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16 May 2025
2026 and 2027 VEU program targets
The Victorian Energy Upgrades (VEU) program emissions reduction targets for 2026 and 2027 will be set at:
- 4.4 million Victorian Energy Efficiency Certificates (VEECs) in 2026, and
- 4.6 million VEECs in 2027.
One VEEC represents one tonne of carbon-dioxide equivalent GHG emissions abated over the lifetime of the upgrade.
To achieve these targets, it is expected that around 6 million VEECs will be created each year, with a VEEC surplus expected to be maintained through 2027. This reflects the feedback that DEECA has heard through the consultation process on the importance of rebuilding a surplus of certificates to support a healthy VEEC market.
These targets and projected level of certificate creation will support industry to continue to maximise the full potential of the VEU program by delivering as many energy-efficient upgrades as possible in Victorian homes and businesses.
The 2026 and 2027 targets will support energy retailers to acquire sufficient certificates to meet their liability. The modelling suggests that VEEC prices for 2026 and 2027 will decrease from recent years.
While the targets for 2026 and 2027 are lower than 2025 levels, this recalibration ensures a smooth transition as the program shifts focus to higher-value electrification upgrades. Additionally, the revised targets provide consistency and stability for industry while the Strategic Review is underway, and while the program adjusts after recent improvements to ban telemarketing and doorknocking.
Meeting these targets will ensure the VEU program continues to be the largest energy efficiency program in Australia, delivering more than triple the energy savings from any programs run in other states.
The VEU targets from 2028 onwards will be set following the Strategic Review of the VEU program, which is considering feedback on the future of the program and how it can better support Victorian households and businesses.
Shortfall penalty rate
The Minister for Energy and Resources will raise the shortfall penalty rate to $100, to ensure all liable retailers are incentivised to purchase VEECs to meet their emission reduction obligations and provide a buffer for short-term VEEC price fluctuations.
Response to consultation
The Department of Energy, Environment and Climate Action (DEECA) has published the Response to Consultation outlining DEECA’s consideration of and response to consultation submissions, which informed the decision on targets and shortfall penalty rate.
DEECA would like to thank the 62 respondents for their participation and engagement in the consultation. After publicly releasing the RIS and considering submissions, changes were made to inform the final targets and shortfall penalty rate.
The consultation submissions and issues raised by participants are addressed in the response to consultation, For further information on the rationale behind the final targets and shortfall penalty rates, please see the response to consultation document.
Next steps
The revised targets and shortfall penalty rate will be set in the Victorian Energy Efficiency Target Regulations 2018 by the Minister for Energy and Resources prior to 31 May 2025.
The Essential Services Commission’s VEU program fees are currently being revised based on these targets. The final fees will be set by the Minister for Energy and Resources, in consultation with the Minister for Finance and the Treasurer, before 1 January 2026.
The public consultation also sought feedback on the Greenhouse Gas Reduction Rates (GGRR) for 2026 and 2027. The final decision on the 2026 GGRR will be made prior to 31 December 2025, and the 2027 GGRR will be made prior to 31 December 2026.
To read the Response to Consultation and submissions received during consultation, please visit the Engage Victoria webpage.
Legislation passes to extend the Victorian Energy Upgrades program
The Victorian Government has passed new legislation to strengthen and extend the VEU program, helping more households and businesses save on energy costs through cleaner, electric appliances.
The Victorian Energy Efficiency Target Amendment (Energy Upgrades for the Future) Bill 2025, which was passed by Victoria’s Parliament on Tuesday 13 May 2025, will see the program’s end date extended from 2030 to 2045. This extension aligns with Victoria’s net zero emissions target, supports more Victorians in switching to electric appliances and gives businesses greater confidence to invest in the program.
Other key changes include:
- More flexibility – energy retailers will have more flexibility in meeting their certificate surrender requirements through changes to the ‘vintage’ rule, as energy retailers will be able to surrender certificates that were created and lodged up to the annual surrender deadline. These changes are expected to commence from 21 May 2025, and will apply to energy retailers surrendering certificates to meet their 2024 liabilities.
- Increased protections – stronger compliance and enforcement powers for the Essential Services Commission to oversee the program as it continues to expand and new mandatory training for scheme participants. These changes are expected to commence from 1 July 2025.
- Consumer support – the changes clarify the VEU’s additionality requirements, meaning that upgrades required by other laws may still receive discounts in future. The updated legislation also means that the VEU will be able to introduce targeted discounts for vulnerable or low-income consumers in the future. These changes are expected to commence from 1 July 2025.
The changes aim to strengthen consumer protections, improve compliance and enforcement, and ensure the VEU program keeps delivering energy savings well into the future.
For more information, please visit Victorian Energy Efficiency Target Amendment (Energy Upgrades for the Future) Bill 2025.
Industry market update and work program
To view the updated 2025 workplan, visit the industry market update and work program webpage.
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Page last updated: 16/05/25