Energy Efficiency And Productivity Strategy

Accelerating Victoria’s energy productivityEnergy productivity is a measure of the economicvalue created from each unit of primary energyconsumed. This measure of energy productivityreflects the way energy is generated, distributedand used across our economy. Getting moreeconomic output from each unit of energy is agoal shared by many businesses – and it is alsoan important goal for Victoria to increase thecompetitiveness of our economy.The Andrews Labor Government has set an aspirationalenergy productivity target: to achieve a 50 per centimprovement in Victoria’s energy productivity by 2030(from 2015). This represents a doubling of our historicrate of improvement since 2000.50%50% improvementthrough energyefficiency andrenewable energy34%34% improvementbusiness as usual0%201556202020252030The actions in this energy efficiency strategy will becritical to realising Victoria’s potential for improvedenergy productivity and the delivery of this target.Increasing energy productivity across the entireenergy supply chain can deliver significantproductivity benefits for the Victorian economy. ForAustralia, a one per cent annual increase in energyefficiency would boost 2030 gross domestic product(GDP) per capita by 2.26 per cent or 1,200 perperson, and total GDP by 26 billion. 5Victoria has significant opportunities for energyproductivity improvement relative to our nationaland international competitors, as we modernise ourenergy system towards more productive generation,supply and use of energy.We can boost our energy productivity by changing theway we supply and use energy – by generating moreenergy from renewable sources and delivering energymore efficiently, and through more efficient appliances,equipment and buildings, and demand managementsystems and processes to reduce energy use.Research undertaken by ClimateWorks Australiashows that “energy efficiency in particular candeliver over half of the potential improvement[in energy productivity]”.6Kember, O (2013) Boosting Australia’s Energy Productivity, The Climate Institute, p 3ClimateWorks Australia (2017) Australia’s Energy Productivity Potential – energy’s growing role in Australia’s productivity and competitiveness, p. 15Energy Efficiency and Productivity Strategy7

Victoria’s Climate Change FrameworkThe Andrews Labor Government’s Climate Change Framework provides the direction and vision to achieve a netzero emissions future by 2050, including achieving an affordable, reliable and sustainable energy system. Stepsalready taken include:Victoria’s Climate Change Act 2017TAKE2 programReforming climate legislation to provide an orderlytransition towards a net zero emissions targetFor state and local government, businessesand members of the community to pledge theircontribution to reduce greenhouse gas emissionsVictoria’s Renewable Energy Action PlanSetting out how we will drive the transition to a cleanenergy future of 25 per cent renewable energy by2020 and 40 per cent by 2025New Energy Technologies Sector StrategyTo capture the economic and job opportunities inpriority growth sectors, which includes the 20 millionNew Energy Jobs Fund that provides funding for newenergy technology projects.Renewable Energy Action PlanKey renewable energy actions that are already beingdelivered are:The actions in this strategy work alongside the AndrewsLabor Government’s Renewable Energy Action Plan.The Renewable Energy Action Plan outlines decisiveaction that the Victorian Government is taking toencourage investment in our energy sector and toensure Victorians continue to benefit from a renewable,affordable and reliable energy system into the future. setting ambitious yet achievable renewable energygeneration targets of 25 per cent by 2020 and40 per cent by 2025 establishing three pilot community power hubs inthe Latrobe Valley, Ballarat and Bendigo to enablecommunity groups to access renewable energyexpertise and servicesThe Renewable Energy Action Plan invests 146 millionacross three focus areas to deliver more renewable,affordable and reliable energy for Victoria: creating the Centre for New Energy Technologiesand appointing the Victorian Renewable EnergyAdvocate.1Supporting sector growth2Empowering communities and consumers3Modernising our energy systemThe Energy Efficiency and Productivity Strategy formspart of our government’s commitment to ensuringaffordable, reliable and sustainable energy forVictoria alongside:Key initiatives include: 48.1 million for renewable energy certificatepurchasing, including powering Victoria’s tram fleet.This has also brought forward the developmentof two new wind farms totalling 100MW and a new75MW solar farm, resulting in over 350 million ofinvestment and 500 new regional jobs 15.8 million for smart software system, solarand battery storage microgrid initiatives acrossthe state 25 million to deploy grid-scale battery storagefacilities in the west of Victoria by Summer 2018.8 driving the uptake of renewable energy throughthe Renewable Energy Action Plan, to produce25 per cent of Victoria’s electricity generation fromrenewable sources by 2020 and 40 per cent by 2025 reviewing electricity and gas retail markets inresponse to rising energy prices tackling climate change and working to our net zeroemissions target for 2050, through Victoria’s ClimateChange Act 2017 and the TAKE2 program building energy industry skills and jobs through theNew Energy Technologies Sector Strategy, supportedby the 20 million New Energy Jobs Fund developing new gas market reforms to preservesupply and drive down prices, supplemented withsupport for businesses to deal with the volatilegas market.

