Residential Buildings Regulatory Impact Statement Methodology · 2017-10-17 · HoustonKemp.com...

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Residential Buildings Regulatory

Impact Statement Methodology

A report for the Department of the Environment and Energy, who

have managed the project on behalf of all Australian jurisdictions

under Measure 31.2 of the National Energy Productivity Plan

6 April 2017

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Report Authors

Adrian Kemp

Tom Graham

Martin Chow

Sarah Nelson

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This report is for the exclusive use of the HoustonKemp client named herein. There are no third party beneficiaries with respect to this report, and

HoustonKemp does not accept any liability to any third party. Information furnished by others, upon which all or portions of this report are based, is believed

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sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The opinions expressed in

this report are valid only for the purpose stated herein and as of the date of this report. No obligations is assumed to revise this report to reflect changes,

events or conditions, which occur subsequent to the date hereof. All decisions in connection with the implementation or use of advice or recommendations

contained in this report are the sole responsibility of the client.

Residential Buildings Regulatory Impact Statement Methodology

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Contents

Executive Summary i

1. Introduction 1

2. High-level cost benefit assessment framework 3

2.1 Overview of a benefit cost framework 3

2.2 What is the problem that is being addressed by changes to the NCC? 3

2.3 Defining the ‘base case’ against which options are assessed 4

2.4 Evaluation timeframe 5

2.5 Discount rates 6

2.6 Region or basis for assessment 8

2.7 Summary 10

3. Estimating the benefits of changes to the NCC 11

3.1 How do changes to the NCC translate to benefits? 11

3.2 Quantification of benefits 12

3.3 Summary 17

4. Estimating the costs of changes to the NCC 19

4.1 What costs are incurred as a consequence of changes to the NCC? 19

4.2 Quantification of costs 19

4.3 Summary 23

5. Suggestions for future research 24

5.1 Improvements in the supporting evidence base 24

5.2 Additional areas for research 25

A1. List of organisations consulted 26

A2. Literature review of relevant studies for any potential future RIS 27

Residential Buildings Regulatory Impact Statement Methodology

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Figures

Figure 1: How a change in NCC leads to benefits – an investment logic map 12

Figure 2: Overview of approach to estimating benefits 13

Figure 3: How a change in NCC leads to costs – an investment logic map 19

Tables

Table 1 – Recommendations regarding the overall methodology to apply 10

Table 2 – Recommendations regarding the methodology to apply for estimating the benefits of

changes to the NCC 17

Table 3 – Recommendations regarding the methodology to apply for costs of changes to the NCC

23

Table 4 – Summary of improvements in the supporting evidence base 24

Table 5 – List of organisations consulted in the development of the methodology 26

Table 6 – Summary of potentially useful previous studies going forward 27

Residential Buildings Regulatory Impact Statement Methodology Executive Summary

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Executive Summary

The National Construction Code (NCC) sets the minimum requirements for the design, construction and

performance of buildings throughout Australia. It also specifies the minimum energy efficiency standard for

newly built residential buildings, which can have a lasting effect on energy consumption of the household,

eg, the design and installation of windows.

HoustonKemp Economists (HoustonKemp) has been engaged by the Department of the Environment and

Energy (the Department), who are managing the project on behalf of all Australian jurisdictions under

Measure 31.2 of the National Energy Productivity Plan, to develop a robust methodology for evaluating the

benefits and costs of possible future increases in the stringency of the energy efficiency provisions in the

NCC. We understand the methodology will be applied to inform future regulatory impact statements (RIS), for

specific proposals related to the energy efficiency provisions applying to residential buildings.

The last consideration of NCC energy efficiency provisions was in 2009 and

there has been a recent renewed focus on such measures

The last changes to the NCC related to energy efficiency were evaluated as part of the development of a RIS

in 2009. While the proposed changes were ultimately approved by Ministers and implemented in 2010, the

evaluation of benefits and costs were considered contentious by stakeholders, for two primary reasons:

concerns that the assumptions and specifications were too narrow to fully capture the true benefits of the changes being considered; and

concerns that the net benefits were relatively modest and so the disruption resulting from the amendments meant the changes should not be pursued.

We understand these contentions reflected the limited data available to support many of the assumptions

that were necessarily made in the analysis, along with general methodological concerns.

There has been a recent renewed focus on the minimum energy efficiency standards for residential and

commercial buildings as the Council of Australian Government’s (COAG’s) Energy Council (EC) seeks to

achieve the objective of the National Energy Productivity Plan (NEPP) released in December 2015, to

improve energy productivity to 2030 by encouraging more productive consumer choices and promoting more

productive energy service.

As part of Measure 31.2 of the NEPP, the COAG EC has agreed there are very likely strong productivity and

emission reduction benefits in further revising energy efficiency requirements in building codes for residential

buildings. However, the COAG EC notes that progressing any NCC advancement under NEPP Measure 31.2

requires the evidence for change to be strengthened. To date, much of the evidence for residential building

policy changes has been based on limited data, which has at times resulted in mixed or inconclusive results.

It follows that any proposals for changes to the building requirements to improve energy efficiency will

require robust analysis of the benefits and costs, supported by the best evidence available.

This project has been established to develop, and consult on, the

appropriate methodology to apply to any future RIS

The objective of this study is to re-examine the methodology applied in 2009 and make revisions as

necessary to ensure that any future RIS assessments reflect current best practices and all of the available

evidence.

Our proposed methodology has benefited from the insights obtained through discussions with a number of

organisations – we are grateful for the information shared during those discussions and would like to thank

all of those that participated.


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Our recommended high-level assessment framework is conceptually

consistent with the 2009 RIS, but with a few key refinements

We recommend the high-level cost benefit approach for a future RIS be conducted using an economic

evaluation approach – which is largely synonymous with that adopted in the 2009 RIS and centres on the

following five key steps:

1. Identifying compliance pathways to ensure compliance with proposed changes to the NCC.

2. Selecting a number of representative dwellings, and determining what would change relative to the status quo against those compliance pathways, ie, the different choices building owners-occupiers would make in terms of design, appliances, etc.

3. Estimating the impact of the proposed changes on thermal energy use, lighting, etc.

4. Estimating the dwelling-level health, safety and amenity implications (quantitatively and/or qualitatively).

5. Aggregating based on projections of expected uptake of dwelling constructions over time.

The table below provides a summary of our recommendations as to the appropriate high-level assessment framework to apply to any future RIS.

Table E1 – Summary of recommendations regarding the high-level economic framework to apply

Modelling decision HoustonKemp recommendation Change from

2009 RIS?

Problem definition Address market failure arising from a developer or builder

seeking to minimise the costs of construction, which can lead

to less than optimal expenditure on building design or

construction that would reduce energy use and increase the

health, safety and amenity of the dwelling over its life time.

No

Base case definition Take into account:

expectations about dwelling types that will be constructed over the timeframe of the analysis;

standardised designs of dwellings, absent any proposed changes;

expectations about the future evolution of energy use within dwellings; and

other policies or regulations that might reasonably be implemented so as to achieve Australia’s commitments to reductions in greenhouse gas emissions, as well as improved health, safety, amenity and sustainability for building occupants.

Partial – greater

emphasis on

considering what

other

policies/regulations

might be avoided if

proposed changes

to building code

were implemented

Evaluation timeframe At least 20 years, and probably 30 years for both benefits and

costs

Yes

Discount rates Report at 5 and 7 per cent level and conduct sensitivity at 3

and 10 per cent level.

Greater weight should be applied to lower discount rates, to

take into account community values about the desirability of

lowering greenhouse gas emissions both now and into the

future.

Yes


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Regional analysis and

basis for assessment

Benefits and costs should be estimated for a number of

representative dwelling designs with different constructions,

for each dwelling type (detached dwelling, terrace house, low

rise and high rise units) in each climate zone area affected by

the proposed change – the exact number of dwelling types for

each zone should be based on building typology, which

should reflect the existing housing stock as well as expected

trends going forward.

The number and type of representative dwellings should be

agreed before estimating the costs and benefits of NCC

changes.

Yes

We recommend several changes to key modelling inputs for capturing

benefits, in light of being able to now better estimate underlying drivers

Changes to the NCC lead to benefits by requiring building designers to modify new building designs by

adjusting choices of materials, insulation, window placement, room sizes, etc. These implications in turn may

lead to the following key benefits:

reduce the size and/or reduce the running time (and so energy consumption) of heating and cooling appliances needed to heat or cool a dwelling, thereby reducing the cost of these appliances;

lead to associated reductions in network electricity costs over time as reductions in energy use during system peak periods avoids the need for network upgrades to maintain reliability obligations;

result in associated reductions in electricity generation costs, including both generation fuel and avoided future new generation costs that might otherwise have been required; and

lowering greenhouse gas emissions from lower thermal electricity generation.

The table below summarises our recommendations on the approaches that should be taken to estimating the

benefits associated with modifying the energy efficiency provisions in the NCC.

Table E2 – Summary of recommendations regarding estimating benefits

Benefit category Recommended approach Change from 2009

RIS?

Benefits from smaller

heating and cooling

appliances

estimate optimal size of appliances before and following changes to the NCC; and

estimate difference in cost of these appliances.

No

Reduced network

and generation costs

estimate reduced gas and electricity consumption (both for total demand and peak demand);

use available LRMC estimates and wholesale market prices where available; and

use retail prices only if LRMC and market price estimates are unavailable.

Yes

Benefits of reduced

greenhouse gas

emissions

estimate reduced gas and electricity consumption;

forecast emission intensity factors during evaluation period;

Partial – no longer relying on the CPRS (but

still valuing


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convert reduced gas and electricity consumption into reduced GHG emissions using forecast emission intensity factors; and

adopt abatement costs of GHG from other studies.

carbon emissions reductions)

Associated health,

safety and amenity

benefits to dwelling

occupants

These benefits are best dealt with qualitatively in a RIS assessment, unless they can be readily quantified.

Either way, the logic of these benefits should be clearly documented and commented on in the assessment as these benefits are likely to exist for many NCC changes and so should not be ignored.

This is a current area of research focus.

Yes

Similarly, we recommend several changes to key modelling inputs for

estimating the costs of any NCC changes going forward

Changes to the NCC can be expected to result in a number of costs being incurred by the government, as

part of additional implementation and compliance monitoring, as well as the building industry as it drives

changes to residential building design and construction.

In broad terms, the relevant cost categories include:

implementation costs, including the administrative costs to governments and the industry arising from changes to the NCC, including any compliance training that might be required;

enforcement costs, as relevant authorities need to administer and enforce potentially additionally complex requirements; and

building compliance costs arising from building redesign and incremental building construction costs of new residential dwellings or renovations so as to comply with proposed changes to the NCC.

The table below summarises our recommendations regarding estimating the various costs associated with

changing the energy efficiency provisions in the NCC.

