Green Energy Trading's Logo8 July 2013

RE: June 2013 Issues paper

Green Energy Trading welcomes the opportunity to provide a submission to the Department of State Development, Business and Innovation on the Issues Paper released in June 2013. We participated in the accredited persons & product manufacturers' round-table discussion held on 28th June 2013 and we are keen to actively participate in the VEET review process.

About us

Green Energy Trading is one of Australia's largest environmental certificate agents, and is committed to making incentives for renewable energy and energy efficiency activities more accessible to Australians.

Green Energy Trading was established in 2007 and supports its clients in accessing incentives available through market mechanisms, including the Energy Saver Incentive (Victorian Energy Efficiency Target), the NSW Energy Saving Scheme and the federal Renewable Energy Target.

Green Energy Trading is a registered agent that creates, purchases and trades environmental certificates for customers of solar PV, solar hot water, small wind and other renewable energy, commercial lighting and other energy efficiency projects.

Green Energy Trading became an Accredited Person (AP) of the VEET scheme in early 2009, shortly after the scheme commenced. As an independent agent we create, purchase and trade VEECs for households and businesses that have chosen to upgrade to eligible solar water heater, high efficiency space heater, and lighting products.

In addition to certificate creation, a large part ofour involvement in the VEET scheme has been as a knowledge leader providing education and information on the VEET scheme and how it works to householders and installers. We have also worked withthe Energy Efficiency Certificate Creators Group (EECC) and the Essential Services Commission on compliance issues that improve scheme integrity.

Our Submission

Green Energy Trading is a member of the EECC and has participated in the development of its submission. We endorse the EECC submission and we would like to make the following additional points.

Question 1 – Barriers to the uptake of Energy Efficiency

The barriers to energy efficiency have been well documented and are now well understood. We refer the Government to a report released by the Australian Industry Group last year on the implementation of energy efficiency. Energy costs, for the majority of businesses, is a very small part of their total input cost and does not get management attention. As a result very little cost-effective energy efficiency ever gets implemented.

The Victorian government and its agencies consume considerable amounts of energy and are a good example of where cost-effective improvements are not undertaken. Due to budget cuts funding is typically not available to support potentially attractive projects.

We also refer the Government to the considerable amount of research and analysis that the Australian Alliance to Save Energy (of which we are a member) has undertaken on energy efficiency and demand side management (refer to www.a2se.org.au).

The ESI is an important policy measure to deal with these barriers. To date however, very little energy efficiency has actually taken place in the business sector in Victoria. This has been due to the delays in implementing new activities for business, delays in product approvals and the delay in implementation of project based assessment methodologies.

Businesses have featured heavily in the creation of NSW energy saving certificates, accounting for over 83 per cent of creation overall and nearly 99 percent for the first six months of 2013.

Table 1 - 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%

We have barely scratched the surface in Victoria with only 250,000 VEECs created for business activities over the last 18 months accounting for 2 per cent of certificates created over this time.

Under an emission trading scheme (ETS) 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 mostconsumers where the price impact remains negligible (refer to discussion on barriers above).

A price on carbon will not address the barriers to energy efficiency. If the barriers are addressed the cost of meeting a defined emissions target will be much higher. The ESI, by providing "up front" support, is able to address finance/payback barriers and supports the energy services industry that can in turn address the information and technical barriers. In this way the schemes are complimentary and the ESI results in an ability to meet the emissions target at a lower cost to the economy.

Many countries have adopted both carbon pricing andenergy efficiency and renewable policies. It is generally accepted that over the medium term ETS prices will remain low and other measures will be required to do the heavy lifting. Dealing with climate change does not involve a single uniform policy solution. A suite of policy measures is required thataddress barriers and market failures to deliver an over-all lower cost outcome.

Question 2 - Performance of the Scheme to date

The scheme has performed well and has generally achieved its objectives to date. As we have outlined previously it has barely engaged with business consumers and we believe that the Government should implement additional methodologies that suit business activities such as project based methodologies.

This could be done readily by moving to directly adopt the NSW Project Impact Assessment Methodology (PIAM) and Baseline Methodologies. It takes timeto get energy consumers familiar with the methodologies and activities so an early implementation is required.

As we are active in both the NSW and Victorian schemes we can provide some insights into the time that it has taken for consumers to become engaged and for activities to build up, particularly for commercial lighting.

As can be clearly seen in Table 1, commercial lighting took nearly three years to get traction in NSW. By 2013 however it had become well established and understood, accounting for more than 81 per cent of certificates created for the six months to 30 June 2013.

