National Strategy for Energy Efficiency

Greetings from Old Parliament House in Canberra, where a meeting between industry and the Environment Department is taking place on what to put in the National Strategy for Energy Efficiency agreed last year by the Council of Australian Governments (COAG).

The staff of the Energy Efficiency Futures section of the Department of the Environment, Water, Heritage and the Arts are under pressure to produce proposals for a COAG meeting in March. They will collect up the input from industry today, summarise it and invite further comment by this Thursday. There are about 25 people at the meeting from electrical industry groups, academia and the government. I am here with my "Computers Off" hat on, as one of their experts on green ICT, along with Dr Idris Sulaiman the CEO.

Before the meeting I took the organisers to task for the very limited and secret way the consultation is being handled. I only found out about the meeting the day before. The discussion paper for the meeting was not made public (text appended). The Environment Department seems to be conducing consultations in a last century way. It seems particularly inappropriate to make people fly to Canberra to discuss energy savings (I arrived on the local bus, as it was too hot to ride my bicycle). The Australian Government has stated an intention to use online consultation and make information more freely available and the Environment Department should implement this policy. They should place the discussion paper online and invite comment. The Department seems to fear they will be overwhelmed with comments. This is unlikely and there are ways to deal with it. The Environment Department happens to have some of the most expert web designers in the federal government and will be able to advise how to do this.

After introductions a slightly philosophical discussion of the role of regulation in energy reduction started. This got into the problems of the division of roles between federal and state government and the role of global standards. While all interesting, this did not appear to be problems we could solve in the next few months.

My particular interest comes further down on the agenda when we get to discuss training and certification of staff on energy saving. I have written a certification training course on Green ICT, commissioned by the Australian Computer Society and currently running globally online.

Also the Environment Department commissioned a report from me in 2008 on "Personal Computer and Monitors Energy Efficiency Strategy". I was asked to write an independent report and seem to have succeeded, in that neither the department, nor industry, seemed to like my report. ;-)

Coincidently, there is a protest meeting about the environment taking place outside the building, making it more difficult to get in past the security.

AGENDA:
Towards a National Strategy for Energy Efficiency
Appliances and Equipment Stakeholder Consultation
Main Dining Room 2, Old Parliament House, Queen Victoria Terrace, Canberra
10:00 to 1:00pm
Tuesday 3 February 2009

1. Introduction/Welcome Chair (Commonwealth, Mr Ross Carter) 10:00 – 10:20pm
a. Purpose
b. The Case for Government Energy Efficiency Interventions
c. Scope of the National Strategy
2. Measures to Improve the Energy Efficiency of Appliances & Equipment (Chair/All) 10:20 – 12:20pm
Existing Measures –
a. Regulation / strategic planning
b. National legislation
Possible Additional Measures –
c. Regulation
d. Government Procurement
e. Information
f. Skills Development: Training and Accreditation
g. Targets
3. Other Issues/Questions (Chair / All) 12.20 – 12.40pm
4. Summary of Issues / Close (Chair) 12.40 – 13.00pm

Towards a National Strategy for Energy Efficiency
Issues Paper
January 2009

CONTENTS

1. Introduction
2. Purpose of Stakeholder Consultations
3. The Case for Government Energy Efficiency Interventions
4. Scope of the National Strategy
5. Targets
6. Measures to Improve the Energy Efficiency of Buildings
7. Measures to Improve the Energy Efficiency of Appliances and Equipment
8. Measures to Improve the Energy Efficiency of Industry
9. Skills Development: Training and Accreditation

1 INTRODUCTION

On 2 October 2008, the Council of Australian Governments (COAG) agreed to develop a National Strategy for Energy Efficiency, to accelerate energy efficiency efforts across all governments and to help households and businesses prepare for the introduction of the Commonwealth Government’s Carbon Pollution Reduction Scheme (CPRS). COAG intends that implementation of the national Strategy will be finalised by June 2009, to ensure that programs assisting households and businesses to reduce their energy costs are in place prior to the introduction of the CPRS.

The National Strategy will build upon the Ministerial Council for Energy’s National Framework for Energy Efficiency (NFEE), which has developed and implemented energy efficiency measures since 2004. For each sector of economic activity (buildings, appliances and equipment, industry) this Paper briefly summarises current energy efficiency actions being delivered through the NFEE and developed through other inter-government processes such as the COAG’s Energy Efficiency Sub-Group of the Working Group on Climate Change and Water. States and Territories are engaged in a range of existing activities or programs (currently outside the scope of COAG), however these are not summarised here.

Measures ultimately included in the National Strategy will be subject to a complementarity assessment against the Carbon Pollution Reduction Scheme. In addition, regulatory measures will be subject to regulatory impact assessment processes.

