energy use target that includes major appliances and on-site renewables. It should be noted that while the ABCB is proposing to let builders make trade-offs between the energy efficiency of appliances and on-site renewables, it is not proposing to let builders make any trade-offs with the building fabric; and
- A new set of Deemed-to-Satisfy elemental provisions for Class 2 buildings (i.e. apartments).
Figure 1 – proposed changes to thermal comfort requirements in the NCC
The EEC will consult with members about their views on the proposed changes to the NCC. On an initial read, if implemented the proposed changes will significantly improve the energy efficiency of new homes, although previous analysis has suggested that the most cost-effective minimum standard for the thermal envelope is equivalent to 7.5 Star NatHERS, which is higher than the proposal of the equivalent of 7 Star NatHERS.
Submissions are due by 17 Oct 2021.
Energy Security Board
On 26 August the Energy Security Board (ESB) presented its final advice to Australia’s energy ministers about changes to the future of the National Electricity Market (NEM). This report is almost three hundred pages long and contains a wide range of recommendations for the future of Australia’s energy system. We will forensically analyse this report and provide a fulsome update next month.
However, I will briefly touch on one issue that has been covered extensively in the press. While many of the ESB’s recommendations are widely supported, there has been a lot of debate about one recommendation – the proposal to amend the Retailer Reliability Obligation into a ‘Physical Retailer Reliability Obligation (PRRO)’, which is sometimes referred to as a ‘capacity market’.
Currently, the NEM only pays electricity producers for what they put into the grid. In contrast, some energy markets in the US and elsewhere pay for both the electricity put into the system and for having capacity available, hence the name ‘capacity market’. The PRRO would require energy retailers and some large energy users to obtain certificates to show that there’s enough ‘capacity’ (e.g. batteries, demand response, hydro-power and coal- and gas-power plants) to back up wind and solar and ensure that the lights remain on.
This means that the PRRO creates a market where energy retailers pay companies to have electricity generation, demand response and batteries ‘available’ when needed, which would potentially increase reliability but also may have implications on energy bills and keep old coal-fired generators running for longer. There is hot debate about whether the PRRO is necessary – there are already incentives in the NEM to ensure that there’s sufficient supply of electricity, and Australia’s electricity system is incredibly reliable by global standards. Despite the headlines, the NEM has exceeded its incredibly high standard to ensure that there’s enough power to meet consumer demand at least 99.998 per cent of the time.
These reforms have not been signed off yet and will take years to design and implement. This remains an important issue to watch, but the debate has a long way to run.
NSW Decarbonisation Innovation Hub
We’d like to remind everyone that the NSW Government is continue its process to finalise its partners for its Decarbonisation Innovation Hub. While the Expressions of Interest stage has closed, the Request for Proposal phase is now open. For more information visit the NSW Government’s dedicated page.
Clean Energy Finance Corporation
On 18 August the CEFC released its annual investment update which details where the CEFC invested $1.37 billion in 2020-21. In addition to investing in a range of start-ups, the CEFC invested $108.5 million in Firstmac to help it support green home loans. Firstmac raised a total of $750 million through an Australian-first green mortgage-backed securitisation. This announcement builds on previous stories in our newsletter, showing that the momentum is really building in the finance world to drive energy efficiency in homes.
On 26 August the CEFC announced a further $87 million investment in a specialist disability accommodation (SDA) platform which will accelerate the development of sustainable housing solutions for people living with a disability.
Victoria’s 30-year Infrastructure Strategy
On 19 August the Victorian Government’s independent infrastructure advisory body, Infrastructure Victoria, submitted a 30-year Infrastructure Strategy to the Victorian Parliament. The EEC was engaged early in the development of this strategy and it’s great to see that the strategy hammers some key messages to the government, including:
- Almost half of Australia’s abatement to 2030 could come from energy efficiency;
- Improving homes reduces heat stress;
- More efficient buildings reduce stress on energy infrastructure; and
- There are significant economic opportunities from improving energy efficiency.
The report sets out seven key recommendations on energy efficiency in some detail:
- Require new homes to be 7 Star from 2022 and 8 Star from 2025 (Recommendation 5);
- Mandate a home energy efficiency disclosure scheme (Rec. 6);
- Strengthen minimum energy efficiency standards for rental homes (Rec. 7);
- Make Victorian government buildings more energy efficient (Rec. 8);
- Use demand management pricing to make the energy system better (Rec. 9);
- Confirm gas pathways and allow the development of gas-free homes (Rec. 10); and
- Improve the energy efficiency of public housing (Rec. 55 and 94).
Sustainability of energy supplies and resources in NSW
In mid-August the NSW Parliamentary Committee on Environment and Planning has released its report on the ‘Sustainability of energy supplies and resources in NSW’. In the past, I would have expected this kind of report to entirely focus on energy supply, but the Committee actively sought our input and I was surprised to find that they’ve quoted extensively from our report The World’s First Fuel.
The report’s ‘8th finding’ is that “Energy efficiency reforms are a key part of reducing energy demand and generation.” Accordingly, the Committee recommends:
- That the NSW Government progresses energy efficiency reforms by finalising and implementing the Draft plan to save NSW energy and money. (Recommendation 5); and
- That the NSW Government supports higher energy efficiency standards for new homes in the 2022 National Construction Code, through the Australian Building Codes Board (Recommendation 6).
Rob Murray-Leach is Head of Policy with the Energy Efficiency Council. Connect with Rob on LinkedIn.
This article was originally published in the September edition of Efficiency Insight.