Table E3 – Summary of recommendations regarding estimating costs

Cost category HoustonKemp recommendation Change from

2009 RIS?

Implementation

costs

Government administrative costs estimated with reference to

government stakeholders.

Compliance training by certifiers and building industry estimated by

multiplying labour rates, by number of staff affected, by training time

required. These costs should accurately represent actual hourly

rates received by these parties.

No

Enforcement

costs

Incremental certifier time requirements (if appropriate) estimated by

multiplying labour rate, by number of staff affected, by incremental

time required.

Yes – not

explicitly

quantified

Building

compliance

costs

Estimated by multiplying building compliance cost per dwelling, by

the cost efficiency rate (2 per cent year-on-year), by projected

dwellings affected. Sensitivity of costs to the assumed cost

Yes – explicit

inclusion of cost

efficiencies


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efficiency rate assumptions – of 1 per cent (lower bound) and 3 per

cent (upper bound).

Compliance cost per dwelling estimated by subtracting compliance

costs provided by quantity surveyor for least cost compliance

pathway, against status quo costs.

The specific efficiency rates should be revised for use in a future

RIS if new evidence becomes available between now and then.

rates (as a

sensitivity)

Application of

least cost

compliance

pathway

We recommend there is continued research into the appropriate

assumptions used to estimate the costs and benefits of changing the NCC

Our project has involved evaluating the current evidence base for undertaking an economic evaluation of

changes to the NCC as it relates to energy efficiency. There have been some important contributions to the

evidence base since the 2009 RIS, which has allowed us to improve on the robustness of the earlier

analyses, through incorporating that evidence into our proposed methodology. However, there remain a

number of gaps, which we believe could be the subject of additional investigation, to further enhance the

methodology.

Residential Buildings Regulatory Impact Statement Methodology Introduction

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1. Introduction

HoustonKemp Economists (HoustonKemp) has been engaged by the Department of the Environment and

Energy (the Department), who are managing the project on behalf of all Australian jurisdictions under

Measure 31.2 of the NEPP, to develop a robust methodology for evaluating the benefits and costs of

possible future increases in the stringency of the energy efficiency provisions in the National Construction

Code (NCC). We understand that the methodology will be applied to inform future regulatory impact

statements (RIS), for specific proposals related to the energy efficiency provisions applying to residential

buildings.

The last changes to the NCC related to energy efficiency were evaluated as part of the development of a RIS

in 2009. While the proposed changes were ultimately approved by Ministers and implemented in 2010, the

evaluation of benefits and costs were contested by stakeholders. This reflected the limited data available to

support many of the assumptions that were necessarily made in the analysis, along with general

methodological concerns.

There is now a renewed focus on the minimum energy efficiency standards for residential and commercial

buildings as the Council of Australian Government’s (COAG’s) Energy Council (EC) seeks to achieve the

objective of the National Energy Productivity Plan (NEPP) released in December 2015, to improve energy

productivity to 2030. Building energy efficiency standards are being increasingly seen as a cost-effective way

to improve residential energy productivity and lower energy related greenhouse gas emissions.

It follows that any proposals for changes to the building requirements to improve energy efficiency will

require robust analysis of the benefits and costs, supported by the best evidence available.

It is within this context that the COAG EC has embarked on a research program to support the improvement

of the evidence base for undertaking a RIS evaluation. The objective of this study is to

re-examine the methodology applied in 2009 and make revisions as necessary to ensure that any future RIS

assessments reflect current best practices and all of the available evidence.

Our approach to this study has involved:

reviewing the 2009 RIS methodology and input assumptions;

examining the research and evidence to support the assumptions to be used in the assessment;

discussing with key stakeholders concerns with the earlier analysis and some of our preliminary thoughts on what might be involved in our proposed methodology;

developing our proposed methodology for conducting the benefit cost analysis of changes to the NCC to improve residential building energy efficiency; and

providing the evidence base to support the input assumptions that we recommend should be used.

This study has benefited greatly from the insights and perspectives of a number of stakeholders with whom we had bilateral discussions. We are grateful for the information shared during those discussions. A complete list of the organisations with which we met is set out in Appendix A1.

The remainder of this report is structured as follows:

section 2 sets out at a high-level our proposed benefit cost assessment framework for changes to the NCC and describes the proposed business as usual case and the considerations that have been taken into account in its development;

section 3 describes in detail how we would propose that the benefits be evaluated;

section 4 describes in detail how we would propose that the costs be evaluated; and

section 5 makes a number of suggestions for further research.

Residential Buildings Regulatory Impact Statement Methodology Introduction

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Appendix A1 lists the organisations that we had discussions with to inform the development of our proposed

methodology. Appendix A2 provides a literature review of relevant studies to support the evidence base for

any future RIS.

Residential Buildings Regulatory Impact Statement Methodology High-level cost benefit assessment framework

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2. High-level cost benefit assessment framework

In this section we set out our proposed approach to the key elements of the benefit cost framework. In

addition, we explain where our proposed approach departs from the approach adopted as part of the

evaluation of proposals to modify the NCC in 2009.

2.1 Overview of a benefit cost framework

At its most fundamental, evaluating a proposed change to a government policy or regulatory arrangement

requires a consideration of the incremental benefits that can be attributed to the proposal compared to the

costs that are directly incurred as a consequence of such a change. The challenges involved in undertaking

such an assessment includes:

being clear as to how a proposed change is going to materially change the behaviour of those affected, as compared to the circumstance where the change is not implemented;

the need to properly understand how the proposed change and resultant changes in behaviour contributes to the achievement of benefits, and to whom are these benefits expected to accrue; and

properly identifying all of the costs that are incurred as a consequence of the change, which would have been avoided if the change was not made.

The important considerations when considering the results of a benefit cost assessment include:

it only considers future changes, and so is based on future expectations of changes in benefits and costs which can create uncertainties and requires the use of assumptions for which sensitivity analysis is used to understand how those assumptions impact on the results; and

typically, not all of the benefits or costs can be quantified in light of data limitations or uncertainties about the future, and so the quantified benefit cost analysis is only one input to the decision making process.

It follows that in undertaking a benefit cost assessment, it is important to pay close attention to understanding the proposal and how it is expected to change the future compared against the base case, and to be clear about the chain of logic linking the proposal and the associated benefits and costs.

The practical steps in a benefit cost assessment, consistent with the requirements of the Office of Best Practice Regulation (OBPR) are:

1. Identify and define the problem that is intended to be addressed by the proposal. This is sometimes referred to as the objective for the proposed change.

2. Articulate the proposal in terms of how it changes expectations about the future, which is usually referred to as the ‘base case’ or the ‘status quo’.

3. Make decisions about the modelling parameters.

4. Identify the chain of logic between the proposed changes and the associated benefits and costs, so as to identify the qualitative benefit and cost categories.

5. For each benefit and cost category, determine how it is to be quantified, and the associated data and evidence to support the quantitative methodology.

6. Test the sensitivity of the results to key modelling parameters and assumptions, so as to understand which parameters and assumptions have the greatest influence on the quantified results.

The remainder of this section focuses on describing the first three elements of the process, along with the

last element, while the remainder of the report discusses the approach to quantifying benefits and costs.

2.2 What is the problem that is being addressed by changes to the NCC?

The starting point for any regulatory benefit cost assessment is to clearly articulate the problem that is

sought to be addressed as a consequence of the changes being proposed.


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The NCC sets out a set of rules that govern building construction so as to achieve a number of policy

considerations including dwelling health, safety, amenity and energy use. Our focus is on changes to the

NCC as it relates to each of these areas, ie, not just reductions in energy use. We are further focused on

changes associated with the regulations relating to residential buildings as part of the Building Code of

Australia (BCA) – namely:

Class 1a buildings – a single dwelling being a detached house, or one or more attached dwellings, each being a building, separated by a fire-resisting wall, including a row house, terrace house, town house or villa unit.

Class 1b buildings – a boarding house, guest house, hostel or the like with a total area of all floors not exceeding 300m2, and where not more than 12 reside, and is not located above or below another dwelling or another Class of building other than a private garage.

Class 2 buildings – a building containing 2 or more sole-occupancy units each being a separate dwelling.

Class 3 buildings – a residential building, other than a Class 1 or Class 2 building, which is common place of long term or transient living for a number of unrelated persons. Example: boarding-house, hostel, backpackers’ accommodation r residential part of a hotel, motel, school or detention centre.

Class 4 – a dwelling in a building that is Class 5, 6, 7 or 9 if it is the only dwelling in the building.1

While we note that the methodology developed has focussed on individual dwellings, it can equally be

applied to assess NCC stringency changes to common areas. Changes to NCC requirements regarding

common areas can affect the performance of individual dwellings and will also affect energy costs etc for

building occupants.

The problem the building code is attempting to address is the market failure arising from a developer or

builder seeking to minimise the costs of construction, which can lead to less than optimal expenditure on

building design or construction that may reduce energy use and increase the health, safety and amenity of

the dwelling over its life time.

Examples of the types of NCC regulations that would be relevant for evaluation by applying our proposed

methodology include:

increasing the minimum requirement for individual class 2 Sole Occupancy Units to match the current minimum requirement for class 1 dwellings, and removing or increasing the average performance requirement;

removing jurisdictional variations in relation to class 1, 2 and 4 dwellings, or parts of dwellings, which reduce the thermal performance requirement below the minimum requirement in the NCC; and

increasing minimum energy performance requirements for all types of class 1, 2 and 4 dwellings. This would focus on cost-effective, feasible reductions in maximum heating and cooling, and total heating and cooling, and overall energy loads in each climate.

We note that parallel with this work, the Australian Building Codes Board has a work program to look at NCC improvements in 2019 to facilitate greater compliance with current requirements in preparation for reviewing stringency. This work includes proposed changes to existing requirements including quantifying the performance standard, introducing a wider range of verification methods and introducing separate minimum requirements for heating and cooling loads.

2.3 Defining the ‘base case’ against which options are assessed

In order to evaluate a proposed option, it is necessary to define what might be expected to happen into the

future, absent the proposed change.

In terms of evaluating NCC changes, the base case needs to take into account:

1 Classes 5-9 include office buildings, shops, carparks, storage, laboratories etc.


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expectations about the future evolution of energy use, and thermal performance, within dwellings, taking into account general improvements in energy efficiency that might be expected as a consequence of general improvements in the energy efficiency of appliances and techniques for construction and design; and

other policies or regulations that might impact on the energy use/comfort of dwellings, including policies that might be reasonably be implemented so as to achieve Australia’s commitments to reductions in greenhouse gas emissions.

We would expect that changes to the building code has the potential to affect each of these future pathways.

It follows that we would propose that consideration should be given to each of these factors when identifying

benefits and cost categories as part of the quantitative analysis.

2.4 Evaluation timeframe

An important modelling question is the timeframe over which the stream of future benefits and costs of a

proposed change is to be evaluated.