Making it happenThe actions in this strategy contribute to three broadgoals that will help Victorians now and position themto prosper in a clean energy future:Goal 1Create and maintain Victorian jobsthrough best practice energy efficiencyand improved productivityWe will support Victorian businesses to take up energyefficiency opportunities that help them improvebusiness productivity and manage the challengesof energy transition. We will create jobs in energyefficiency, and through increased energy productivityin the Victorian economy.Goal 2Support Victorians to live in comfortable,healthy homes with affordable energy billsEnergy is an essential service and we will increaseits accessibility and affordability. We will support lowincome and vulnerable Victorians to implement energyefficiency upgrades that assist with managing energycosts and improve comfort and health.Goal 3Transition to high efficiency,low emissions buildingsWe will transition our residential and commercialbuildings to operate with less energy, in line with ourlong-term emissions reduction target. Higher qualitybuildings will improve health, workplace productivityand energy affordability.through a range of approaches, including: marketmechanisms and other incentive programs; standards(e.g. improvements to the National Construction Code);information and assessment tools; industry capabilitybuilding and training; and accessing innovative typesof financing.Successful implementation will involve collaborationswith other jurisdictions, local government, industryassociations and not-for-profit organisations and, mostimportantly of all, effective engagement of Victorianbusinesses and households.Alongside this strategy, the Andrews Labor Governmentcontinues to be a strong advocate for nationalaction to increase energy efficiency and energyproductivity. Victoria supports the Council of AustralianGovernments (COAG) Energy Council’s National EnergyProductivity Plan and will advocate for ambitious actionto realise productivity benefits across the nation.Energy productivity, including energy efficiency, is aninvestment in the future – supporting the transition toan energy efficient and productive economy, as wellas growing jobs in new energy sectors. It is central tomeeting Victoria’s net zero emissions target for 2050.The energy efficiency actions outlined in this strategyare expected to reduce greenhouse gas emissions by34 million tonnes of carbon dioxide equivalent (tCO2-e)by 2030. Long-term savings are expected to be muchlarger, as these actions provide the foundation to scaleup Victoria’s energy efficiency and energy productivityagenda over time. It also delivers dividends now forVictorian businesses and households dealing withenergy cost pressures.We commit to reporting annually on progress with thesegoals and the actions in this strategy.This strategy builds on commitments and prioritiesoutlined in our Energy Efficiency and ProductivityStatement Saving Energy, Growing Jobs (2015),available online at energy.vic.gov.au.The International Energy Agency (IEA) has identifiedthat government policies have been fundamental toimproving energy efficiency, but also that third partyfinance for energy efficiency products and services isexpanding.7 The actions set out in this strategy positionVictoria to capture opportunities for unlocking energyefficiency and improving our energy productivity7International Energy Agency (2016) Energy Efficiency Market Report 2016, IEA PublicationsEnergy Efficiency and Productivity Strategy9

10

Goal 1Create and maintainVictorian jobs through bestpractice energy efficiencyand improved productivityEnergy Efficiency and Productivity Strategy11

