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 customer, who upgraded an aging and inefficient 2MW boiler with three 500kW boilers, was able to register over 800 VEECs thanks to Northmore Gordon’s expertise. This not only helped to offset the cost of the upgrade, but also contributed to the reduction of greenhouse gas emissions.

“We are thrilled to have achieved this milestone,” said Patrick Blain for Northmore Gordon. “With gas prices on the rise and the world on track to overshoot 1.5C global warming, it has never been more important for businesses to take action to reduce energy usage and emissions. Our gas efficiency solutions are a great first step in this direction, and we are committed to helping our customers make the transition to more sustainable energy sources.”

To learn more about the value your business can receive from the VIC and NSW with gas efficiencies, please visit https://northmoregordon.com/technologies/boiler-upgrades/.

To find out more about electrification and other alternatives, visit https://northmoregordon.com/articles/increase-boiler-energy-efficiency-and-reduce-costs/.

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That’s why we need plumbers and other skilled trades to turn plan into action.

Even though plumbers are doing the important work of actually installing new and more efficient equipment, many of them are leaving thousands of dollars on the table when they complete jobs without capturing the accompanying certificates that they deserve.

If you’re not used to regulatory language, it can seem complicated and burdensome. But when you realise just how simple the process is — some of it being paperwork that plumbers are already required to do — you will be able to earn up to an extra $3,000 per water heater installation.

For many plumbers, this could mean an extra $12,000 in hand every week.

What are the energy efficiency certificates?

Certificates represent a reduction in carbon emissions from qualifying energy efficiency upgrades. As state and federal governments ramp up their decarbonisation efforts, electricity retailers are required to show proof of progress by submitting an annual quota of certificates.

Replacing and upgrading water heaters is a qualifying energy efficiency job… and it’s one that many plumbers do routinely.

At the state level, both Victoria and New South Wales offer certificates for replacing water heaters. The Victorian Energy Upgrades (VEU) program aims to collect 6.5 million certificates in 2021. That number is set to rise to 7.3 million by 2025.

Similarly, the Energy Savings Scheme (ESS) in New South Wales penalises electric retailers who do not meet their target certificate quotas. On top of the VEU and ESS, the federal government also offers certificates. Plumbers can take advantage of both the federal and the appropriate state certificate when providing their service.

One way or another, certificates will be acquired. Since plumbers installing water heaters have already done the intense labour, they might as well be rewarded by allowing their work to count towards Australia’s carbon reduction plan.

How to collect the water heater certificates

Regulations and political dialogue can be tedious and seem complicated. Sometimes it is.

In the case of water heater certificates, however, the process is so easy and financially rewarding that plumbers will be looking for ways to add more water heater upgrades to their weekly project lineup.

Receiving a certificate can be as simple as:

• Taking 5 specified photos during the course of the water heater installation job &
• Sufficiently filling out paperwork for provided plumbing and/or electrical services

While the photos may be a new element to plumbers’ work, they are taken on-site and require little time. The paperwork is already a job requirement, so by simply understanding the appropriate details needed for regulatory purposes, plumbers will be able to take advantage of the lucrative certificates.

With the new water heater installed, the photos taken, and the paperwork filled out, the material is submitted to a regulator for approval. Once approved, appropriate certificates will be given.

How to monetise the certificates

Due to the large number of certificates needed by electricity retailers, participants will only be able to effectively monetise certificates in the wholesale market.

This can be challenging for small business plumbers who are doing one to three water heater jobs a week.

Fortunately, there is a simple solution that streamlines the regulatory process and assures you get paid for your individual certificates.

How Northmore Gordon makes the certificate process easy

At Northmore Gordon, we have the capacity to aggregate large enough quantities of certificates to participate in the wholesale market.

That means we want to make it as easy as possible for plumbers to get certificates and be fairly compensated for their critical work.

To streamline the certificate process, Northmore Gordon:

• provides training on what photos to take and what information needs to be included on paperwork
• shares an app outlining a step-by-step certification process so that plumbers don’t have to worry about missing something
• manages all of the third-party regulatory relationships once plumbers’ photos and paperwork is completed

Dealing with regulation is what Northmore Gordon does, so we want to remove the headache and uncertainty plumbers feel towards certificates and replace it with a steady cashflow.

A cashflow that you deserve for helping the state meet its carbon emissions goals.

When it’s all said and done, plumbers have already put the work in. Northmore Gordon is here to make sure that the work is properly recognised and that plumbers receive the payment they deserve.

