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8th July 2013

Dear David,

Review of Energy Saver Incentive - Issues Paper

Low Energy Supplies and Services Pty Ltd (LESS) is pleased to have the opportunity to comment on the Review of Energy Saver Incentive Issues Paper.

LESS supports the continued operation of the ESI (otherwise known as VEET) and believes there is justification for a significant increase of the target for phase 3 particularly if the scheme were to expand its eligible buildings to the large commercial sector.

The ESI has been a successful scheme that has easily achieved its targets in phases 1 and 2. Indeed each phase has experienced a serious slowing in demand for certificates once targets are reached. Currently the target for 2013 is achieved with the overall target for phase 2 is 75% achieved. This makes the management of a certificate creation business challenging. However, it is LESS' view that once there is an uptake in demand for certificates there is further opportunity for energy efficiency measures in the residential (LED upgrades) and business sectors (which has just emerged through phase 2).

LESS is an active member of the Energy Efficiency Certificate Creators group and also a member of the Clean Energy Council. We endorse the submissions made to the ESI Review by those organizations. We do not propose to restate each of the matters raised in those Responses. In our Response we outline the work undertaken by LESS through the ESI and other energy efficiency schemes all of which could not have occurred without the market incentives. The ESI and similar schemes create a demand for energy efficiency activities at a scale that provides sufficient economies for investment in the establishment of a certificate creation business. We strongly believe that the market structure has provided a sufficient level of certainty to allow an uptake of energy efficiency that would otherwise not have been possible in the absence of these schemes.

About LESS

LESS is an Australian company that delivers energy and water savings to generate real financial and environmental benefits. With current programs in NSW, Victoria and South Australia LESS has over 80 staff and established portfolio of programs. Founded in 2001, LESS considers itself a leading innovator in creating and delivering energy efficiency and demand management programs. Our expertise is in the generation of energy certificates for the supply and installation of energy efficient products to residential and

commercial clients - which either pay for or subsidise the cost of those products and services. We have undertaken services to more than 2,500 commercial businesses in NSW through the Energy Saver Scheme (ESS) and through the ESI in Victoria we have serviced more than 150,000 households in metropolitan and regional locations. In Western Australia we have partnered with the WA Water Authority and Western Power to deliver community audits.

It is a characteristic of LESS' approach to our work that we seek to partner with energy retailers, water authorities, government agencies, Banks and community agencies to seek innovative ways to deliver energy and water saving programs to households and businesses.

LESS Profile of LESS energy efficiency projects

  • In NSW end-to-end management of large scale commercial lighting projects and certificate creation for more 500 nationwide and local commercial businesses following lighting upgrades
  • In NSW the roll out of large numbers of downlights to some 2,000 small and medium businesses
  • In Victoria working in partnership with Sustainability Victoria we have delivered 3 Energy Water Taskforce programs (inner city Melbourne, Ballarat, Yarra Ranges) which is a home retrofit for low income earners serviced by long-term unemployed / newly-trained by LESS installers from marginalised socio economic groups who had experienced long term disadvantage, including from Culturally and Linguistically Diverse (CALD) Backgrounds
  • Working with a tier 1 Energy Retailers to achieve revenue-raising projects for regional community groups through home retrofits (Victoria)
  • Behaviour-change projects within workplaces (Victoria)
  • A range of pilots testing the viability of products and services for large retailers or government agencies (Western Australia, NSW, Victoria)

1. Barriers to uptake in energy efficiency

The barriers to energy efficiency identified in the Productivity Commission Report (2007) and Australian Industry Group (Energy Shock, July:2012) have not fundamentally been overcome by the existence of the ESI. There are more energy efficient products and behaviours that can be undertaken by energy consumers (particularly an estimate 20million halogen replacements in Victoria). It is LESS' experience that the presence of the VEET market has enabled consumers to benefit from the installation of simple energy efficient technologies. It has also enabled other stakeholders with an interest in energy efficiency to take advantage of the scheme. Sustainability Victoria, Local governments and Energy Retailers are examples of government and private entities that have ¡¥leveraged' the VEET market to value add energy efficient products to residents and to provide behavior change services. These opportunities are augmented and made more cost-effective when coupled with certificate- creating activities.