Goal 1Create and maintain Victorianjobs through best practice energyefficiency and improved productivityMost businesses who invest in energy efficiency do so to reduce energy costs,but there are other benefits for the business and the broader community. Energyefficiency improves business and economic productivity. An investment in energyefficiency can bring benefits as much as two and a half times the value of the directenergy savings, including from improved output, product quality, branding andmarket advantage, and worker comfort.8Energy efficiency improves business resilience, providing immediate savings on energybills and protecting businesses from future volatility in energy costs. It positions them assustainable businesses in a low carbon future.Energy efficiency also frees up capital for growth. Energy savings cut operating costs,allowing businesses to be more competitive, employ more staff, diversify, enter new marketsand redirect investment. Savings from household energy efficiency will also drive jobs andeconomic growth.The IEA estimates that global investment in energy efficiency was 221 billion (USD) in 2015,an increase of 6 per cent from 2014.9 This was two thirds greater than the investment inconventional power generation.Energy efficiency investment is not confined to businesses – it is being harnessed bygovernment (including at local government level), households, community organisations,sporting clubs and not for profit organisations. Energy efficiency services are strongly growingas a new market sector, with the potential to generate thousands of jobs for Victorians.Globally, companies whose primary business model is delivering energy efficiency solutionshad a total turnover of 24 billion (USD) in 2015.10 California now has more than 321,000 peopleemployed in energy efficiency, with employment growing six per cent per year in recent years.1189101112International Energy Agency (2014) Capturing the Multiple Benefits of Energy Efficiency, IEA Publications, p 22.International Energy Agency (2016) Energy Efficiency Market Report 2016, IEA Publications, p 15International Energy Agency (2016) Energy Efficiency Market Report 2016, IEA Publications, p 15BW Research Partnership (2016) Advanced Energy Jobs in California, Advanced Energy Economy Institute, p 9

Action 1.1Strengthen and expand the Victorian Energy Upgrades programVictorian Energy Upgrades – established underthe Victorian Energy Efficiency Target Act 2007 –is the largest energy efficiency certificate programin Australia. Since its establishment in 2009, close to1.7 million Victorian households and 70,000 businesseshave undertaken energy-saving upgrades andthese upgrades will reduce their energy bills by over 400 million in 2017. These benefits are delivered acrossVictoria. In 2016, over 62,000 households and 5,000businesses in regional Victoria received an energyupgrade through the program.The program provides incentives for a wide rangeof energy efficiency improvements and technologiesin households and businesses. Incentives under theVictorian Energy Upgrades program are based onthe greenhouse gas emissions reduced or avoidedby undertaking a defined activity. The program willcontinue to grow over the next three years, withthe certificate creation target for each year risingfrom 5.4 million in 2016 to 6.5 million in 2020, eachcertificate representing one tCO2-e of greenhousegas emissions abatement.Victorian Energy Upgrades is central to drivingVictoria’s transition towards a zero emissions economy.Through this program, Victorians have invested inupgrades to buildings and installed more efficient,low emissions technologies, saving 42 million tonnesof greenhouse gas emissions since 2009.These investments are creating jobs for Victorians –over the period from 2016 to 2050, Victorian EnergyUpgrades is modelled to create 2,000 jobs andhave a net benefit to Victoria of between 1.3 and 3.2 billion dollars.12 12 Modelling undertaken when the targets for 2016 to 2020 were set in 2015.Energy Efficiency and Productivity Strategy13

The Andrews Labor Government has committed 8.1 million over the four years to 2019-20 to furtherstrengthen and expand Victorian Energy Upgradesto respond to the needs of Victorian businesses andhouseholds, and to rapidly evolving technologies,such as energy efficient LED lighting. This includeslooking at new methods for crediting energy savingactivities, supporting cutting-edge technology, addingnew activities to mitigate against rising energy prices,and providing easier access to the program forall Victorians.By giving households and businesses access to abroad range of discounted energy efficient productsand services, the program makes energy efficiencyimprovements more affordable, contributes to thereduction of greenhouse gases, and encouragesinvestment, employment and innovation in industriesthat supply energy efficiency goods and services.We are collecting further evidence of the program’sbenefits to inform the future design of the programand its targets, as well as the design of other energyefficiency programs that complement it.14CASE STUDYSaving on lighting costs throughVictorian Energy UpgradesThe Melbourne Cricket Ground (MCG) completed amajor upgrade to its facilities, including to exteriorand interior lighting. Over 10,000 high-efficiencylight fittings were installed over a 12-month period,with incentives provided through the VictorianEnergy Upgrades program.The Melbourne Cricket Club partnered withSiemens and Wattly to complete the project andmade a claim for approximately 8,500 VictorianEnergy Efficiency Certificates. The value of thesecertificates helped lower the capital costs of this 3.5 million upgrade by an estimated 100,000.The greenhouse gas emissions that will beavoided as a result of this project are equal toapproximately 8,500 tCO2-e. The new light emittingdiode (LED) lights save more than 2,545 MWh ofelectricity each year and last much longer thanthe original halogen and metal-halide lamps.

