Ms Susan Page COAG Taskfrce Secretariat Deregulatin Grup Department f Finance and Deregulatin Jhn Grtn Building, King Edward Terrace PARKS ACT 2600 Email: COAGTaskfrce@finance.gv.au 11 January 2013 Dear Ms Page The Energy Efficiency Cuncil (EEC) welcmes the pprtunity t prvide further input t the Cuncil f Australian Gvernments (COAG) Taskfrce n regulatry and cmpetitin refrm (the Taskfrce). The EEC has analysed the range f energy efficiency prgrams in Australia and cnsulted with members t develp a number f key recmmendatins. The Taskfrce has prpsed prcesses t accelerate: - Refrms t intercnnected energy markets, t imprve cmpetitin and efficiency f electricity netwrks; and - Refrms t ratinalise carbn reductin and energy efficiency plicies that are nt cmplementary t a carbn price; r are ineffective, inefficient r impse duplicative reprting requirements n business. The Taskfrce prpsed that the aim fr this refrm prgram wuld be lwering csts fr business and imprving natinal cmpetitin and prductivity. 1 The EEC strngly supprts this aim. T deliver utcmes that substantially meet this aim, COAG needs t fcus n: - Reducing energy csts fr businesses and husehlds The majrity f electricity price rises in recent years have been caused by netwrk expenditure. In the cming years, rising cal and gas prices are prjected t be majr drivers. Better netwrk regulatin, demand management, distributed generatin and enduse energy efficiency wuld reduce peak demand and imprve energy prductivity, substantially reducing energy bills relative t business-as-usual. In December COAG made majr cmmitments regarding netwrk regulatin and peak demand. Additinal plicies are required t build n these cmmitments and realise the full ptential fr reduced energy csts, particularly in regards t energy efficiency, distributed generatin and netwrks. - Eliminating duplicatin and ineffective prgrams Australia must have effective energy efficiency prgrams t reduce energy csts fr businesses and husehlds. Critical energy efficiency prgrams like the Energy Efficiency Opprtunities (EEO) prgram and the prpsed Energy Savings Initiative (ESI) help husehlds and businesses respnd t rising energy prices, and d nt duplicate the carbn price. Hwever, there are genuine pprtunities t eliminate duplicatin between state and federal prgrams and terminate ineffective state-based prgrams. The EEC makes recmmendatins t strengthen energy efficiency prgrams, reduce duplicatin and eliminate ineffective prgrams n pages 5-7 f this submissin. - Reducing red tape While sme grups use the term 'red tape' t criticise effective plicies that deliver cmmunity benefits, 'red tape' is prperly defined as unnecessary administrative prcesses r regulatins that deliver limited benefit. Remving effective prgrams t reduce cmpliance csts is cunter-prductive. Hwever, the EEC has identified pprtunities t reduce genuine red-tape by reducing duplicatin and simultaneusly strengthening and reducing the reprting burden f key prgrams. 1 Taskfrce Paper 2012 29 June 2012 Taskfrce Cnsultatin - Summary f Refrm Prpsals 1 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
Genuine utcmes in these three areas wuld deliver substantial benefits fr businesses. The Taskfrce shuld avid taking actins that may appease certain stakehlders, but wuld actually result in lnger-term increases in energy bills. Remving ineffective prgrams delivers benefits fr the cmmunity, but remving effective energy efficiency prgrams wuld reduce the ability f businesses t respnd t rising energy prices, exacerbating the rise in peak electricity demand. Furthermre, eliminating critical plicies wuld increase uncertainty in sectrs f the ecnmy that have already been strained by legislative risk. The review f plicies that are cmplementary t a carbn price needs t recgnise that: - While sme energy efficiency prgrams may deliver reductins in greenhuse gas emissins, this is incidental t the main gal f these prgrams. Fr example, the main gals f mst energy efficiency prgrams are t help husehlds and businesses adjust t rising energy prices. Therefre, while these prgrams are clearly cmplementary t a carbn price, they are better framed as nt duplicating the carbn price'. - Fr investrs, whether they are energy users, energy suppliers r energy service suppliers, there is cnsiderable uncertainty regarding the lngevity f the current carbn pricing regime. Eliminating effective plicies in 2012-13 that culd be reinstated as early as 2013-14 