independent review final report...spc standby power controller tco 2-e tonnes of carbon -dioxide...

DPI01 – Victorian Energy Efficiency Target Act Review

Victorian Energy Efficiency Target Act

Independent review – Final report

October 2011


111025 VEET Parliament Report FINAL p.2

Contents

Review Team .................................................................................................................................. 4

Acronyms .. ................................................................................................................................. 5

Glossary .. ................................................................................................................................. 8

Executive Summary ...................................................................................................................... 11

Recommendations ............................................................................................. .... 13

Chapter 1: Context .................................................................................................................... 14

1.1 Overview of the VEET Scheme ....................................................................... 14

1.2 Policy Landscape ............................................................................................ 19

1.3 Terms of Reference......................................................................................... 20

1.4 Methodology ................................................................................................... 23

Chapter 2: Achievement of Objectives ...................................................................................... 24

2.1 Reducing greenhouse gas emissions .............................................................. 24

2.2 Encourage efficient use of electricity and gas .................................................. 27

2.3 Encourage employment, investment and technology development ................. 30

2.4 Recommendations .......................................................................................... 33

Chapter 3: VEET Act Targets .................................................................................................... 34

3.1 Phase 1 Target Overview ................................................................................ 34

3.2 Phase 1 Target Appropriateness ..................................................................... 36

3.3 Phase 2 Target Overview and Appropriateness .............................................. 39

3.4 Sub-targets and Increased Scope ................................................................... 41

Chapter 4: Prescribed Activities ................................................................................................ 43

4.1 Current Prescribed Activities ........................................................................... 43

4.2 Future Prescribed Activities ............................................................................. 49


Chapter 5: Compliance and Accreditation ................................................................................. 54

5.1 Compliance Risks – Relevant Entities ............................................................. 54

5.2 Compliance Risks - Accredited Persons .......................................................... 55

5.3 Strengthening compliance & accreditation ....................................................... 58


Chapter 6: Administration of VEET by the ESC.......................................................................... 67

6.1 Current Administration Provisions ................................................................... 67




Chapter 7: Penalties ................................................................................................................. 72

7.1 Penalties for Offences ..................................................................................... 72


Appendix 1: Stakeholder Consultation ......................................................................................... 84

Appendix 1.1 Stakeholder list .................................................................................. 84

Appendix 1.2 Stakeholder survey ............................................................................ 86

Appendix 1.3 Stakeholder themes ........................................................................... 88

Appendix 2: Compliance, Accreditation and Audit Process for VEET ........................................... 90

Appendix 3: Sections of the Victorian Energy Efficiency Act 2007 ................................................ 96

Appendix 4: Case Studies ............................................................................................................ 99

Appendix 4.1 Case study comparison ...................................................................... 99

Appendix 4.2 How to read the case studies ............................................................ 107

Appendix 4.3 Case study – New South Wales ........................................................ 109

Appendix 4.4 Case study – South Australia ............................................................ 127

Appendix 4.5 Case study – United Kingdom ........................................................... 141

Appendix 4.6 Case study – France ......................................................................... 157

Appendix 4.7 Case study – Italy ............................................................................. 168

References . .............................................................................................................................. 180

End-Notes . .............................................................................................................................. 186



Review Team

This Independent review was prepared by GerrardBown (in collaboration with Baker and McKenzie

and Morphosis). This multi-disciplinary team was comprised of the following individuals:

Jason Gerrard (Director, GerrardBown)

Guy Olian (Senior consultant, GerrardBown).

Dung Nguyen (Consultant, GerrardBown)

Andrew Beatty (Partner, Baker & McKenzie)

Kate Phillips (Senior Associate, Baker & McKenzie).

Elizabeth Caldwell (Junior Associate, Baker & McKenzie).

Simon Carter (Director, Morphosis)

The role of each team member is outlined below.

