NSW Government leaves energy efficiency in limbo

Businesses have shown themselves to be spectacularly effective at delivering on NSW's energy efficiency target. Yet, despite today's announcement, the government still dithers over its longer-term plans for the target.

The NSW Government’s Environment Minister Rob Stokes announced today that they will be expanding the NSW Energy Efficiency Savings Scheme to cover efficiency gains in use of gas, not just electricity.

A sensible move given gas prices are spiking upwards, but greeted with yawns and even frustration from energy efficiency companies who heard the speech given at the Energy Efficiency Council annual conference.

The reason for the yawns was simple. The government announced its intention to expand the scheme to efficiency savings from gas last year.

The reason for the frustration was that what these businesses really wanted to hear about was what will be the future level of the target of the Energy Savings Scheme.

The government commenced a review of the scheme last year and at the time indicated it was keen to increase the target. The review was expected to have been completed and decisions announced about the target midway through this year.

Three months later and there has been no announcement on the target and the overall outcomes of the review.

At the same time – as has been shown again and again with market-based emissions reduction schemes – once an incentive is created and businesses are given the flexibility to innovate in how they respond to the target, they end up proving the economists and polluter lobbyists to be hopelessly pessimistic about what can be done (see Markets to reduce pollution – Cheaper than expected for historical evidence). 

Prices for NSW energy efficiency certificates have steadily declined over time and are now at a third of the value compared to when the scheme commenced.

Figure 1: Spot market price for NSW Energy Savings Scheme certificates (ESCs)

Source: Green Energy Markets

Businesses have shown themselves to be spectacularly effective at delivering the energy savings required to meet the target. It’s now clear the industry can achieve far more and it is providing this at a level that provides net economic benefits to the NSW economy.

So what’s stopping the government? They’ve announced they’d like to increase the target and the market has demonstrated it can achieve a higher target cost effectively, too.

Crude politics, it appears. Sources have informed Climate Spectator that the government’s plan is not to announce its plans surrounding the level of the target until closer to the next election.

Meanwhile, energy efficiency businesses are left in limbo and unable to plan for the future.