On Thursday afternoon the federal government quietly released a report detailing a preliminary model for a national market to save energy, referred to as the National Energy Saving Initiative. This scheme would be largely modelled on programs already in place in NSW and Victoria, which place requirements on electricity retailers to acquire energy savings via the use of tradeable certificates.
The Victorian scheme has been operating for several years now without any major hiccups. Interestingly it has been quite effective in assisting low income households in improving energy efficiency – contrary to the assertions of some. Also of note is that it has been expanded in ambition and scope under the Liberal state government, after being introduced by Labor.
The NSW scheme is off to a slow start due to quite stringent qualification criteria to obtain energy savings certificates. However with growing familiarity, businesses are beginning to learn how to take advantage of the program.
An expansion and harmonisation of these schemes to one single national market would reduce administrative costs, provide for greater economies of scale, and improve market liquidity.
In addition it would deliver on federal Labor’s still to be actioned 2007 election commitment for a national energy efficiency target, which would put Australia "at the forefront of OECD energy efficiency improvement.”
Yet it seems as if the government is hoping people might just forget all about this policy initiative. The draft model for a national energy efficiency scheme is detailed not in a White Paper or even a Green Paper, but a "progress report”.
It comes on the back of the 250 page report from the prime minister’s Task Group on Energy Efficiency recommending such a scheme in July 2010, and a 109 page issues paper released in December 2011, coupled with 140 pages of energy market modelling, indicating that benefits of such a scheme outweigh its costs.
These prior documents provide extensive detail on why households and businesses tend to systematically sub-optimise energy efficiency. They also explain why an incentive targeted at energy efficiency service and product providers could help address this. Yet it seems from reading this so-called ‘progress report’ that the government has been overcome by a collective case of amnesia.
On the second page of the report it states:
"It is important to note that no conclusions have been made on whether a national Energy Savings Initiative is in the public interest at the current time. To arrive at such a conclusion, the investigation of a national Energy Savings Initiative would need to demonstrate that:
"- There was a case for government intervention on the basis that market failures are currently preventing a socially optimal amount of energy efficiency activity occurring and that this will persist over the lifespan of a scheme;
"- A national Energy Savings Initiative is the most suitable policy instrument to address these market failures than other available tools; and
"- The benefits of a national Energy Savings Initiative would outweigh the costs over time.
"These issues will be considered further throughout 2012."
In light of the considerable work that has preceded the progress report addressing the points above, this reads to me like a great big kick into the long grass. Yet when I called a long-standing strong supporter of this initiative to get their response I was left incredibly surprised.
She told me that this low key, drawn-out response was actually a good thing.
Somewhat shocked I responded, "But this means you can pretty much count out getting anything up in this term of government. Why?”
Paraphrasing her, she said something along the lines of:
"Look, it would be great to get a national energy savings target up as soon as possible, but having this government prominently behind this thing is like the kiss of death. I reckon this has got a pretty good chance of getting up under a Coalition government. Both Greg Hunt and Ian MacFarlane understand that there is large room for improvement in energy efficiency where government intervention is justified. They get this stuff.
"But I’m just afraid that the moment the government proposes this scheme, Abbott will just oppose it because that’s what he does. And the Daily Telegraph and Herald Sun will write it up as another electricity bill slug to the battler, even though any price increases will be more than outweighed by savings through reduced energy consumption."
So that’s the sorry state of affairs in which we find ourselves.
Energy costs are a function not just of price but also how much energy gets consumed. And the best way to address concerns around energy affordability, and at the same time reduce the cost of reducing carbon emissions, is to consume less energy. Not by freezing in the dark, but by being smarter about how we use energy.
But try explaining that to a tabloid reporter addicted to headlines of ‘battlers getting slugged by price rises’.