Jason Gerrard was the Project Leader. His responsibilities included stakeholder

consultation, content development, client liaison and strategic oversight of the project.

Guy Olian and Dung Nguyen were involved in the development of content, project co-

ordination and stakeholder consultations.

Andrew Beatty provided legal research, policy advice, insight and review of the draft and

final reports.

Kate Phillips and Elizabeth Caldwell provided legal research and policy advice as well as

content development for the draft and final reports.

Simon Carter provided insight and advice into the review process and conducted a review

of the draft and final reports.



Acronyms

AEMO Australian Energy Marketing Operator

AP An Accredited Person, a person accredited under the VEET Act to create certificates in the VEET Scheme in respect of Prescribed Activities.

ACP An Accredited Certificate Provider, a person accredited under the NSW Energy Saving Scheme to create Energy Savings Certificates following the implementation of energy savings activities.

CEE Certificats d‟Economies d‟Energie. The French National Energy Efficiency Scheme.

CEF Clean Energy Future. The program proposed by the Commonwealth Government to reduce carbon emissions.

CERT Carbon Emissions Reduction Target. The energy efficiency scheme operating out of the United Kingdom between 2008-2012.

DAVE Data and Address Validation Engine (used by ESC) to check VEEC creations

DPI Victorian Department of Primary Industries

EE Energy Efficiency

EEC Energy Efficiency Commitment. The previous UK energy efficiency schemes, prior to CERT. There were two commitments: EEC1 (between 2002-2005) and EEC2 (between 2005-2008).

ESC Essential Services Commission established under the Essential Services Commission Act 2001.

ESI Energy Saver Incentive, the term used to describe the VEET Scheme for the purpose of promotion to the public.

GLS General Lighting Service

GHG Greenhouse Gas. These gases include carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, hydro-fluorocarbons, perfluorocarbons and any other gas prescribed to be a greenhouse gas.

HIP Home Insulation Program (Commonwealth Government of Australia)

IHD In-home display

kWh Kilowatt hour



NEM

National Electricity Market is a wholesale market for electricity supply in Queensland, New South Wales, Victoria, South Australia, The Australian Capital Territory and Tasmania.

NGER National Greenhouse and Energy Reporting

MEPS Minimum Energy Performance Standard

MER Victorian Minister for Energy and Resources (MER)

MWh Megawatt hour

OFGEM The Office of the Gas and Electricity Markets in the UK.

RE A Relevant Entity which sells electricity or gas, or both, to at least 5,000 Victorian customers and makes a VEET Scheme acquisition in connection with those sales.

RESA Recognised energy savings activity, as set out in the NSW scheme. A specific activity, approved by the Scheme Administrator, which is implemented by an Energy Saver and increases the efficiency of electricity consumption or reduces electricity consumption with no negative effect on production or service levels.

RET Renewable Energy Target, operated by the Commonwealth Government, but has now been split into the Large Scale Renewable Energy Target and the Small Scale Renewable Energy Scheme.

RIS Regulatory Impact Statement

SHW Solar Hot Water

SME Small and Medium Enterprise

STC Small Scale Technology Certificate, created by installation of solar hot water systems (and similar technologies) under the Small Scale Renewable Energy Scheme operated by the Commonwealth Government.

SPC Standby Power Controller

tCO2-e Tonnes of Carbon-Dioxide equivalent, carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, hydro-fluorocarbons, perfluorocarbons and any other gas prescribed to be a greenhouse gas

Toe Tonnes of Oil Equivalent

VCEC Victorian Competition and Efficiency Commission

VEEC Victorian Energy Efficiency Certificate

VEET Victorian Energy Efficiency Target



VEET ACT Victorian Energy Efficiency Target Act 2007

VEET SCHEME The Scheme established by the VEET Act



Glossary Unless otherwise specified the terms below relate to the VEET Scheme.