In principle, the choice should balance:

the expected length of time over which a proposed change is expected to have a meaningful impact;

the timeframe over which forecasts are possible, given inherent uncertainties; and

the timeframe over which the chosen discount rate means that additional years of analysis do not materially affect the results.

Typically, where a regulatory change affects decisions about physical infrastructure, then the starting point for the analysis will be the expected life of the asset balanced against forecasting uncertainty and the discounting effect.

For example, the Australian Energy Regulator (AER) indicates that for assessments of proposed investments in electricity network assets, which have assumed lives of up to 50 years: 2

…the duration of modelling periods should take into account the size, complexity and expected

life of the relevant credible option to provide a reasonable indication of the market benefits and

costs of the credible option. This means that by the end of the modelling period, the network is in

a ‘similar state’ in relation to needing to meet a similar identified need to where it is at the time of

the investment.

The AER also indicates that ‘in the case of very long-lived and high-cost investments, it may be necessary to adopt a modelling period of 20 years or more’. Typically, the default analysis period for such assessments is 15 years, although this is assessed on a case by case basis,3 and has been up to 40 years.4

In the 2009 RIS, the timeframe for the analysis was set at 10 years. We understand this choice was based on an assumption that changes to the NCC occurs about every ten years and so it follows that this is a reasonable length for the analysis. Specifically, it was stated that this time horizon appears appropriate, because it is not unreasonable to expect that after ten years an energy efficiency standard could be: (1) achieved in the base case as a result of technological innovation and/or improvement in background levels of energy efficiency gains; (2) and/or made obsolete as a result of regulatory review or revision.5

2 AER, RIT-T Application Guidelines, June 2010, p. 41.

3 Grid Australia, RIT-T Cost Benefit Analysis Handbook, July 2011, p. 9.

4 ElectraNet and Australian Energy Market Operator, South Australia – Victoria (Heywood) Interconnector Upgrade, Project Assessment Conclusions Report, January 2013, p. 73.

5 CIE, Economic evaluation of energy efficiency standards in the Building Code of Australia – Standardising the cost-benefit analysis, January 2009, p. 22.


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In our opinion, the argument in support of a 10-year time horizon is not valid, because changes to the building code affect dwellings constructed over the period for which those changes have effect, which will then endure over the life of that asset, which we would expected to be significantly longer than 10 years.

It follows that we recommend the timeframe for the analysis of benefits should be at least 20 years (ie,

consistent with the time period typically used for benefit cost analyses). That said, should reasonable

forecasts be possible then it would be appropriate to undertake the analysis of benefits over a 30-year time

horizon. This would ensure that all of the benefits of changes to the NCC are appropriately included in the

analysis.

In light of the contention that the NCC only applies for about 10 years before being amended, then the

timeframe for measuring costs should be either:

10 years, assuming that at the end of that period the proposed changes are expected to have been rescinded, thereby leading to a reversion back to the obligations in place under the status quo; or

the same as for benefits (ie, 20 or 30 years) if the changes to the NCC in 10 years’ time are expected to be incrementally more stringent than the changes being considered at the time of the analysis being undertaken.

We would expect the latter approach to be the most common approach, as in our opinion any future changes

can reasonably be assumed to enhance the requirements for energy efficiency and are unlikely to be

rescinded. The benefit cost analysis at that time would then have a base case including the current proposed

changes, and would then appropriately evaluate benefits and costs at that time as incremental to the status

quo. Keeping the timeframe consistent will ensure consistency through time of the economic benefits and

costs for each evolution of the NCC.

2.5 Discount rates

An important decision in any economic evaluation is the choice of discount rate to apply to the stream of

future benefits and costs. The discount rate represents the opportunity costs resulting from either incurring

costs today or delaying the receipt of benefits from today, to sometime in the future.

In terms of costs, by incurring costs today then there is an opportunity cost from being able to invest those

funds (and in an appropriate return on the funds invested) to expend on future needs.

In terms of benefits, it assumes that benefits in the future are preferred less than benefits earned today.

In general, a higher discount rate means that benefits incurred today are valued more highly than in the

future, while there is a strong preference to delay the incurrence of costs. Equivalently, a lower discount

means that benefits in the future are valued more highly than today and costs incurred in the future are close

to equivalent to today.

For a business case associated with a proposed investment, it is typical to use estimates of the cost of

capital for the relevant business, based on costs of debt and equity. These costs tend to fluctuate over time

in line with circumstances in debt and equity markets.

For policy and regulatory evaluations, the OBPR provides guidelines on the discount rate to apply and the

sensitivities that should be tested. Specifically, OBPR requires the calculation of net present values at an

annual real discount rate of 7 per cent but notes that, as with any uncertain variable, sensitivity analysis

should be conducted. In addition to the 7 per cent ‘central’ discount rate, the net present values should also

be calculated with real discount rates of 3 per cent and 10 per cent.6

This rate reflects a decision as to how the Australian community prefers the incurrence of benefits into the

future versus costs. Importantly, a standardised discount rate across all policy and regulatory evaluations

ensures consistency of comparison between economic evaluations and over time.

6 OBPR, Cost-benefit analysis guidance note, February 2016, p. 7.


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However, in a number of countries, a lower discount rate has been applied for evaluating policies or

regulatory changes associated with energy efficiency or environmental outcomes – see the box below. This

approach is to acknowledge that reductions in greenhouse gas emissions resulting from improvements in

energy efficiency in the future should be valued nearly as highly as similar reductions today. This can lead to

some policies not being implemented because the costs incurred today are not outweighed by the benefits,

which are often incurred well into the future. In other words, it can lead to inaction despite clear community

preferences towards action in reducing greenhouse gas emissions.

Box 1 – International examples of where lower discount rates have been applied for evaluating

policies or regulatory changes associated with energy efficiency or environmental outcomes

It is not uncommon internationally to use lower discount rates for assessing initiatives with environmental

significance than would be used for other assessments.

In the United States for example, regulations with environmental or energy efficiency impacts are

assessed at a lower rate than other projects. The governing regulation, OMB Circular A-94, outlines the

guidelines and discount rates for benefit-cost analysis of federal programs. The regulation recommends a

base rate of 7 per cent, and sensitivity analysis testing using rates of 3 per cent and 10 per cent.7

However, there are exceptions for projects with environmental impacts – for example, the Department of

Energy recommends using a 3.0 per cent real discount rate (2.5 per cent nominal) for projects relating to

energy conservation and renewable energy sources in 2013.8

The United Kingdom has recently reduced its all-government discount rate from 6 per cent to 3.5 per cent

with the introduction of a new set of guidelines for regulatory appraisal in central government, the Green

Book.9 The 3.5 per cent rate applies to any project, and a series of declining rates are applied to long term

projects. Lower rates often apply to projects with energy efficiency outcomes, for which the benefits accrue

over a number of decades. Where benefits of costs are accrued for up to 30 years, the 3.5 per cent rate

should be used, but this declines to 3 per cent when benefits are accrued for between 30 and 75 years,

and continues to decline to 1 per cent for projects with benefits or costs accruing for more than 300 years.

The new regulation also recommends that for projects where there are significant and irreversible wealth

transfers from the future to the present (eg, those with environmental or climate change impacts), the pure

social time preference should be 0 per cent (rather than the 0.5 per cent incorporated into the standard 3.5

per cent rate), which reduces the base discount rate to 3 per cent.10

In New Zealand, regulatory bodies can decide to use a lower discount rate if the regulation has

environmental impacts. The New Zealand Treasury recommends a standard discount rate for all

regulatory appraisals of 8 per cent. However, a number of RISs have used lower discount rates when

there are environmental or energy efficiency concerns. A RIS for the updating of energy efficiency

regulations for air conditioners used a 5 per cent rate, citing “the value of long term environmental and

social benefits associated with energy efficiency”.11

In our opinion, there is merit in considering lower discount rates as a sensitivity for comparison against the standardised rate guidelines given by the OBPR. We would therefore recommend the results of an evaluation of energy efficiency be reported at a discount rate of 5 per cent and 7 per cent, with sensitivities

7 Xu, M, NRCS Use of Discount Rates in Conservation Programs and Projects, 67th Annual SWCS International Conference, July 2012.

8 A.S. Rushing, J.D. Kneifel, B.C. Lippiatt, Energy price indices and discount factors for life-cycle cost analysis - 2013, U.S. Department of Commerce, June 2013, p 7.

9 HM Treasury, The Green Book: Appraisal and Evaluation in Central Government, July 2011 (date of most recent amendments), pp 26-27, 98-99.

10 Lowe, J, Intergenerational wealth transfers and social discounting: Supplementary Green Book guidance, HM Treasury, July 2008, p 3.

11 http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-efficiency-environment/documents-library/energy-efficiency-docs/RIS%20Air%20conditioners%20freezers%20and%20refrigerators%20MEPS.pdf


HoustonKemp.com 8

being undertaken at 3 per cent and 10 per cent. This approach provides a clearer sensitivity analysis of discount rates for changes to the NCC because if the proposal:

has positive net benefits under each case, then the proposal can be considered to be clearer net beneficial;

has positive net benefits at the 3, 5 and 7 per cent levels of discount rate, then there is a strong likelihood the proposal can be considered net beneficial;

has positive net benefits at the 3 and 5 per cent level, then the decision maker will need to decide whether the proposal should be accepted because of the expected long stream of benefits being sufficient to outweigh the near term costs; and

has negative net benefits under each of the discount rates, then the proposal is clearly not net beneficial.

In our opinion this approach provides the greatest insights on how a proposal leads to benefits and costs, and so allows decision makers to make an informed decision as to whether to proceed with the proposal. Importantly, under this approach more than one net benefit result should be reported. We believe this is good practice, reflecting the inherent uncertainties in any analysis of benefits and costs.

2.6 Region or basis for assessment

The final modelling consideration is the geographic region or basis for assessing benefits and costs.

In earlier NCC assessments, the assessment of changes was undertaken for Australia as a whole. In

practical terms this involved defining a list of common dwelling types for the whole of Australia, and

evaluating the benefits and costs across those dwelling types. Geographic differences, say in electricity

prices, were incorporated as part of the process of aggregating up the assessment of benefits and costs by

dwelling type across the entirety of the nation.

In our consultations with stakeholders, it was acknowledged that:

each jurisdiction (and potentially sub-areas within a jurisdiction) will be characterised by unique dwelling types and designs given local conditions and construction styles, such that a single set of dwelling types is unlikely to be applicable across the nation; and

the changes to dwellings that are likely to result from changes to the NCC are likely to differ between regions, given differences in climatic conditions, consumption patterns, etc.

In principle, the number of dwelling types evaluated and geographic areas considered should reflect the diversity of dwelling types and geographic characteristics that are likely to impact on the benefits and costs of any change to the NCC. Of course, taken to the extreme this might lead to a substantial expansion to the analysis, the additional cost and complexity of which would not be justified given the potentially marginal additional precision such an analysis would involve.

