The Victorian Government sets the VEU targets, with the current targets covering 2020 to 2025. The targets for 2026 to 2030 will involve consultation in (late?) 2024 and must be completed by May 2025. The government is committed to continuing the Energy Upgrade program beyond 2025, and the new targets will provide a clear direction for the program’s future through to the end of 2030.

As of February 2023, 13.5 M Victorian Energy Efficiency Certificates (VEECs) are registered or pending in the VEU registry against the VEU target for 2022 of 6.7 M (due for surrender by the Energy Retailers in April 2023). This will leave a surplus of at least 7 million VEECs against the 2023 target of 6.9 M VEECs. The VEET targets are currently set to the end of 2025 and, in aggregate (2022 – 2025), amount to 28 M VEECs (against which 13M have already been created). See current targets.

Surplus VEEC in the VEU registry over time and VEEC price charge. 2010 – 2023 – Image courtesy of DEECA (Vic Government) – February 2023 Market Update.

The VEEC price in February 2023 is sitting at $69.00. This is reasonably high and surprising, given the surplus of 7 M VEECs. The VEEC price remains high because the phase-out of lighting under the program has created uncertainty about where the remaining VEECs will come from. Residential, commercial and street lighting has registered 59 M of the 80 M VEECs ever created; 74% of all VEECs have come from lighting. Hotwater Heatpump, weather sealing, HVAC upgrades, and (Northmore Gordon’s favourite) PBA (Measurement and Verification) will generate significant numbers of VEECs as well as new methods yet to be announced, including Home Energy Rating Assessment (HERA), new HVAC and Hotwater methods, smart thermostats and potential building insulation.

For the past few months, the price has been relatively stable, in the past when new methods are released, or the market realises that substantial VEECs can be created from existing methods, then the VEEC price can move quickly. One such method is commercial and residential hot water replacing electric resistance. When new methods are announced or an existing method takes off then prices tend to move suddenly. The other important consideration is that at the end of every January, the forward emission factor for electricity in the VEU drops by around 20% reducing the number of VEECs from electrical energy savings by this much.

Below is the Victorian Government Department of Energy, Environment and Climate Action (DEECA) Roadmap for 2023 and consultation of new activities planned.

In addition to helping households and businesses save money on their energy bills, the Energy Upgrade program has helped to reduce carbon emissions by promoting the use of renewable energy sources and encouraging energy-efficient behaviour.

Disclaimer: This information is provided by Northmore Gordon based on factual market information and is not financial advice, businesses should make their own decision or seek professional advice by engaging with Northmore Gordon around their specific requirements.

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The ERF is a $2 billion Abbott-era government fund that purchases carbon abatement twice a year by conducting reverse auctions. At each auction, projects can be awarded ACCU off-take contracts that are either fixed – where the project must deliver the ACCUs over the contract term; or optional – where the project can sell their ACCUs to the ERF or choose to sell at a higher price on the spot market. 

The average price paid by the Australian Government for ACCUs in the latest auction was $16.94, spread across 24 optional delivery contracts, for a total of 6.8 million tonnes of CO₂-e abatement. This is the first time that no fixed delivery contacts have been awarded, against the backdrop of climbing ACCU prices in spot market. This suggests that the ERF is moving to a role of providing a floor price to project developers while still allowing them to participate in the growing spot market. 

As shown below, this year has seen significant growth in the ACCU market with spot prices diverging from the historic trend of following the auction results. In the past 12 months, there has been a 108% growth price to $33.50, $10.40 (65% of the 12-month growth) being in the past 6 weeks alone. 

In compassion to international markets, ACCUs (AU$33.50) are still trading at discount, per tonne of CO₂-e, compared to European Allowances – €57.93  (AU$90.36); and UK Allowances – £58.00 (AU$106.95); But above the Californian Emission Trading Scheme – US$23.30 (AU$31.21); and China’s newly launched ETS – ¥41.62 (AU$8.73). 

Also this month, the Minister for Energy and Emissions Reduction announced the program development priorities for 2022, which add methods for electric vehicle and hydrogen refuelling infrastructure, use of hydrogen, stacking of different activities on farms, and expansion of the existing carbon capture and savanna fire management methods. This announcement builds on the existing priorities for soil carbon, biomethane, plantation forestry, and blue carbon. 

