1. Executive Summary

HP Open MindBackground and objectives

The Energy Saver Incentive (ESI) scheme is one of the first mandatory energy efficiency target schemes in Australia, its first phase running from 2009 - 2011. Those accredited under the scheme provide incentives to householders undertaking eligible energy efficiency activities. The scheme has been very extensive, involving over 600,000 Victorian households since 2009. The activities that have been taken up by households to the greatest extent have been those involving lighting, heating, hot water, and shower rose upgrades.

In installing/undertaking an activity in a household, accredited persons create a tradeable Victorian Energy Efficiency Certificate (VEEC). Energy retailers then ultimately retire their VEECs to meet their portion of the annual ESI target.

The Department of Primary Industries (DPI) provides policy advice to the Minister for Energy and Resources regarding the ESI scheme, which is administered by the Essential Services Commission (ESC). DPI is currently undertaking an evaluation of the first phase of the scheme. A key part of the evaluation process involves surveys of consumers, accredited persons, and technology manufacturers in relation to their experience of key features of the scheme. The findings from the current research will contribute to the overall evaluation of Phase 1 of the ESI scheme.

The study brings together two separate surveys, of consumers on the one hand, and of accredited persons (APs) on the other, with the broad aim of providing a holistic overview of the experiences of those taking part in the ESI scheme since its inception.

Supporting this overall objective was a number of specific research objectives, namely to:

  • Identify key barriers to consumers undertaking energy efficiency upgrades;
  • Identify key motivations on the part of consumers to undertake activities under the ESI;
  • Explore any additional behavioural impact on energy consumption that may have followed on from the consumers' uptake of ESI measures;
  • Examine the longevity of any changes that resulted from the uptake by consumers of ESI measures;
  • Examine consumers' preparedness to pay for undertaking energy efficiency upgrades under the ESI;
  • Explore potential economic impacts in terms of investment, employment, and technology investments made by APs; and
  • Examine the costs associated with the ESI, including both direct costs to participating consumers and certificate prices faced by APs.

The two separate surveys carried out as part of the study involved:

  1. Consumer survey. A substantial telephone survey of 1,000 scheme participants since 2009, split between four regions, and four key ESI activity groups (lighting, water heating, shower roses, and space heating). A response rate of 41% was achieved amongst those households who were eligible for interview and able to be contacted. All interviews took place between 28 July and 7 August 2011. The questionnaire covered motivations to undertake the ESI activity, continuing behaviour since the activity, and overall experience with the scheme.
  2. AP survey. A telephone survey of 50 current providers under the scheme, including 5 manufacturers (one of which also operates as an AP). A response rate of 61% was achieved, with all interviewing taking place between 29 July and 3 August 2011. The questionnaire covered drivers and barriers faced by consumers, and the impact of the scheme on their business.

The ESI scheme in context

The introduction of the ESI in 2009 has created an industry sector that is highly diverse, ranging from micro-businesses based around local trades or environmental services, through to national energy retailers and manufacturers with international ownership. APs are heavily concentrated in Melbourne and larger regional centres, with relatively weak representation outside of those areas. The sector has a strong reliance on lighting and water heating, although recent shifts towards solar water heating and standby power controllers have been emerging.

The consumers who have taken up energy efficiency upgrades under the ESI scheme have been mostly home owners, and have a demographic profile that is skewed towards mature households and pre-retirees and retirees. While this is partly a reflection of the skew in the survey sample towards higher cost ESI activities, there is a consistent tendency across all activities for those older people taking part in the scheme to be more educated and on higher household incomes. This suggests that the scheme may have been more successful in appealing to informed middle class households than the broader population. This is particularly apparent in relation to higher value products, such as water and spaceheating. Amongst those taking up lighting or shower rose upgrades (which have been the dominant activities under the scheme), however, the age and income profile is skewed in the opposite direction, towards younger, lower income earners (and the exclusion of many tenants from the survey may mean that these skews are even more pronounced across the whole operations of the scheme).

Consumer motivations to participate

Prior to the introduction of the ESI, the primary barrier to consumers upgrading their energy efficiency appears to have been inertia – it just wasn't important enough, things were still working well enough, they couldn't see clear benefits. The implication is that the intervention of the ESI may have prompted action that might not have happened otherwise.

When consumers have acted to undertake efficiency upgrades under the scheme, their motivations have been primarily economic (to reduce energy bills, to take advantage of discounts on offer) and environmental; marketing appears to have been a relatively limited spur to action. The strongest incentive has been offering the consumer a free product; the role of government rebates is not being acknowledged, and suggests that APs may be "grabbing all the glory".

Most consumers claim that they would have proceeded to upgrade their energy efficiency without the scheme, although this is slightly at odds with the inertia that had stopped them acting prior to the scheme's introduction. There is also a suggestion that APs may not be aggressively marketing the scheme, or using the cost savings it enables to leverage more upgrade activity; consumers are left with the impression that it was their decision, and it was something they were going to do anyway.