A comparison of the build-up in activity for commercial lighting under both schemes shows (Table 2) that it has taken 18 months for only 30,000 VEECs to be created for commercial lighting in Victoria. What is more important however is that the leading indicators are starting to look better for Victoria with more businesses accredited and creating certificates than had occurred at the same point in NSW. This also reflects that a number of APs are accredited in both states and that considerable learning has been achieved as a result.

Table 2 - Certificate Creation and Activity for Commercial Lighting in NSW and Victoria
Commercial Lighting NSW
Year 2009 2010 2011 2012 2013
Total number of ACPs accredited CL 2 9 28 48 61
Total number of APs creating certificates in that calendar year - 8 17 34 40
Number of certificates created in that calendar year - 19,739 320,896 1,413,907 1,530,634

Commercial Lighting VIC
Year 2009 2010 2011 2012 2013
Total number of APs accredited for CL - - - 11 22
Total number of APs creating certificates in that calendar year - - - 5 9
Number of certificates created in that calendar year (excluding withdrawn certificates) - - - 6,551 29,901

In Green Energy Trading's experience, there were considerable delays in getting the commercial lighting regulations and product approvals in place. We became accredited for commercial lighting in August 2012, however it took a considerable amount of time for lighting products to be approved and for installations by our clients to proceed. By 30 June 2013 we had created just over 10 per cent of the commercial lighting VEECs and a number of our clients are beginning to roll out installations in more significant numbers. We are also witnessing considerably more interest from suppliers and installers. Our training workshops have been well supported and we have had more than 83 participants since the beginning of 2013.

We therefore expect that the level of activity will step up markedly. The low VEEC price and less attractive number of certificates (extended operating hours not available) means that it might take some time to reach the position that NSW has reached at present.

The following concerns have also been raised (from time to time and raised in the workshops) with regard to the rollout of free activities:

  • Very low trust through door-knocking (from both customer and compliance perspective)
  • It trains customers to expect that energy efficiency should be free
  • It does not give consumers experience in evaluating efficient product and service investment
  • Little other than low cost tech benefits
  • Consumers are misled by spruikers which builds distrust in energy efficiency

We believe that it is important to consider the manner by which activities have been rolled out, rather than just to focus on certain activities being free. We believe that the "door knocking" model is the issue that needs to be addressed, rather than free products. It appears that it is this practice that has led to poor customer engagement, poor practices and the cases of potentially misleading information.

We believe that a number of the adverse experiences and impacts could be addressed within the scheme through:

  • More onerous compliance requirements for those activities that are free or have the potential to be free. This could include the introduction of an accreditation program.
  • Not permitting "door knocking" and requiring energy consumers to initiate the engagement, to have a good understanding of the product and its energy efficiency potential and to want the activity to occur at their premises.

We have previously made submissions to the Victorian government on addressing unintended consequences in the Regulations that govern voltage optimisation units and lighting control units. The manner in which VEECs are calculated for these activities significantly understates the energy savings.

Question 3 – Future of the Scheme

We believe that the scheme should be extended and expanded:

  • The target should be significantly increased in line with the EECC recommendations to at least 10 million tonnes per annum so that all energy consumer sectors are covered roughly in proportion to their energy use
  • Inclusion of EREP sites and only permitting exemptions for energy intensive trade exposed industries as implemented with the carbon price and renewables scheme.
  • Fast tracking the implementation of the NSW PIAM and Baseline methodologies.

Australia's historical record on energy efficiency improvement has been poor compared to that of other countries (Report of the Prime Ministers Task Group on Energy Efficiency, July 2010). This also means that we have more scope and opportunities for improvement. A focus on improvement of the energy performance for Victorian businesses, in particular, will result in an improvement in our economic performance.

Other policy measures that have been successfully used overseas to address the barriers to energy efficiency have included:

  • Government grants, rebates and funding mechanisms
  • Obligations on energy suppliers

Due to the manner in which energy market reform has been implemented in Australia obligations on energy suppliers are difficult to implement. Budgetary constraints and the "on again – off again" nature of rebates and fiscal support means that these cannot be relied upon by industry and consumers to support long term investment.

The ESI overcomes the above issues and has shown itself to be a robust policy measure. Its benefits are greater than its costs and it has supported a stronger and more secure Victorian economy. We welcome the opportunity to assist the Government as it progresses through the review process.

Yours sincerely

Ric Brazzale

Managing Director

Page last updated: 24/06/20