2 PURPOSE OF STAKEHOLDER CONSULTATIONS

Stakeholders’ views are being sought on the range of measures that Australia could adopt to accelerate and expand energy efficiency. Three sectoral round table discussions are being organised for late January / early February 2009 to allow stakeholders to provide their views to senior government officials charged with developing the National Strategy. The roundtables will individually cover appliances and equipment energy efficiency; buildings (residential and commercial) energy efficiency; and industrial energy efficiency. Governments are keen to streamline the processes and timeframes for establishing and implementing energy efficiency measures. An expeditious approach to improving energy efficiency – with the active involvement of businesses, community organisations, individuals and all spheres of government – will help Australia become a leader in energy efficiency. To this end, the consultation process will seek the views of industry stakeholders on how industry can contribute to expediting the uptake of energy efficiency.

It is important to note that the policy options discussed in this Paper are not endorsed by governments.

The aim of the paper is to outline the current issues being raised in the public realm as a means of providing some focus for those roundtable discussions.

Transport issues are beyond the scope of this Paper. Transport energy efficiency is being dealt with through processes established by the Australian Transport Council (ATC). This includes the ATC’s joint
work with the Environment Protection and Heritage Council on vehicle fuel efficiency, the National Transport Commission’s public consultation process on “Freight Transport in a Carbon Constrained
Economy” and work on travel behaviour change.

3 THE CASE FOR GOVERNMENT ENERGY EFFICIENCY INTERVENTIONS

Energy efficiency measures provide the opportunity to achieve significant greenhouse gas emission reductions at relatively low cost. The Commonwealth Government’s White Paper on the Carbon
Pollution Reduction Scheme (CPRS) notes that while the CPRS will be the primary mechanism through which Australia will seek to meet its emissions reduction objectives, energy efficiency will also form an
important element in Australia’s emissions mitigation strategy.

The International Energy Agency (2006) has estimated that increased end-user energy efficiency could account for around 45 per cent of global emission reductions to avoid the worst climate changes. It has
also estimated (2006) that energy efficiency improvements – predominantly in buildings, appliances, transport and industry – represent the largest and least costly abatement opportunities, finding for
example, that improvements in energy efficiency involving low cost or net-cost savings over time are projected to provide more than a third of the reductions in energy-related emissions required to reduce
total global emissions by 50 per cent from current levels by 2050.

In launching the Commonwealth Government’s White Paper on a Carbon Pollution Reduction Scheme (CPRS), the Prime Minister noted there are “Three arms to this Government’s climate change policy:
One, for the first time in the history of Australia, having a carbon price set for the country. Two, actively supporting on the supply side, renewable energy and clean coal; and three on the demand side, an active agenda further to be developed on energy efficiency.”1

The CPRS addresses the absence of a price signal for carbon emissions, but other impediments to the efficient uptake of energy efficiency measures remain. The National Strategy will aim to address these other impediments to households and businesses taking up energy efficiency opportunities, and thus operate as a complement to the CPRS2. These other market failures and barriers are summarised in the following terms:

· Information Failures. Information failures occur when one party to a transaction has more or better information than the other, or both parties have incomplete information. Insufficient information could act as a barrier to the take-up of cost-effective abatement opportunities such as those provided by energy efficiency measures. In the case of energy efficiency measures, information failures are quite prevalent owing to the need to assess the reduced energy costs over a long time period compared to the known upfront installation costs. For instance property owners can be unaware of their buildings’ energy consumption, and household members can be unaware of the energy implications of their consumer choices;

· Non-Price Barriers: Non-price barriers limit the transmission of price-based incentives: These include principal-agent barriers or split incentives. The costs and benefits of energy efficiency may
accrue to different agents. For example, landlords and tenants have different incentives with respect to the benefits of energy efficiency upgrades for rental housing;

· Capital Rationing: Capital rationing is a lack of access to capital to fund the up-front costs of energy efficiency measures. Access to capital to take advantage of cost effective technologies can be a particular problem for low-income residential households, or small businesses. These groups
may trade off lower capital costs now for higher ongoing operating costs due to the relatively large opportunity costs these groups may face in accessing funds; and

· Early Mover or R&D Disadvantage – where innovation in one field leads to benefits for others who have not borne the initial investment costs (in that or another field) and the initial investor does not gain the full rewards from innovation.

The nature and extent of specific energy efficiency policies will be driven by assessment of the materiality of an identified market failure, the cost of particular policies intended to overcome such failures; the likely effectiveness of such policies; and their capacity to be implemented and administered efficiently.

1 Source: Prime Minister’s National Press Club Q &A Following the CPRS White Paper Address, 15 December 2008.
http://www.pm.gov.au/media/Interview/2008/interview_0701.cfm

2 See COAG Complementary principles: http://www.coag.gov.au/coag_meeting_outcomes/2008-11-
29/docs/20081129_complementarity_principles.rtf

In discussing uptake of energy efficiency measures within a carbon trading economy, Garnaut3 concludes that ‘policies that tackle these market failures would lower the cost of mitigation across the economy’. This will be the case when the costs of policy interventions are equal to or less than the cost of carbon.

4 SCOPE OF THE NATIONAL STRATEGY

It is proposed that the National Strategy focus on end-user energy efficiency measures in the stationary energy and transport sectors. Energy efficiency should be broadly interpreted as downstream energy
management measures including energy efficiency and conservation, together with energy efficiency opportunities in the transport sector, such as vehicle fuel efficiency and travel demand management.