BILL Energy Legislation Amendment (Bushfire Mitigation and Other Matters) Bill 2011 (Vic)

COMPLIANCE YEAR The period over which each annual target must be achieved (common term for all schemes)

CUMAC Cumulés actualises, used in the French scheme, is the value of energy savings corresponding to the standardised annual energy savings (in kWh/year) summed over the relevant energy saving activity‟s lifetime and discounted at a 4% rate.

DEMONSTRATION ACTION Is a sub-category of a Qualifying Action in the UK scheme. It is an action which is reasonably expected to achieve a reduction in CO2 emissions, but it has not been possible to determine a specific carbon saving to date.

ENERGY ACQUISITION STATEMENT

An annual statement by a RE about the amounts of electricity and gas acquired under Scheme Acquisitions during the year.

ENERGY EFFICIENCY CERTIFICATE SHORTFALL

The number of certificates for which a RE has fallen short of to meet its target under the Scheme (across all schemes).

ENERGY EFFICIENCY SHORTFALL PENALTY

A civil pecuniary penalty for which a RE is liable in the event of an energy efficiency certificate shortfall.

ENERGY SAVER Exists in the NSW scheme. An Energy Saver is the retail or wholesale customer that is named in the contract, or if no contract exists is liable (by statute, convention or otherwise) to pay the electricity charges derived from a meter with a National Meter Identifier in the National Electricity Market.

GREENHOUSE GAS REDUCTION RATES

Rates, fixed annually by an order made by the Governor in Council, in respect of electricity and gas for a particular compliance year.

GUIDELINES The Scheme Guidelines made by the ESC under the VEET Act.

LIABILITY The liability of relevant entities to surrender VEECs under the VEET Act.



MARKET TRANSFORMATION Set out in the UK scheme. This is an emission reduction action which must achieve a greater carbon emission reduction than a similar action approved in the previous EEC scheme. If the action is deemed as transformational a 50% uplift in reduction will be attributed to the action. Microgeneration and solid wall insulation are also considered market transformation actions within CERT.1

NON-STANDARD PROJECT Set out in the French scheme. Standard projects have set deeming values whilst non-standard projects require engineering calculations.

OBJECT/OBJECTIVES [of the Act]

The purpose or intent of the Act.

PRESCRIBED ACTIVITY An activity, prescribed under the VEET Act, which results in a reduction in greenhouse gas emissions that would not otherwise have occurred if the activity was not undertaken.

PRESCRIBED GREENHOUSE GAS SCHEME

A voluntary offset scheme or mandatory greenhouse gas scheme or any other arrangement which promotes the reduction of greenhouse emissions and is prescribed under the VEET Act.

PRIORITY GROUP Set out in the UK scheme. Vulnerable and low income households which include people on government benefits and pensioners over the age of 70.

QUALIFYING ACTION Set out in the UK scheme. An approved energy efficiency action by OFGEM.

REBOUND EFFECT In conservation and energy economics, the rebound effect (or take-back effect) refers to the behavioural or other systemic responses to the introduction of new technologies that increase the efficiency of resource use. These responses tend to offset the beneficial effects of the new technology.

REGISTER OF ACCREDITED PERSONS

A public register, maintained by the ESC, which contains the names and other particulars of APs.

REGISTER OF ENERGY EFFICIENCY CERTIFICATES

A public register, maintained by the ESC, which contains information about energy efficiency certificates as required by the VEET Act and the ESC Guidelines.

REGISTER OF PRODUCTS Public registers, maintained by the ESC, containing particulars of certain allowable products that may be used for the purposes of prescribed activities.

REGULATIONS The scheme Regulations made under the VEET Act.

SCHEME ACQUISITION The purchase by a RE, for on-sale to Victorian customers, of electricity or gas, or both, within the provisions of the VEET Act.

1 Other examples of what may be considered market transformation activities are set out in the OFGEM

publication Carbon Emission Reduction Target 2008-2011 Market Transformation Action.



