8th July 2013

Dear Sir,

Re: Review of the Energy Saver Incentive

Please find attached the response to the Review of the Energy Saver Incentive (ESI) prepared by the Energy Efficiency Certificate Creators (EECC) Group.

We welcome the opportunity to participate in the ESI Review and strongly support the continuation of the ESI given the overall performance and positive outcomes of the Scheme in assisting Victorian households and businesses to access energy efficiency products and services.

The EECC Group have direct experience in the Victorian ESI, and many of our members also participate in the NSW Energy Saver Scheme and the SA Residential Energy Efficiency Scheme. The EECC also have active representation on the National ESI advisory group.

We commend the state government in supporting the implementation of energy efficiency to date and see the multiple benefits as not just an avoidance of cost for many of the most vulnerable but also in its part to play in providing local business a competitive edge.

A further benefit is the avoidance of expensive infrastructure upgrades for the generation and distribution of electricity. These are certainly not the only benefits of energy efficiency but they are worth mentioning in any consideration of a scheme promoting energy efficiency.

Whilst there is a small flow through cost of running any such scheme, we believe it important to note the reduction in wholesale prices largely due to the significant lowering demand (including peak) and the part that the ESI has contributed to the lowering. The EECC contend that the savings made in purchase of wholesale and peak electricity would outweigh the cost of the scheme to the retailers.

It is our experience these regulated market schemes play a critical role in overcoming barriers to the uptake of energy efficiency, particularly in residential households and small to medium sized businesses.

We advocate for the continuation of the Scheme through phase 3 with an extension to large industrial businesses including those previously excluded under EREP requirements. Based on our modelling, a phase 3 target can easily double the existing target with an estimated 30 million tonnes of savings to be made through accredited energy efficiency activities. ESI Response - EECC

We also believe that the three year review of the scheme needs to be extended to at least six years so as to provide certainty for business investment. This is particularly important where project based activities are implemented with the certificates created over a longer time frame.

Together the EECC Group in Victoria:

  • Form a significant part of 134 accredited certificate creator businesses approved to operate within the ESI
  • Are responsible for provision of employment opportunities to an estimated 2,500 personnel, many of which are long term and highly skilled.
  • Have provided energy efficiency services to more than 1 million Victorian households.
  • Have developed business opportunities to Victoria through the supply relationships with more than 100 appliance manufacturer's to purchase and supply products for installation.

We are proud of the role that we have played and continue to play in supporting the state governments successful ESI and look forward to continuing it into stage 3. We look forward to the outcome of the Review.

Please contact Bruce Easton from Ecovantage, convenor of the EECC Group on 0417 568 918

Yours sincerely

Bruce Easton

Submission - Review of the Energy Saver Incentive

About the EECC

The EECC was formed in 2009 by a number of "Accredited Persons" under the VEET scheme initially with the purpose of improving the operational effectiveness and efficiency of the VEET scheme. The EECC group has expanded to include businesses operating in the NSW Energy Saver Scheme. While not formally constituted the EECC meets regularly in both Victoria and NSW. It seeks to represent the interests of organisations that are actively and responsibly involved in energy efficiency certificate markets in Australia.

The aims of the Group include support for:

  • Responsible and "best practice" certificate creation
  • Effective and constructive engagement with Designers and Regulators of the market schemes and governments
  • The continued development and harmonisation of energy efficiency schemes operating across Australia.

In 2009 EECC developed a voluntary Code of Conduct to achieve self-regulation of certificate creators in direct marketing activities.

We are proud of the overwhelming success of the schemes and our contribution to that success.

Executive Summary

The Victorian Energy Saver Incentive (ESI), also known as the Victorian Energy Efficiency Target (VEET) scheme has been very successful. It has delivered on its legislative objectives resulting in a reduction in energy consumption, lower greenhouse emissions and supported new businesses, technologies and jobs at a cost lower than initially expected.

The ESI has worked to address a number of the market barriers which has historically resulted in a sub-optimal level of investment in energy efficiency.

Access to Energy Efficiency

  • The ESI (scheme) has assisted more than 1 million Victorian households in overcoming barriers to the uptake of energy efficiency through some 2.3 million approved energy efficiency installations. These have directly reduced the energy consumption and costs to those households. Participation in the scheme has offset the cost increases passed on to electricity customers throughout the state and will continue to do so into the future. Modelling for the National ESI estimated the benefit of efficiency schemes to participating households of $185 pa.
  • The scheme has also supported interest in the broader community in energy efficiency not only through discounting the product and it's installation but providing a degree of credibility and support that allows householders and business people alike to feel less uncertain when dealing with accredited products and activities. An extension to this is the interest shown in undertaking further energy efficiency activities following the successful initial participation in the scheme. So a multiplier effect occurs which may also be extending beyond the scheme to decision making when purchasing appliances.