While there have been criticisms of some land-based methods in the past months, ACCUs are recognised as a high-integrity carbon units with a diversity of methods to credit carbon savings. The growing value of ACCUs is increasing interest in projects for industry, particularly in energy efficiency, fuel switching, transport, and alternative waste treatment across a range of sectors. The methods for industry are based on rigorous internationally recognised standards, such as the International Performance Measurement and Verification Protocol. While the ERF is dominated by land-based projects, industrial projects now make up 22% of the active projects, with further growth expected as higher ACCU price reduces payback periods for capital intensive projects in the industrial sector. 

If you haven’t factored ACCU pricing into your next project, now is the time to reconsider how the carbon value of your projects can be realised to boost the energy productivity of your business as the world transitions to net-zero. 

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Without urgent action countries will lock in high-emissions pathways for decades to come. We need to plan effectively and accelerate implementation of climate action plans to avoid the most devastating impacts of climate change.

New IPCC Report stresses the need for more Climate Action

Development on the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6) examines global impact under various climate change scenarios. The report suggests that limiting global warming to 1.5°C relative to pre-industrial levels is still possible, but it will require swift action and significant global cooperation.

Many countries, including Australia, came together for the Paris Climate Agreement in 2015 to address climate change and commit to emissions targets aimed at keeping global temperature rise within 1.5°C of pre-industrial temperatures. While the Paris Climate Agreement was a monumental step towards international cooperation to address climate change, a reflective look at countries’ pledges shows that many nations will not hit their 2030 emissions targets.

Countries like China and India are poised to continue increasing carbon emissions through to 2030 while the United States and Australia’s current tracks are insufficient in keeping pace with the Paris Climate Agreement.

To stay within a 1.5°C increase, Earth’s atmosphere could likely not take more than 500 billion tonnes of CO2 emissions. Considering the world currently emits roughly 40 billion tonnes of CO2 annually, these figures project that a decade of business-as-usual operations will force us past the 1.5°C threshold.

Surpassing the 1.5°C threshold will have significant ecological and socioeconomic impact as extreme weather events become more intense and frequent, changes to the global water cycle cause severe drought and intense flooding, and sea-level rise poses serious threat to low-lying islands and river delta areas. The IPCC recommends that to stay well below 1.5C of warming, the cumulative emissions from 2018 needs to stay under 500 billion tonnes of carbon.

There is available technology to impact industrial decarbonisation

While policy can be a huge driver for environmental action, it’s not the only force. Consumer demand for sustainably sourced products has increased over the past decade, and large financial institutions and investors are putting more stock into clean energy platforms. This puts pressure on companies to incorporate decarbonization methods and sustainability measures into their business practices.

On top of that, improving industrial efficiency can result in energy cost savings, helping businesses paving the way for sustainable practices to have a greater competitive edge. Good news is that there are already plenty of ways to effectively decarbonize commercial and industrial operations. Northmore Gordon is ready to help establish and execute commercial decarbonization plans and has being doing so for over a decade.

Some tried and true strategies businesses should consider to increase energy efficiency and reduce carbon emissions include:

· Recover and use heat wherever possible, such as the flue gas of an oven or boiler

· Electrify heating processes under 200°C

· Identify and quickly rectify air and steam leaks

· Optimise the control of and monitor the efficiency of existing equipment

· Install on-site solar PV system

· Engage employees in a ‘treasure hunt’ for energy waste

Businesses have the power to lead on Climate Action

The IPCC report shows that global efforts to fulfil the Paris Climate Agreement are lacking. This decade is a pivotal time for us to step up to the challenge… to take ownership over our fossil fuel usage and transition to sustainable practices… to protect our home and communities for generations to come. Businesses have the opportunity to lead the charge on climate action. Technologies are available to lower industrial carbon footprint. Time will tell if we have the will to make it happen.

Resources:

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This announcement increases the previous targets for 2022 to 2025, announced in 2016, by 0.5% per year, meaning the 2025 target has increased from 8.5% to 10.5% of electricity supplied. This rate of increases continues year-on-year through to 2030, targeting savings of 13% of all electricity supplied to end customers. In line with previous target setting, the goal for 2030 to 2050 is currently set at 13% per year, but as the government has done before this likely to be reviewed at the five-yearly target setting. Importantly, this is the first time a target has been set more than ten years in advance and indicates that the ESS is likely to be a key part of NSW goal to achieve net-zero by 2050.

The final certificate target for 2020 is yet to be released by the regulator as the annual compliance deadline doesn’t fall until April, but the 2019 target was 4.6M ESCs. The creation for 2020 activities to date is 3.7M ESCs, down 24% on 2019 with the 2020 compliance surrender yet to be completed. If the 2020 target is similar to 2019, there will be a surplus of 4.3M ESCs – or another way to look at it the program is 11 months ahead of the target.