wuld have majr cst implicatins fr gvernments and businesses. In 2012 the EEC undertk significant wrk n energy plicy, including jintly releasing a 'Plan fr Affrdable Energy' with the Australian Industry Grup, CHOICE and the Brtherhd f St Laurence. Based n bth the Plan and independent wrk, the EEC's key recmmendatins are: - COAG and the Standing Cuncil n Energy and Resurces (SCER) shuld cntinue their prgram f key energy market refrms and expand this prgram t cver critical energy efficiency plicies and barriers t distributed generatin. - COAG nte that far fewer energy efficiency prgrams currently perate in Australia than estimated by the Prductivity Cmmissin in 2011 2. The Cmmissin's list f energy efficiency plicies includes many prgrams that have either ceased t perate r are nly incidentally related t energy efficiency. - COAG nte that energy efficiency measures are critical t help husehlds and businesses respnd t rising energy prices, which is critical fr their welfare and cmpetitiveness. Many f the energy efficiency prgrams that are currently running deliver substantial benefits and shuld be retained. Hwever, there are pprtunities t enhance, streamline, merge r eliminate a number f prgrams. The EEC has made a number f detailed recmmendatins n pages 5-7 f this submissin - Strengthen the EEO prgram by adjusting reprting requirements, cmbining it with industry radmaps and resurcing it t assist smaller energy users. This wuld allw Victria t eliminate the Envirnment and Resurce Efficiency Plan prgram, and supprt NSW businesses as the Energy Savings Actin Plans prgram is wund dwn. - Establish a Natinal Energy Savings Initiative (ESI) t replace three existing energy efficiency schemes (the NSW Energy Saving Scheme (ESS), Victrian Energy Efficiency Target (VEET) and Suth Australian Residential Energy Efficiency Scheme) and the prpsed ACT scheme. In the meantime, the VEET prgram shuld be substantially redesigned t perate like the NSW ESS, s that the schemes are harmnised, and bth schemes shuld cver gas and electricity s that they can supprt cgeneratin. - Enhance and merge prgrams t imprve the energy efficiency f gvernment peratins Each gvernment requires an effective prgram t reduce agencies' expenditure n energy, like the well-regarded Victrian Greener Gvernment Buildings Prgram (GGBP). Within each jurisdictin there are a number f gvernment energy efficiency prgrams that shuld be either: Strengthened r merged int a small number f prgrams (e.g. the Victrian 'energy efficiency in schls' prgram shuld merge with the mre effective GGBP) Incrprated int nrmal business prcedures. Fr example, installing LED traffic lights shuld be classified as part f standard cst-saving prcedures fr rad agencies, rather than classified as a separate energy efficiency prgram. 2 Prductivity Cmmissin 2011, Carbn Emissin Plicies in Key Ecnmies, Research Reprt, Canberra. 2 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
The Energy Efficiency Cuncil lks frward t wrking with the Taskfrce t ensure that it delivers utcmes that genuinely benefit the cmmunity. Please cntact me n 03 8327 8422 shuld yu wish t discuss any f the issues raised in this submissin. Yurs sincerely Rb Murray-Leach Chief Executive Officer 3 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
Cntents 1. Key Recmmendatins... 5 2. Reducing energy csts fr husehlds and businesses... 8 2.1 A Plan fr Affrdable Energy and COAG's energy refrms... 8 2.2 Imprving husehld and business energy prductivity... 9 4 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
1. Key Recmmendatins The Energy Efficiency Cuncil recmmends: 1. Cntinuing a prgram f Energy Market Refrm COAG and the Standing Cuncil n Energy and Resurces (SCER) shuld cntinue their prgram f critical energy market refrms and build n this prgram t achieve its full ptential by: - Cmplementing energy refrms with key energy efficiency prgrams - Tackling the barriers t distributed generatin (see the attached submissin t the Victrian Cmpetitin and Efficiency Cmmissin) - Develping targets fr distributin netwrk service prviders t use demand-side activities t reduce expenditure n netwrk expansin 2. COAG nte inaccuracies in lists f current energy efficiency plicies COAG shuld nte that far fewer energy efficiency prgrams currently in peratin in Australia than suggested by the Prductivity Cmmissin in 2011 3. The Cmmissin's list f climate change prgrams in Australia: - Includes many energy efficiency prgrams that have either cmpletely ceased t perate r are being phased ut - Includes prgrams that are incidentally related t energy efficiency (e.g. investment in public transprt infrastructure) - Repeats several prgrams multiple times. 