Reduced exposure of the Victorian economy to high fuel prices.

  • Energy Efficiency activities supported by the ESI have resulted in a significant reduction in energy consumption with a positive impact on the energy markets resulting in:
    • more than 500 GWh electricity savings per annum
    • more than 50 MW of peak summer demand reduction
    • lower wholesale prices
    • reduced pressure on future network charges.

AEMO estimate that the impact of the ESI by 2020 will be to reduce summer peak demand by 425 MW and energy consumption by 4000 GWh per annum. We believe that these projections may understate the contribution by more than 25 per cent.

  • The energy efficiency savings result in a direct cost saving to energy consumers. It is estimated that in 2012 households and small businesses saved $240 million on their power bills as a result of the ESI and this will rise to $550 million in 2013. With rising electricity and gas prices these opportunities for savings will become more highly valued by electricity consumers.

Job creation

  • The ESI has supported the development of an energy services industry that has underpinned investment in new and innovative products and business models. The EECC have estimated that amongst the certificate creator businesses alone there are some 2,500 new jobs that have been created in Victoria. These include business development, operational, project management and field services and have offered employment to skilled, professional and unskilled personnel. Many of these businesses, established as a result of the ESI, or have transferred operations from other jurisdictions attracting business and investment opportunities in Victoria that would not have occurred but for ESI. The ESI has provided a commercial incentive and demand for the provision of energy efficiency services. With five years' experience these businesses are maturing and developing new solutions and options for the uptake of energy efficiency initiatives.

Aids flexibility of supply

  • The energy savings delivered through the ESI enhances security of supply and makes the Victorian economy more resilient to the changing supply landscape.
  • Reduced reliance on current generation aid the decarbonising of the Victorian economy and assist in minimising the cost impact on business in a carbon constrained future.

Low cost delivery

  • The cost of liable parties complying with the scheme has averaged $43 million per annum for the first three year period and then increased to $115 million in 2012 with the expansion of the scheme. When we consider the impact on electricity customers which account for 77 per cent of the liability then this equates to 0.28 cents per kWh in 2012 (refer to Table 3). For an average household consuming 6.5 MWh per annum this amounts to less than $18 per annum or 1 per cent of their electricity bill.
  • Scheme compliance costs incurred by obligated, accredited and administrators has been estimated at $2.62 per certificate in 2011 (NERA, 2012) and falling through economies of scale as targets increased and participants became more efficient.

86% of this cost was in labour and illustrates some of the employment as noted above. The $1 registration charge per certificate very nearly covers the estimated cost of administration of $1.10.

Untapped potential

  • The late introduction of the non-residential sector and further delays in implementing the commercial lighting activity and ongoing delays in the development of project based activities allow an enormous and largely untapped potential for energy savings in businesses, local government and community groups. It is expected that the recent activity will develop momentum in the short to medium term although the uncertainty of the continuation of the scheme will undermine this to a certain extent. .

The EECC Group believes that the benefits the scheme delivers significantly outweigh its costs and has been key in addressing market barriers to the uptake of energy efficiency. The group also consider that the scope for increasing the target further will continue to drive the benefits to Victorians, in particular non-residential sector.

Barriers to the uptake of energy efficiency measures

Addressing market barriers to energy efficiency

Energy efficiency is one of the most cost-effective means to reduce greenhouse gas emissions. It does however suffer from a range of market failures and barriers which mean that a sub-optimal level of investment takes place.

The barriers to energy efficiency have been well documented (Victorian ESI RIS 2008, 2010, Productivity Report 2008) and include:

  • Energy is typically a small proportion of a consumers total income and does not get the attention that it deserves
  • Capital is not available to fund the energy efficiency improvement and where it is available, very short investment payback periods are required
  • Energy consumers may lack the knowledge or information to assess and implement energy efficiency improvements
  • Split incentives (eg. between landlords and tenants)

The Australian Industry Group in its report, "Energy shock: pressure mounts for efficiency action" (July 2012) found that:

  • "to date most efficiency improvements have been modest, indicating that business capital for investment is either not available or is largely reserved for other purposes"
  • "While a growing number of businesses are taking action to improve their energy efficiency, most are looking for quick wins and would only consider an energy efficiency project where the expected payback period was less than three years"
  • "The biggest drivers for efficiency action were concerns about energy prices and the desire to maintain or enhance business profit margins"

Consistent with findings of previous Ai Group surveys

  • 27 per cent of respondents spent the equivalent of more than 2 per cent of their sales revenue on energy (73% less than 2%)
  • while only 7 per cent of respondents spent the equivalent of more than 5 per cent of their sales revenue on energy.
  • Forty-six per cent of businesses reported an energy spend of less than 1 per cent of their turnover

The VEEC scheme has been important in addressing a number of these barriers through:

  1. being able to reduce the payback period to more acceptable levels; and
  2. the creation of an energy services industry where service providers are able to bundle the value of the VEECs into packaged solutions to customers.