Looking forward it is hard to know what the annual ESC target will be, as the future energy consumption is not known, but based on the latest NSW consumption forecasts by AEMO out to 2030, the 2021 target could be 5.5M ESCs increasing to 8.4M ESCs per annum by the end of the decade.

During 2019, activities under the ESS saved 2.8 TWh of electricity, 520 TJ of gas, avoided 2.6M tonnes of green house gases, and saved NSW consumers $235M. The cost of the program to electricity customers was estimated to be $88-112M representing a return on investment of 109%. These savings also contribute to demand reduction across the state reducing the cost of transmission and distribution assets.

The Energy Savings Scheme is a market-based mechanism that was implemented in 2009 with the goal to provide financial incentives for business and residential consumers to undertake energy efficiency upgrades. The approved activities cover “deemed” upgrades – where there is a pre-determined level of savings based on the upgrade and is available for specific technologies – there is also the technology-neutral “Measurement and Verification” approach. Whilst an M&V approach is more complex and takes longer to complete it enables the full value of the savings to be realised. The program supports many types of upgrades ranging from industrial boilers, refrigeration, improving NABERS ratings, air-conditioning and HVAC, LED lighting, high-efficiency appliances, and many bespoke upgrades in the commercial and industrial sectors. The NSW government has continued to make the ESS an integral part of their energy strategy, expanding the program into the Energy Security Safeguard which will incorporate a future demand response mechanism.

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ESS Commercial Lighting Requirement Changes – Effective November 1, 2018

A summary for the ESS Rule change effective from November 1, 2018.  Any existing activities must be registered with IPART prior to the 1st of November in order to claim the existing ESC quantities.

• There is now a cap on the Nominal Lamp Power (NLP) for High-Intensity Discharge (HID) Lamp i.e. Mercury Vapor Lamp, Metal Halide Lamp for use in indoor spaces at 400W. Lamps with a higher NLP can only be claimed at 400W.  Outdoor fittings on the external faces of buildings can be claimed at the full wattage.
• The table below shows how the asset lifetime values have been manipulated to stimulate growth in underserved areas. A discount rate has been applied to most metro installs to promote more regional installs. While car parks and certain types of factories have been bumped up to stimulate more installs in metro and regional areas.

The post Energy Savings Scheme (ESS) Update | Commercial Lighting Amendments | 1 Nov 2018 appeared first on Northmore Gordon.

From October 6, 2018. APs undertaking activities under Schedule 34 – Building Based lighting upgrades must provide the following three additional pieces of evidence:

• Geo-tagged photographs of each upgraded space type showing the arrangement of at least 75% of the existing lighting equipment before removal from its original position
• Geo-tagged photographs of each upgraded space type showing the arrangement of at least 50% of upgrade lighting equipment after installation
• Where high-bay products are replaced, a close-up geo-tagged photograph of at least one existing high-bay product for each upgrade space type, before removal from its original position

Wattly is in the process of releasing a new version of the app that will request these additional photos. These additional requirements have come about due to increasing concerns about over claims or ineligible claims.

More details can be found in the Information Bulletin and in the ESC explanatory note for commercial lighting.

The post VEET Scheme Update | VEU Sch 34 | Building Based (BB) Lighting Upgrades | Additional Photos Required | 6 Oct 2018 appeared first on Northmore Gordon.

The Victorian Energy Efficiency Target (VEET) Scheme has decided to make a change and rebrand with a new name and new regulations. The VEET Scheme, also known as the Energy Saver Incentive began in 2008 with a purpose to make energy efficiency improvements more affordable, reduce greenhouse gas emissions and encourage energy efficiency. The VEET Scheme has been well-known for offering Victorian’s free lighting upgrades and has said to have helped more than 70,000 businesses and 1.7 million households.

Why are they changing the name to Victorian Energy Upgrades Program

The ESC website explains this well. To put it simply, there was confusion on who administers and regulates the program and who set the program policy. The government rebranded the public-facing aspect of VEET to the Victorian Energy Upgrades Program, but the internal administrative side remains known as the VEET Scheme.

Changes for the Victorian Energy Efficiency Target Regulations

Fundamentally the scheme didn’t change, the purpose and objectives are relatively the same. The big difference is the scheme is moving with the times and as the industry evolves, the relevant methods change. The new scheme will now include several new activities including a customised way to measure energy savings. The changes in the program will also give previously excluded large energy users the opportunity to benefit from Victorian Energy Upgrades.

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