Energy Saver Incentive Scheme: Phase 1 Evaluation Survey
7. The impact of the ESI scheme on accredited persons
In this final section of the report we seek to draw together a range of findings from the AP survey in relation to their perceptions of the economic, employment, and technological impacts of the ESI scheme on their businesses. Our approach to this has been to adopt a semi-qualitative evaluation methodology, drawing on AP responses to a series of open-ended questions presented to them in the course of the interviews, and linking these less-structured responses to their more purely quantitative responses to the other survey questions.
Our reason for adopting this approach is that the nature of the population under study is a highly diverse grouping of businesses, ranging from locally-based micro businesses through to large national (and even multinational) operations. In researching such a population quantitatively, there is always an inherent risk of overstating the representativeness of "hard numbers" derived from a sample survey. The inclusion or exclusion of any individual business could change such aggregate results markedly, particularly where impact measures, such as changes to turnover or employment, or share of activities, are involved.
Our preference is to use the quantitative data as a guide only, and to derive conclusions from a considered comparison of such data and the verbal responses that relate to each issue. Consequently, this section of the report is purely textual; all data charts relating to the AP survey are provided at Appendix 1 for reference purposes.
Business establishment by providers
Around a quarter of the sample of APs had established their business as a result of their participation in the ESI scheme. As such these firms represent a clear example of the economic impact of the scheme.
The 12 new businesses that were surveyed, with a primary activity focus on lighting and water heating, included 11 providers and one manufacturer. By the time of the survey they employed 10-15 people, which placed them at the smaller end of the AP spectrum. While they had been established to deliver ESI activities, only around 40-45% of their turnover is made up of such activities; clearly some have used ESI as a launching pad to a more diverse range of operations.
ESI as a business focus
APs claim to derive an average of only around 20% of their turnover from the ESI scheme, suggesting that it is a supplementary rather than core part of their business mix. However, there is strong variation in this; four surveyed APs rely almost entirely on the scheme, while more than half have less than a tenth of their turnover coming from ESI activities.
Regardless of their current reliance on the scheme, around four in ten APs claim that the scheme has changed their mix of activities. What this has meant has varied considerably from business to business:
- For some it has made them focus more strongly on particular (existing) parts of their business, while others have been encouraged to launch into totally new activities.
- Some businesses have been forced to seek out more efficient products to meet customer requirements.
- For some smaller and newer operations, the scheme has added an element of credibility to their business, and enabled them to market themselves as "accredited", "backed by government".
- The nature of the scheme has led some APs to a raised awareness of environmental issues, and by enhancing their own knowledge of the subject matter they have been able to broach the subject more readily with customers.
Surveyed APs employ an average of 14 employees to work specifically on ESI-generated activities, 5 full-time and 9 part-time. This ESI workforce represents around 19% of the average of 73 employees per AP, which is very close to the turnover share attributed to the scheme. ESI-related staff fill a range of roles, but notably administrative, and to a lesser extent managerial and skilled trades positions.
Across the sample, almost one in three APs claim to have hired new staff specifically to work on the ESI scheme. ESI hirings appear to have been most concentrated amongst APs with a focus on the two lower value products (lighting and shower roses). The average number of new staff hired to work on ESI activities was 8, suggesting that the balance of the average of 14 ESI staff have been diverted from existing roles in other parts of the APs' business activities.
Investment and technological impacts
Around a third of surveyed APs invested in new products, machinery or systems to facilitate their participation in the scheme. The nature of such investment has ranged from new products and equipment related to ESI products, to equipment to assist administrative processes (particularly IT equipment), and staff training. Only around one in five surveyed businesses claim to have required any borrowing to fund their ESI involvement.
For almost a quarter of the surveyed businesses, involvement in the ESI scheme has supported the development of new technology or services, with lighting the product category that this has applied to most clearly. Basically, those APs that have taken on such development feel that their involvement with the scheme has encouraged them to look beyond their usual practices and experiment with new products and services. In terms of products, it has helped them take an interest in, and proactively seek out new technology, including ducted heating units to replace more standard units, LED down-lights, and stand-by power controllers.
In terms of services, APs feel that the scheme has encouraged them to branch out into new ventures, such as importing and wholesaling, product design (e.g. a new solar hot water system), software development, and providing training, such as that targeted at special needs groups such as older people and other disadvantaged groups.
The costs and benefits of participation in the ESI scheme
Surveyed APs claim that around half of the price that receive for VEECs (which in most cases they sell on the spot market to either retailers or intermediaries) is taken up by the incentive that they offer to consumers to undertake the energy efficiency upgrade. This might suggest that their involvement in the scheme is of limited economic benefit. However, around seven in ten of those surveyed view the scheme as offering them a nett benefit; that is, the benefits to them of participation outweigh the costs of administering it and providing the required products.
Specifically, APs nominate a number of key business impacts from participating in the scheme:
- Increased competitive capacity that flows from an increase in company turnover
- A boost to employment of skilled personnel, and to investment
- An enhanced capacity to diversify their operations, and to smooth out activity and bring more financial certainty to the business, by providing more secure sources of revenue
- "The main impact on my business is to keep our ESI work going when other work is quiet"
- An ability to increase their ability to approach consumers with a persuasive offer
- "We mention that the scheme is available so we get a double impact"
- A shift towards greener technology with the mix of products that can be sold under the scheme.
There are also, of course, downsides to participation, notably:
- Increased compliance and administrative workload; and
- Minor cash flow and warehousing issues.
While the overall perception is positive (70% consider the benefits of the scheme to outweigh the costs), there is a minority of APs who don't believe that the scheme has had any impact on their business. They cite a range of reasons for this view:
- Products that are popular with consumers, such as solar panels and various insulation products, are not included in the scheme
- The incentive offered is not high enough for some customers to consider switching to more energy efficient products
- The incentive is also not considered adequate to cover the necessary administrative work involved in obtaining certificates
- "We put in a hot water system that cost between $8,000 and $9,000 to install. We would be lucky if the VEECs tallied up to 1% or $80. It is not worth us doing the paperwork for it."
- Some APs feel that oversupply of green products in the market has been pushing prices down, reducing the financial benefits of participating in the scheme. It was not clear whether they saw the scheme as driving or even contributing to that oversupply, or whether it was simply due to an expansion in the energy efficiency sector more generally.
Suggestions for improvement to the scheme
While in the main APs have not experienced any real "drama" in participating in the scheme, they do feel strongly about some aspects of the ESI:
- They would prefer to see the compliance and administration burden reduced, particularly for small businesses.
- "It is the smallest rebate available but requires the most work"
- They would like to see increased efforts made to market the scheme and increase understanding of it amongst consumers; the public-facing website is felt to be in need of updating, and being made more user-friendly as part of this process.
- More certainty in pricing is also sought.
A number of secondary suggestions were also made by APs:
- The scheme needs to become more responsive to changing market conditions and emerging energy efficiency opportunities (particularly solar and insulation).
- The logistics costs and issues faced in servicing more remote areas needs to be acknowledged by increasing incentives in these areas.
- Higher incentives were generally seen to be needed.
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.
Page last updated: 24/06/20