If you provide water heater upgrades or other energy efficiency services, give us a call today on 1300 878 500 so that we can get you set up to make an extra $3,000 per installation.

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The 330kW of additional capacity installed at the site provided green energy to lighting, HVAC, and IT equipment in the dealership, as well as machinery used in the workshop. The VEU program can credit any projects that save electricity or gas from the grid, so this site with a high level of self-consumption is suited to capitalise on the value from the Project Based methodology.

While export of excess solar generation is allowed in the program, it can’t be counted in the energy savings, meaning sites that have 6 or 7-day per week operations, have high daytime loads, or are able to shift loads into the solar generation curve – colds storage, retail, warehousing, and manufacturing – are able to maximise the value from participating in the VEU program over the traditional approach of claiming LGCs for the renewable generation. The added bonus of using the VEU program is that the Federal Government carbon account rules allow keeping the green power credentials of your project towards your corporate sustainability goals.

“Solar VEECs now cover well over 40% of the cost of a large-scale solar system; it’s very compelling.  Even businesses excluded on the VEU SAP list would benefit opting in. They’d reduce their power consumption (and hence their VEU liabilty) and gaining access to large reductions in the capital cost of the solar system.   Add 30% back from full depreciation in the first financial year to > 40% covered and it’s a no brainer.  With the full capital expensing* likely to be extended to June 2023 companies should be doing this now to ensure systems are fully commissioned by then”

Hamish McGovern – Northmore Gordon, Group Commercial Director

With the VEEC price continuing to hit all-time highs, the solar PBA approach can yield 3 times the value of LGCs in net present value, while also bringing forward the incentive cash flow in 12 to 15 months from the commissioning of the system. The announcement in last year’s Federal Budget also allows businesses to fully deduct capital equipment purchases that are in operation by June 2022, further improving the project ROI. The additional benefit of using measurement and verification is that your saving are verified against an internationally recognised standard so you can be certain that the saving you have paid for have been achieve.

Talk to Northmore Gordon today to take advantage of the Victorian Energy Upgrades program – the leaders in PBA VEEC creation.

Sources: *ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/JobMaker-Plan—temporary-full-expensing-to-support-investment-and-jobs/

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Similarly, Measurement & Verification (M&V, also known as MRV) protocol assures performance of energy conservation measures (ECM) and significantly improves businesses’ capacity to realize energy savings —  savings that result in lower energy costs and fewer expenses on operations and maintenance.  

Considering the pivotal role that Measurement and Verification (M&V) plays in guaranteeing energy and cost savings, it’s important to maintain the diligence, rigor, and transparency that make M&V so reliable and effective.  

Given the worldwide disturbance caused by the Covid-19 pandemic, we want to share insight from one of Northmore Gordon’s Principal Consultants, Alan Wang. Interviewed last week, Wang addresses the importance of recognizing Covid’s impact on M&V and what we can expect for its future. 

Q: FIRST, WHAT DOES M&V ENTAIL?  

AW — An M&V method is a well-defined, transparent means of measuring and verifying performance of an energy conservation measure (ECM) so as to identify the true energy savings the ECM brings the facility. Using a statistically valid modelling approach — such as linear regression modelling or estimate of the mean to model baseline conditions — M&V reveals true energy savings of an ECM under normal operating conditions of the facility.  
 

Q: WHAT ARE THE RELEVANT STANDARDS FOR M&V?  

AW — M&V measures must adhere to rigorous and well-defined standards in order to maintain reliability and credibility. The International Performance Measurement and Verification Protocol (IPMVP) has become the international gold standard for M&V. The IPMVP offers a versatile and flexible framework which allows for energy consumption estimates to be made using a proxy. This, however, is not permitted under any of the Australian M&V measures.  

In New South Wales, the Energy Savings Scheme (ESS) uses a couple of methods (PIAMV and MBM) which are both M&V based but operate under stricter guidelines than the IPMVP. Under Victoria’s Victorian Energy Upgrades, there is a similar M&V based program known as Project Based Activity (PBA).  

Q: HOW HAVE THE M&V METHODS RESPONDED TO COVID?  

AW — IPMVP released a Covid guide late last year which has enabled businesses to adopt adjusted guidelines for their Covid impacted facilities. The IPMVP Covid guidelines allow businesses to be flexible with their ‘Covid impacted period,’ allowing businesses to backcast or forecast the Covid impacted period to baseline or operating conditions so as to minimise the issues coming from Covid between those affected dates.  