1.1.1 Strengthening the program withmore options for more businessesKEY FACTSIn 2017, the Andrews Labor Government has introducedmajor changes to the Victorian Energy Upgradesprogram, providing opportunities for more industriesand businesses to access incentives for upgrades thatimprove energy efficiency.Victorian Energy Upgrades Established in 2009 under the VictorianEnergy Efficiency Target Act 2007, VictorianEnergy Upgrades was previously known as theVEET scheme.Commercial lighting has been a great success storyfor the program and government is keen to ensure thatthe program is ready to support and respond to otheremerging opportunities. Through future targets andnew activities, Victorian Energy Upgrades can continueto give Victorians the benefits of emerging technologiesand methods for energy efficiency. In 2016, Parliament set new targets for 20162020, providing certainty for Victoria’s energyconsumers and growing energy efficiencyservices sector. The 2017 target is 5.9 millioncertificates, rising to 6.5 million in 2020. There has been an 8.1 million investment (from2016-17) to strengthen and expand the programto keep pace with business and householdneeds and emerging technologies. There are 36 different activities eligible forincentives under the program; for example,installing energy efficient lighting in businesspremises or replacing an inefficient waterheater with an efficient one in a household.New, more flexible project-based activitiescommenced in 2017. In 2016, over 226,000 households and 22,000businesses across Victoria received an energyupgrade through the program. Averageparticipating household can reduce their billsby 180 a year, small to medium businesses cansave 670, and savings for larger businesses canbe much larger. The Victorian Energy Upgrades program isexpected to generate a net benefit of between 1.3 and 3.2 billion between 2016 and 2050.13We will ensure incentives are flexible and technologyneutral to support innovation, new business models,and the rapid deployment of emerging technologies.This may include best practice integrated energymanagement and solar PV-connected batteries, whichcan cut emissions, improve energy productivity andstrengthen the electricity network. We will also exploreincentives for solar heating and cooling technology forhomes, which can help mitigate the impact of risingelectricity and gas prices and improve electricitynetwork security in times of high demand.New project-based incentives will be available for arange of businesses – including large manufacturers,commercial buildings and the agriculture sector –providing flexible pathways for recognising electricityand gas upgrades.13 Net present value, discounted at four per cent per annum.Energy Efficiency and Productivity Strategy15

Measurement and Verification methodTargeting gas efficiencyThe measurement and verification method, introducedin June 2017, offers incentives for a wide range ofupgrades applicable to large and complex equipment,including fuel switching. The technology neutral methodis designed for crediting large energy saving projectsat commercial and industrial sites. This new activitymoves away from the existing set of simplified energysaving calculations, meaning that businesses canclaim incentives by calculating the energy saved at aproject level using industry-standard measurementand verification methods. Government will be workingclosely with industry through 2018 to build capacity inmeasurement and verification and support the roll outof this method.There are substantial efficiency gains possible forindustrial gas use in Victoria, and increased efficiencyis critical to many businesses in light of rising gasprices. Gas is used to generate heat or steam for a widerange of industrial processes including drying, heatingand firing.We will introduce a new gas efficiency activity streamin the Victorian Energy Upgrades program in thesecond half of 2018. This will provide new incentivesthat support optimised and efficient gas-consumingprocesses, including for:Large energy users who were previously excludedfrom the program can now opt in to Victorian EnergyUpgrades. Energy efficiency can provide critical relief tolarge energy users dealing with energy price impacts,and this voluntary approach allows them to choose ifbeing part of the program is right for their business andtheir energy needs. improving the efficiency of industrial, agriculturaland commercial boilers installing low-emissions industrial h

Renewable energy is also important to improve our energy productivity - and in many cases, the best options will involve a combination of energy efficiency and renewable energy. 1 ClimateWorks Australia (2017) Australia's Energy Productivity Potential - energy's growing role in Australia's productivity and competitiveness,