In terms of behaviours around energy efficiency, LESS' experience indicates that SMEs and households act in a similar manner and should therefore be treated similarly under the scheme. Like households SMEs will benefit from more energy efficient lighting particularly for smaller-end businesses. LESS is undertaking retrofits for SMEs under ESS and it is our experience that SMEs, who invariably experience cash-flow and other business-related pressures do not rank energy

efficiency as a business priority. The opportunity to invest in energy efficiency is not a priority for SMEs notwithstanding payback profiles. For SMEs, lower-cost simple technologies that are easy to install, such as LED downlight replacements, are attractive but it is currently only viable for businesses such as LESS to provide such services via certificate creation schemes.

LESS notes that under the ESS there are some 2.9 million certificates that have been generated through commercial lighting upgrades. The uptake of more efficient lighting technologies in Victorian businesses is limited. There have very few certificates created in this sector since the expansion of ESI in phase 2. This is an important opportunity for reduced capital expenditure on more efficient-cost-saving technologies that have yet to occur in the Victoria.

2. Performance of ESI

A platform for program innovation

The existence of regulated energy efficiency schemes in Victoria, NSW and South Australia has provided a platform for related programs and investment. LESS has participated in several partnerships with local Government and with community organisations and businesses.

Examples of how Government agencies have leveraged ESI to augment and support other social purpose programs.

Local governments working together to provide retrofit opportunity

The Eastern Alliance for Greenhouse Action (EAGA)

A collection of six Councils in the eastern suburbs of Melbourne have supported LESS' Live Green With LESS program over 2013 to undertake more than 1,000 household retrofits to their constituent households and SMEs. Each Council provided $5000 to assist low income households to receive a free LED installation. The suite 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 of the Shire of Yarra Ranges. The program which, due to the falling VEEC price has become increasingly challenging has recently concluded its residential offer. However, the program 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.

The GreenHouse Project

Funded by Sustainability Victoria in 2009 this project targeted high consuming households to engage them in behaviour change actions. LESS offered an energy assessment, retrofit and mentoring program that was part funded through VEECs. In partnership with the Knox, Casey and Boroondara Councils, some 1500 households participated in the program.

Low Income projects

  • Energy Water Taskforce - LESS has successfully worked with Sustainability Victoria and undertaken retrofit services to 1500 low income households Energy Water Task Force programs for Sustainability Victoria. The creation of certificates when eligible products were installed enabled the program to achieve a higher number of low income households than it otherwise would.
    • 2008-2009 in the Cities of Yarra and Darebin we retrofitted 900 low income households providing employment and training to 9 long-term unemployed installers.
    • 2011 in the Ballarat and Ararat region we retrofitted 400 low income households providing employment and training to 6 long-term unemployed installers.
    • 2013 in the remote townships in Shire of Yarra Ranges we retrofitted 166 low income households

Community Housing Audit Program LESS delivered 360 low income house Audits in the management of Community Housing Agencies through Sustainability Victoria.

  • This program (delivered across Victoria) worked on a matrix of low cost / high abatement options. As the housing stock is in public ownership the program was also designed to provide data to Community on effective asset upgrades to improve energy cost saving. The participation in the program has provided LESS with important knowledge and capability in the planning, design and delivery of effective energy efficiency options for low income homes.

Programs developed in Partnership with Energy Retailers and the Community

  • Ban The Bulb (2009-2010):A joint project with AGL and Bendigo Bank, whereby community organisations (Lion's Clubs, sporting groups, SES) were trained by LESS and installed CFLs in residents' homes. LESS made a financial donation of over $423,000 to the 53 community organisations that participated in the project. Ban the Bulb became an important fundraising project for rural and regional community organisations. The project installed 189,666 low energy lights into more than 12,500 homes and 22,169 low energy lights to SME across regional Victoria. Bendigo Bank Community Bank® branches provided links to recruit community organisations to be involved in the project and took bookings from customers at their bank branches. The project provided installation services and trained and supported over 1,000 volunteers.