In Victoria, there was a six-month delay for the release of the finalized Covid guidelines. That put a delay on the release of M&V certifications, some of which were delayed by as much as 18 months.  

New South Wales was not heavily impacted by Covid. There were few cases, but we do anticipate consultation for Covid guidelines to start in the near future and for final guideline papers to be released in the first half of 2022.  

Q: HOW HAS COVID IMPACTED CONDUCTING M&V FOR INDUSTRIAL BUSINESSES?   

AW — The widespread impact Covid had on consumer lifestyle caused significant changes in industrial production. Some manufacturers needed to increase production to match growing demand while others decreased production in response to lower demand or disruptions in their supply chain.  

For example, one of our clients is a coffee pod manufacturer that saw a 400% increase in production because of heightened demand for coffee at home. Although this was great for the manufacturer’s revenue, the production increase posed a huge problem for M&V measures. The increased production heavily skewed the amount of energy consumption per product produced, lowering our confidence in the energy KPI. This abnormal production volume necessitated some timeline adjustments to the baseline and operating period in order to claim the savings of the certificates, and not all anticipated credits could be claimed.   

In another example, an abattoir experienced reduced production and delayed fuel delivery. Without normally delivered fuel, the abattoir went through month-long stretches without showing much fuel consumption. This change in activity significantly impacted the energy KPI, making M&V measures a real challenge. 

Q: HOW HAS COVID IMPACTED CONDUCTING M&V AT BUILT ENVIRONMENT SETTINGS?  

AW — With lockdowns instituted during Covid, many people were not going into work at retail settings. In several cases, a lower occupancy led to decreases in energy consumption, which resulted in M&V delays in order to gather sufficient data to assess true energy savings from the ECM.  

It’s easier to anticipate the impact of Covid on built environment settings than on industrial operations because occupancy is the primary factor impacting built environment whereas the industrial sector is affected by a wide range of interconnected variables that are difficult to predict. 

Covid does impose a number of challenges for M&V. Fortunately, there are different modelling techniques and other flexible guidelines which allow M&V experts to adjust timelines and carry out their Measurement and Verification measures.  

There will be issues going forward as Covid persists, but energy efficiency improvements are arguably the most impactful start for businesses striving to reduce energy demand, save money, and lower their carbon emissions.  

At Northmore Gordon, we are well aware of the challenges, and we are ready to help businesses carry out energy conservation measures and the appropriate M&V method to make sure they effectively decarbonize and capture their true energy savings. 

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The successful project claimed VEECs for avoided carbon emissions from 581kW system installed on the roof of The Australian Glass Group’s (AGG) head office and manufacturing site in Knoxfield. The building owners – APN Property Group – agreed to an addendum on the existing lease to allow AGG to save on energy costs with an agreed ROI, while greening their property portfolio.

The PV system has had the annual carbon savings measured and verified at 421 tonnes of CO₂ per annum. Using the VEU program has also enabled AGG to continue to use Green Power from the solar PV system on their roof. If the system had claimed LGCs and sold those LGCs they could no longer claim the site was reducing their emissions from electricity based on the federal carbon accounting rules. 

Using the VEU Project Based Assessment (PBA) has given a return of more than 3x what would have been realised for the customer had they claimed LGCs. The time to cash was dramatically reduce to 15 months from project commissioning instead of claiming LGCs out to 2030. The high value of the VEECs combined with the 15-month time frame for realising the certificate value, reduced the upfront cost of the system, payback period, and increased the ROI of the project. 

“Solar VEECs are really ramping up VIC. Today, 30-40% of the cost of a large-scale solar project can be covered through VEECs – it’s a game changer. Whilst the VEU PBA method is complex, Northmore Gordon pioneered measurement & verifications under the VEU and we now have substantial experience across a wide range of sites and implementations. For our customers this means less risk and the best possible outcome.”

Hamish McGovern – Northmore Gordon, Group Commercial Director

Northmore Gordon is the leader in VEEC creation under the VEU PBA method, which was launched in 2017, with 64% of all VEECs created using the method to date, corresponding to 121,000 tonnes of CO₂-e abated from Victorian projects. The Victorian Energy Upgrades program is the state’s flagship energy efficiency program that has driven a reduction of 74.9 million tonnes of CO₂-e in Victoria since 2009. Each VEEC is worth 1 tonne of CO₂-e not emitted.

Talk to Northmore Gordon today to take advantage of the Victorian Energy Upgrades program.

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