Energy savings schemes to drive electrification

Energy savings schemes must drive electrification sooner

Fuel switching incentives becoming available under energy savings schemes across Australia represent a crucial opportunity to drive electrification sooner for commercial and industrial businesses and households, writes Ric Brazzale, board member of the Energy Savings Industry Association (ESIA).

IN A POSITIVE STEP the Albanese government has legislated an emissions reduction target (ERT) of 43% by 2030. However, based on the science we need more like 75% to limit global warming to 1.5°C in line with the Paris Agreement.

The 82% renewables target by 2030 and an aggressive battery storage program and Rewiring the Nation plan are all great news. But to plug a major gap, we still urgently need a national energy savings scheme (NESS) which the Climate Change Authority has recommended since 2017 and which the Business Council of Australia recommended in 2021 at least for vulnerable households.

Decarbonisation of the National Electricity Market (NEM) is set to accelerate by 2025, so policy makers at federal and state level now need to weave in policy measures that enable mass uptake of more efficient household and business appliances and equipment that switch energy consumers from gas to electric fuel sources rapidly to 2025.

It’s a big call to swiftly shift the focus to largely get off gas and only reward gas-to-gas efficiency where other options are limited, so we need a nuanced suite of policies.

In early October the Albanese government delivered the welcome news of a national energy performance strategy consultation commencing in late 2022. It will take further consultation to shape and launch a NESS, hopefully based on the NSW model so most of the groundwork has been done.

The immediate national opportunity to rapidly accelerate efficiency upgrades across Australia is to introduce more methods under the federal Carbon Farming Initiative (CFI) energy efficiency methods. These can be adopted directly from the longestablished energy savings schemes in New South Wales and Victoria.

To date, less than 2% of the total Australian Carbon Credit Units (ACCUs) created under the CFI have been for energy efficiency projects. Given that existing methods require measurement and verification by energy efficiency expert engineers, the integrity of the savings awarded ACCUs are very high.

“… we still urgently need a national energy savings scheme”

Victoria’s gas use and emissions

In Victoria, which has just announced an ERT of 75-80% by 2035, 2.2 million households and businesses use gas, about 65% use gas for heating and cooling, and hot water. The gas sector contributes 17% of the state’s emissions, and most of the gas is consumed by industry.

That state’s Gas Substitution Roadmap 2022 sets a clear pathway and is relying on the Victorian Energy Upgrades (VEU) energy savings scheme as a key lever. Grant programs such as sub-metering are a crucial adjunct and first step for businesses to better inform their energy management.

The VEU, which has a greenhouse gas emissions (CO2-e) target metric, could support the gas-to-electric switch over the long term as the emissions intensity of electricity supply reduces.

The VEU is phasing out upfront financial incentives for households upgrading from old to more efficient gas-to-gas appliances.

The Energy Savings Industry Association is urging Victoria to introduce much stronger fuel switching signals for all upgrades under the program. A way to do this is to value permanent fuel-switching. For example, in its response to consultations reviewing existing water heating and space heating and cooling activities, underlying calculations could value more than equipment lifetimes.

Once the switch has “Without strong signals, been made, getting energy consumers will back on gas is unlikely. lock into gas products Without strong signals, which will be more energy consumers will expensive to run and lock into gas products higher emitting to 2030” which will be more expensive to run and higher emitting to 2030.

The state of NSW

The New South Wales Energy Savings Scheme (ESS), which has a MWh-based target, is addressing fuel-switching opportunities as part of its current consultation.

That state is wrapping this new direction into its overarching Energy Security Safeguard which now includes a peak demand reduction scheme (PDRS). Commencing from 1 November, the PDRS provides financial incentives called peak reduction certificates (PRCs – ‘perks’).

The first tranche of eligible activities includes commercial and industrial hot water heat pumps. This activity attracts energy savings certificates (ESCs) under the ESS and PRCs.

It has the scope to support significant uptake as switching to more efficient equipment that also reduces water heating load during peak times from 2.30pm to 8.30pm AEST during summer from 1 November to 31 March, significantly reducing peak energy demand. Addressing all sectors

upgrades using measurement and verification methods. For homes, upgrading and switching pool pumps to operate outside of the peak could save up to 450MW: more than the capacity of a generating unit at Liddell coal-fired power station. We are advocating that the federal government also launch a PDRS based on the NSW model. Finally, beyond emissions reductions and efficiency gains, energy upgrades deliver significant bill savings. In a cost-benefit analysis of the NSW ESS and

PDRS to 2040, households and businesses participating in both schemes are expected to save an additional $3.6 billion on their bills from 2022-2040. The net economic benefit is predicted to be $1.2 billion by 2040 for that state. We mustn’t kid ourselves. We have a short “Policy measures must runway of eight years to 2030 to deliver swift provide targets with change on the demand side that proactively penalties for liable parties, financial incentives for energy consumers and workable activities and supports electrification well before the infrastructure gets built under the federal Rewiring the Nation plan. Policy measures must provide targets with penalties for liable parties, financial incentives methods for industry” for energy consumers, and workable activities and methods for industry. Only then can commercially viable business models mobilise and change out old equipment rapidly at scale, switch to cleaner fuels sooner, and drive the transformation we so desperately need to safeguard our smart energy future across Australia. The ESIA is the national peak body representing and self-regulating businesses that create and trade energy efficiency certificates under state and federal schemes in Australia and includes energy experts, product developers, manufacturers and installers. For more insights contact ESIA Executive Officer comns@esia.asn.au

Ric Brazzale is calling for a national energy savings scheme

SUNTANK X