Save + Raise Program (2010 - ongoing)

The Save + Raise program is a unique certificate creation programs which as been operating in regional Victoria since 2010. The program is partnered with AGL, who purchase all the VEECs from the program.

Save + Raise is a well regarded and respected program that has:

  • contributed to the reduction of household electricity of more than 22,500 regional households
  • provided local jobs and training opportunities through the employment of more than 70 regional staff over the program
  • been promoted widely through out regional Victoria through media and regional events
  • has been responsible for fund raising revenue and supporting local community organisations.

Save + Raise commenced in Ballarat in November 2010 and expanded to Mildura and Shepparton (and surrounding areas) in September 2011. The program employs local staff to undertake the installation of a number of products that generate VEECs - SPCs, CFLS and LFSs.

The program has generated over 225,000 VEECs primarily through a community run program of bookings, referrals and is a fund raiser for participating community agencies. The program has raised more than $97,000 in fund raising revenue for community groups through-out regional Victoria since the beginning of the program.

On average the program generates 10 VEECs per home and therefore the program has been responsible for over 22,500 appointments across regional Victoria. Save + Raise has undertaken minimal door knocking and installations are generated through bookings which are achieved through ¡§lead generation¡¨ and marketing activities. This includes referrals from community organisations, shopping centre stalls, farmers markets, local TV and media advertising and more recently has included telemarketing promotions.

3. Future of the ESI

LESS has undertaken some basic bottom-up modeling to give an indication of the scale of opportunity of the VEET market, particularly with the inclusion of commercial buildings in the SME sector. Our calculations indicate that with a higher than existing market price, an overall target for Phase 3 of VEET of over 20million tonnes is realistic and can be achieved equally in residential buildings and in commercial buildings.

Scheme Scope - expanding the scheme to include large businesses

LESS advocates a broad range of energy efficient technologies and measures should be included for SMEs. Abatement should be verified and be attributed to technology installations, as is the case with the current rules under VEET.

It will be important that a wide definition of SME is adopted to ensure that all potential savings are captured under the scheme. Equally important is the need for a simple definition that does not become legalistic and create barriers for participation and cost to APs. We favour the inclusion of

large energy (EREP) users with trade exposed entities being exempt. We also advocate the inclusion of public sector entities. There are many small operations, occupying buildings that are providing important public benefit services who should be eligible for energy efficiency activities. This contributes to the achievement of the target and also allows those entities to share the benefits of reduced electricity costs.

Assigning Abatement Values

LESS advocates that a blended model of abatement creation through deeming activities and project-based methodologies is appropriate. The process of deeming and pre-determining abatement factors is important. It provides certainty to market players and to Government in terms of calculation of savings. The capacity of the scheme to calculate life-time savings and bring them forward through the creation of a certificate is an important feature of VEET and enables small, otherwise low-margin activities to be commercially viable. For this reason LESS would advocate the deeming of as many activities that can be forward calculated. However, equally we recognize the need for project-based methodologies for larger commercial buildings where building owners and occupiers see the advantage of longer-term, higher cost activities. The challenge for APs is that certificates are generated at the conclusion of the project - this is potentially a disincentive to create abatement by reliance on project-based methodologies.

Improved performance and outcomes

It is important for the VEET scheme to be well advertised as the process of certificate creation for carbon abatement is still not well understood. Generating wide understanding that ESI is a government scheme that is regulated and subject to accreditation, auditing and penalties for non-compliance, is important in creating public confidence. This is increasingly an issue for consumers considering higher cost abatement products that require a financial contribution. Given the Governments support of a certificate-based market scheme it is important that beneficiaries of the scheme are provided with information so that they can differentiate this scheme from other non-accredited practices. This will be an issue for SMEs when they are incorporated into the auspices of the scheme.

LESS believes that the continuation of ESI presents an exciting and important opportunity for Victoria to move ahead on energy efficiency.

We would be pleased to work further with the DPDBI as it works through the design, rules and structure of the expanded scheme.

Yours Sincerely,

Keith Tracey, Chief Executive Officer

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