SMART METER Digital meters which can provide real time information about actual consumption amounts and patterns of energy consumption at specified intervals (e.g. 1, 15 or 30 minutes).

STANDARD ACTION Set out in the UK scheme. Similar to a prescribed activity.

STANDARD PROJECT Set out in the French scheme. Similar to a prescribed activity. Standard projects have associated deeming values and are kept on a register.

SUPER PRIORITY GROUP Set out in the UK scheme. Is a sub-set of the priority group who are considered at high risk of fuel poverty.



Executive Summary

Section 76 of the VEET Act, requires that an independent review be conducted by December 31st,

2011 and that the review findings be tabled in both houses of Parliament by the Minister for Energy

and Resources.

GerrardBown in collaboration with Baker & McKenzie has been commissioned by the Department

of Primary Industries, Victoria to conduct this independent review of the VEET Scheme.

We find that during 2009 and 2010 (the first two full years of operation), the VEET Scheme has

been successful in encouraging the efficient use of electricity and gas within Victoria‟s residential

sector, notwithstanding some recommendations for improvement.

Table 1 below summarises our findings related to the achievement of the objects of the VEET Act

for Phase 1 and the associated VEET targets for both Phases 1 and 2. Other recommendations

are outlined in Table 2 that follows. The findings and recommendations are discussed in detail in

the following chapters of this review report.



Table 1: Executive Summary



Recommendations

Table 2: Summary of recommendations

Section Recommendation Requires

change to:

Ad

min

istr

ati

on

VE

ET

Ac

t

Re

gu

lati

on

ES

C G

uid

eli

ne

Objectives of

the Act

1. ESC should develop and implement a marketing strategy from early 2012 to increase householders‟ and businesses‟ awareness and understanding of the Scheme. This should be supported by appropriate resources.

2. In the Objects of the Act replace „technology development‟ with „technology deployment‟, to align with the design of the Scheme.

Prescribed

Activities

3. Submissions for new activities should be able to be made at least each quarter, with the Activities Review Panel meeting to assess each submission within 30 days of a complete submission. Sufficient resources should be made available to DPI to achieve this and any subsequent consultation process.

4. If feasible, allow the discount factor for ceiling insulation to expire on December 31

st, 2011 or remove it earlier.

5. In order to ensure timely decision making, increase the ESC‟s skilled resources available to review and approve prospective projects. Resources should be available by the time that a project-based methodology is approved.

Compliance &

Accreditation

6. Delete section 11 of the Act and replace it with a discretionary but limited “fit & proper” person test.

7. ESC to produce model guidelines that clarify its expectations for minimum standards of AP procedures.

8. ESC to put in place a pre-accreditation audit of all APs.

Administration

of Scheme by

ESC

9. Fix the point in time of the creation of VEECs to the submission of a VEEC creation form.

Penalties 10. Increase the pecuniary penalty for improper creation of VEECs and

fraud and dishonesty offences in-line with penalties under Section 40 of the Act.

11. DPI should assess the practicality of allocating VEEC shortfall penalty revenue to contribute to energy efficiency (for example by buying VEECs) in order to increase the extent to which the Scheme achieves the objectives.

12. The Regulations should replicate any Guidelines amounting to a condition of accreditation and have a penalty associated when these are breached.



Chapter 1: Context

This chapter explains the background and context for the report and outlines the methodology.

1.1 Overview of the VEET Scheme

This section outlines the aims and structure of the scheme, the scheme participants, targets and

scope and the amendments to the scheme since its inception.

The Aims and structure of the Scheme

The Victorian Energy Efficiency Target Scheme („the Scheme‟), also known as the Energy Saver

Incentive („ESI‟) is established under the Victorian Energy Efficiency Target Act 2007 (―the Act‟)

and supported by the Victorian Energy Efficiency Target Regulations 2008 (―the Regulations‟). The

Scheme aims to:

a) reduce greenhouse gas emissions;

b) encourage the efficient use of electricity and gas;

c) encourage investment, employment and technology development in industries that

supply goods and services which reduce the use of electricity and gas by consumers.

