It has been an eventful year for government energy efficiency schemes, and the year ahead looks promising.
In my last article, I talked about the opportunities that could arise from rethinking ways to use energy efficiency subsidies for commercial gain. State and national energy efficiency subsidy programs are seeing strong gains at policy and market levels. But how do you decide which subsidies to consider?
The NSW government has committed to expand the Energy Savings Scheme to include gas, and increase targets, with details expected after the March election. Since this was announced in December, certificate prices have increased steadily from a low of just under $10, moving back up to between $16 and 18 in February.
Despite this, certificate creation has been slow. This is in part due to the reduction in deemed savings for the previously dominant commercial lighting. But the market has been slow to take advantage of the significant increase in subsidies for any energy efficiency projects that uses measurement and verification to demonstrate savings.
In Victoria, until the November election last year, the previous government had committed to terminating the VEET Scheme at the end of 2015. In December, the new government committed to a target for energy retailers of 5.4 million certificates, with a review mid-this year to strengthen it even further.
This has seen a steep increase in activity with creation rates still below the average required to meet the 2015 target. Prices have been steady around the $18 mark for the year to date, compared with a low of just under $14 last September. Activity is dominated by halogen down-light replacement projects.
Nationally, the first reverse auction round of the $2.5 billion Emissions Reduction Fund (ERF) will come on April 15/16 this year. Up until late last year, there was deep market scepticism as to whether the legislation would ever pass, and if did, whether anyone would participate. There is still scepticism and controversy over elements of the auction process and price transparency.
However, at national road shows over the last few weeks, the Clean Energy Regulator (CER, the ERF administrator) has maintained that they are confident that they have enough new projects registered and will not exercise their option to disclose the benchmark price (or cap) for the first auction.
The 212 currently registered projects are all based on methods adapted from the Carbon Farming Initiative – including projects from land use, agriculture and landfill. The only energy efficiency methodology released so far has been the commercial building method. This is adapted for the ESS and allows proponents to use improvement in NABERS ratings to demonstrate savings. However, a measurement and verification based method, adapted from the NSW ESS has been consulted on and is expected to been released shortly, and more are understood to be in development.
Late last year, the South Australian government also followed through in its commitment to extend and expand the Retailer Energy Efficiency Scheme (REES) to small business. It also released a significant expansion and updating of eligible energy savings activities and calculation methods. The scheme now covers one of the broadest ranges of residential activities in the country, as well as variation on the NSW ESS commercial lighting method. There is little public data on prices or project volumes, as trading under REES is all through direct bilateral contracts with energy retailers, without certificates. However anecdotally, the prices paid for energy savings in south Australia have been significantly higher than NSW or Victoria.
The ACT committed to extending its Energy Efficiency Incentive Scheme (EEIS) last year. Proportional to the size of the ACT, EEIS is much smaller. Like REES, there is little public information with activity based on bilateral contracts with retailers not certificates. However, the EEIS review suggests that the average cost energy savings was $41 per tonne. EEIS has a much smaller range of eligible activities, primarily residential with small business lighting and appliances.
Choosing between these schemes depends on the technology you are interested in, the geographic distribution of your projects, the timing of project costs and your access to project financing.
State-based schemes maybe a more attractive choice if the projects are not national, financing certificate revenue is not possible, or the projects involve simple activities that are deemed under state schemes (eg commercial lighting, building fabric, packaged appliances).
The key advantage of the ERF is scale. The benefits of combining projects across multiple national sites may outweigh the lack of forward creation if financing can cover future certificate revenue. The ERF energy efficiency methods are very limited at the moment, but are expected to expand soon.
However for NSW sites, the ESS may be a preferable choice given the breadth of activities that are potentially eligible for forward creation. This covers any residential, commercial or industrial project where savings can be demonstrated through a range of approved measurement and verification approaches. Examples include HVAC, industrial refrigeration, building automation, process redesign, motor systems, and commercial and industrial water heating and process heating.
The following table gives a quick overview of the pros and cons, and the types of pro: