This week we continue to explore the factors that impact the BAU case. These factors should be applied independently when considering their impact across energy efficiency schemes such as the VEU. We also explore the potential technologies that could take-up the short-fall in certificate creation, such as Project Based Activities (PBA), if lighting is re-considered in the 2021-2025 target setting for the VEU.

Other factors that impact the Business As Usual (BAU) case…

Have other state based energy-saving schemes adopted a BAU approach?

• NSW Scheme (ESS): have applied a small BAU discount factor to commercial lighting as part of a long-term strategy.
• SA Scheme (REES): have not factored BAU as a result of the challenges around market penetration. The REES is in the process of removing its 900GJ cap to support deeper market penetration.

VEU abatement lighting opportunities are still readily available. 

Residential lighting opportunities:

• Dimmable downlights: very low penetration to date.

Commercial lighting opportunities:

• Warehouses (medium to large businesses): highbays, floodlights and battens.
• Office spaces (very low penetration to date): fluorescent troffers, downlights, battens and floodlights. 
• Small business: shoplights, fluorescent lights and battens.
• Sports lighting: tennis, soccer, football clubs (etc).

If BAU is imposed, affecting the abatement within lighting in a negative way, what are the possible implications?

1. Certificate creation will drop: lighting currently makes up >80% of all creation. Changing the abatement could affect this delivery and significantly impact the ability to supply certificates.
2. May not meeting targets: the risks around not meeting compulsory certificate targets is significantly increased. If this happens the ‘liable parties’ (energy retailers) will seek compensation or relief.
3. Certificate prices will rise: current certificate prices reside at approximately $20.00-$22.00. If certificate prices rise this will impact energy retailers and ultimately consumers. Retailers could impose higher electrical bills as a trigger to regain margins. 
4. Risk of job losses in Victoria: lighting under the VEU has become an industry. Thousands of people and businesses are employed or supported by the VEU. If significant changes are made to the inclusion of lighting in the VEU, this industry is at risk of collapse. 
5. Other industries will be impacted: such as solar. A high number of solar installers sell lighting as part of their value proposition. Therefore, lighting will impact solar businesses.
6. Affordability: residential and commercial consumers can not afford to invest in upgrades without the support of an energy-efficiency scheme.
7. Lighting outcomes: the customer is guaranteed a lighting outcome that will comply to the relevant standards. Products are of a very high quality as a reflection of the strong compliance hurdles the VEU have imposed on approved products.
8. What other technologies could take up the shortfall in certificate creation?

• New deemed activities: What activities? Are they tested and commercial?
• Insulation
• Project based activities (PBA)

Project based activities (PBA) is characterised by the following:

• Projects are long and slow, can take between 1-9 years.
• Upfront customer contribution will be high.
• Opportunities lie at the big-end of town.
• Residential & small to medium businesses will not benefit.
• Certificate creation will be hidden and inconsistent.
• Risks around meeting forward contracts will be challenging.
• General commercial risk will be high.
• Compliance risk is high and challenging.

Furthermore, PBA is untested in high volumes.

Current PBA certificate creation so far in 2019:

• NSW = <3% – 56K certificates created (PBA has been active in NSW for 5-years)
• VIC = <1% – 14k certificates created

Don’t miss next week’s article where we summaries Stuart Edgley’s Energy Expo discussion and the details published over the last 3-weeks.