Key areas of focus for the National Strategy are likely to include:

· reducing the cost of greenhouse gas abatement under the Carbon Pollution Reduction Scheme (CPRS) through the adoption of energy efficiency policies with demonstrated net economic benefits;
· ensuring consumers and businesses are well positioned to make energy efficiency decisions; and
· removing other barriers that may limit the uptake of cost effective energy efficiency measures.

Under the umbrella of the National Strategy, sectoral roadmaps may be developed that set out more detailed aspirations for energy efficiency improvements in the covered sectors, including setting measurable goals for improved performance.

5 TARGETS

Proposals have been made for an overall energy efficiency target for Australia. Such targets exist in several other countries. The case for a target revolves around the focus that it gives to quantifying contributions from each sector and, inferentially, to the outcomes required of various policy
interventions.

The case against revolves around the fact that Australia already has an emission reduction target as prescribed by the CPRS, and this target includes the energy sector. The purpose of measures under the
national strategy is to address market failures and in so doing ensure that energy efficiency measures contribute to the achievement of the CPRS target in a cost effective way.

The use of a separate overall target for energy efficiency implies that Governments are committing to achieve that target irrespective of whether energy efficiency is the most economically efficient way to reduce emissions. However, several States and Territories have introduced or have committed to introduce energy efficiency target regimes on the assumption that time lags, market barriers and other inefficiencies may result in cost-effective energy efficiency activities not being progressed at the optimum level under the CPRS.

An alternative approach could be to focus target setting on specific areas for energy efficiency where the potential for achieving cost-effective abatement is well-established. For example, the Premier of South Australia has asked that the work on the National Strategy include an examination of Australia matching the UK’s target of zero carbon for commercial buildings by 2019.

Some examples of types of such targets used overseas are:
· zero-carbon new homes from 2016 (UK);
· zero-net energy commercial buildings by 2030 (California);
3 Final Report of Garnaut Climate Change Review (2008) p 403
· zero-net energy homes by 2030 (California);
· zero net heating / cooling demand by 2014/15 (NZ); and
· energy intensity (per gross dollar of production value) for the industrial sector reduced by 25 per cent by 2020 (California).

ISSUES

Stakeholders’ views are sought on:
5.1 Should targets be established overall and/or within each sector?
5.2 If targets were to be considered, what type of targets would be most suited to Australia?
5.3 If targets were to be considered, how aggressive should they be?

6 MEASURES TO IMPROVE THE ENERGY EFFICIENCY OF BUILDINGS

Residential Buildings

Residential stationary energy use accounts for around 10 per cent of national greenhouse gas emissions. Despite recent improvements in energy performance requirements for new houses, emissions in this sector have risen by 45 per cent over the period 1990 to 2005.

The increase is the result of a range of factors, including the increasing size of new homes (higher lighting, heating and cooling demand), reduction in the number of people per household (increasing the number of houses for a given population) and increasing ownership and use of energy consuming appliances.

Barriers that will need to be addressed to improve the uptake of cost effective energy efficiency measures in the residential sector include split incentives (e.g. homebuyer-builder or tenant-landlord) and information barriers. These market barriers will not be addressed by the CPRS price signal alone.

New residential buildings present a relatively wide range of opportunities to implement energy efficiency. Measures such as appropriate orientation and insulation levels are difficult, or in some cases impossible, to rectify following the completion of a building. Other efficiency measures are typically implemented at a lower cost and with fewer constraints during the design and construction phase of a building.

The National Strategy could seek to both lift the minimum performance standards (regulation) and to encourage energy performance standards and innovation (incentives and information provision).

The Building Code of Australia (BCA) prescribes requirements for residential buildings, including energy efficiency considerations. These apply to new buildings, alterations and additions that require development approval. BASIX sets the energy efficiency requirements for new dwellings in NSW.

Most residential buildings projected to be standing in Australia in 2050 are already constructed, and therefore not subject to future BCA or BASIX provisions. To deliver high levels of energy efficiency in the residential sector, energy efficiency measures must also target improvements in existing homes.

For established residential buildings there are opportunities to improve the energy efficiency (thermal performance) of the building as well as fixed appliances, such as water heaters, space heaters and space coolers. Low cost items, such as energy efficient lighting and water efficient showerheads, are likely to be suitable for broad rollout to the residential sector.

Portable energy consuming appliances in homes are discussed in the Appliances and Equipment

Section 7.

Commercial Buildings

The commercial buildings sector represents an important focus for energy efficiency and greenhouse gas abatement due to the rapid growth in this sector and the significant technical and economic potential for emissions reduction that exists. Stationary energy consumption in commercial buildings accounts for around 10 per cent of Australia’s greenhouse gas emissions. Commercial buildings include both office buildings and other non-residential buildings such as shops, car-parks, warehouses,
hospitals and schools.