That said, we recommend that the number of dwelling types evaluated should be expanded across a number of geographic areas.

In particular, we recommend that benefits and costs should be assessed for a number of representative dwelling designs with different constructions, for each dwelling type (detached dwelling, terrace house, low rise and high rise units) in each climate zone area affected by the proposed change. The exact number of dwelling types for each zone should draw on building typology, which should reflect the existing housing stock as well as expected trends going forward.

The number and type of representative dwellings should be agreed before estimating the costs and benefits of proposed NCC changes.

In our opinion, while this will add additional complexity (and so cost) to the economic evaluation, it improves

the analysis by:

more accurately capturing how changes to the NCC affect dwelling construction given the particular circumstances arising in each jurisdiction; and

allowing the analysis to report the net benefits for each jurisdiction separately.

This will provide greater confidence in the results and allow local considerations to be evaluated.


HoustonKemp.com 9

In addition, we consider that it may sometimes be warranted to examine how proposed NCC changes affect

the costs of renovations and deliver additional benefits, as part of the assessment. The methodology set-out

previously focuses on examining benefits and costs for new buildings whereas changes to standards are

also applied to alterations and additions in each jurisdiction.

In general, quantifying the costs and benefits of proposed NCC changes on renovations will likely involve a

greater degree of complexity than for new builds and would involve the following:

considering and articulating each of the jurisdictional ‘triggers’ for renovations needing to comply with the relevant NCC standards (eg, does the renovation add a certain m2 to the dwelling size) – we understand these differ across jurisdictions, as well as the climate zones within each;

assumptions regarding the stock of houses at varying degrees below the current standard, for which there is limited information;

the benefits of these existing housing stock complying – in terms of the dwelling health, safety, amenity and energy use; and

the costs of compliance, which may differ to new builds given the inherent variability in renovations.

Given the inherent complexity in quantifying the implications of proposed NCC changes for renovations, we

would suggest undertaking a qualitative assessment of benefits and costs for renovations, and in particular

articulating how and why a particular NCC change might also result in net benefits to dwellings being

renovated.

In general, we would expect it would be reasonable to presume that the net benefits of proposed NCC

changes for renovations are similar to those for new dwellings, ie, if there are net positive benefits for new

dwellings then the benefits for renovations can be assumed to be net positive, absent any evidence to

support a conclusion that benefits or costs might differ between the two. We would expect such evidence to

be identified through the qualitative assessment, and via discussions with building experts and the

construction industry, amongst other relevant stakeholders.

That said, if the core net present value (NPV) assessment shows marginal or negative net benefits from any change, then it may be worthwhile developing the assumptions needed to quantify the effects on renovations in order to test whether including renovations might change the overall findings of the RIS.

This approach pragmatically ensures the assessment focuses only on quantifying benefits and costs where it will affect the conclusions that might be drawn from the assessment, given the complexities involved in quantifying the costs and benefits of proposed NCC changes on renovations.


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2.7 Summary

The table below summarises our recommendations on the benefit cost analysis methodology.

Table 1 – Recommendations regarding the overall methodology to apply

Modelling

decision

HoustonKemp recommendation Change from 2009

RIS?

Problem definition Address market failure arising from a developer or

builder seeking to minimise the costs of construction,

which can lead to less than optimal expenditure on

building design or construction that would reduce energy

use and increase the health, safety and amenity of the

dwelling over its life time.

No

Base case

definition

Take into account:



expectations about the future evolution of energy use within dwellings; and

other policies or regulations that might be reasonably be implemented so as to achieve Australia’s commitments to reductions in greenhouse gas emissions.

Partial – greater

emphasis on

considering what other

policies might be

avoided if proposed

changes to building

code were implemented

Evaluation

timeframe

At least 20 years, and probably 30 years for both

benefits and costs

Yes

Discount rates Report at 5 and 7 per cent level and conduct sensitivity

at 3 and 10 per cent level.

Greater weight should be applied to lower discount

rates, to take into account community values about the

desirability of lowering greenhouse gas emissions both

now and into the future.

Yes

Regional analysis

and basis for

assessment

Benefits and costs should be estimated for a number of

representative dwelling designs with different

constructions, for each dwelling type (detached dwelling,

terrace house, low rise and high rise units) in each

climate zone area affected by the proposed change –

the exact number of dwelling types for each zone should

be based on building typology, which should reflect the

existing housing stock as well as expected trends going

forward.

The number and type of representative dwellings should

be agreed before estimating the costs and benefits of

NCC changes.

Yes

Residential Buildings Regulatory Impact Statement Methodology Estimating the benefits of changes to the NCC

HoustonKemp.com 11

3. Estimating the benefits of changes to the NCC

Having clearly defined the proposed change, what would happen absent the change (ie, the base case), and

made a number of technical modelling parameter decisions, the next step is to identify benefit categories and

quantify benefits where possible. This is the subject of this section.

3.1 How do changes to the NCC translate to benefits?

The starting point for an assessment of benefits is to identify how each of the proposed options leads to

changes in outcomes relative to the status quo. In so doing, these changes in outcomes are expected to

result in benefits.

The NCC sets the minimum requirements for the design, construction and performance of buildings

throughout Australia. It also specifies the minimum energy efficiency standard for newly built residential

buildings, which can have a lasting effect on energy consumption of the household, eg, the design and

installation of windows.

It follows that changes to the NCC leads to benefits by requiring building designers to modify new building

designs by adjusting choices of materials, insulation, window placement, room sizes, etc which would:

reduce the size and/or reduce the running time (and so energy consumption) of heating and cooling appliances needed to heat or cool a dwelling, thereby reducing the cost of these appliances as well as improving the comfort and health of occupants;

lead to associated reductions in network electricity costs over time as reductions in energy use during system peak periods avoids the need for network upgrades to maintain reliability obligations;

result in associated reductions in electricity generation costs, including both generation fuel and avoided future new generation costs that might otherwise have been required;

lowering greenhouse gas emissions from lower thermal electricity generation.

Relevantly, the benefits of lower energy bills will accrue in the first instance to a household, but may not

reflect the actual avoided network and generation costs, depending on the extent to which current electricity

charges are cost reflective. It follows that we consider near term reductions in a consumer’s electricity bill as

not necessarily representing the full economic cost reduction resulting from improvements in energy

efficiency.

The figure over the page summarises the chain of logic linking changes to the NCC and the achievement of

benefits.


HoustonKemp.com 12

Figure 1: How a change in NCC leads to benefits – an investment logic map

This figure shows how problem identification and NCC amendment can lead to benefits realisation for households, electricity networks and generation, and the environment.

In summary, the key benefit categories associated with changes to the NCC include:

avoided electricity network expenditure, resulting from reductions in peak electricity consumption;

avoided electricity generation expenditure, including both fuel reductions and avoided new thermal electricity generation investment;

reductions in greenhouse gas emissions from electricity generation;

the avoided cost of larger heating and cooling appliances; and

associated health, safety and amenity benefits to dwelling occupants.

We note also that changes to the NCC may have a negative effect on these benefit categories, ie, they may result in costs to the economy under each of these categories. For example, a particular, poorly-designed, change may in fact increase electricity peak demand (as opposed to decreasing it). We therefore strongly urge the ramifications of any proposed change are tested to ensure that these perverse outcomes are avoided and the analysis is being used to make fully informed decisions.

3.2 Quantification of benefits

Having identified the benefit categories, the next step is to determine how to quantify the benefits for each

dwelling type affected by the proposed change to the NCC.

Consistent with previous RIS methodologies, we propose that benefits be quantified on a per dwelling basis

and then aggregated up to reflect the benefits that could be expected for the geographic area being

considered.

As outlined in section 2, we recommend that as part of a future RIS assessment benefits be estimated for up

to two dwelling designs for each dwelling type affected by the proposed change being assessed. These

dwelling designs should then be assessed at least for each jurisdiction, to reflected differences in key

assumptions across the jurisdictions.

The remainder of this section describes our proposed approach to quantifying each of the benefit categories

identified in section 3.1 above.


HoustonKemp.com 13

Figure 2: Overview of approach to estimating benefits

This figure shows how to quantify the benefits of a proposed change in the NCC, by multiplying savings per dwelling, unit benefit and aggregation.

The remainder of this section provides more detail on how of these benefit categories can be incorporated in

a RIS assessment.

3.2.1 Reduced cost of supplying energy

The expected savings from reduced energy use per dwelling will vary depending on how the minimum

energy efficiency standard is proposed to be changed within the NCC. For example, it could involve

increasing the minimum standard from six stars to seven stars, removing some of the current exemptions so

that more dwellings are subject to the minimum energy efficiency standards, or both. This is expected to

reduce the energy needed for cooling or heating appliances, thereby reducing demand for electricity and

gas.

Our proposed approach for estimating the reduced cost of supplying energy involves:

estimating the reduction in energy consumption needed for a standard dwelling as a result of an increase in minimum energy standards (estimated MJ required for cooling and heating purposes);

converting a reduction in energy consumption needs into reduced consumption of electricity and gas; and

estimating the resource cost savings from reduced consumption of electricity and gas.

The first step could be estimated using estimates provided by the Nationwide House Energy Rating Scheme

(NatHERS)12. NatHERS provides an estimate of how much energy consumption (on a MJ/m2 basis) is

required to keep a dwelling at a reasonable level of comfort based on the design of the dwelling. These

estimates can be tailored to the particular location and dwelling type.

The second step is to convert reduced energy consumption needs into reduced consumption of electricity

and gas. The conversion will need to reflect how appliances are powered in the particular location, eg,

gas-powered heaters are commonly used in Victoria whereas electricity-power heaters are more commonly

12 NatHERS is a rating system (out of ten) that rates the energy efficiency of the design of the house. It is administered by the

Department of the Environment and Energy and is one way industry can demonstrate their dwelling complies with NCC’s minimum energy efficiency standards.


HoustonKemp.com 14

used in New South Wales. These estimates could be adjusted to reflect likely energy efficiency

improvements for air-conditioners and heaters over time. The end result of this step would be the reduced

consumption in electricity (measured in kWh) and gas (measured in MJ) overall, as well as potentially peak

demand.

The final step is to estimate the benefits from reduced electricity and gas consumption. Previous studies

have used reduction in the retail bill as the benefit, which represents the financial savings to households

based on existing tariffs. However, we believe a more accurate approach is to estimate the resource cost

savings from reduced electricity and gas consumption, ie, reduction in network and wholesale costs. It is

important to note that there is still a cost to parties but that this cost is less than what it would be for a less

efficient dwelling.