3. Strengthening the EEO prgram and eliminate similar state-based prgrams Gvernments shuld wrk tgether t help businesses t build their capacity t manage energy while reducing red-tape. This shuld invlve: Expanding resurcing fr the Australian Gvernment's highly effective Energy Efficiency Opprtunities (EEO) prgram t supprt smaller energy users. Over the last five years the EEO has helped ver 200 large energy users using mre than 0.5 PJ f energy t imprve their prductivity and find ver $1.2 billin f annual energy savings. The prgram shuld be resurced s that it can be expanded and prvide supprt fr cmpanies that use ver 0.1 PJ f energy per annum. These cmpanies typically pay ver $1 millin fr energy each year, and the benefits f their participatin wuld significantly exceed csts. If the EEO prgram is resurced extended t smaller energy users, it wuld allw the Victrian Gvernment t eliminate the Envirnment and Resurce Efficiency Plan prgram and enhance supprt fr NSW businesses as the Energy Savings Actin Plans prgram is wund dwn. Reducing the effrt required fr EEO reprting by allwing thse cmpanies that can demnstrate gd energy management practices and utcmes t shift frm administratively-intensive reprting f prcesses t simpler reprting f utcmes. This wuld reduce reprting burdens and enhance the incentive fr cmpanies t imprve their energy management. This apprach wuld need t be trialled befre it is rlled ut. The Natinal Greenhuse and Energy Reprting Scheme (NGERS) shuld be resurced and enhanced s that it cllects the infrmatin required fr EEO and ther prgrams. This wuld mean that industry has a single, cmprehensive prtal fr entering energy and emissins data, rather than multiple prtals. 3 Prductivity Cmmissin 2011, Carbn Emissin Plicies in Key Ecnmies, Research Reprt, Canberra. 5 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
4. Develp a natinal energy efficiency scheme and replace state schemes The Australian Gvernment is cnsidering a Energy Savings Initiative (ESI) t help husehlds and businesses adjust t rising energy prices. The Federal Liberal Party and Australian Greens have previusly supprted investigating a natinal ESI. An ESI is entirely separate t a carbn price. An ESI wuld: - Prvide a psitive price signal fr demand-side activities t crrect distrtins in energy csts that are practically difficult t refrm, such as crss-subsidisatin fr installing and using air cnditiners. - Enable third-parties t help cnsumers undertake crdinated demand-side activities at scale. This wuld address the structural imbalance in the energy market which encurages supply-side activities at scale but impedes delivery f demand-side activities at scale. - Create an incentive fr third-parties t find ways t vercme well-knwn market failures that prevent the take up f privately cst-effective energy efficiency, including infrmatin barriers, bunded ratinality and split-incentives. - Enable market-transfrmatin in the supply f energy efficiency gds and services, such as high-efficiency mtrs. The ESI wuld imprve regulatry efficiency and reduce red-tape by replacing three existing state-based schemes, the NSW Energy Saving Scheme (ESS), the Victrian Energy Efficiency Target (VEET) and the Suth Australian Residential Energy Efficiency Scheme. The ESI wuld als replace the scheme currently being develped by the Australian Capital Territry Gvernment. A single natinal ESI is likely t be far mre effective than each state scheme, as ecnmies f scale allw sufficient resurces t be invested t develp and run a highly effective scheme. While the ESI is being cnsidered, the VEET prgram shuld be substantially redesigned t perate like the NSW ESS, which wuld bth imprve the perfrmance f the VEET and enable cmpanies t perate mre effectively acrss brders. Bth the ESS and VEET shuld cver natural gas, t allw highly effective cgeneratin prjects t be supprted by these prgram. 