Prospects darken for Victoria's energy efficiency future

As the International Energy Agency declares that the global energy efficiency market is an ‘invisible powerhouse’ worth at least $US310 billion per annum, and vital to containing global warming, the Victorian Napthine Government is about to move to make it genuinely invisible and not very powerful in Victoria.

As foreshadowed several months ago in Climate Spectator, the Victorian Coalition Government has tabled legislation to abolish the Victorian Energy Efficiency Target, or VEET, at the end of next year. The VEET scheme has, in conjunction with the NSW Energy Savings Target, helped to support the creation of a range of businesses focused on providing products and services that help households and businesses to reduce their energy bills, with a strong move towards efficient lighting in recent times. According to the Energy Efficiency Certificate Creators Association, the EECCA, these businesses support the employment of 2000 people.

The legislation to close the scheme has already passed the upper house of the Victorian Parliament and would allow for one more year of operation for the scheme albeit at a reduced target of 2 million tonnes of CO2. The government is yet to put the legislation to a vote in the lower house but a spokesperson for Energy Minister Russell Northe informed Climate Spectator they intended to do this next week.

If legislation is not passed through the lower house in the last three days of parliament next week then the target for the scheme next year would be zero, effectively killing the scheme anyway, but a year early. Although, according to Ric Brazzale from the EECCA, because there is already a significant oversupply of certificates there would not be much need for additional energy efficiency installations in 2015 to meet a 2 million target anyway. So either way it appears that the Coalition Government’s move to axe the VEET scheme will put 2000 people out of work next year, instead of assisting homes and businesses with lowering their energy bills.

According to the Coalition Government they were unprepared to continue the scheme because, while it would help households participating in the scheme to save more than $1000 off their energy bills to 2030 and also leave heavy industry more competitive, it would impose a cross-subsidy on Victorian electricity consumers who did not participate in the scheme. A spokesperson for Northe told Fairfax: ‘‘The Coalition government will not support a scheme that is cross-subsidised by the most disadvantaged.”

Yet the claim is contradicted by the minister’s own department’s review of the scheme, which stated:

Drawing on the analysis undertaken by the ABS on the distributional impacts of the scheme, it is reasonable to assume that households from lower socio-economic groups have not been proportionately disadvantaged by this cross subsidisation. This is consistent with the finding that, particularly for low cost measures that have formed the majority of activities undertaken under the scheme, households from lower socio-economic backgrounds have received proportionately higher numbers of VEET activities.

Also, the charity Brotherhood of St Laurence has argued that they would like to see the scheme continued because of the assistance it provides for low-income households to better manage their energy costs.

In addition, an analysis of the VEET scheme using real-world data about the likely benefits and costs of energy efficient products by the energy market modelling group within the firm Jacobs (formerly SKM-MMA) found that even though consumers that did not participate would bear an additional cost, the overall Victorian economy would be around $100 million better off.

It is possible that Labor might be able to obtain the co-operation of independent Geoff Shaw in the lower house, to pass amendments to keep the scheme target at 5.4m tonnes of CO2 savings next year. These would still need to pass the upper house. However, Mark Wakeham of Environment Victoria told Climate Spectator he is hopeful that the Coalition would accept such a change to avoid it becoming an issue in the forthcoming election in November.

Labor has said it intends to expand and extend the scheme beyond next year if it is elected in November, saying it will release details of how it will shape the scheme before the election.