Energy Efficiency Activities supported by the ESI

The first three years (phase 1) of the scheme was limited to residential activities with a target of 2.7 m tonnes of abatement per year. The scheme was expanded to include business activities in 2012 and the target doubled to 5.4 million tonnes per annum.

A broad range of energy efficiency activities have been accredited under the scheme. Nearly 2.3 million energy efficiency installations have occurred with more than 1 million households having benefited from the scheme. It is EECCs contention that on a "business as usual" basis there would be a significantly lower proportion of these energy efficiency activities.

Table 1 below shows the breakdown of energy efficiency activities under the Scheme since 2009 (extracted from the Essential Services Commission (ESC) Registry):

  • Standby power controllers and lighting have been the dominant activities to date accounting for 48 and 33 per cent of certificates created respectively.
  • Data from the ESC Scheme Forum (Figure 1) shows in activities creating VEECs for 2013 (to 7 Jun). There is continued activity in the non SPC/lighting activities although with a significant drop off in residential lighting. Importantly there is continued and steady activity in hot water and space heating activities. New activities such as In Home Displays (approved in 2012) and high efficiency TVs are emerging.

Table 1 - Activities creating VEECs (1 Jan 2009 to 1 June 2013)

Business Residential Total
Avtivity Summary No. of Installations No. of VEECs No. of Installations No. of VEECs No. of Installations No. of VEECs
Standby Power Controller 23 42 1,154,216 9,559,240 1,154,239 9,559,282
Lighting 1,119 81,910 695,961 6,428,127 697,080 6,510,037
Water Heating 269 11,076 46,699 1,806,542 46,968 1,817,618
Low Flow Shower Rose 14,293 61,216 215,919 573,975 230,212 635,191
Weather Sealig

129,956 487,986 129,956 487,986
Space Heating 13 2,222 4,097 452,559 4,110 454,781
Freezer/Refrigerator 19,519 93,355 22,180 98,634 41,699 191,989
Other 357 733 7,010 71,433 7,367 72,166
Grand Total 35,593 250,554 2,276,038 19,478,496 2,311,631 19,729,050

Complementarity of ESI with national emissions reduction scheme

While the objectives of the VEET Act include emission reduction, it is noted that this is not the sole objective of the Scheme. Nevertheless, the ESI has been significant is assisting in Victoria's emission reduction with some 20 million tonnes of savings delivered through phases 1 and 2 already.

Under an emissions trading scheme a cap is placed on total emissions and the emissions cost is seen as an increase in energy costs by consumers. The supply side of the industry can readily respond to this signal however it becomes very muted for most consumers where the price impact remains negligible (refer to discussion on barriers).

A price on carbon will not address the barriers to energy efficiency. The ESI deals with these in a way that result in a lower overall cost to the community of meeting a defined emissions target. In this way the schemes are complimentary.

The existence of a target scheme that achieves measurable and verified emissions reduction is a prudent measure for the Victorian government irrespective of the introduction of a national emission trading scheme, or other initiatives at a national level. The State-based ESI ensures:

  • Victoria delivers cost effective abatement through a regulated environment that assists energy consumers reducing consumption and costs.
  • that energy efficiency will occur in Victorian irrespective of initiatives at a national level, which in the instance of the Direct Action Fund will not necessarily target or result in energy efficiency or emission reduction programs in Victoria.
  • there are metrics for calculation of abatement in the longer term, when it is anticipated there will be increased binding targets for emission reduction.

The review of the options available for a National ESI favoured adopting harmonised state based schemes. (NERA) This is sensible in that the states have developed significant knowledge, systems and processes which should be further developed rather than replaced.

Energy efficiency schemes in particular are complimentary to other emission reduction measures such as emissions trading and renewable energy targets. It is noted that many other developed countries have implemented energy efficiency and demand side programs (Italy, France, UK). Many of these approaches are based on utility run programs where the regulated electricity utility is able to recover the cost of these programs through their rate base. In Australia we have separated our vertically integrated electricity businesses and the comparable way to incorporate energy efficiency programs is through retailer licensing obligations.