Reducing the demand of electricity and gas will reduce the associated fuel cost and operating cost in the

short run and reduce the total amount of capacity needed in the long run in terms of electricity and gas

infrastructure. The change in costs as a consequence of small changes in electricity or gas consumption are

known by economists as the long run marginal costs (LRMC). Estimates of LRMC are available for network

businesses and represent a better estimate that electricity prices of the network cost savings that can be

achieved as a consequence of changes in consumption.

For electricity generation, average wholesale market prices typically reflect in some jurisdictions that

represent suitable estimates for the resource cost savings. Retail tariffs should only be used in the absence

of LRMC estimates and market prices.

Box 2 provides a stylised example of these calculations for New South Wales.

Box 2 – Stylised example of how to calculate benefits from reduced electricity consumption

Having estimated the reductions in electricity consumption expected for representative dwellings under

any stringency changes being assessed, these can easily be translated into the following benefits:

reductions in network electricity costs over time as reductions in energy use during system peak periods avoids the need for network upgrades to maintain reliability obligations; and

reductions in electricity generation costs, including both generation fuel and avoided future new generation costs that might otherwise have been required.

Please note that both of these reductions are reductions relative to what they would have been under the

business-as-usual base case. So while total electricity, for example, may still be expected to increase

under certain NCC changes, the benefits are to be calculated as the reduction relative to how much higher

they would have been without the change in place.

To estimate the first category, the practitioner should draw on public estimates of LRMC for the relevant

electricity network, which are prepared by the businesses for different tariff classes within the context of

their network pricing proposals.13 By way of example, if the dwelling in question is assumed to be located

in the Ausgrid network (ie, the greater Sydney region) then LRMC estimates for residential customers,

currently range from 6.9 – 25.6 cents per KWh with a point estimate of 11.3 cents per kWh.14

As an example, assume that a NCC change is estimated to reduce the thermals load of a certain type of

dwelling in Sydney by 9 MJ/m2 per year. Assume also that these dwellings are 100m2 and so this reduction

in thermal load translates to a reduction of 250 kWh/year. Applying the network LRMC estimates provided

13 LRMC refers to the cost of providing one unit of additional output in the long run. The LRMC is a forward looking concept and is

typically estimated based on the expected growth in consumption and the associated cost of meeting this growth. Network businesses commonly set prices based on LRMC so that consumers face the appropriate price signals about the additional capital and operating cost associated with using electricity.

14 Ausgrid, Ausgrid Network Pricing Proposal For the Financial Year Ending June 2015, May 2014, p. 18.


HoustonKemp.com 15

by Ausgrid allows for the benefit from reductions in network electricity costs to be estimated at

approximately $28.25/year, with a lower and upper bound of $17.25/year and $64/year, respectively.

To estimate the benefit from reductions in electricity generation costs, average wholesale market prices

can be used as they typically represent suitable estimates for the resource cost savings. For example,

assuming an average wholesale electricity price for New South Wales of $51.60/MWh, then the assumed

reduction of 250 kWh/year outlined above translates to a benefit of approximately $12.90/year associated

with reductions in electricity generation costs.

Overall therefore, in the hypothetical example where a NCC change is assumed to result in an annual

reduction of 250 kWh, the benefits from reduced electricity consumption can be considered to sum to

approximately $41.15/year per dwelling in Sydney (ie, $28.25 + $12.90).

3.2.2 Benefits of reduced greenhouse emissions (CO2e)

The benefits of reduced greenhouse gas emissions, or carbon dioxide equivalents (CO2e), can be calculated

using the following steps:

estimate savings in electricity and gas consumption;

calculate reduction in CO2e as a result of reduced electricity and gas consumption; and

multiply CO2e savings with assumed benefit ($ per CO2e) to calculate total benefits.

The previous section discusses how savings in electricity and gas consumption can be estimated. The

remainder of this section discusses how the last two steps can be calculated.

Reduced CO2e emission

Greenhouse gas emissions are currently a by-product of using electricity and gas. The exact amount of

carbon emitted depends on the carbon emission intensity of the energy source, eg, coal typically generates

more CO2e per MWh of electricity produced when compared with other sources such as gas and renewable

energy. Emission intensity factors available in the National Greenhouse Account Factors published by the

Department can be used to convert consumption in gas and electricity into estimated CO2e emissions.

It will also be important to factor in the likely reduction in energy emission intensity over the period of

evaluation to avoid overestimating the benefits. Electricity generation in Australia has been gradually shifting

from thermal generation, particularly coal, to renewable sources such as wind farms and solar PVs. This shift

is expected to continue, meaning that energy emission intensity should fall over time.

Cost of carbon per CO2e

It is difficult to estimate the benefits of reducing greenhouse gas emissions without a carbon market in

Australia. In the absence of this, it is common for regulators and governments to assume abatement values

as a way of introducing the cost of carbon emissions. For example, the AEMO assumes the abatement cost

of carbon is of $25/tonne CO2-e in 2020 rising to $50/tonne CO2-e by 2030 in its development plans. For the

purpose of this cost benefit analysis, we suggest using assumptions consistent with those adopted in other

studies and government departments. For example, the recent consultation on proposed vehicle emissions

and fuel quality measures undertaken by the Ministerial Forum on Vehicle Emissions, recommended

conservatively using the United States Environmental Protection Agency’s social cost of carbon as a central

estimate, and $12/tonne as a lower bound, with sensitivity analysis.15

15 See RIS documents located here: https://infrastructure.gov.au/roads/environment/forum/index.aspx


HoustonKemp.com 16

3.2.3 Benefits from smaller heating and cooling appliances

The first benefit category results from the potential scope to install smaller heating and cooling appliances as

a consequence of changes to the NCC.

We understand there is some uncertainty whether changes to the NCC lead to a resultant reduction in the

actual size of appliances. This reflects the opinion that:

purchasers of new dwellings are less focused on the ‘optimal’ size of heating and cooling appliances and given the relative cost differences in different sized appliances would likely opt for larger appliances even though changes to the dwelling construction might mean that it is not required;

developers often receive volume discounts on the purchase of appliances and so do not optimise the size of appliance to particular dwelling requirements;

the reduction in costs is likely to be immaterial to a consumer’s decision to purchase a dwelling; and

for existing dwellings, if they are to be included, the owner may not wish to replace what is there entirely.

While these might be arguments to support an ex-post assessment that changes to the NCC did not lead to the reduction in these costs, in practice we would expect that it would depend on how large potential improvements in thermal efficiency of a dwelling is likely to be. Indeed, part of the lack of focus on this area might be uncertainty about the size of savings that could be delivered by more optimal sizing of heating and cooling appliances.

In order to quantify these benefits, as part of the assessment of design, we would recommend that consideration be given to:

the optimal size of appliances for heating and cooling following the changes to the NCC; and

the difference in costs between these appliances.

The difference in cost represents a one-off benefit that can then be directly attributable to changes to the NCC.

3.2.4 Associated health, safety and amenity benefits to dwelling occupants

Any changes to the NCC may have flow-on effects and benefits to the health, safety and amenity of dwelling occupants. For example, there may be human health implications from changing building designs, eg, through condensation/moisture, heat stress etc.

Our recommended approach to including these benefits in any RIS assessment is the same as for other benefit categories – namely, that the party carrying out the RIS should develop a clear logic map to track how and why these benefits are expected to arise.

We note that there is currently very little data, information and insight into the precise implications of building design on the health, safety and amenity of dwelling occupants. However, we understand that this is a current area of research focus and that a greater understanding of the magnitude of these benefits is likely to be achieved in coming years.

Overall, we consider that these benefits are best dealt with qualitatively in a RIS assessment, unless they can be readily quantified. Either way, the logic of these benefits should be clearly documented and commented on in the assessment as these benefits are likely to exist for many NCC changes and so should not be ignored.

3.2.5 Aggregating results – number of dwellings affected by change to NCC

The total benefits from increasing the minimum energy efficiency standard depends critically on the number

of dwellings that would be affected by the change. Our approach to this estimating involves:

forecasting the total number of new dwellings and major renovations over the period of evaluation; and

calculating the proportion of new dwellings and major renovations that would be affected by the change in standard.

Given the importance of the estimates above, we also suggest the Department consider running different

sensitivities to test the robustness of the economic results against different scenarios.


HoustonKemp.com 17

Forecasting the total number of new dwellings and major renovations

Forecasts of total number of new dwellings could be estimated from existing government and industry

forecasts such as Australian Bureau of Statistics (ABS) and the Housing Industry Association (HIA). HIA

forecasts new dwelling constructions for a five-year period and these forecasts are available by detached

and attached buildings and by jurisdiction. This should be sufficient detail for the purposes of this cost benefit

analysis. HIA forecasts could be extrapolated to cover the time period evaluation using ABS forecasts on

number of households.

We are not aware of any forecasts for major renovations for existing houses. We suggest estimating these

based on historical data on major renovation over the past 5 years or so.

Calculating proportion of dwellings affected by change in standards

In theory, the increase in minimum standards will only affect dwellings that will be built below the proposed

new standard if existing standards remained intact. In other words, if a new building is designed to achieve a

seven-star rating, then increasing the minimum standard to six stars would not require a redesign of building

from a compliance perspective, ie, the change in standards will not necessarily require a change in design

and construction for all buildings.

We suggest examining current distribution of energy efficiency ratings of building and examine the proportion

of buildings that fall between the existing standard and proposed new standard. This implicitly assumes that

energy ratings of buildings will remain largely unchanged unless a change to the NCC is introduced.

3.3 Summary

The table below summarises our recommended approach to quantifying the benefits per dwelling.

Table 2 – Recommendations regarding the methodology to apply for estimating the benefits of

changes to the NCC

Benefit category Recommended approach Change from

2009 RIS?

Reduced network

and generation

costs


use available LRMC estimates and wholesale market prices where available; and

use retail prices only if LRMC and market price estimates are unavailable.

Yes

Benefits of reduced

greenhouse gas

emissions


forecast emission intensity factors during evaluation period;

convert reduced gas and electricity consumption into reduced GHG emissions using forecast emission intensity factors; and

adopt abatement costs of GHG from other studies.

Partial – no longer relying on the CPRS

Benefits from

smaller heating and

cooling appliances

estimate optimal size of appliances before and following changes to the NCC; and

estimate difference in cost of these appliances.

No

Associated health,

safety and amenity

benefits to dwelling

occupants

These benefits are best dealt with qualitatively in a RIS assessment, unless they can be readily quantified.

Either way, the logic of these benefits should be clearly documented and commented on in the assessment as these

Yes


HoustonKemp.com 18

benefits are likely to exist for many NCC changes and so should not be ignored.

This is a current area of research focus.

Residential Buildings Regulatory Impact Statement Methodology Estimating the costs of changes to the NCC

HoustonKemp.com 19

4. Estimating the costs of changes to the NCC

This section focuses on the proposed approach to estimating the costs that would arise as a consequence of

changes to the NCC.

