Trading in energy efficiency in Australia: What are the lessons learnt so far?

Panel: 2. Energy efficiency policies: What delivers?

This is a peer-reviewed paper.

Authors:
Regina Betz, Zurich University of Applied Sciences (ZHAW), Switzerland
Martin Jones, Centre for Energy and Environmental Markets, Australia
Iain MacGill, School of Electrical Engineering, Centre for Energy and Environmental Markets, Australia
Robert Passey, School of Electrical Engineering, Centre for Energy and Environmental Markets, Australia

Abstract

Since 2009, three energy efficiency obligation schemes have been operating in three states across Australia. As with other schemes operating around the world, the choice of design elements such as the type of target, sectors and fuels covered, and eligible activities differs in many cases across the three schemes. The aim of this paper is to provide an overview of the Australian schemes and review the evidence on their performance as well as explore other lessons from the schemes to date.

We develop a framework to compare the schemes according to specific design elements such as targets, coverage, cost-recovery, eligible energy saving activities, penalties, trading, and banking and borrowing. We assess the schemes according to compliance, sources of energy savings and price developments. We discuss the data requirements to evaluate the level of ’real’ or additional energy savings achieved by the schemes and explain the critical concept of “additionality” of activities in this context.

We conclude that success with white certificate systems in Australia has been mixed to date. Firstly, the compliance rate in NSW was low compared to the other states, leading to penalty payments of over A$7.3m in 2010. This may be explained by the fact that obligated parties in NSW were allowed to pass through penalties fully in their electricity tariffs. Secondly, differing coverage of sectors and eligible saving activities between the three schemes resulted in significantly varying composition of implemented energy saving activities. As expected, the cheapest and simplest eligible projects in each scheme dominated. Given these findings, one of the most crucial design elements to enhance ‘real’ savings is the choice of eligible activities and the number of certificates these can create. In addition, the broader regulatory environment of liable parties’ compliance design needs to be taken into consideration in order to improve the compliance rate.