Performance of the ESI to date

On balance the ESI has performed remarkably well and all involved should be proud of their contribution. There have been few complaints and problems given that several thousand people have installed products in over a million houses.

Retailer compliance costs of less than 5% and total compliance costs of less than 10% of the cost of the certificate is also worthy of note meaning that product and service is not unduly encumbered by overhead.

The scheme, unlike energy efficiency funds in other jurisdictions, is regulated by an independent administrator at arm's length from the market and subject to statutory obligations. This has ensured that energy efficiency in Victoria is delivered through this regulated framework with clear rules applicable to operators, providing a safety-net and sense of confidence for consumers.


Given the sheer scale of activity, the number of businesses and the attractiveness of many of the energy efficiency offers, it is unsurprising that there have been some complaints. These have, on balance been low in number compared to the high level of customer satisfaction, measured through ESC customer surveys. It is likely that issues will stay low or even decrease further in Phase 3 given the maturation of the Scheme and the trend to activities requiring a co-contribution. The EECC supports strong and effective regulation to minimise and penalise poor and non-compliant practices. These isolated instances of poor practice can and should be addressed through regulatory penalties either under the VEET Act or the Australian Consumer Law.

Benefits of the ESI

Lower electricity consumption and lower peak summer demand

The Australian Energy Market Operator (AEMO) in their 2012 National Electricity included estimates for energy efficiency contributions to reducing electricity consumption and peak summer demand (refer to Figures 2 and 3). Over the 2011-12 to 2013-14 period, AEMO have estimated that energy efficiency is contributing more than 500 GWh per annum in energy reductions and more than 50 MW per annum of peak summer demand reduction.

If we consider the activities that have been installed since the scheme start on 1 January 2009 we estimate that by the end of 2012 the contribution to reducing electricity consumption is 1,240 GWh per annum (refer to Table 2). The reduction in electricity consumption for 2013 is estimated to be 1,900 GWh.

Based on average residential electricity prices, electricity consumers saved a total of $336 million in 2012 and are expected to save nearly $550 million in 2013 (refer to Table 2).

Table 2 - Activities under ESI reducing electricity consumption

(Assuming an average of 10 years deeming for activities, 2013 represents half a year)

2009 2010 2011 2012 2013 half year
VEECs created reducing gas 257,582 86,906 89,068 461,726 477,852
VEECs created reducing electricity 4,055,426 2,011,192 2,166,801 7,881,599 2,574,748
Total VEECs created 4,313,008 2,098,098 2,255,869 8,343,325 3,052,600
Abatement factor (electricity) 0.983 0.983 0.983 0.983 0.983
Full year electricity savings (GWh/a) 412.6 204.6 220.4 801.8 261.9
Electricity saved each year (GWh/a) 206.3 514.9 727.4 1,238.5 950.6
Average residential electricty price c/kWh

27.1 28.9
Annual electricity cost savings ($m)

335.6 274.7

Note: Average Electricity prices from AEMC Price Trends Report (Mar 2013)
Full year 2013 cost savings of $549.4 million

Average household electricity consumption has been falling with Energy Australia outlining in their financial results that their Victorian residential customers have reduced their power consumption by 10 per cent reducing from 6.5 MWh per household in 2011 to 5.8 MWh in 2012. This is a material reduction and is considerably higher than EA observed in other states and can be partly explained by the contribution the VEEC scheme.

Lower electricity demand, including lower peak demand, leads to:

  • cost savings across consumer sectors,
  • lower wholesale, benefiting all consumers
  • reduced infrastructure requirements and cost,
  • reduction in stress on current ageing generation capacity,
  • reduced likelihood of supply interruptions and
  • increased capability to introduce other forms of generation.

Lower electricity demand reduces pressure on networks and reduces pressure on wholesale prices. Wholesale power prices have reduced markedly in Victoria over the last few years (refer to Figure 4). The impact of the ESI in reducing demand since 2009 will have contributed to this with the benefits being seen by all electricity consumers.

New businesses jobs and investment

There are 140 businesses accredited under the scheme and 66 of these have created certificates. The scheme has supported the creation of many new businesses and enabled the expansion of existing businesses (many SMEs). Many of these businesses, established as a result of the ESI, or have transferred operations from other jurisdictions to Victoria have attracted business and investment opportunities in Victoria that would not have occurred but for ESI.

  • It is estimated that 2500 full time employees are currently working both directly and indirectly within the scheme and that a further 800 jobs will be created in the next year with the schemes further expansion into the business sector. (refer Figure 9 and 10) These include business development, operational, project management and field services and have offered employment to skilled, professional and unskilled personnel.
  • The scheme has provided a platform for innovative program delivery - many certificate creators have partnered with government agencies, business, community organisations and Councils to leverage certificate creation and to support other complementary programs.

