Victorian energy efficiency program expands focus to complex upgrades

All-Energy Conference: The rebranded Victorian Energy Efficiency Target scheme is now open to more complex upgrades and will help business cases to “stack up better”, according to the Victorian government, which is looking for early adopters to take advantage of the new incentives.

Now known as Victorian Energy Upgrades, the scheme has expanded its focus from simple activities such as lighting upgrades to a broader range of project-based activities.

Presenting at the All-Energy 2017 Conference, Kathryn Lucas-Healey, senior policy officer at the Department of Environment, Land, Water and Planning, told the Making Business More Energy Efficient session that 1.7 million households and 70,000 businesses have benefited from discounted energy upgrades since the scheme was established in 2009.

Each year a target is set for greenhouse gas abatement and energy retailers in Victoria have an obligation to meet their share of the target. They acquire Victorian Energy Efficiency Certificates (representing one tonne of greenhouse abatement over the life of the activity), which are issued for a range of prescribed activities such as replacing lighting or appliances.

So far more than 42 million tonnes of greenhouse gas emissions have been avoided.

However, the scheme has had its limits.

“Up until June this year the program had a set of activities that were quite simple deemed activities where the regulations had done all the calculations to estimate what the average amount of abatement if I was to replace my refrigerated display cabinets in my store or if I was to go to someone’s house and replace their shower rose,” she said. “So it was really simple to roll out these large-scale programs without having to figure out how much abatement can be attributed to each activity.”

Ms Lucas-Healey said this approach was suitable for products that were standardised, however didn’t really cater for one-off complex integrated energy efficiency projects like improving a control system or replacing a refrigeration plant.

“The program simply didn’t cater for those and that’s a pretty valid criticism of it over the years,” she said.

With the new project-based approach, the abatement and therefore the incentive is calculated for each specific project.

“The advantage of the expanded approach is that if you are looking at accessing the scheme’s incentive for your project, it’s really matched to what your project is saving and so the incentive you get is not averaged – you get the full credit for that,” Ms Lucas-Healey said.

However, it’s not simply a matter of pulling out your old energy bills and telling DELWP how much energy you have saved. More detailed evidence of greenhouse gas abatement is required.

The scheme has introduced a technology-neutral tool known as the Measurement and Verification method to assist organisations in calculating abatements. The method is similar that used for the NSW Energy Saving Scheme and is available for any non-residential site in Victoria.

Typical upgrade projects include:

  • HVAC
  • Fans/Pumps
  • Building upgrade
  • Refrigeration
  • Compressed air
  • Power systems

In NSW about 70,000 certificates have been issued for HVAC upgrades and 50,000 for fans/pumps.

“In Victoria at $15 dollars or thereabouts per certificate, you can see that there’s a lot of incentives that are available to sites who have a project that they might think is suitable for this,” Ms Lucas-Healey said.

Unlike the NSW scheme which measures energy savings, the Victorian scheme measures greenhouse gas savings.

“So that can become an interesting factor when you’re talking about fuel switching projects,” she said.

Projects are defined using a measurement boundary – it could be a whole site (billing meter) or a sub-meter. Participants need to create a baseline energy model to show what would have been used if the upgrade had never happened. The duration of the baseline and operating periods depends on the type of upgrade – they need to be long enough to be able to characterise the energy consumption.

The savings equals the baseline energy consumption minus the energy consumption after the upgrade.

“You do the upgrade then you have to verify the saving so it means the incentives may be calculated a little while after you have done the physical project on-site,” Ms Lucas-Healey said.

“So the implication of that is the incentive is not necessarily going to help you with the capex [capital expenditure] but it will very much help with you NPV [net present value] when you are pitching a project to decision makers.”

There is flexibility with timing of incentives. Participants can undertake the project, collect data for a year and verify savings, then apply for incentives. Or they can forward-project savings based on a smaller period of data collection.

“Say based on this verification exercise we have done, we can estimate our savings over 10 years and bring all those incentives forward,” Ms Lucas-Healey said. “And so you can see that can make quite a big difference to the NPV of a project and help get the case up at the board.

“Really what it’s doing is making your business case stack up better. There’s an incentive there, but you are also saving energy as soon as your upgrades are up and running. So it’s very much a win-win. It’s not one or the other.”

For more information, visit www.victorianenergysaver.vic.gov.au

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