Moreland Energy

8 July 2013

Dear David

Review of the Energy Saver Incentive: Issues Paper – June 2013

The Moreland Energy Foundation Ltd (MEFL) regards a properly designed and operated Energy Saver Incentive scheme as a highly effective mechanism to reduce greenhouse gas emissions and to promote the efficient use of energy in Victoria. MEFL therefore strongly supports the continuation and expansion of the Victorian Energy Saver Incentive scheme and welcomes the opportunity to provide our input to the review of the scheme.

Background

MEFL is an innovative not-for-profit organisation established by the City of Moreland in 2000 with the objective of reducing greenhouse gas emissions. MEFL works within and beyond the Moreland community to implement a range of sustainable energy programs, including behaviour change programs, research and demonstration projects and advice and information services. Some relevant examples include:

  • Zero Carbon Moreland: a program to inspire and facilitate residents, community groups and businesses to reduce energy use as part of a community-wide response to climate change;
  • Zero Carbon Moreland Concession Assist (CA): a program to help those less able to adapt to the impacts of a changing climate through energy efficiency audits and retrofits for low-income households;
  • The Moreland Solar City Warm Home Cool Home (WHCH) program was delivered by the Brotherhood of Saint Laurence in partnership with MEFL and with support from Moreland City Council aiming to deliver energy efficiency upgrades to 1,000 low-income households in the City of Moreland, with a view to reducing both greenhouse gas emissions and the impact of rising energy prices.
  • Positive Charge: a social enterprise partnering with local governments to offer smart energy answers for homes and businesses. Positive Charge offers independent energy saving advice; quality products (such as lighting and solar panels) and more.
  • Easy Energy Efficiency for SMEs: This program develops and delivers energy efficiency information to small business across the northern region of Melbourne. The information includes written materials and video production.

The delivery of these programs, which to date has engaged with over 6000 households and hundreds of businesses have benefitted from the Victorian Government's delivery of the ESI. The delivery of these programs has also highlighted some of the barriers to the uptake of energy efficiency.

Barriers to the uptake of energy efficiency measures

Our program delivery experience highlights that cost, information and trust issues are the main barriers to the uptake of energy efficiency measures. More specifically, MEFL's energy efficiency programs with households and businesses highlights the obstacles described below.

Rental properties

MEFL's recent experience delivering energy efficiency retrofits to low income renters through our Concession Assist program and our work with Just Change Australia has highlighted these issues:

  • The split incentive has been well documented by many and remains an important barrier to the uptake of energy efficiency measures, as owners of rental properties lack the incentive to implement energy efficiency measures.
  • Cost was the most commonly reported barrier to improvements to home energy efficiency.
  • Rental tenure was the second most commonly reported barrier – uncertainties about the length of tenure diminish substantially incentives for tenants.
  • Communication issues with landlords were mentioned by many renters that were aware that most energy efficiency measures required consent from the landlords. This consent is not easy to obtain, as most tenants are reluctant to ask their landlords, not feeling confident about asking or believing that they would receive a negative response. A few of them asked and did not obtain the consent.

Low-income households

  • Low-income households are very often renters so the issues previously described are valid. The issue with low-income households is that they are unable to afford their energy bills, but cannot afford to take action to bring their energy use (and associated costs) down. The Warm Home Cool Home (WHCH) program showed clear evidence of the importance of costs as a barrier for low-income households, not having enough disposable income for such expenses. This highlights the need for specific targeting and support for these households.

Access to information

  • Experience shows that households often lack awareness regarding the existing energy efficiency programs. Energy bills are also difficult to understand, as reported by over a quarter of the Concession Assist (CA) participants. A quarter reported that they had experienced energy bill or contract-related problems, including issues with estimated bills, concessions, overcharging and door-to-door sales.
  • These issues combined with the complexity of calculating savings over time in the context of rising energy prices and political uncertainties regarding climate change action reduces the likelihood that households will take up action.
  • These programs demonstrate that there is a need for both generic information that can support the objectives of ESI broadly, as well as specific information that can be tailored the circumstances of each participating household and business.

Cultural factors

  • Cultural factors including language barriers often impinge on the ability of business owners from different cultural backgrounds to implement energy efficiency measures. MEFL's project Easy Energy Efficiency for SMEs achieves great results by embracing cultural differences.
  • Cultural factors also make access to information more complicated. For example, 75% of the CA participants who did not speak English very well found it difficult to understand their energy bills.

Capital for new activities

  • Small and medium enterprises often lack the capital to undertake deeper energy efficiency action. The landlord-tenant split incentive adds an additional layer of complexity to this barrier.

