The National Energy Savings Initiative Working Group¹ (Working Group) released an Issues Paper (the Paper) on 20 December 2011 seeking input on the policy objectives, principles, major design elements, coverage and focus of efficiency savings for a National Energy Savings Initiative. The Paper seeks feedback on 107 separate questions. To assist in the design parameters, a Modelling Assumptions Report has also been released.

The Working Group will hold consultative workshops in capital cities in the coming two weeks, details of these are available on DCCEE's website with the first workshop in Brisbane on 31 January 2012 (see link at the end of this article).

The Paper sets out the main areas on which the Working Group is seeking stakeholder feedback.

Drivers for change

The Working Group recognises that:

  • there is considerable scope for energy efficiencies in all sectors of the community
  • efficiencies are not being realised even where the savings are recognised
  • electricity costs are rising steeply (up 19% on average from 2011/2012 to 2012/2013) and without a reduction in energy use some sectors of society will be significantly disadvantaged
  • network costs, in particular, are rising steeply due to high demand in peak periods and the need to replace ageing assets
  • there are over 300 separate individual energy efficiency measures across different levels of government
  • replacing three state based schemes with a single national scheme should reduce compliance costs.

Broad parameters

The Working Group indicates support for an energy efficiency obligation scheme over direct regulation as this results in least-cost energy efficiency. Energy efficiency or 'white certificate' schemes are in place in New South Wales, Victoria and South Australia as well as in the UK, France, Belgium, Denmark, India, Italy and in 26 states of the US.

Policy objectives

The Working Group recognises that setting the correct objectives impacts on scheme design. For example if the primary objective is to reduce energy costs, activities which reduce peak demand would be favoured recognising that 25% of retail electricity costs are derived from peak events occurring less than 40 hours per year. If the objective is to reduce emissions, switching from electricity to gas appliances would be favoured. If saving energy for low income households is the primary objective then the scheme would focus on activities in those households rather than in commercial premises.

Major design elements

The Working Group favours a baseline and credit scheme (examples being the current energy efficiency schemes in Australia) over a cap and trade (an example being the carbon pricing mechanism post 1 July 2015) and states that a scheme which allows the trading of certificates can assist parties meet their obligations for a lower cost.

Sectoral and fuel coverage

The Working Group indicates a commitment to cover activities in residential, commercial and industrial sectors. It states that covering both electricity and gas would reduce the scheme costs but would add complexity and could increase administration and participation costs thus increasing energy prices in comparison with an electricity only scheme.

Liable entities

The current energy efficiency schemes in Australia impose liability on electricity and gas retailers. The Working Group ask whether distributors would be better placed as the obligation point as they benefit directly from improvements in efficiencies and could for that reason be better placed to target activities. On the other hand as distributors are in a monopoly position receiving regulated prices there is no scope for competitive pressures to minimise compliance costs.

Making a submission

Submissions on both the scheme design for a National Energy Savings Initiative and the Modelling Assumptions Report are sought by 4pm AEST on 17 February 2012. Details are available on the DCCEE website.

Footnotes

1 The Working Group comprises senior officials from the Department of Climate Change and Energy Efficiency and the Department of Resources, Energy and Tourism.

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