Buildings designed today, informed by current policy settings, will continue to contribute to greenhouse gas emissions for many decades.
While the Carbon Pollution Reduction Scheme will help to improve the energy efficiency of the building stock over time, there are a number of challenges specific to the commercial buildings sector:

· the length and complexity of the supply chain leading to a widespread culture of minimal compliance in all except premium buildings;
· the nature of contractual obligations between the different parties in the supply chain that serve to dilute focus on and accountability for energy performance outcomes;
· the lack of awareness and market transparency with respect to the energy performance of buildings and hence limited scope for tenants to drive efficiency outcomes; and
· the extent to which architects, designers, mechanical engineers and electrical engineers have the requisite knowledge and skills to design, build, operate and maintain high-performance buildings.

The following sets out some areas for possible policy intervention:

Regulation
Residential Buildings – Minimum Standards for New Dwellings
In conjunction with the Australian Building Codes Board, the NFEE has developed minimum energy efficiency performance standards (MEPS) for new buildings. Minimum five (5) star performance standards for new residential buildings and minimum energy efficiency performance standards for commercial buildings have been included in the Building Code of Australia. These have been adopted by most jurisdictions, with one jurisdiction using an alternative approach of overall energy use
benchmarking met through the use of an integrated rating tool.

The NFEE has undertaken scoping studies on the mandatory disclosure of energy performance of residential buildings and is committed to introducing mandatory disclosure of energy performance at the
time of sale or lease of residential buildings. The ACT’s House Energy Rating Scheme (ACTHERS) is currently the only scheme in Australia requiring mandatory disclosure of energy ratings for residential
buildings.

A number of jurisdictions have established additional requirements for fixed appliances installed into new homes, such as water heaters and lighting.

Stakeholder views are sought on whether the National Strategy could increase energy efficiency requirements for new residential buildings to six-stars nationally by 2010 and then consider indicating an intention to progress to higher levels of stringency over a longer period (allowing industry time to adjust).

An enhanced residential building star rating system could be complemented by specific minimum requirements for individual components of a new house that are substantially permanent such as lighting while allowing flexibility for features that will be replaced several times during the life of the building such as heating and cooling, water heating and cooking.

Stakeholder views are also sought on whether the National Strategy could alternatively set overall energy targets for new residential buildings nationally by 2010 with a schedule of increased stringency
over a longer period. For example, all new residential buildings could be required to achieve a 40% energy reduction target when compared to current average performance, increasing over time.

Householders would be encouraged to innovate to achieve energy reduction targets rather than meet fixed standards for each appliance in the home.

In addition to energy efficiency requirements for buildings and fixed appliances, stakeholders are encouraged to consider whether energy efficiency requirements could also be established for building
lot layouts, in order to facilitate greater use of passive solar design, though improved orientation, to deliver low-cost energy efficiency gains.

Commercial Buildings – Minimum Standards
In conjunction with the Australian Building Codes Board the NFEE has developed minimum energy efficiency standards for new buildings and these have now been included in the Building Code of Australia and adopted by most jurisdictions. The Regulatory Impact Statement undertaken for these standards indicates a benefit to cost ratio of up to 4.9:1 from raising the standards, suggesting that there is significant scope for raising minimum standards without imposing undue cost penalties.

Through the NFEE, minimum energy performance standards have been developed for a range of equipment used in commercial buildings. Further expansion of MEPS for equipment and appliances is planned through the NFEE (refer Section 7 of this Paper).

The NFEE is developing a national regime for the mandatory disclosure of commercial building energy efficiency at the point of sale and lease. A regulatory impact statement (RIS) for commercial office buildings is currently out for consultation.

An immediate opportunity to improve energy efficiency in the commercial buildings sector would be to raise the minimum standard for new buildings. The National Strategy could significantly increase
energy efficiency requirements for all classes of commercial buildings in the Building Code of Australia from 2010, including new efficiency requirements for heating, ventilation and air conditioning systems
and for lighting. This example is provided to demonstrate the sort of policy considerations which will need to be considered in the development of the National Strategy.

The following sets out some of the other specific issues that have been identified for further consideration:

· The overall objective would be to set a minimum standard of 4.5 stars for new commercial buildings from 2010.
· Under the present NABERS Energy, rating applies only to commercial office buildings and hotels. Consideration could be given to setting standards for other forms of commercial buildings.
· How to address the technical, commercial and regulatory challenges that may prevent the significant ramp-up of co-generation and tri-generation facilities as key measures for improving building energy efficiency?

Rating Tools

Residential Buildings

The Commonwealth Government, on behalf of all jurisdictions, oversaw the development of AccuRate (a computer program that can determine the thermal performance of residential buildings), the second generation version of the National House Energy Rating Scheme (NatHERS). A national training framework and registration process for AccuRate assessors has been established and launched.

The NSW Government has developed the NABERS Home Rating System to rate the operational performance of households and BASIX to assess the energy efficiency of the building shell and fixed appliances such as water heaters, heating and cooling systems, lighting and cooking. These tools also incorporate contributions from on-site renewables in reducing energy use.

Clearly the National Strategy offers the most important opportunity to date to agree a national approach to ratings tools. There is then a separate consideration which needs to be given to establishing a national minimum standard for building regulations which could deliver a more predictable and lower cost outcome for industry. However, it needs to be recognised that achieving that standard could cause more difficulty for some jurisdictions than others, particularly those in tropical and sub-tropical areas.

