Transformational or incremental? Victoria’s energy efficiency and productivity challenge

This is article 3 in a series of four on the Andrews government’s upcoming climate and energy policies. Article 1 on the Renewable Energy Action Plan here, and article 2 on coal closure here

I was reminded while cleaning up some files last week that Victoria has a long history of energy efficiency strategies and initiatives – like these ones I stumbled across from 1991 and 2006.

Some of these strategies have been transformative. Victoria’s decision to introduce minimum five-star standards for new homes from 2005 was a game-changer, that was replicated nationally and locked in lower energy bills and better performance.

But so often these strategies nibbled at the edges of what was possible in energy efficiency. We all know that energy efficiency is the lowest cost, highest benefit, biggest no-brainer when it comes to reducing pollution across our economy. Governments pursuing energy efficiency strategies are essentially asking the following questions:

• Do we want families and businesses to save a lot of money or just a little bit of money on their energy bills?
• Should we go for large environmental benefits or small ones?
• Do we want to create thousands of new jobs or just a handful?
• Do we want vulnerable people to be a lot safer in heatwaves and extended cold periods or just a little bit safer?
• Do we want to reduce the government bill for energy concessions by a lot or a little?

Too often Cabinet Ministers settle for a little bit instead of a lot of energy efficiency. Which is why despite many energy efficiency strategies over decades Victoria still has dangerously poorly performing housing stock, with the average thermal efficiency of pre-2005 homes being less than two stars.

The hope this year is that the Andrews government understands and capitalises on the state’s enormous potential for saving money, increasing productivity, reducing energy use and pollution and accessing all of the co-benefits such as more liveable homes, reduced health costs and new industries and jobs.

In the Andrews Government’s first 12 months in office Energy Efficiency Minister Lily D’Ambrosio and her Department have given every indication that they are serious about energy efficiency. They have released an Energy Efficiency Statement and held an Energy Efficiency Summit. They’ve extended and increased the Victorian Energy Efficiency Target scheme. They’ve consulted widely on what the next steps should be.

But now its decision time, with a comprehensive energy efficiency strategy for the state being finalised for release ahead of the May state budget. The Andrews government Cabinet will again face the fundamental choice in the weeks ahead, do we want a little bit of the good stuff energy efficiency delivers or do we want a lot of it?

Environment Victoria released a detailed Six Steps to efficiency leadership agenda in November last year. In it we outlined a plan that would see Victoria join Germany, California and New Zealand as leaders in energy efficiency. In brief the six key steps are:

• Improve standards for residential buildings: Improving Victoria’s existing homes will require the introduction of mandatory disclosure for homes being sold or leased, followed by the introduction of mandatory minimum standards. We don’t let unroadworthy cars on the road because they are dangerous. Neither should we allow unliveable houses that cannot be heated or cooled because of poor thermal efficiency on the market. Of course we need low-cost ratings schemes and a period of adjustment for landlords, but we also need a firm signal of intent that the days of selling or leasing dangerous homes are over.

New building standards also need to be improved as the homes we build now will be lived for decades in as we experience two, three or 4° of warming in coming decades depending on whether we get our act together and avert catastrophic warming of the planet. We should be aiming for an increase in new building standards to achieve zero net emissions and water efficient new buildings by 2020.

Finally we need to improve compliance to ensure that higher standards actually deliver higher performing buildings. Too often buildings are being designed to a good standard, and then built to a low standard by poorly trained or negligent builders. We need more audits of newly completed buildings and serious fines for non-compliance with the standard.

• Facilitate accessible and affordable finance: although efficiency upgrades save money over time the upfront costs can discourage many building owners from taking action. There’s an important role for government to facilitate and provide affordable finance to enable homeowners and landlords to meet standards. Existing schemes like the Victorian Energy Efficiency Target need to be broadened to reward new activities like ceiling insulation and efficient heating solutions like split system air-conditioning. Greater support needs to be given to whole-of-house retrofits over the installation of single measures. And most importantly there is a need for significant investment in low income homes where upfront costs are hardest to overcome and the health and social justice benefits are greatest.

• Create a culture of efficiency: most Victorians are unaware of how their homes perform, how much money they could save, and which measures will deliver the most cost-effective improvements. A mass public education push in the tradition of successful road safety, water conservation and public health campaigns is needed to build public support for efficiency and improve standards. Such a program is no substitute for programs that deliver efficiency but can increase their value as a complementary measure.

• Deliver targeted programs for those most in need: a significant number of disadvantaged low income Victorian households face extra barriers to engaging with efficiency programs and need targeted interventions from government to ensure they miss out. Government should fund a low income energy efficiency program which could ensure that low income households can access energy efficiency audits and retrofits. The State government could work with electricity retailers to assist households who are already facing energy hardship and can’t pay their bills. Instead of retailers spending millions of dollars each year in debt collection that money could be matched by government and then used to install solar hot water, solar PV or even an efficient air-conditioner to help people out of a poverty cycle exacerbated by high electricity bills. Scaling up the state’s energy efficiency industry will also require an investment in skills and training to ensure enough well-trained workers to deliver a massive improvement in energy efficiency across the state safely and effectively.

• Upgrade government buildings: the Andrews Government should reinstate the greener government buildings programme inexplicably axed by the Baillieu/Napthine government. This program was saving government money and delivering environmental results. Secondly the government’s public and community housing portfolio makes it the state’s largest landlord. It should set a target of retrofitting the entire public housing stock over the next decade and raise the standard for new public housing to 8 stars.

• Improve commercial and industrial energy efficiency: while much of the above focus has been on residential energy efficiency there is huge untapped potential in the commercial and industrial space. The Victorian EPA’s Environment and Resource Efficiency Program, which required large energy and water using sites to implement efficiency measures that had a short payback time, should be reinstated immediately. This highly successful program was saving industry $120 million per year and yet was cut by Baillieu/Napthine government in a supreme example of ideology trumping good policy.

Our six steps to efficiency leadership report highlights that delivering the above plan, and improving Victoria’s existing housing stock to an average of five stars by 2025 would create between 7000 and 13,000 jobs per year over the next decade and support $960 million worth of economic activity every year. Homes would be more comfortable, safer and cheaper to live in. Retrofitting programs could be targeted to areas being hard hit by industrial change and the closure of car manufacturing in areas like Geelong, Broadmeadows and Dandenong, and a transition away from coal generation in the Latrobe Valley. Households living in a house retrofitted to 5 stars from two stars would save $1000 a year in electricity bills.

So the question for the Andrews Government when its Cabinet Ministers consider the energy efficiency strategy is how much of a good thing do you want? A little bit or a lot?

Next week’s final instalment in the series of four articles will dissect Victoria’s Climate Change Act review and climate policy currently being developed.

Mark Wakeham is CEO of Environment Victoria, one of Australia’s leading environmental charities.