Consumer experience since the ESI activity

Up to two and a half years after the introduction of the ESI, almost all installed products are continuing to function properly; the typical consumer experience is therefore one of a functional upgrade to their energy efficiency. However, where products have stopped working, product quality is blamed in a majority of cases, and particularly when normal product wear-out (e.g. for light globes) is taken out of the equation. Most of those affected have since replaced the worn-out or faulty product, apart from where cost, inertia, or delays on the part of APs have precluded them from taking such actions.

There are clear indications that participating households have changed their behaviour in relation to saving energy. Despite the potential for the installation of more energy efficient products to lead to more careless behaviour (e.g. leaving lights on because they now use less power), far more consumers have shifted further towards energy efficiency. These compounding energy efficiency gains have been more concentrated amongst older, lower income, and larger households, where the economic impetus to behaviour change might be expected to be stronger.

Beyond the specific ESI activity in which they were involved, consumers appear to be active in pursuing energy efficiency, undertaking almost half of an extensive set of actions presented to them (albeit with a focus on more simple and less costly actions). Their main limitations on doing more are primarily economic, but they also express concerns about a lack of information, and scepticism about the nett benefits of upgrading. Both of these are potentially able to be addressed by a combination of government communications and AP marketing.

Overall consumer experience with the ESI scheme

Consumers' experiences with the ESI scheme appear to be predominantly positive; they see clear benefits in terms of economic gains (reduced energy bills, ability to receive discounts), an environmental contribution, and the quality and efficiency of the service that has been provided to them. Most participating consumers have had a problem-free experience, confirming this positive overview. 

However, for those who do experience problems, the primary issue has been product quality, with the way that installations were carried out a further source of discontent. This aligns with the experience of those who have had product failure since their ESI activity was completed, and suggests that a minority of APs might be "cutting corners" in terms of either the quality of the products that they source, or the way that the installation is carried out. Both hold the potential to weaken the positioning of the scheme over time if not addressed.

The impact of the ESI scheme on accredited persons

The ESI scheme has had a mixed impact on participating businesses; while around a quarter were established specifically to address the opportunities generated by the ESI, for most businesses it represents a minority of their overall business activities. The scheme has enabled many participating businesses to alter their business mix, added credibility to their business offer, and enabled them to create a dialogue with consumers seeking out "green solutions".

Overall, the scheme has provided nett benefits to participating businesses, and has given them the opportunity to diversify their operations, smooth out patterns of activity (and cash flow), and increase their competitiveness. Against these benefits, administrative requirements and logistical issues have created some discontent, and there are seen to be currently missed opportunities in relation to currently popular or emerging products that are not covered. Not surprisingly, what APs would like to see change focuses on cutting administrative requirements, increasing incentives, and marketing the scheme more aggressively.


In drawing together the findings from this evaluation study, it is clear that the overall impact and perception of the ESI scheme is positive; it has met a consumer need for financial incentive to overcome inertia in relation to upgrading household energy efficiency, and has delivered the upgrades with, in most cases, ease, efficiency, and to satisfactory standards of quality. Participating businesses see an economic argument for their involvement, and consumers have responded.

These points aside, however, there are suggestions throughout the findings that the scheme is not performing to its potential because of a number of perceived limitations that APs nominate, or that are apparent from the direction of key survey findings:

  • Consumers have tended to find the ESI rather than it finding them; outside of low value activities (lighting and shower roses), government marketing does not appear to have played a particularly strong informational role, and nor have APs been particularly proactive in marketing it to consumers. Both consumers and APs appear to misunderstand some features of the scheme, potentially impacting on their full ability to benefit.
  • Consumers and APs seem to be moving more generally to higher levels of awareness of energy efficiency activities and the ESI is supporting this; consumers often feel that they were bringing forward actions that they were going to take anyway, but undertaking ESI activities seems to drive further behavioural energy efficiency actions over time. ESI also seem to be supporting industry development in this area.
  • The consumer responses to low cost and high cost activities are substantially different. High cost activities are skewed towards older, more financially secure consumers who are able to access it more readily because of their knowledge, available time, and financial resources. Low cost activities, such a lighting, seem to be skewed to rental and low income households, with a younger age profile.
  • There may be barriers to participation for those living in areas outside Melbourne and the major regional centres; APs nominate logistical and cost issues that currently make it difficult for them to offer the scheme to consumers outside of the major centres.
  • The administrative workload imposed on APs is seen to be out of line with the value of the activities undertaken; while business, and particularly small to medium business, is typically seeking reduced administrative and compliance requirements from government, the requirement for registering certificates appears to be creating difficulty for businesses (and particularly smaller businesses) in justifying their active involvement in the scheme.
  • The value of the incentive is not seen to be adequate to drive maximum uptake of the activities. APs are concerned that the value of the incentive to the consumer is high compared to the price they are able to obtain for VEECs, leading them to encounter lower margins than they believe should be the case. At the same time, many consider the level of incentive they are able to offer to consumers to be insufficient to prompt upgrade activity; this is particularly the case in relation to higher value products such as water and space heating.
  • There is a sense that the scheme needs to be more dynamic, responding to changing consumer priorities and emerging technologies, rather than being based around what is felt to be a relatively static set of energy efficiency products, and one that is not necessarily aligned with consumers' current and changing green energy priorities. The process for bringing new products into the scheme should operate more rapidly in the view of many surveyed APs.

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Page last updated: 24/06/20