4.1 What costs are incurred as a consequence of changes to the NCC?

Changes to the NCC can be expected to result in a number of costs being incurred by the government, as

part of additional implementation and compliance monitoring, as well as the building industry as it drives

changes to residential building design and construction.

In broad terms, the relevant cost categories would include:

implementation costs, including the administrative costs to governments and the industry arising from changes to the NCC, including any compliance training that might be required;

enforcement costs, as relevant authorities need to administer and enforce potentially additionally complex requirements; and

building compliance costs arising from building redesign and incremental building construction costs of new dwellings or renovations so as to comply with proposed changes to the NCC.

These costs and how they could be quantified are discussed in further detail in the remainder of this section.

The figure below summarises the link in the logic between proposed changes to the NCC and anticipated cost categories.

Figure 3: How a change in NCC leads to costs – an investment logic map

This figure shows how problem identification and NCC amendment leads to costs being incurred by the government.

4.2 Quantification of costs

We anticipate the first two cost categories will be quantified by considering the specific proposed changes to

the NCC, and understanding how these changes can be expected to be implemented and enforced.

Similar to the quantification of benefits, the third cost category would be estimated on a per dwelling basis

and then aggregated across the timeframe for the analysis, to estimate the total direct compliance costs

resulting from changes to the NCC.


HoustonKemp.com 20

The remainder of this section describes our proposed approach to quantifying these cost categories.

4.2.1 Implementation costs

Changes to the NCC require implementation as a consequence of (mostly):

agencies responsible for enforcing compliance with the NCC needing to be trained on the changes, and implications;

builders and designers needing to understand changes and implications for design and construction; and

administrative costs incurred by government to implement any changes (depending on the change, it may also need supporting legislation, which could require Cabinet and Parliamentary processes).

We would expect these implementation costs are one-off, incurred in the year of implementation and would be mostly affected by the extent of complexity of any changes being made. However, there may also be costs incurred well before and well after the effective date of the NCC change, eg, there may be a transition period, and ongoing training for an extended period.

For relatively routine changes to the NCC, the costs might be considered minimal and so would not be expected to be material. In this circumstance, it is unlikely to be necessary to quantify the size of these costs.

For more complex changes, then we would expect the implementation costs might extend to an amount associated with administrative implementation by government, the costs of training for agencies which would be proportional to the staff needing training on the changes, and the number of builders/designers affected.

We would propose these costs be estimated by multiplying an assumed labour cost (based on appropriate

government and industry benchmarks) by an assumed training time and the number of staff affected. For

relevant agency staff, this would be informed by discussions with jurisdictions. For industry assumptions, it

would be possible to use information on the number of construction companies as a proxy for the number of

organisations that could be affected.

Overall, we would expect that implementation costs are likely to be a relatively small proportion of the total

costs incurred as a consequence of changes to the NCC. That said, for more complex changes it would be

appropriate to estimate these costs based on benchmarking of expected training time and staff related costs

across both compliance enforcement agencies and those affected by the building industry.

4.2.2 Enforcement costs

The second category of costs might not arise in all circumstances, as it relates to the additional compliance

enforcement costs that might be incurred as a consequence of proposed changes to the NCC. These costs

arise where the processes of building certification or enforcement of energy efficiency related requirements

of the NCC are altered as a consequence of proposed changes.

These costs are distinct from the training related costs for these officers, but would include the additional

time that might be required so as to certify compliance with any NCC requirements.

These costs could be estimated by multiplying the total number of new dwellings in a year (as a proxy of

number of certifications required) by the incremental time that would be expected to be incurred by relevant

officers certifying compliance, and a benchmark hourly labour rate. We anticipate the incremental time may

diminish as understanding of the requirements for compliance improves.

Importantly, whether this category of costs is quantified in a particular assessment will require consideration

as to the likely impact on compliance certification of any proposed changes. Where such a change is likely to

be minimal, then these costs might be appropriately determined to be immaterial and not quantified.

However, there may be circumstances where changes have a significant impact, which would warrant

quantification. This inference could be tested through stakeholder engagement and consultation over the

course of a RIS.


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4.2.3 Building compliance costs

The last cost category is expected to be the largest, and refers to additional costs that would be expected to

be incurred as part of the design and construction of a dwelling to comply with changes to the NCC.

Our approach to estimating direct compliance costs involves the following steps:

estimating the additional cost per dwelling, including how costs will change over time as industry adapts to new requirements; and

estimating the total building compliance costs for each year over the assessment timeframe (ie, 20-30 years).

Estimating the building compliance cost per dwelling

Complying with changes to the NCC will be dependent on a number of factors, including (but not limited to):

the type of dwelling, and the particulars of its design (absent changes to the NCC);

the location of the dwelling, which is a proxy for differences in climatic conditions and typical construction materials and designs;

the particular approach that is adopted to comply; and

natural cost efficiencies going forward, ie, industry technological advancements and innovation that assist designers and builders with identifying the least cost methods of satisfying the requirements.

It follows that actual building compliance costs will be unique to each dwelling, location, designer and builder. Given the impracticalities of estimating compliance costs for every possible combination of these factors, we need to identify what degree of aggregation of dwellings will be required (this is discussed in greater detail in the next section).

Having determined the number of dwelling designs and locations, the next step is to determine the compliance pathway. We anticipate this would be done through discussions with expert designers/builders who would be asked:

What is the likely least cost pathway for complying with the proposed NCC change?

Relevantly, the question focuses on the ‘least cost’ pathway of compliance rather than what might be the ‘most expected’ pathway of compliance. This distinction is important because the only relevant costs for an analysis of benefits and costs is the least cost pathway, as any deviation from this pathway is not a direct consequence of the proposed change but rather involves a consideration of other factors (eg, ease of implementation by a builder, etc).

The difference between the least cost pathway and the most expected pathway is therefore an estimate of the additional costs the building industry might incur so as to minimise the overall impact of changes to the NCC, but if these costs are included it would also be necessary to include the associated benefits incurred by the building industry from retaining a popular dwelling design as the least cost compliance pathway is implemented. Given the building industry would be making these commercial decisions, any costs above the least cost pathway can be considered to be net beneficial to the industry and so can (and should) be properly excluded from the analysis.

Importantly, in considering the least cost compliance pathway, it would be appropriate to consider whether

the least cost pathway involves a redesign of the dwelling. As part of early RIS assessments, we understand

that some stakeholders argued that the building compliance costs are likely be minimal as new standards

could be met by simply redesigning the layout of the house, which would not necessarily require additional

material or effort. In response, some stakeholders commented that the redesign of layouts would negatively

affect the end sale prices, and so a more realistic option was to leave the layouts unchanged, and comply

using additional installation or other material at significantly higher cost.

We believe that considering dwelling redesign, if it is the least cost compliance pathway, is an important

consideration for any analysis of compliance costs. In addition, in our opinion if a builder decides to not adopt

the least cost appliance pathway, then they are implicitly recognising that end purchasers value the

incremental value associated with not changing the design layout by more than the incremental cost


HoustonKemp.com 22

between least cost compliance and a most likely compliance pathway. It follows that this is not an

appropriate basis for arguing for a higher than least cost compliance pathway.

That said, we would anticipate that the least cost pathway would necessarily be subject to stakeholder

consultation and needs to be a ‘realistic’ least cost pathway.

Having identified the likely least cost compliance pathway, the cost of compliance would be estimated by a

quantity surveyor, whom would provide cost estimates of the costs for construction of the compliant dwelling

compared against the cost of the status quo dwelling. These incremental costs would then be the estimate of

the building compliance cost per dwelling.

We recommend that sensitivities be developed regarding the strength of least cost assumption, particularly if

the use of a least cost approach is contentious. Specifically, the RIS assessment would assume a number of

suitable transitions times to allow the adoption of the least cost pathway – these could assume a one or two

year transition to least cost glide path for example. A transition to least cost is likely to be relevant in

circumstances where there is expected to be little time between the release of the NCC in its final form and

its commencement (since in these circumstances, the least cost pathway is unlikely to be feasible in the first

year).

Cost efficiencies going forward

A key consideration in estimating building compliance costs is the extent to which the building industry

adapts the best and most cost-effective ways of achieving compliance over time. This is achieved by natural

cost efficiencies on account industry technological advancements and innovation that assist designers and

builders achieving least cost compliance. These ’cost efficiency’ compliance cost savings are in addition to

the ex-ante opinion as to the least cost pathway identified above.

In practical terms, assumed cost efficiency rates would be applied to the building compliance cost per

dwelling estimates used in each year over the assessment timeframe. It follows that the associated

percentage decreases would be applied for each year, as relevant.

In our opinion, the evidence supports the application of such rates to the assumed dwelling costs, under both

the base case as well as each option for change. We further propose the cost efficiency rates be considered

as a sensitivity given the uncertainty surrounding these rates, and the likely influence they will have on the

result outcomes. Such an approach provides decision makers with sufficient information to determine how

sensitive the results are to these assumptions, and decide to what extent a decision to agree to a change is

dependent on expectations surrounding likely cost efficiencies.

We recommend applying a cost efficiency rate of 2 per cent year-on-year as a starting point with sensitivities

of 1 per cent (lower bound) and 3 per cent (upper bound). These rates are broadly consistent with what is

considered in other sectors, eg, the electricity and gas network sector.16 The specific efficiency rates should

be revised for use in a future RIS if new evidence becomes available between now and then.

Quantifying total costs

Having estimated building compliance costs per dwelling, the total costs are calculated by multiplying the

assumed compliance costs by the year on year expectations about dwelling constructions of each type in

each location.

As described in section 3, this requires projecting the total number of new dwellings and major renovations

that will be affected by the proposed changes to the NCC over the timeframe for the analysis. This also

requires a consideration of the extent to which the NCC affects behaviour, and so this number should be

reduced by the proportion of dwellings that would have otherwise been built at the status quo building

16 For example, work in this area in the United Kingdom in relation to electricity and gas distribution networks has previously estimated

that these efficiencies lie within the range of 1.2 to 3.4 per cent, with a central estimate of 2.4 per cent. See: Cambridge Economic Policy Associates, Productivity Improvements in Distribution Network Operators, Final Report, November 2003, p. vi.


HoustonKemp.com 23

requirements. The same assumptions as used for quantifying benefits would also be applied to quantify total

costs.

The total costs for building compliance in any year would then simply be the building compliance cost per

dwelling multiplied by the cost efficiency rate, and then multiplied by the number of dwellings of each type

that is expected to be constructed in that year.

4.3 Summary

The methodology to estimate the costs resulting from changes to the NCC is summarised in the table below.

Table 3 – Recommendations regarding the methodology to apply for costs of changes to the NCC

Cost category HoustonKemp recommendation Change from 2009

RIS?

Implementation

costs

Government administrative costs estimated with reference to

government stakeholders.

Compliance training by certifiers and building industry

estimated by multiplying labour rates, by number of staff

affected, by training time required.