The ESI has provided a commercial incentive and demand for the provision of energy efficiency services. With more than five years' experience these businesses are maturing and developing new solutions and options for the uptake of energy efficiency initiatives.

If the Scheme is not continued these businesses and jobs will go, either completely ceasing to operate or moving to other jurisdictions that have schemes similar to ESI.

Enhancing security of supply

The scheme enhances security of supply making the Victorian economy better able to cope with a disruption in energy supply. It also reduces the exposure of the Victorian economy to higher fuel prices (gas in particular).

Manufacturing Australia in its recent report found that rapidly rising gas prices (Fig 5) was threatening 200,000 jobs in manufacturing, a large proportion of which were likely to be in Victoria.

Supporting Victorian businesses to use gas more efficiently is an econimically efficient way to manage gas price risk and take the pressure off gas prices more generally.

At present large gas consumers (greater than 100 TJ/annum) are excluded from participating in the VEEC scheme. Enabling these businesses to create VEECs for activities that result in a reduction in gas consumption will assist them in managing higher gas prices.

Higher gas prices will also feed into higher prices for gas fired generation which will result in higher electricity prices.

De-carbonising Victoria's economy

Decarbonising the Victorian economy and assisting in positioning Victoria for a carbon constrained future in a way that minimises the cost impact on business.

Victoria has been reliant on brown coal for electricity generation for more than 90 per cent of its electricity generation with only modest contributions from renewables and gas (refer to Fig 6).This means that Victoria has the highest emissions intensity of any state and has more than 20 per cent higher emissions than NSW, the next highest emitter (refer to Fig 7).

Reducing demand decreases the supply stress and allows generation to be sourced more broadly.

Modest cost pass through to customers - 1%

VEEC prices have been considerably lower than initially expected and this means that the cost of the scheme has been considerably lower as a result. The spot price of VEECs has averaged $17.96 since the scheme started (refer to Figure 8). The price has varied at times reaching a high of $41.50 towards the end of 2011 and a low of $9.10 in mid-2010. During 2012 the spot price averaged $21.21 and for the first six months of 2013 averaged $17.29.

The cost of complying with the scheme has averaged $43 million per annum for the first three year period and then $115 million in 2012 with the expansion of the scheme. When we consider the impact on electricity customers which account for 77 per cent of the liability then this equates to 0.28 cents per kWh in 2012 (refer to Table 3). For an average household consuming 6.5 MWh per annum this amounts to less than $18 per annum or 1 per cent of their electricity bill.

Table 3 - Cost of complying with ESI for electricity customers

2009 2010 2011 2012 2013 half year
Target ('000 VEECs) 2,700 2,700 2,700 5,400 2,700
Average spot price $12.18 $10.92 $24.51 $21.21 $17.29
Compliance Cost ($m) $32.9 $29.5 $66.2 $114.5 $46.7
Electricity component 77% 77% 77% 77% 77%
Electricity cost passthrough ($m) $25.3 $22.7 $51.0 $88.2 $36.0
Eligible Acquistions (GWh) 13,058 14,709 14,709 32,012 15,332
Cost per unit (cents per kWh) 0.19 0.15 0.35 0.28 0.23
Average residential consumption (MWha) 6.5 6.5 6.5 6.5 6.5
Average cost per household $/a $12.61 $10.03 $22.52 $17.91 $15.24

Note: Electricity component of 77% based on 2013 allocation between electricity and gas

A regulated framework for energy efficiency

The ESI has the advantage of being established through a legislative framework and administrated by the Essential Services Commission (ESC).

Accreditation requirement for all energy efficiency certificate creators ensuring accountability to the administrator. Each accredited party must achieve particular standards, must demonstrate a business model for certificate creation that is supported by adequate record keeping systems and compliance processes. Each of these businesses are subject to regular audit and penalties for improper certificate creation.

A screening and approval process for energy efficiency technologies. This may be increasingly important as new and emerging technologies are promoted to consumers, particularly LED lighting. It is a well-known issue that there is a proliferation of LED manufacturers that are seeking to offer products to the market. The ESC has recently been instrumental in establishing clear and high standards for LED product approvals in Victoria. This will minimise the number of low performing LEDs being installed into Victorian households. Given the high number of halogen downlights in Victoria, there is significant benefit to consumers to ensure they are not paying for LED lights that do not match the stated performance. This results in better quality solution for customers at a cheaper and more affordable price.

