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Department of Economic Development, Jobs, Transport and Resources

Victorian Energy Efficiency Target Forum

16 April 2015

Village Roadshow Theatrette, State Library of Victoria

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Dr Sharn EnzingerDirectorEnergy Efficiency

Department of Economic Development, Jobs, Transport and Resources

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Kylie WhiteDeputy SecretaryEnergy and Earth Resources Division

Department of Economic Development, Jobs, Transport and Resources

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Objectives

• Present the initial findings

• Provide details of the consultation process

• Provide an opportunity for questions and input

• Open up the modelling and analysis for your feedback

Welcome to the VEET Forum

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Mark FeatherExecutive DirectorEnergy Sector Development Branch

Department of Economic Development, Jobs, Transport and Resources

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On 18 December 2014, the Hon Lily D’Ambrosio, Minister for Energy and Resources, announced:

• The VEET target for 2015 would be 5.4 million tonnes of greenhouse gas reduction

• VEET would be reviewed during 2015, with a view to further strengthening the scheme

Background, Preliminary Findings and Consultation

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Next Steps

• Determine targets for 2016 and beyond→VEET Act amendments aim to occur by 1 January 2016

• Review the VEET scheme – aim to strengthen and improve→Amend the VEET Regulations as necessary

• Involve our stakeholders in all of the above

Background, Preliminary Findings and Consultation

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Background, Preliminary Findings and Consultation

VEET Target Options Tested

1. 5.4 million tonnes of greenhouse gas, 2016-18

2. 5.8 million tonnes of greenhouse gas, 2016-18

3. 6.2 million tonnes of greenhouse gas, 2016-18

4. 5.8 million tonnes of greenhouse gas, 2016-20 (5 year target)

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Background, Preliminary Findings and Consultation

Cost benefit analysis results$millions 5.4M, 3 years

5.8M, 3 years

6.2M, 3 years

5.8M, 5 years

Total costsLow 392.3 485.3 615.4 893.9

High 411.6 509.1 645.5 937.7

Total benefitsLow 1,067.7 1,125.6 1,224.1 2,261.1

High 2,129.8 2,239.9 2,416.6 4,136.7

NET BENEFIT

LOW 656.1 616.5 578.5 1,323.4

HIGH 1,737.4 1,754.5 1,801.2 3,242.9

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Background, Preliminary Findings and Consultation

Consultation Process

• Consultation package will be available shortly

• Written submissions can also be provided

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Approach – How have future targets been modelled?

Residential sector energy efficiency

opportunities

Business sector energy efficiency

opportunities

Energy market model

Cost benefit analysis

What opportunities are there to improve energy

efficiency?

How would those energy savings

affect the energy market?

What are the overall costs and

benefits to the Victorian economy?

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Approach

Modelling potential VEET targets

The residential and business models aim to:

• Identify the opportunities to improve energy efficiency• Predict how large each opportunity is

• How many houses have electric storage hot water?• Predict how long each opportunity will last

• When will there be no houses left with electric storage hot water?

• Predict what happens next• How long will these new efficient hot water system lasts, and

what happens at end of life?

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Approach

Modelling potential VEET targets

The residential model was created by Sustainability Victoria in 2007 and has been updated for each VEET review since then.

It includes:• Residential-type VEET activities • Currently eligible activities• Potential new or revised activities

The models do not determine or define which activities will be included in the scheme, now or in the future.

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Approach

Modelling potential VEET targets

The business model was created by Energetics.

The business model includes:• Current VEET activities relevant only to business premises• A wide range of other activities which have been identified as

potential energy efficiency opportunities

It assumes that:

• Project-based assessments become available in VEET in 2017• The large business exclusion is lifted

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Approach

Modelling potential VEET targets

The energy market model predicts the following benefits:

• Savings in electricity generation costs• Deferral of transmission and distribution network infrastructure

(poles and wires)

• Savings in gas production and transmission costs• Savings in gas resource costs

• Environmental benefits:• Avoided greenhouse gas emissions• Avoided air pollution

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Approach

Evaluating costs and benefits

A cost benefit analysis was undertaken using the outcomes of the models.

The costs include the following:

• The cost of certificates purchased by energy retailers

• The cost of compliance borne by energy retailers associated with purchasing and retiring certificates

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Approach

Evaluating costs and benefits

The benefits include:

• The avoided energy market costs

• The avoided greenhouse gas emissions

• The benefits of improved air quality due to avoided air pollution

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Approach

Evaluating costs and benefits

5.4M, 2016-18 5.8M, 2016-18 6.2M, 2016-18 5.8M, 2016-20 $-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

VEET Target Option

Net

Ben

efi

t (m

illion

s)

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Comparison with 2014 analysis

The difference in results between 2014 and now are largely due to:

• More comprehensive cost-benefit analysis• Lower certificate costs• Voluntary contributions by households and businesses are offset by

benefits• Valuation of greenhouse gas and air pollution reduction

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Issues

Participation of large businesses

• The VEET scheme was expanded to the business sector in 2012, but excludes participation by some large sites

• The Department would like feedback on whether any large businesses should be excluded from VEET, and if so, on what basis

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Issues

Participation by different sections of the community

• The VEET scheme creates opportunities to reduce energy bills

• Aside from increasing the range of activities, the Department seeks input on ways to broaden participation in the VEET scheme

• For example:• Low income consumers• Regional and rural consumers• Businesses

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Issues

Introducing new activities and revising existing activities

• Modelling to consider targets does not change the activities available in the VEET scheme. It does not pre-empt any decisions

• New or amended activities can be included after a Regulatory review process

• Stakeholders wishing to propose revisions or new activities are welcome to as part of this consultation process

• A full consultation process will be initiated shortly, which will provide further opportunities to provide feedback

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Issues

Improving the VEET scheme

Aside from the issues already presented, there are further opportunities to strengthen the VEET scheme.

Stakeholder feedback is invited on changes that could be made to strengthen the scheme.

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Kylie WhiteDeputy SecretaryEnergy and Earth Resources Division

Department of Economic Development, Jobs, Transport and Resources