No

Enforcement

costs

Incremental certifier time requirements (if appropriate)

estimated by multiplying labour rate, by number of staff

affected, by incremental time required.

Yes – not explicitly

quantified

Building

compliance

costs

Estimated by multiplying building compliance cost per

dwelling, by the cost efficiency rate (2 per cent year-on-year),

by projected dwellings affected. Sensitivity of costs to the

assumed cost efficiency rate assumptions – of 1 per cent

(lower bound) and 3 per cent (upper bound).

Compliance cost per dwelling estimated by subtracting

compliance costs provided by quantity surveyor for least cost

compliance pathway, against status quo costs.

The specific efficiency rates should be revised for use in a

future RIS if new evidence becomes available between now

and then.

Yes – explicit

inclusion of cost

efficiencies rates (as

a sensitivity)

Application of least

cost compliance

pathway

.

Residential Buildings Regulatory Impact Statement Methodology Suggestions for future research

HoustonKemp.com 24

5. Suggestions for future research

Our project has involved evaluating the current evidence base for undertaking an economic evaluation of

changes to the NCC as it relates to energy efficiency. There have been some important contributions to the

evidence base since the 2009 RIS, which has allowed us to improve on the robustness of the earlier

analyses, through incorporating that evidence into our proposed methodology. However, there remain a

number of gaps, which we believe could be the subject of additional investigation, to further enhance the

methodology.

This section briefly summarises the improvements in the evidence base since 2009, before setting out our

suggestions for further investigation in greater detail.

5.1 Improvements in the supporting evidence base

The table below summarises the improvements in the supporting evidence base that we have relied upon as

part of improving the robustness of the economic evaluation methodology.

Table 4 – Summary of improvements in the supporting evidence base

Evaluation parameter Evidence

Annual changes in the costs to

comply with changes to the NCC

The BASIX scheme has been in operation since July 2004 and has

amassed a significant database of design decisions made in NSW.

The changing housing stock When we met with the HIA they outlined the work they have, and

are, doing on the changing composition of housing structures –

much of this data and forecasts are available on their website

(https://hia.com.au/en/BusinessInfo/economicInfo.aspx)

How the residential market has

responded to recent stringency

changes, eg, the move to 6-star

compliance

NatHERS Universal Certificate portals collect data on how

designers and architects model, measure and compare the energy

efficiency of house designs – CSIRO portal available at:

https://research.csiro.au/energyrating/

Human health implications from

changing building designs, eg,

through condensation/moisture,

heat stress etc

Williamson, T.J., Grant, E., Hansen, A., Pisaniello, D. and

Andamon, M. (2009) An Investigation of Potential Health Benefits

from Increasing Energy Efficiency Stringency Requirements:

Building Code of Australia Volumes One & Two, A Report for The

Australian Building Codes Board.

Electricity network LRMC estimates Electricity network businesses in the National Electricity Market are

now required to estimate LRMCs for their networks (across different

tariff classes) as part of their network pricing proposals.

Learning rates We understand the Department is currently undertaking a separate

piece of work on construction learning rates, albeit for commercial

buildings. In addition, we understand the Moreland Energy

Foundation is also looking at industry adaptation to existing NCC

requirements.


HoustonKemp.com 25

5.2 Additional areas for research

There are a number of additional areas of research, which we believe would improve the robustness of the

analysis. Specifically research to support:

the assumptions about the future evolution of dwellings, which is used to aggregate the dwelling level benefits and costs to the jurisdictional and national level, including:

> expectations about the future mix of dwellings given construction trends; and

> the linkages between population growth and forecasts of dwelling constructions, taking into account potential vacancies;

assumptions used to estimate health and wider amenity benefits from changes to the NCC;

the assumptions about the relationship between dwelling construction and peak energy use, and the opportunities to avoid actual network and generation expenditure within new development areas;

the development of ‘standardised’ dwelling designs for each dwelling type and jurisdiction, to ensure that future evaluations are undertaken on the same basis and to take into account localised construction considerations and styles;

cost efficiency rates for the residential sector, by type of building organisation, eg, ‘volume builders’, sole traders and large construction companies that build apartments and multi-unit dwellings; and

levels of (non) compliance in the building industry as stakeholders mentioned this is currently an issue and could be addressed as part of the measures.

We believe these areas should be the focus of additional work to improve the overall robustness of the

evaluation of changes to the NCC.


HoustonKemp.com 26

A1. List of organisations consulted

We conducted a series of bilateral discussions with stakeholders that had previously indicated an interest in

the benefits and costs of NCC changes. The complete list of organisations is set out in the table below.

Table 5 – List of organisations consulted in the development of the methodology

Organisation

1 Australian Building Codes Board

2 Australian Sustainable Built Environment Council (ASBEC) and many of their current members

(Australian Institute of Refrigeration, Air Conditioning and Heating, Australian Glass and Glazing

Association, Australian Institute of Architects, Australian Sustainable Building Association,

Australian Sustainable Building Association, Australian Windows Association, Building Designers

Association of Victoria, City of Sydney, ClimateWorks, CRC for Low Carbon Living, ICANZ,

Insulation Australasia, Property Council of Australia).

3 Jurisdictional Departments and Regulators

4 Housing Industry Association

5 Master Builders Australia

6 Office of Best Practice Regulation


HoustonKemp.com 27

A2. Literature review of relevant studies for any potential future RIS

The table below contains a range of studies that may be of relevance for any future RIS undertaken. The

studies in the table below were provided to HoustonKemp at the onset of this project.

Table 6 – Summary of potentially useful previous studies going forward

Document (and area of relevance for a future RIS) Source

AECOM, 2012, Understanding how the building industry responds

to energy efficiency standards, Final Report, Department of

Climate Change and Energy Efficiency (direct costs)

On file at the Department.

Ambrose MD, James M, Law A, Osman P, White S (2013) The

Evaluation of the 5-Star Energy Efficiency Standard for

Residential Buildings. CSIRO, Australia. (direct/indirect

costs/benefits)

www.environment.gov.au/system/file

s/energy/files/Evaluation5StarEnergy

EfficiencyStandardResidentialBuildin

gs.pdf

ASBEC, 2015, Low Carbon, High Performance: How buildings

can make a major contribution to Australia’s emissions and

productivity goals. (direct & indirect benefits)

www.climateworksaustralia.org/public

ation/document/low-carbon-high-

performance-buildings-full-report

ASBEC, The Second Plank – Building a low carbon economy with

energy efficient buildings (direct & indirect benefits)

www.asbec.asn.au/files/ASBEC%20

CCTG%20Second%20Plank%20Rep

ort%202.0_0.pdf

Belusko, M and O’Leary, T (2010) ‘Cost analyses of measures to

improve residential energy ratings to 6 stars – Playford North

Development, South Australia’, Australasian Journal of

Construction Economics and Building, 10 (1/2) 36‐47. (direct

costs)

https://epress.lib.uts.edu.au/journals/i

ndex.php/AJCEB/article/download/15

84/1729

Cambridge Econometrics, 2015, Assessing the Employment and

Social Impact of Energy Efficiency, Cambridge, UK. (indirect

benefits)

https://ec.europa.eu/energy/sites/ene

r/files/documents/CE_EE_Jobs_appe

ndices%2018Nov2015.pdf

CIE/Master Builders, 2010, Energy-efficiency: building code star-

ratings What’s optimal, what’s not. (direct costs/benefits)

www.thecie.com.au/wp-

content/uploads/2014/06/MBA_Repo

rt_9_July_2010.pdf.

ClimateWorks, 2010, Low Carbon Growth Plan for Australia,

Monash University, Clayton VIC. (direct costs/benefits)

www.climateworksaustralia.org/proje

ct/national-projects/low-carbon-

growth-plan-australia

Coates, Haynes, O’Brien, McAneney & Dimer de Oliveira, 2014,

Exploring 167 years of vulnerability: An examination of extreme

heat events in Australia 1844–2010, Environmental Science &

Policy, Volume 42. (indirect benefits)

www.sciencedirect.com/science/articl

e/pii/S1462901114000999

Crawford R, Bartak E, Stephan A, Jensen C. 2016 Evaluating the

life cycle energy benefits of energy efficiency regulations for

buildings, Renewable and Sustainable Energy Reviews (indirect

costs)

-

http://www.climateworksaustralia.org/publication/document/low-carbon-high-performance-buildings-full-report



http://www.asbec.asn.au/files/ASBEC%20CCTG%20Second%20Plank%20Report%202.0_0.pdf



https://epress.lib.uts.edu.au/journals/index.php/AJCEB/article/download/1584/1729



https://ec.europa.eu/energy/sites/ener/files/documents/CE_EE_Jobs_appendices%2018Nov2015.pdf



http://www.thecie.com.au/wp-content/uploads/2014/06/MBA_Report_9_July_2010.pdf.



http://www.climateworksaustralia.org/project/national-projects/low-carbon-growth-plan-australia



http://www.sciencedirect.com/science/article/pii/S1462901114000999



HoustonKemp.com 28


Databuild/City of Sydney, 2015. Industry awareness and drivers of

overcompliance: Multi-residential Developments built under the

NSW BASIX scheme (direct costs/benefits)


DEHWA 2008 Energy Use in the Australian Residential Sector

1986-2020 (direct costs/benefits)

www.industry.gov.au/Energy/Energy-

information/Documents/energyuseau

stralianresidentialsector19862020par

t1.pdf.

Dewsbury, M and Law, T and Henderson, A, Investigation of

destructive condensation in Australian cool temperate buildings,

Building Standards and Occupational Licensing, Department of

Justice Tasmania, Tasmania, Final report (2016) (indirect costs)


DIS/Energy Consult, 2015 Residential Energy Baseline Study:

Australia. (direct costs/benefits)

www.energyrating.gov.au/document/r

eport-residential-baseline-study-

australia-2000-2030.

E3, 2012, REMP: Heating and Cooling Loads Data Collection and

Analysis. (direct costs/benefits)

www.energyrating.gov.au/sites/new.e

nergyrating/files/documents/REMP-

Heating-Cooling_0.pdf

Energy Australia, 2005, Multi-Unit Residential Buildings & Peak

Demand Study. (direct/indirect costs/benefits)

www.ausgrid.com.au/Common/Our-

network/Demand-management-and-

energy-efficiency/Energy-use-facts-

and-

figures/~/media/Files/Network/Dema

nd%20Management/Energy%20use

%20resources/Networks_multi_unit_

sumrep_Oct08.pdf.

Garnaut, 2008, Garnaut Climate Change Review. (indirect

costs/benefits)

www.garnautreview.org.au/2008-

review.html

Gasparrini, Antonio et al. 2015 Mortality risk attributable to high

and low ambient temperature: a multicountry observational study.