Case Studies

VEET is a "good news" story on energy efficiency and demonstrates the benefits of regulated market scheme. There are a great number of potential case studies which could be used to help understand actual activity under the scheme.

Residential Case Study

A collection of six Councils in the eastern suburbs of Melbourne have worked with an AP over 2013 to undertake more than 1,000 household retrofits to their constituent households. The partnership demonstrates how a Scheme such as ESI can provide incentives not only to energy consumers but also government agencies to leverage the scheme and augment services. Each Council provided $5000 to assist low income households to receive a free LED installation. The suit of product offers included LEDs (paid for by households but discounted by VEECs), SPC (free), weather and draft sealing (free), TV rebates, low flow showerheads (free) and non zigby Energy Monitors (In home displays, free if more than certain number of products installed). The program also attracted funds from Sustainability Victoria to offer the Energy Water Task Force program to 160 low income households located in out-lying locations. The program which, due to the falling VEEC price has become increasingly challenging nevertheless demonstrates how the ESI market has been a platform for allied programs and agencies to support, augment and provide incentives for activities to target groups and geographic locations.

SME Case Study

A chain of IGA's with stores through-out north west Victoria took the opportunity trial a refrigerator fan motor replacement in one of its regional stores. Working with an AP the IGA replaced 150 of existing inefficient refrigerator fan motor replacements with the more efficient ESC approved fan motors in all refrigerated displays. The VEECs generated from the upgrade meant that 35% of the capital cost of the fan motors were covered through discounts from VEEC creation. A data logger installed to monitor energy savings showed that around $13,500 were saved in energy bills per year. On the strength of the trial IGA has now undertaken a full replacement of refrigerator fan motors through-out all 15 stores in North West Victoria resulting in more than $200,000 of energy savings to the business per annum.

Commercial Lighting Case Study

Green Energy Trading (GET) created certificates for a client that undertook a lighting upgrade at a small supermarket in regional Victoria. The project involved the replacement of a number of inefficient florescent tubes and halogen down lights with efficient florescent tubes and LEDs. The VEECs contributed approximately one-third of the total cost of the project. This meant that simple payback for the project was less than 2 years.

Please ask for further information on these or other examples.

Looking Forward: The Future of the Scheme from 1 January 2015

The current ESI provides a proven robust market framework that can continue be built on and improved. The EECC believe that the scheme needs few fundamental changes but should continue to evolve in response to market conditions and product availability.

The EECC modelling shows that there are two significant outcomes not yet achieved.

  1. Halogen to LED in the Residential SectorIn the residential sector there are some estimated 20 million downlights that the Scheme has not yet penetrated. The recent and rapid developments in LED technologies mean that this energy efficiency measure is now well placed for market uptake. The halogen down light is not only energy hungry but has been directly linked to many ceiling fires and are therefore dangerous. The LED equivalents do not operate at the same heat levels and will actually fail prior to getting anywhere near the temperatures of a halogen. The energy efficiency is significant with a 10 watt replacing a 50 watt globe and producing equivalent light output. The ESC have put in place regulatory measures to ensure that appropriate performance standards exist to ensure that in Victoria only high performing LEDs will be installed in replacement of inefficient halogen downlights. This provides a significant safety-net for Victorian consumers to ensure that the market is not flooded with low-performing LEDs.
  2. Commercial Sector
    The expansion to the commercial sector has barely started with momentum only building recently. There has been a significantly lower amount of certificates than modelled and forecast as part of the Regulatory Impact Statement for Phase 2.1 However, the framework is now in place for commercial activities and over 2013 there have been 33,000 VEECs under Sch 34 and more in other Schedules demonstrating that whilst it has taken some time for the regulatory requirements and business models to be established, this is a sector that will benefit in the near future.

The opportunity for SME businesses in particular, who experience similar barriers to uptake of energy efficiency as households (lack technical expertise, cashflow and time poor) have yet to receive the benefits of low cost energy efficiency appliances /measures and with it, the opportunities to reduce energy bills.

It is also noted that under the NSW Energy Saving Scheme (refer to Table 4) experienced a similar slow uptake by Commercial.

Table 4 - Methodologies creating certificates in NSW Scheme

2009 2010 2011 2012 2013 half year Total
Deemed Residential 18,020 479,938 286,479 98,752 24,901 908,090
Deemed Commercial Lighting - 19,739 320,896 1,414,135 1,530,634 3,285,404
Metered Baseline 25,287 147,954 167,006 245,586 216,352 802,185
Project Impact Assessment Method 46,825 140,040 139,689 146,468 111,671 584,693

90,132 787,671 914,070 1,904,941 1,883,558 5,580,372
Business Proportion 80.0% 39.1% 68.7% 94.8% 98.7% 83.7%

Supporting an appropriate Target

The EECC modelled the scale of opportunity for continued energy efficiency measures through a market certificate scheme. Based on the experience of Phases 1 and 2 and assuming a similar range of energy efficiency measures it is forecast that there is some 30 million tonnes of energy efficiency activities to be generated. The EECC Group therefore supports a strong target - particularly given the early achievement of targets in phases 1 and 2.