Performance of the ESI to date

MEFL supports the scheme as a market-based mechanism to reduce emissions and believes that its scope should be increased and include more diverse activities. The reviews of the list of eligible products and activities should continue to be held regularly. However, a few issues regarding the implementation of the scheme are offered based on our recent experiences:

Recruitment, awareness and access to information

  • There is a lack of information reaching households and businesses, combined with miscommunication and confusion around the scheme; this was demonstrated through our Concession Assist program.
  • The recruitment of beneficiaries for the scheme consumes lot of resources of the companies, NGOs and local councils implementing energy efficiency measures, as ESI does not include significant levels of support for recruitment of participating households and businesses.
  • There is a need for a comprehensive communication strategy taking into account cultural and social factors. It would help to build the trust that is currently missing and mitigate miscommunication from under-qualified operators.

Issue of compliance with standards

  • It was reported that standards in the installation and the use of the energy efficiency appliances were not always respected. The case of Standby Power Controllers illustrates well the issue (see Standby Power Controllers market research conducted by the Essential Services Commission). As limited skills and capital requirements for businesses are needed to obtain VEECs, quality is not the focus of many companies.

Complementary behavioural approaches

  • Technological solutions are not sufficient; there is also a need for appropriate behavioural approaches. Users have to be informed of the benefits of the technologies and know how to use them properly. Installers and engagement staff need to be properly trained and resourced to educate consumers on what the product is and what it does before installing it. There is a clear need for broad based and adaptable communications materials that communicate ESI objectives and build confidence and trust in the program.

Instability and uncertainty around the prices of certificates

  • The instability and uncertainty around certificate prices impacts on the potential of the program to drive the involvement of well-structured companies with staff properly trained and communication strategies correctly rolled-out.

Non-inclusion of several activities in the scheme

  • Activities particularly effective in reducing emissions and increasing energy efficiency cannot be included in the scheme, for example deep retrofits in the residential sector that produce significant CO2 reductions. This factor limits the scheme's overall and potential effectiveness. It is important that ways to overcome the administrative barriers preventing the inclusion and deployment of high impact items are overcome as the scheme develops.

Looking forward: the future of the scheme

MEFL notes several scheme improvements for the future development of the ESI which would promote a more comprehensive approach, including more activities and better targeted groups.

Expansion of the scheme

  • MEFL recommends investigations to be conducted within a wider range of business sectors to add new products and activities to the scheme, e.g. manufacturing, construction.
  • Including local governments in the scheme would be a valuable expansion to the scheme with the potential for significant CO2 emissions reductions and implementation of energy efficiency measures, for example with improvements in street lightning.

A new 'hybrid' scheme combining Victoria's certification system and NSW's project-based approach

  • One of the advantages of the ESI scheme is its ability to add (or remove) particular products or technologies as they become available, providing ongoing flexibility and responsiveness to technical developments and changing costs.
  • However, a number of businesses are currently not benefitting from the limited products and retrofit opportunities available through the scheme. A project-based approach, similar to what is currently done within the NSW Energy Savings Scheme, would make the scheme inclusive of new activities, while keeping administrative costs lower.
  • MEFL supports the development of a scheme combining aspects of the different state-based schemes at the federal level.

Strengthening the communication strategy

  • As previously stated, communication should be improved to mitigate miscommunication and to ease the recruitment of households and businesses for the implementation of energy efficiency measures. The Concession Assist program and the ongoing Positive Charge service demonstrate the need to increase awareness and to adopt a comprehensive strategy. Such a strategy should be developed by the government with the close involvement of the non-government actors that currently support the communication costs.

Addressing the issue of low-income households and renters

  • The Victorian Government should specifically target low-income households and renters. Specific targets for priority groups should be included in the VEET scheme, following the example of the UK's Carbon Emission Reduction Target Scheme1.
  • Additional incentives should also be added to the VEET program for delivering multiple retrofit measures in low-income households, as well as alternative financing approaches to access higher value measures that would benefit concession card holders.

Thank you for the opportunity to provide comments for the review of the Energy Saver Incentive. MEFL would be pleased to provide additional information, based on our direct experience to assist the review process. Please contact me if you would like any further information, case studies or clarification on the issues raised in this submission.

Yours sincerely

Paul Murfitt
Chief Executive Officer

1See final report of the CERT (May 2013) http://www.ofgem.gov.uk/Sustainability/Environment/EnergyEff/Documents1/CERT_FinalReport2013_300413.pdf

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