The Lancet, Volume 386, Issue 9991, 369 - 375. (indirect

benefits)

www.thelancet.com/journals/lancet/ar

ticle/PIIS0140-6736(14)62114-

0/abstract

George Wilkenfield & Associates, 2011, Review of Regulatory

Impact Statement Methodology for Energy Efficiency Stringency

Upgrades to the Building Code of Australia. (direct/indirect

costs/benefits)


Guan, Walmsely & Chen (2015) Life cycle energy analysis of eight

residential houses in Brisbane, Australia. Procedia Engineering,

121, pp. 653-661.(indirect costs)


e/pii/S1877705815027873

Hatvani-Kovacs, G., Belusko M., Pockett, J., Boland J., 2016,

Does the Australian Nationwide House Energy Rating Scheme

ensure heat stress resistance? 1-19 pp. (indirect costs/benefits)

http://search.ror.unisa.edu.au/media/r

esearcharchive/open/991609740910

1831/53139706390001831

Horne, R E, Hayles, C, Hes, D, Jensen, C, Opray, L, Wakefield, R,

and Wasiluk, K. 2005 International comparison of building energy

performance standards (direct costs/benefits)

http://citeseerx.ist.psu.edu/viewdoc/d

ownload?doi=10.1.1.460.30&rep=rep

1&type=pdf

http://www.industry.gov.au/Energy/Energy-information/Documents/energyuseaustralianresidentialsector19862020part1.pdf




http://www.energyrating.gov.au/document/report-residential-baseline-study-australia-2000-2030.



http://www.energyrating.gov.au/sites/new.energyrating/files/documents/REMP-Heating-Cooling_0.pdf



http://www.ausgrid.com.au/Common/Our-network/Demand-management-and-energy-efficiency/Energy-use-facts-and-figures/~/media/Files/Network/Demand%20Management/Energy%20use%20resources/Networks_multi_unit_sumrep_Oct08.pdf








http://www.garnautreview.org.au/2008-review.html

http://www.garnautreview.org.au/2008-review.html

http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(14)62114-0/abstract





http://search.ror.unisa.edu.au/media/researcharchive/open/9916097409101831/53139706390001831



http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.460.30&rep=rep1&type=pdf




HoustonKemp.com 29


IEA, Energy Efficiency Market Report 2016: Market Trends and

Medium-Term Prospects. (direct/indirect costs/benefits)

www.iea.org/eemr16/files/medium-

term-energy-efficiency-

2016_WEB.PDF

Livingston, Cole, Elliott & Bartlett, 2014, Building Codes Program:

National Benefits Assessment, 1992-2040, US Department of

Energy (direct/indirect costs/benefits)

www.energycodes.gov/sites/default/fi

les/documents/BenefitsReport_Final_

March20142.pdf

Moore, T, Ridley, I, Strengers, Y, Maller, C & Horne, R. 2016

Dwelling performance and adaptive summer comfort in low-

income Australian households, Building Research & Information

(direct costs/benefits)

www.tandfonline.com/doi/full/10.1080

/09613218.2016.1139906

Moore, T, Strengers, Y, Maller, C, Ridley, I, Nicholls, L and Horne,

R. 2015, Horsham Catalyst, Research and Evaluation, Final

Report, Centre for Urban Research RMIT. (costs/benefits all)

http://cur.org.au/cms/wp-

content/uploads/2016/08/horsham-

final-11.pdf

NSW Department of Planning & Infrastructure 2013 BASIX Target

Review – Supporting research paper (direct/indirect

costs/benefits)

www.basix.nsw.gov.au/iframe/image

s/4050pdfs/BASIX-Target-Review-

supporting-research.pdf

NSW Department of Planning, 2009, BASIX Multi-Dwelling

Outcomes (direct/indirect costs/benefits)


s/2006-09%20BASIX%20Multi-

Dwellings%20Full%20Report%20[we

b].pdf

NSW Department of Planning, 2011, BASIX Five Year Outcomes

Summary. (direct benefits)


s/BASIX_Five_Year_Outcomes_Sum

mary.pdf

Palmer, G 2012. Does Energy Efficiency Reduce Emissions and

Peak Demand? A Case Study of 50 Years of Space Heating in

Melbourne, Sustainability 4(7), 1525-1560 (direct/indirect

benefits)

www.mdpi.com/2071-

1050/4/7/1525/pdf

Pears & Isaacs, 2016, How cautious analysis could lead to ‘do

nothing’ policy: A case study of the 6-star housing Regulation

Impact Statement. (direct/indirect costs/benefits)


Pitt & Sherry 2016, Pathway to 2020 for Increased Stringency in

New Building Energy Efficiency Standards: Benefit Cost Analysis:

2016 Update for Residential Buildings (direct costs/benefits)

https://industry.gov.au/Energy/Energ

yEfficiency/Non-

residentialBuildings/Documents/Path

way-to-2020-for-Increased-

Stringency-in-New-Building-Energy-

Efficiency-Standards-2016-

Update.pdf

Pitt & Sherry DoCCEE, 2013, Final Report: Quantitative

Assessment of Energy Savings from Building Energy Efficiency

Measures. (direct benefits)

www.pittsh.com.au/assets/files/CE%

20Showcase/Quantitative%20Assess

ment%20of%20Buildings%20Measur

es.pdf

https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF



https://www.energycodes.gov/sites/default/files/documents/BenefitsReport_Final_March20142.pdf



http://www.tandfonline.com/doi/full/10.1080/09613218.2016.1139906

http://www.tandfonline.com/doi/full/10.1080/09613218.2016.1139906

http://cur.org.au/cms/wp-content/uploads/2016/08/horsham-final-11.pdf



https://www.basix.nsw.gov.au/iframe/images/4050pdfs/BASIX-Target-Review-supporting-research.pdf



https://www.basix.nsw.gov.au/iframe/images/2006-09%20BASIX%20Multi-Dwellings%20Full%20Report%20%5bweb%5d.pdf




https://www.basix.nsw.gov.au/iframe/images/BASIX_Five_Year_Outcomes_Summary.pdf



http://www.mdpi.com/2071-1050/4/7/1525/pdf

http://www.mdpi.com/2071-1050/4/7/1525/pdf

https://industry.gov.au/Energy/EnergyEfficiency/Non-residentialBuildings/Documents/Pathway-to-2020-for-Increased-Stringency-in-New-Building-Energy-Efficiency-Standards-2016-Update.pdf







http://www.pittsh.com.au/assets/files/CE%20Showcase/Quantitative%20Assessment%20of%20Buildings%20Measures.pdf





HoustonKemp.com 30


Pitt & Sherry, 2015, Final report: Cost-optimal insulation levels for

Australian and New Zealand houses (direct costs/benefits)

www.knaufinsulation.com.au/sites/kn

aufinsulation.com.au/files/FINAL%20

Cost-

optimal%20insulation%20levels%20f

or%20Australian%20and%20New%2

0Zealand%20home....pdf

Pitt & Sherry, 2016, Commercial Buildings Learning Rates. (direct

costs)


Pitt & Sherry, 2012 Increased Housing Energy Efficiency

Standards in WA: Benefit Cost Analysis, WA Public Utilities Office

& WA Building Commission (direct costs/benefits)

www.commerce.wa.gov.au/sites/defa

ult/files/atoms/files/energyefficiencyc

ostbenefit.pdf

Productivity Commission, 2005, The Private Cost Effectiveness of

Improving Energy Efficiency (direct costs/benefits).

www.pc.gov.au/inquiries/completed/e

nergy-efficiency/report/energy.pdf

R.H. Crawford and A. Stephan (eds.), Living and Learning:

Research for a Better Built Environment: 49th International

Conference of the Architectural Science Association 2015,

pp.403–412. ©2015, The Architectural Science Association and

The University of Melbourne. (Several papers). (direct/indirect

costs/benefits)

http://apo.org.au/node/61762

Ramesh, Prakesh & Shukla, 2010, Life cycle analysis of buildings:

An overview, Energy and Buildings, 42, pp. 1592-1600. (indirect

costs)


e/pii/S0378778810001696

Saman, Berry, Webby, Chao, Whaley & Mudge, 2014, RP1006

Viable integrated systems for zero carbon housing: Progress

Report: 2013 (CRC LCL). (summary of studies)

www.lowcarbonlivingcrc.com.au/sites

/all/files/publications_file_attachment

s/rp1006_2013_progress_report.pdf.

Sproul, 2014, CRC LCL RP1019: Advanced Comfort Index for

Residential Homes. (indirect benefits)

www.lowcarbonlivingcrc.com.au/rese

arch/program-1-integrated-building-

systems/rp1019-advanced-comfort-

index-residential-homes

Stephan & Crawford 2016, The relationship between house size

and life cycle energy demand: Implications for energy efficiency

regulations for buildings, Energy 116 (2016) 1158-1171 (direct

costs/benefits)


e/pii/S0360544216314724

Stern, 2006, Stern Review Report on the Economics of Climate

Change. (indirect costs/benefits)

http://webarchive.nationalarchives.go

v.uk/20100407172811/www.hm-

treasury.gov.uk/stern_review_report.

htm

http://www.knaufinsulation.com.au/sites/knaufinsulation.com.au/files/FINAL%20Cost-optimal%20insulation%20levels%20for%20Australian%20and%20New%20Zealand%20home....pdf






https://www.commerce.wa.gov.au/sites/default/files/atoms/files/energyefficiencycostbenefit.pdf



http://www.pc.gov.au/inquiries/completed/energy-efficiency/report/energy.pdf

http://www.pc.gov.au/inquiries/completed/energy-efficiency/report/energy.pdf

http://apo.org.au/node/61762



http://www.lowcarbonlivingcrc.com.au/research/program-1-integrated-building-systems/rp1019-advanced-comfort-index-residential-homes






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Sustainability House 2012 Identifying Cost Savings through

Building Redesign – Parts 1 & 2. (direct costs/benefits)


y-

information/Documents/identifyingcos

tsavingsbuildingredesignachievingen

ergyefficiencystandards.pdf &


y-

information/Documents/IdentifyingCo

stSavingsPart2SummaryReport2012

0619.pdf

US Building Energy Code Field Study (direct costs/benefits) www.energycodes.gov/compliance/re

sidential-energy-code-field-study

US Building America Solution Center (assorted documents) https://basc.pnnl.gov/library

Wang, Chen and Ren, 2009, Assessment of Climate Change

Impact on Residential Building Heating and Cooling Energy

Demand in Australia. (indirect benefits)

https://publications.csiro.au/rpr/downl

oad?pid=csiro:EP092302&dsid=DS3.

Whaley, Mudge & Saman, RP1006: Viable Integrated Systems for

Zero carbon Housing: Lochiel Park Monitoring Case Study (CRC

LCL). (direct/indirect costs/benefits)

www.lowcarbonlivingcrc.com.au/reso

urces/crc-publications/crclcl-project-

reports/rp1006-lochiel-park-

monitoring-case-study

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