Observations about Phase 1 Trends (2009 - 2011)

The phase 1 Scheme target was 8.1million tones to be achieved by 31 December 2011 with annual targets of 2.7mt.


  • 2009 - 100% target met by November 2009 with activities commencing in March
  • 2010 - 95% of target (2.3mt) achieved by end May 2009
  • 2011 - 60% scheme target (1.6mt) achieved between Sept - December post introduction of SPCs
  • VEEC market prices have varied from a high of $41.50 per VEEC (late 2011) to a low of $9.20 (mid 2010)
  • Phase 1 targets were achieved through some 400,000 residences through lighting (64%), water heating (15%), SPCs (13%), shower roses (3%).

Trends show:

  • Strong correlation between achievement of target and available activities
  • Market responds to available products. VEEC creation slowed from mid-2010 to late 2011 when price could not sustain further CFLs and need for new lead product.

VEET Phase 2 (2012-2014)

Scheme target for phase 2 was 15.3mt to be achieved by 31st December 2014 with annual targets of 5.1mt


  • As at 6th June 75% of the overall scheme target has been achieved (11.5mt VEECs)
  • Of the 11.5m VEECs
    • 2.8% (33,201) were created from Commercial lighting activities (Schedule 34)
    • 47% (9m) were created from SPCs
  • Other Activities prominent in Phase 1 represent less than 10% of VEECs
    • 8% (1m) CFLS
    • 0. 3% (360,000) LFS
    • 0.43% (500,000) weather sealing
    • 0.05% (61,000) hot water upgrades
  • No activities have been from LED product installation (no product approval)
  • VEEC market prices have varied in phase 2 from high $32 (Jan 2012) to low of $14.25 (June 2013)

Phase 2 trends show:

  • SPCs activity is slowing
  • CFL/LFS/draft sealing continuing but diminished by contrast to phase 1
  • Commercial lighting under Schedule 34 under-performed

Scale of Opportunity

It is estimated that the market could deliver at least 30mt target in the residential and commercial sectors with an expansion to EREP and large businesses currently excluded and with VEEC market prices within similar ranges to Phase 1 and Phase 2.

12mt Residential comprising of:

  • 9 mt LED down lights
  • 3.1mt CFLs, LFS, SPC, IHD, draft sealing (conservative)

4.2mt from Commercial comprising of:

  • 2.8mt commercial lighting
  • 1.1mt other activities such as refrigeration
  • 0.5mt project based activities

Significant further savings delivered in other non-residential areas like government buildings. It is noted that an estimated 1 in 3 buildings are government owned or leased.

EREP exclusion sites will also provide significant further opportunity for energy efficiency.


The replacement of halogen down lights with LED lighting under Schedule 21 is the lead product and main opportunity with an estimated 9 million certificates.

The Calculation methodology is based on 23 million LED lights to be replaced and installed in Victorian households with 2.1m Victorian households with average of 11 LED replacement per household (Australian Lighting Study).2

Other activities

(CFL, LFS, weather sealing, hot water, space heating, IHD and SPCs)

With a new lead product it is expected that there will continue to be opportunities to undertake CFL, LFS, weather sealing and SPCs. As was evidenced with the introduction of SPCs there was continued activity in the activities that had been prominent in phase 1.3

Commercial Sector

The scheme would be strengthened if project based abatement activities were included for business activities as is available under the NSW Energy Saving Scheme. Energy savings from a broader range of activities would provide opportunities for SMEs.

Using NSW Energy Saving Scheme (ESS) as the reference point for the potential opportunity in Victoria in 2009 - 2013 there were 2.9m certificates created through commercial lighting with 90% (2.8m) since 2011 once confidence was established in the market. There are a further 1.3m certificates from metered based line and project impact assessments.

In Victoria, by contrast only 82,000 VEECs generated from lighting in the non-residential sector (Table 1) and 169,000 from all other activities. As with NSW it takes time for business models to emerge and for activity to occur. There has been a significant investment in the ESC registry and system development, product approvals to establish the framework for the continuation of business sector energy efficiency. For many APs the business models are now in place for activity to commence. However, the fall in price for VEECs will mean there is unlikely to be any significant activity in the commercial sector until there is a demand for VEECs.

