The NSW government risks leaving renters with higher power bills if it introduces minimum energy efficiency standards that stop at ceiling insulation and air conditioning, new modelling warns.
National sustainability organisation Renew found the “sweet spot” for home energy upgrades is a more substantial package combining insulation, shading and efficient heating and cooling with heat-pump hot water and rooftop solar.
That package could cut renters’ energy bills by between two-thirds and three-quarters while keeping their homes within a healthier temperature range of 18°C to 25.5°C.
The NSW government has been consulting on whether to introduce minimum energy efficiency standards for rental homes but has not committed to a final scheme.
The state currently lags behind Victoria and the ACT, which have already introduced some minimum energy-efficiency requirements for rental homes.
But Renew’s modelling also produced a counterintuitive finding: a weaker standard could improve tenants’ comfort while increasing their energy use and bills.
“What happens in reality when you give somebody energy efficient cooling in summer? What are they going to do? They’re going to turn it on,” Renew CEO Helen Oakey told Renew Economy’s SwitchedOn Australia podcast.
“In the baseline scenario they may not have had any cooling to use, and they’re in a really difficult situation, it’s a very uncomfortable place to live in. When you add the cooling in, what happens is people start using it, so their energy bills can go up.”
Renew modelled three levels of upgrades to a typical unrenovated 1970s three-bedroom brick veneer house across seven NSW climate zones.
The minimum package included ceiling insulation, external shading, basic draught sealing and two efficient reverse-cycle air conditioners.
In Coffs Harbour, for instance, the modelled home’s annual running costs increased from $1,558 to $2,024 under this package. In Sydney, they rose from $1,397 to $1,685.
But under the moderate package annual bill costs fell substantially. This added wall insulation, heat-pump hot water and a 4.5-kilowatt solar system to the minimum measures.
Annual bills dropped from $1558 to $556 in Coffs Harbour, a saving of $1,002 a year or about 64%. And in Sydney running costs fell from $1,397 to $355, a saving of $1,042 or about 75%.
In Armidale, a cooler climate, annual running costs fell even further from $6,543 to $1,502, while in Goulburn they dropped from $5,392 to $1,311.
Oakey describes the moderate package as the “sweet spot” where the investment delivers lower bills as well as significantly better health and comfort.
“Until you add that wall insulation and potentially try to offset some of those energy bill costs, you’re actually just creating a situation where their bills may rise, and that’s not an ideal scenario.”
The more comprehensive “excellent” package, which includes underfloor insulation, double glazing, comprehensive air sealing and mechanical ventilation, delivers greater comfort and energy efficiency, but at substantially higher cost for relatively modest additional savings on tenants’ energy bills.
It cuts bills by between 80 and 90 per cent compared with the original home, but delivers only another $109 to $612 a year in savings beyond the substantially cheaper moderate package, depending on location.
The NSW government has acknowledged the cost of upgrading homes with its recent introduction of the Home Energy Saver Program, which offers interest-free loans of up to $15,000 for eligible home improvements for both owners and landlords.
But Oakey argues cheap finance won’t work without regulations requiring landlords to act.
She points to the former Low Emissions Assistance Plan for Renters, which aimed to reach 700,000 rental properties nationally. But only 5,625 claims were made in its first stage, less than one per cent of the target.
The underlying problem that regulations need to overcome is the split incentive: landlords pay for improvements, while tenants receive most of the immediate benefits through lower bills and greater comfort.
“Financial incentives aren’t necessarily enough, and they’re not actually necessarily the block,” Oakey says.
She describes incentives and regulation as two essential “bookends”: assistance makes the work affordable, while standards push landlords to use it.
“We have the incentives …. but landlords haven’t been moving towards them. And putting regulations in place is going to be a really important part of that story.”
Oakey says standards could be introduced progressively, giving landlords time to undertake improvements and allowing the installation workforce to expand safely.
Renew’s modelling estimates the annual cost over twenty years for a minimum package would be $1,025, a moderate package $1,598, and an excellent package $2,917.
But Oakey warns NSW against settling for politically easier and weaker standards.
“You can do a little bit of ceiling insulation, but don’t kid yourself that that is actually the full answer to the challenge that’s in front,” Oakey says.
“It’s not, and I think that’s the bit that we wanted to add to this debate.”
You can hear the full interview with Helen Oakey on the SwitchedOn Australia podcast when it is released on Wednesday 23 September.