Finally, there are the issues of whether a national standard for building regulations should prescribe a maximum level of performance as well as a minimum standard and whether they should be the same.

Industry has expressed concerns about Local Governments’ capacity to impose standards over and above State/Territory/Commonwealth standards. BASIX sets a maximum and has generally been supported by industry.

Commercial Buildings

Two rating systems, NABERS Energy and GreenStar, are most widely used in Australia. NABERS Energy deals specifically with energy use, based on building operation. GreenStar deals with energy as one of nine categories that contribute to an overall ‘green’ rating. It is a ‘predictive’ tool, based on
building design, The two scales are not currently comparable due to the different scope and methodology of the rating schemes. Both NABERS Energy and Green Star distinguish between the performance of buildings and tenancies for office buildings. NABERS uses a 5 star rating scale reflecting the measured performance of the building in comparison to the market while GreenStar uses 6 stars, based on the number of “credit points” met by the design elements of the building. .Both schemes are based on best practice benchmarks, which may be revised as practices improve.

Measuring and rating the energy efficiency performance of commercial buildings underpins the implementation and evaluation of many potential policy responses. The National Strategy could advance national agreement on the application of energy efficiency ratings tools for commercial
buildings.

Incentives

Residential Buildings

Many jurisdictions offer a range of incentives to encourage improved energy efficiency in existing dwellings. These include:

· free household sustainability assessments and green loan subsidies through the Commonwealth Government’s green loan scheme (currently under development);
· free household sustainability assessments available in several jurisdictions; and
· rebates and other forms of financial support for energy efficient appliances and fittings, such as solar water heaters and insulation available in several jurisdictions.

In some jurisdictions, these incentives are supported by obligations on energy retailers to deliver quantified outcomes, focussing particularly on low-income households.

All jurisdictions have agreed to review their initiatives in this area to assess their complementarity with the CPRS. For these purposes, complementarity is defined as whether they address certain market failures. Once again, the underlying principle is that governments will refrain from implementing initiatives with outcomes that the CPRS would be expected to better deliver. A copy of the complementarity principles agreed by COAG is included at Attachment 1.

Even where there is a market failure and a case for action identified, by definition the cost of the action would need to represent a cost of abatement below that of the carbon price for it to be cost-effective.

Decentralised Energy

Looking beyond the immediate term there is a significant potential for decentralised energy to play a much greater role in providing the energy needs of all forms of the built environment. Australians are
familiar with decentralised energy because of the proliferation of solar water heaters, particularly in rural areas.

The new agenda is around the deployment of new photovoltaic technologies, micro-wind turbines and co-generation and tri-generation facilities. The last of these presents significant challenges for policy
makers, particularly where those power generators are supplying more than one building.

There are isolated examples of public authorities addressing these challenges, e.g. City of Melbourne.

The National Strategy could be a major contributor to accelerating development of decentralised energy generation by taking a national approach to removing or mitigating regulatory barriers as well as
sponsoring the development of technical standards and providing templates for commercial agreements for shared use of facilities.

New and innovative technologies and processes that could support the achievement of zerocarbon/ zero net energy commercial and residential buildings are continually in development, both in Australia and overseas. Low-emission distributed energy systems, such as cogeneration or combined heat and power systems are considered one component to achieving energy efficiency outcomes.

Stakeholder feedback is requested on ways to overcome the range of financial, technical and regulatory barriers that currently limit their broader uptake.

Government Procurement

Commercial Buildings

‘Green leases’ are being progressed through the NFEE. The rationale for this policy is that Commonwealth, State and Territory governments are major lessees accounting for approximately 35 percent of total commercial office space, and have the potential to use this market power to generate
improvements in energy efficiency (by agreeing to only lease office buildings that exceed a specified energy performance level). Currently, several jurisdictions have policies or guidelines for leasing only 4.5 or 5 star (NABERS Energy) buildings.

Australian, State and Territory governments are owners of a range of commercial buildings, such as healthcare, education and correctional facilities, and have the potential to demonstrate leadership by significantly improving the performance of such buildings. This can also stimulate further development of the energy services industry, and embed the use of energy performance contracts as a means of facilitating low-risk energy efficiency improvements in commercial buildings.

Stakeholder views are sought on government procurement policies in this area and how these policies might better support cost effective investment in energy efficiency.

Behaviour Change

Residential Buildings

Several jurisdictions have programs in place to provide home sustainability assessments and associated incentives. Stakeholder views are sought on the effectiveness of these programs.

Consideration could also be given to the merits of coordinating these into a coherent national system of assessments, possibly with a focus on low income households.

Such a program could encompass recommendations for specific behaviour change, home, appliance and equipment upgrades and referral to sources of assistance. It could also provide support for lowcost energy efficiency measures such as high efficiency showerheads and lighting. Further, a National Strategy could support innovative financing arrangements for higher-cost energy efficiency improvements in households. Building on existing schemes, this could be through low interest loans available through partnering financial institutions.