Further expansion to large and EREP businesses

It is advocated that the Scheme should be continued and expanded further to large energy users and in particular to include EREP businesses unless they are designated trade exposed businesses.

It is noted that "EREP type" sites are not excluded from the NSW scheme, although a number of larger energy intensive businesses are exempt.

It is also noted that many of the EREP sites are actually designated EREP based on water use rather than electricity.

Table of Figures

Figure 1: VEEC Activities YTD 7th June 2013Source: Essential Services Commission



SPCs 1,894,736
Lighting (21) 371,505
Weather sealing 263,795
Shower Rose 161,119
Water heating 109,325
Fridge/Freezer 58,419
Space Heating 47,261
Commercial Lighting (34) 23,761
In home displays 7,409
Pool Pumps 1,698
TVs 1,030

Graph showing VEECs by activity for the year to date. This data is displayed in the previous table.

Figure 2: Energy efficiency impact annual energy forecasts for VictoriaSource: Extract from AEMO 2012 Electricity Forecasting Report

Graph showing that Annual Energy is higher for Non-residential than Residential by around 1/3

Figure 3: Energy efficiency impact summer maximum demand forecasts for VictoriaSource: Extract from AEMO 2012 Electricity Forecasting Report

Graph showing summer maximum demand which is higher fro Non-Residential than Residential by around 1/5th. It is expected to increase from just over 50 in 2011-12 to over 400 MW in 2021-22.

Figure 4: Victorian annual electricity demand and wholesale priceGraph showing Victorian annual electricity demand and wholesale price. The demand has risen steadily to 2008 and then fallen slightly each year. The Price pre Carbon peaked in 2007.

Source: AEMO (NEM-Review)

Note: Average price from 1 July 2013 has been reduced by $21/MWh to reflect the impact of the carbon price

Figure 5: Domestic Eastern Market Gas Price Forecast

Graph showing Eastern market gas price forecast from 2010 to 2030. The forecasts are rapidly appreciating.

1 ACIL Tasman, February 2012 as input into AEMO planning and the AETA (BREE Gas Market Report, July 2012), 2015 and 2025 average of surrounding estimates
2 ACIL Tasman, late 2011 for AETAQ (BREE Gas Market Report, July 2012)
3 ACIL Tasman, 2010 projections under their central 'planning scenario' (BREE Gas Market Report, July 2012)
4 Estimated price at which producers would be indifferent between selling to Japan as or domestically, IPL: $11.05 (Australia) and NERA: $11.80 (US example)

Source: Manufacturing Australia citing ACIL Tasman forecasts

Figure 6: Scheduled Generation in Victoria by Fuel Source

Graph showing scheduled generation in Victoria for Brown Coal, Gas, Hydro and Wind.
Source: Green Energy Markets, Research Note 1-2013 Jan 2013)

Figure 7: Carbon Dioxide Index

Chart showing the Carbon Dioxide Equivalent Intensity Index for the states of Australia which is highest in Victoria. Source: AEMO

Figure 8: VEEC spot price

Graph showing the VEEC spot price which was highest in November 2011 at around $42

Figure 9: VEEC Employment Current (2013)



F/T Jobs


Accredited Person (AP) management and administration overhead

Based on 75 active APS with 8 staff that provide management, compliance and administration services




Extrapolation from Energy Makeovers SPC in-field workforce



Other "free-at-door" activities (eg. weather sealing, CFLs, showerheads, in-home displays)

Extrapolation from Energy Makeovers in-field workforce



Co-payment activities (eg. commercial and residential lighting, pool pumps, etc)

Based on known industry operations (eg. Ledify, ecoVantage, Energy Makeovers, etc)



Incremental 3rd party activity (hot water, lighting and other activities where installer is not an AP)

Equivalent to 20% jobs created by 1-4 above



Manufacturing and supply of products for VEET

Assume multiplier of 0.3 of direct jobs created


Total 2013 FTEs:


1 The reasons for this are many and include: release of Regulations in May 2012, length of time for accreditation and pre-accreditation audits, coinciding with falling VEEC price.

2 Calculation methodology 29% Victorian households have down-lights (SV Green Light Report); Each household with downlights has an average of 38 globes installed (Note Bis Schrapnel report showing Victorian households with 30% higher than national average of downlight installations) allowing 50% penetration before saturation therefore 11 million downlights.

3 Calculation methodology Per annum: Water 400,000; Space 200,000; Fridges 100,000; CFLs, LFS, weather sealing 80,000 IHD 200,000

Page last updated: 24/06/20