5. Enhance and cnslidate prgrams that imprve gvernment efficiency Imprving the energy efficiency f gvernment peratins delivers substantial financial savings. The Victrian Gvernment's well-regarded 'Greener Gvernment Buildings Prgram' (GGBP) fcuses n delivering financial savings, and will save the Victrian Gvernment between $1 billin and $2 billin ver 20 years. Other gvernments shuld redesign and upgrade their energy efficiency prgram prgrams that that they perate similarly t the Victrian GGBP. While each gvernment needs t have its wn prgram, within each jurisdictin a number f gvernment energy efficiency prgrams shuld be either: a. Strengthened r merged int a small number f prgrams. Fr example, the Victrian 'energy efficiency in schls' prgram shuld be merged int the GGBP. b. Incrprated as part f nrmal business practices. Fr example, installing LED traffic lights, shuld just becme part f standard cst-saving prcedures fr rad agencies, rather than an 'energy efficiency' measure. 6 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
6. Retain and strengthen key energy efficiency plicies Gvernments shuld retain and strengthen key prgrams that help husehlds and businesses reduce their energy bills. These include: a. Infrmatin and training prgrams, such as: - The NABERS and Cmmercial Building Disclsure (CBD) prgrams that help tenants and building wners determine the actual efficiency f buildings and identify ptins t imprve their efficiency - The EEO prgram, which helps businesses t develp energy management prcedures and skills (see Recmmendatin 3) - The Australian Gvernment's Energy Efficiency Infrmatin Grants - Prgrams that help develp the energy efficiency sectr, such as radmaps, training and accreditatin b. Natinal grant prgrams that help transfrm sectrs' appraches t energy, such as the Clean Technlgy Investment Prgram (CTIP) and Cmmunity Energy Efficiency Prgram (CEEP). c. Marketing, facilitatin and standard tls that assist business t take up prfitable energy efficiency ptins. State-based business-supprt prgrams shuld generally be shifted away frm grant prgrams t well-funded facilitatin prgrams (see Recmmendatin 7) d. Finance prgrams that address specific barriers t funding energy efficiency, such as the Clean Energy Finance Crpratin and Envirnmental Upgrade Agreements (EUAs). The CEFC shuld ffer funding t energy users thrugh energy efficiency service prviders, in rder t imprve efficiency and reduce the cst f finance fr energy users. e. Cnsumer prtectin thrugh develpment and applicatin f standards and labels fr appliances and standards fr buildings, including effective evaluatin f adptin and, where they are mandatry, effective enfrcement. f. Energy market refrms, r prgrams like the Energy Savings Initiative that crrect distrtins in energy markets. 7. Shift the fcus f state-based business-supprt prgrams State-based business-supprt prgrams shuld be shifted frm grant prgrams t industryled, well-funded facilitatin prgrams. State-based prgrams tend t invlve mdest levels f funding, which are t small t deliver substantial benefits as grant prgrams. Given the mdest quantum f funding, these prgrams will achieve substantially greater utcmes if they fcus n facilitatin. Examples include: a. In NSW the Energy Saver and Energy Efficiency fr Small Business prgrams have delivered sme gd results, but have als funded sme pr-quality audits that weren't implemented. The NSW Gvernment shuld use the learnings frm the effective cmpnents f these prgrams and wrk clsely with the Energy Efficiency Cuncil t develp a mre targeted business facilitatin and supprt prgram that invlves extensive private-sectr delivery. b. In Victria the Resurce Efficiency Business Prgram shuld fcus n facilitatin, by helping energy users t scpe ut their gals, linking them t energy service prviders and helping them develp and manage cntracts fr energy services. 7 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
2. Reducing energy csts fr husehlds and businesses 2.1 A Plan fr Affrdable Energy and COAG's energy refrms In late 2012 the EEC, Australian Industry Grup, CHOICE and the Brtherhd St Laurence jintly cmmissined independent analysis by Oakley Greenwd n the factrs driving up electricity prices, and ptins t place dwnward pressure n electricity prices. This reprt can be fund at: http://www.eec.rg.au/nde/234 The reprt fund that the cst f building new netwrk infrastructure was respnsible fr arund 50 per cent f electricity price rises ver the last five years, and netwrk csts nw accunt fr arund 40 per cent f husehld electricity bills. One way t help netwrks becme mre efficient is t reduce critical peak demand (super peak), which ccurs n just a few days a year, nrmally during very ht r cld days. Arund 25 per cent f electricity bills are driven by these 'super peaks', because infrastructure has been build t meet peak demand and generatin is mre expensive during peaks. Over the next decade, bth netwrk csts and rising gas and cal prices are likely t drive up electricity prices. This means that it is essential t help energy users becme mre energy efficient and manage their peak demand t get mre ut f each dllar that they spend n electricity. In Octber 2012 the EEC, Australian Industry Grup, CHOICE and the Brtherhd St Laurence released a 'Plan fr Affrdable Energy' that recmmended plicy changes t place dwnward pressure n rising energy bills. The full plan is attached. In summary, the Plan recmmended: 1. Adpting the Australian Energy Market Cmmissin (AEMC) prpsal t allw cnsumers and third-parties t sell demand respnse int the whlesale market at times f 'super peak' demand 2. A number f refrms t ensure that netwrk cmpanies are as cst-effective as pssible, including increasing the pwer f the Australian Energy Regulatr and develping a prpsal t set distributin netwrk service prviders minimum targets t use demand-side activities t reduce expenditure n infrastructure. 3. Strengthening key energy efficiency prgrams, including the Clean Technlgy Investment Prgram and Victrian Greener Gvernment Building Prgram. 4. Taking a segmented apprach t time-f-use pricing and interval meters 5. Mnitring retail csts and margins t ensure the retail sectr is cmpetitive, flexible and meets cnsumers' needs 6. A number f refrms t ensuring cnsumers are prtected, including setting up a natinal cnsumer energy advcacy bdy. In December 2012 COAG agreed t a number f refrms in line with the Plan's recmmendatins. The EEC strngly welcmes COAG's cmmitments. Further wrk will be required t implement these refrms effectively, and fully realising the ptential f COAG's cmmitments will require additinal cmmitments, including: - Develping targets fr distributin netwrk service prviders t use demand-side activities t reduce expenditure n netwrk expansin - Cmplementing energy refrms with key energy efficiency prgrams - Tackling the barriers t distributed generatin. In Nvember 2012 the Federal Parliament's tri-partisan Senate Select Cmmittee n Electricity Prices endrsed many f the EEC's recmmendatins n distributed generatin. Fr mre infrmatin see the attached EEC submissin t the Victrian Cmpetitin and Efficiency Cmmissin. 8 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291
2.2 Imprving husehld and business energy prductivity Imprvements t the NEM are vital, but sme f these changes will take sme time t implement and, n their wn, these refrms will nt address a number f price and nn-price barriers that make it hard fr husehlds and businesses t respnd t rising energy prices. Measures that help husehlds and businesses vercme these barriers will cmplement peak reductin prgrams and drive significant reductins in energy bills. While these measures may als reduce greenhuse gas emissins, this is nly a side-effect f their primary aim, which is reducing barriers t ptimal energy-use patterns and enhancing scial and ecnmic utcmes. Many businesses have the pprtunity t reduce their energy use by well ver 30 percent, including very lw cst pprtunities t reduce their use by 5 t 15 per cent. Australia is ne f the least energy efficient develped cuntries, and this puts ur ecnmy at a cmpetitive disadvantage. Between 1973 and 1998 Australia s energy efficiency increased by just 0.7 per cent a year, cmpared t 1.6 per cent a year in mst ther develped cuntries. The Cuncil recmmends a number f measures t imprve energy prductivity, including: - Infrmatin prgrams like the Cmmercial Building Disclsure scheme - Capacity building prgrams like the Energy Efficiency Opprtunities prgram - Minimum standards fr appliances and buildings; and - Establishing a Natinal Energy Savings Initiative (ESI), which wuld bth imprve energy prductivity and reduce red-tape by harmnising existing state scheme. The intent f the ESI is t make it easier fr husehlds and businesses t respnd t rising energy prices. The ESI is discussed mre n page eight f this submissin. The COAG Taskgrup undubtedly played a key rle in the refrms that COAG adpted in December 2012. The EEC lks frward t wrking with the COAG Taskgrup as it helps COAG t develp the suite f strengthened energy efficiency prgrams that it will need t adpt t cmplement its energy market refrms. 9 P a g e Suite 2, 490 Spencer Street, West Melburne VIC 3205 ABRN 136 469 291 ABN 63 136 469 291