ISSUES

Stakeholders’ views are sought on:

6.1 The measures proposed to improve the energy efficiency of buildings?
6.2 Any other measures that could be included in the National Strategy.
6.3 What opportunities exist to develop an integrated national residential rating tool to assess the energy efficiency of the building shell as well as fixed appliances such as water heaters, heating and cooling systems, lighting and cooking?
6.4 Should the National Strategy include a commitment from all governments to improve the performance of the buildings they own or occupy?
6.5 How to establish energy efficiency requirements for building lot layouts in order to facilitate greater use of passive solar design;
6.6 What minimum standards for new commercial buildings and major refurbishments should be set in the BCA?
6.7 Should energy efficiency requirements for new residential buildings be raised to six-stars nationally by 2010 and then progress to higher levels of stringency over a longer period (allowing industry time to adjust)?
6.8 What are the merits of coordinating multiple sustainability assessments and associated incentive schemes into a coherent national scheme?
6.9 What opportunities are there to improve the range, targeting and delivery of government incentive measures, and
6.10 How to overcome the financial, technical and regulatory barriers to systems such as cogeneration or combined heat and power systems in commercial buildings.

7 MEASURES TO IMPROVE THE ENERGY EFFICIENCY OF APPLIANCES AND EQUIPMENT

The principal regulatory means to improve end-use product energy in Australia is currently through the Ministerial Council on Energy’s Equipment Energy Efficiency (E3) program. The E3 program seeks to
improve energy efficiency by establishing minimum energy performance standards (MEPS) and rewards best practice through product energy labelling.

MEPS levels are generally set at the equivalent of world-best levels, with implementation dates set so as to allow sufficient time for industry to adapt. The MEPS and energy labelling program has been successful in achieving significant improvements in the energy efficiency of electrical appliances and equipment. There are some views that the rate of progress could be more aggressive, for example regarding increased minimum energy performance standards for air-conditioners.

One advantage of Australia’s MEPS system is that new product groups are regulated, or regulatory requirements are strengthened for product groups which are already covered, following a national Regulatory Impact Statement (RIS) process and MCE sign-off in accordance with the requirements of the COAG “Principles and Guidelines for National Standard Setting and Regulatory Action by Ministerial
Councils and Standard-Setting Bodies. An appliance or equipment model only needs to be registered for MEPS and/or labelling in one Australian or New Zealand jurisdiction to be legally able to be sold throughout Australia and New Zealand. As a result, there are no significant additional compliance costs for businesses operating in more than one jurisdiction.
Existing Measures – Appliances and Equipment Regulation / strategic planning A number of specific measures have already been undertaken through the National Framework for energy efficiency (NFEE) process. Thirteen products currently have regulated MEPS and/or labelling
requirements, with a range of additional products scheduled by 2012 (refer Attachments 2 and 3).

The NFEE process has also developed a number of long term strategic plans:
· Greenlight Australia – A Strategy for Improving the Efficiency of Lighting in Australia 2005- 2015;
· Switch on Gas – Australia’s Strategy to Improve the Energy Efficiency of Gas Appliances and Equipment;
· Money isn’t All You’re Saving – Australia’s Standby power Strategy 2002-2012; and
· HVAC High Energy Efficiency Strategy. National legislation

On 2 October 2008, COAG agreed to develop, subject to a regulatory impact statement, national legislation for appliance energy performance standards and labelling to simplify enforcement and ensure consistency. COAG has directed officials to develop this option for consideration as part of the National Strategy for Energy Efficiency.

An important part of this work will be an examination of opportunities for process reform. Innovation in energy efficiency in appliances is accelerating nationally and internationally. Australia needs to be in a
position to respond with a regulatory environment that removes obstacles to the rapid take-up of innovation and imposes new standards where this is justified economically.

This needs to be progressed on timeframes reasonably capable of being met by domestic manufacturers and distributors and which see Australia taking a leading position among developed countries.

This has to be achieved within a federated state where the legitimate interests of all jurisdictions are recognised.

The national legislation agreed to by COAG can be expected to provide the overall government arrangements. An important issue will be how it operates in practice, particularly in respect of resolving the sometime competing demands of transparency, information dissemination, business certainty and expeditious turn around times.

Views of stakeholders on these issues are welcome.

Possible Additional Measures – Appliances and Equipment

Specific measures that could be included in the National Strategy are:

Regulation

The National Strategy could accelerate the introduction of new MEPS and labelling to cover a wider range of appliances and equipment and to streamline regulatory processes. In addition, the introduction date for MEPS could be brought forward. For example, the E3 Committee is undertaking a Regulatory Impact Assessment on bringing forward the next set of MEPS for air conditioners to October 2009, and introducing more stringent MEPS for air conditioning in 2012.

