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Submission by ESAA to the Issues Paper on the Expansion of the Energy Saver Incentive

19 November 2010

ESAA logo

Expansion of Energy Saver Incentive – Issues Paper

Dear Mr Williamson,

The Energy Supply Association of Australia (esaa) welcomes the opportunity to comment on the Department of Primary Industry's issues paper on the expansion to the Energy Saver Incentive scheme (ESI).

esaa is the peak industry body for the stationary energy sector in Australia and represents the policy positions of the Chief Executives of over 40 electricity and downstream natural gas businesses. These businesses own and operate more than $120 billion in assets, employ 52,000 people and contribute $16 billion directly to the nation's Gross Domestic Product.

The Victorian Government has announced as part of its Climate Change White Paper process that it will double the ESI target and expand the scheme to include small and medium scale enterprises. A regulatory impact statement process will be undertaken prior to the expanded scheme's proposed commencement date of January 2012.

The energy supply industry is supportive of cost-effective energy efficiency and considers that adoption of a price on carbon via a national emissions trading scheme (ETS) will be the most effective and appropriate measure in providing greater incentives for efficiency across the supply chain. The non-price barriers to energy efficiency are well understood and we consider it appropriate that, once a national ETS is established, targeted complementary measures should be introduced to address these barriers.

esaa recognises that the current uncertainty around climate change policy at the Federal level is leading to State and Territory Governments implementing new, or expanding existing, emissions reduction measures. However, our primary concern is with the additional regulatory burden this imposes on energy supply businesses that operate across multiple jurisdictions and are required to comply with numerous overlapping and inconsistent schemes. This adds inefficient costs that are ultimately passed through to consumers in the form of higher energy prices.

In this regard, esaa is supportive of the recent recommendations in the Prime Minister's Task Group on Energy Efficiency report to develop a national energy efficiency scheme incorporating the existing jurisdictional schemes. We also agree with the statement in the issues paper that, following the implementation of a national ETS, separate energy efficiency measures would not provide any additional abatement beyond the scheme cap and therefore the rationale for operating both in tandem is diminished. As the paper notes, the COAG principles on complementary measures provide the appropriate framework for analysis in this respect.

While the issues paper considers that developing the next stage of the ESI will help to provide regulatory certainty to business, a firm commitment from the Victorian Government that the ESI would be phased out (for example, a “sunset clause” embedded into the relevant legislation) should a national energy efficiency scheme be established would also be viewed positively by industry. Such a commitment would be analogous to the certainty Victoria provided when it indicated well in advance that it would roll its proposed Renewable Energy Target (RET) into the National RET Scheme.

esaa also welcomes the acknowledgement in the issues paper that the expansion will increase the regulatory burden on energy retailers as liable entities and that the Government is open to considerations of how obligations could be allocated to minimise such burdens. Given the long lead time prior to the implementation of the expanded scheme, we encourage the Government to engage closely with affected entities on this issue to ensure, to the greatest extent possible, an equitable approach is implemented.

In terms of the expanded target, esaa considers industry participants would benefit from further analysis as to how the Victorian Government envisages the target will be met. While the issues paper states that to date the scheme targets have been easily met, it also notes hot water upgrades generated a large number of certificates under the ESI. esaa notes that this is not likely to have been exclusively driven by the ESI as solar hot water and heat pump systems were also directly incentivised via the deeming of certificates under the National Renewable Energy Target. The multitude of incentives for such technologies across the jurisdictions led to a significant oversupply of certificates under the RET and resulted in the need to split the scheme into large and small scale components earlier this year.

In conclusion, esaa is concerned by the increased regulatory burdens that will be imposed by the proposed expansion of ESI. We encourage the Victorian Government to commit to phasing out the ESI should a national approach be implemented and working with liable entities to reduce the onerousness of the regulatory burden.

If you require any further information in regards to this submission please contact Nick Wilson, Policy Adviser.

 

Yours sincerely

Brad Page
Chief Executive Officer