The current MEPS and labelling arrangements only apply to energy consuming equipment, and more specifically only electricity and gas consuming equipment. The National Strategy could expand coverage of the current scheme to include:

· Equipment that consumes other fuel types, e.g. wood, fuel oils.
· Products and equipment that do not consume energy in their operation, but impact on the amount of energy used by other equipment. Products such as air conditioning ductwork, ceiling and wall insulation, windows (including glazing and frames) and the way they are installed can all have a large influence on energy use of equipment such as air conditioners
and gas heaters.
· Industrial equipment. The E3 is currently preparing a 10 year strategy to increase the range of products covered by MEPS in the industrial equipment sector. Items that could be covered include compressors, boilers, industrial chillers, heat exchangers and refrigeration equipment.
Stakeholders are invited to comment on products which could be assessed for MEPS or labelling by E3 but which have not yet been raised and on what should be considered in determining whether a ‘base case’ can be made for introduction of MEPS. Stakeholders are also invited to consider what actions can be taken to streamline the development and introduction of new MEPS.

Information

The current product labelling scheme is an important information provision tool to assist consumers to choose more efficient energy consuming products. However, labelling is only required for a relatively
small number of consumer product types. As has recently emerged with televisions, there is scope to provide voluntary information provision tools before a mandatory regime is introduced. A voluntary registration scheme could be established which would allow for suppliers of products not covered by mandatory labelling to provide information on the energy performance of their products. This would allow suppliers of efficient products to differentiate their product from less efficient models. Web based tools could be used to assist consumers access this information.
Government procurement Government procurement policies and standards could be reviewed to specify minimum energy efficiency requirements for items such as office equipment refrigerators and single phase air conditioners.

ISSUES

Stakeholders’ views are sought on:

7.1 The measures proposed to improve the energy efficiency of equipment and appliances.
7.2 Any other measures that could be included in the National Strategy.
7.3 What actions can be taken to streamline the development and introduction of new MEPS?
7.4 What products could be assessed for MEPS or labelling by E3 but which have not yet been raised?
7.5 What parameters could be established to determine the “base case” for new MEPS?

8 MEASURES TO IMPROVE THE ENERGY EFFICIENCY OF INDUSTRY

According to International Energy Association (IEA) data, Australian industry is more energy intensive compared to the majority of other developed countries. This is largely due to the high levels of energy
intensive raw material production. Engaging with the industrial sector offers potentially large benefits given the significance of emissions from this source. It is noted that, even under a strong carbon price signal from the CPRS, a range of factors may combine to cause the industrial sector to under-invest in energy efficiency. These include:
· a lack of relevant information relating to the diverse situations of industrial energy users, such as the effective life of energy efficiency investment, especially where technological change is rapid (information failure);
· the opportunity costs of capital and managerial focus in the business, leading to available capital budgets being devoted to capital and labour productivity improvements rather than energy cost savings (even if these offer high rates of return) (capital rationing);
· potentially limited consideration of wider, systemic changes in processes within individual businesses, and a tendency to confine innovations to marginal changes (outside of major plant reinvestment); and
· a lack of appropriate skills in industrial design and process engineering within industrial firms and the supporting energy services sector (information failure).

Existing Measures - Industry

Regulation

Approximately 210 corporations are registered for the Energy Efficiency Opportunities (EEO) program.

These companies are required to identify, evaluate and report publicly on cost effective energy savings opportunities. Participation in the program is mandatory for corporations that use more than 0.5 petajoules (PJ) of energy per year. In addition, New South Wales, Victoria and Queensland have implemented energy efficiency programs that mandate the implementation of identified energy efficiency opportunities under a certain threshold of pay back periods or are otherwise defined as cost-effective.

Other jurisdictions are investigating similar programs.

Minimum Energy Performance Standards (MEPS) have been developed for 3 phase electric motors and distribution transformers.

The Australian Government has recently established the five year $2.15 billion Climate Change Action Fund (CCAF) to provide targeted assistance to business, community sector organisations, workers, regions and communities to smooth the transition to a low carbon economy. Under the CCAF, a small business capital allowance sub-program will provide small business with assistance to invest in energy efficiency equipment. Investments will need to meet established energy saving criteria. Eligible
applicants will be partially reimbursed for the capital and installation costs of energy efficient equipment.

Information

An Energy Efficiency Exchange (EEX) website was designed and constructed to disseminate best practice information and to increase the availability of best practice information and expertise. The National Framework on Energy Efficiency (NFEE) also developed guidelines to assist in designing and implementing energy efficiency demonstration programs.

Incentives

Several states manage programs that provide support and incentives for the uptake of energy efficiency in small businesses.

Possible Additional Measures – Industry

Measures that could be included in the National Strategy:
· Extend the capacity and knowledge-building aspects of the EEO program to companies that use between 0.1 and 0.5 PJ per annum;
· Provide competitive grants to assist companies that are representative of specific industrial sectors with the identification and evaluation of energy efficiency opportunities using the EEO methodology.
The intention would be to make information from investigating energy efficiency opportunities widely available through dissemination of case studies across similar businesses;
· Provide support to implement energy savings projects with long pay back periods for companies having to buy permits under the CPRS that are not eligible for other support from the CPRS;
· Develop a package of information-based measures that assists the industrial sector to adjust to the Carbon Pollution Reduction Scheme. The package could include:
· an enhanced Energy Efficiency Exchange (EEX) website as a national portal for industrial energy efficiency information. Possible enhancements could include an energy services directory and an energy efficiency technology database;
· supporting information that provides industry with best practise case studies and (where available) business case information that address issues and barriers to the uptake of opportunities using the experiences developed by companies under the EEO and state programs;
· regular national ‘state of industry’ energy efficiency reporting for industry
(benchmarking) and government that draws on the findings of the NFEE energy efficiency data project;
· a guide to facilitate cogeneration partnerships between businesses;
· Undertake a coordinated review of industrial energy efficiency research and development and innovation opportunities in consultation with the State and Territory Governments; and
· Activities to address skill shortages in energy auditing and advisory services including reviewing the Australian Standard for Energy Audits (AS/NZ 3598:2000)

ISSUES

Stakeholders’ views are sought on:

8.1 The measures proposed to improve the energy efficiency of industry.
8.2 Any other measures that could be included in the National Strategy.
8.3 What timeframes would be required to implement these measures?

9 SKILLS DEVELOPMENT: TRAINING AND ACCREDITATION

The current shortage of skills and expertise in energy efficiency in (and available to) the commercial and industrial sectors has a significant impact on the potential for these sectors to respond appropriately to policy signals. Demand from industry for these services will continue to increase in the
lead up to, and after the commencement of the Carbon Pollution Reduction Scheme.

Similarly, improving the energy efficiency in new and existing homes will require industry trades and professions with the necessary skills, knowledge and tools.

Existing Measures – Skills and training

There has been work undertaken in many individual jurisdictions to address the green skills shortage.

Further existing cross-jurisdictional programs, such as the EEO have already sparked increased levels of demand for these skills. Through the NFEE Trades and Professional Training and Accreditation Project there has been progress on incorporating energy efficiency training into a number of trade and professional courses to improve the skills of practitioners to deliver energy efficient outcomes.

NFEE is also undertaking ongoing research to identify:
· current availability of energy efficiency training;
· demand for energy efficiency accreditation from professional energy service providers and consumers; and
· gaps in skills development, training and accreditation.

NFEE has also developed modules for electricians and HVAC professionals as well as a long term training strategy to develop industrial energy efficiency skills.

Possible Additional Measures – Skills and training

Residential Buildings

The National Strategy could accelerate a nationally coordinated education and training program across the trades and professions involved in residential building design, construction and renovation.

Commercial Buildings and Industry skills

The National Strategy could address skills shortages by supporting a comprehensive strategy to increase the commercial building industry’s capacity to deliver more energy efficient buildings. This measure would deliver specific and comprehensive energy efficiency training to all applicable commercial building professions and trades. Activities to address skills shortages in energy auditing and advisory services, including reviewing the Australian Standard for Energy Audits (AS/NZ
3598:2000) could also be included.

ISSUES

Stakeholders’ views are sought on:
9.1 What measures could be included in the National Strategy to improve energy efficiency skills and training?
9.2 What timeframes would be required to implement these measures?

Attachment 1

COAG AGREED PRINCIPLES ON COMPLEMENTARITY

Complementarity Principles

1. The measures are targeted at a market failure that is not expected to be adequately addressed by the Carbon Pollution Reduction Scheme or that impinges on its effectiveness in driving emissions reductions. For example, research and development failures, common use infrastructure issues,
information failures and excess market power.

Complementary measures should adhere to the principles of efficiency, effectiveness, equity and administrative simplicity and be kept under review. They may include:

a) measures targeted at a market failure in a sector that is not covered by the Carbon Pollution Reduction Scheme.
b) measures for where the price signals provided by the Carbon Pollution Reduction Scheme are insufficient to overcome other market failures that prevent the take-up of otherwise cost-effective abatement measures.
c) measures targeted at sectors of the economy where price signals may not be as significant a driver of decision making (e.g. land use and planning).
d) some measures in (a) or (b) may only need to be transitional depending on expected changes in coverage or movements in the carbon price.

2. Complementary measures should be tightly targeted to the market failure identified in the above criteria that are amenable to government intervention. Where the measures are regulatory they should meet best-practice regulatory principles, including that the benefits of any government intervention should outweigh the costs.

3. Complementary measures may also be targeted to manage the impacts of the Carbon Pollution Reduction Scheme on particular sectors of the economy (for example to address equity or regional development concerns). Where this is the case, in line with regulatory best-practice, the nonabatement objective should be clearly identified and it should be established that the measure is the best method of attaining the objective.

4. Where measures meet the above criteria, they should generally be implemented by the level of government that is best able to deliver the measure. In determining this, consideration should be given to which level of government has responsibility as defined by the Constitution or convention/practice, the regulatory and compliance costs that will be imposed on the community, and how the delivery of the measure is best coordinated or managed across jurisdictions.

Attachment 2

Products currently regulated for MEPS and labelling Source: E3 Committee, September 2008, Achievements 2007/08 – Report 2008/03

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Attachment 3

List of products proposed for MEPS and/or labelling by 2012

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Source: E3 Committee, September 2008, Achievements 2007/08 – Report 2008/03