This Victorian Government scheme gives households access to discounts or benefits on a range of

energy efficient products and services. Products have been evaluated and those that provide

greater lifetime greenhouse gas savings are awarded proportionally more certificates in the

scheme.

The VEET Scheme is a market-based energy efficiency scheme. Schemes of this nature are often

referred to as „white certificate‟ schemes. This refers to any scheme where a certain quantum of

energy or greenhouse savings resulting from energy efficiency initiatives is recognised by the

creation of certificates.

In VEET, annual targets are set for reductions in greenhouse gas emissions. The target is met by

the undertaking of eligible energy efficiency activities. There are currently 26 energy efficiency

activities (called „Prescribed Activities‟) that are eligible to generate certificates. Such activities

include providing energy efficient appliances, installing low flow shower roses and installing energy

efficient light globes.



For each Prescribed Activity, the Regulations sets out the calculation method that is to be used to

calculate the number of certificates which will be allocated to the activity, with each certificate

equivalent to 1 tonne of lifetime greenhouse abatement. This calculation method is known as

„deeming‟. Deeming enables participants to identify how many Victorian Energy Efficiency

Certificates („VEECs‟) will be created from undertaking a given Prescribed Activity. The VEECs

that are created when a Prescribed Activity is undertaken (e.g. when an energy efficient light globe

is installed to replace an inefficient light globe) represent the greenhouse gas savings that will

accrue over the average life of the activity (e.g. over the deemed lifetime of that light globe).

VEECs can be traded in a marketplace or via direct contracts between Relevant Entities (e.g.

energy retailers) and Accredited Persons (e.g. businesses that are accredited to generate

certificates by undertaking Prescribed Activities).

Participating businesses provide the consumer with a free installation, discount or benefit to

encourage the consumer to install a high efficiency product (e.g. electronic goods, white goods,

shower roses and light globes). Such product installations are eligible to generate certificates.

Relevant Entities (e.g. energy retailers) must acquire and retire certificates every year in proportion

to the amount of energy they acquire. If they fail to do this they must pay a penalty. A Relevant

Entity may be an Accredited Person (in which case it could directly create VEECs) or it may

purchase VEECs from the market.

The rationale for a „white certificate‟ scheme such as VEET is primarily to overcome a number of

market barriers and failures to undertaking energy efficiency activities. These were outlined in the

Regulatory Impact Statement for Phase 2 of the scheme and include (but are not limited to):

Imperfect information: insufficient or inaccurate information provided on the energy

performance of products

Split incentives: (also known as the principal-agent problem). For example in a rental

situation, the up-front cost to conduct installations falls on the landlord but the benefits can

accrue to the renter/occupier. Thus the landlord has no incentive to conduct the works, or

purchase more expensive but more energy-efficient products, as it is the occupier that

receives the benefit (e.g. in the form of lower energy bills). They also occur when a third

party (e.g. builder or tradesperson) control the decision regarding the efficiency of the

equipment installed but do not have to pay the running cost.



Behavioural factors: personal decisions made by households and businesses that appear

not to be economically rational. That is, it is not economically rational to choose an

inefficient product which has high overall lifetime costs (purchase price and lifetime running

costs) if a high efficiency appliance has lower lifetime costs. A key reason for this is that

people often pay little attention to the efficiency of new products as energy bills are only a

small percentage of their total expenditure. Given that energy efficiency is only one of many

product features, and people are time poor, it can be easier to simply replace like with like.i

In an effort to overcome these barriers, the VEET Scheme rewards householders up-front for the

full lifetime greenhouse abatement benefits of energy efficiency initiatives in their homes (by using

„deeming‟ as described above). VEET also reduces the transaction costs associated with installing

energy efficient products. This is particularly important for some of the low cost simple measures

where, due to behavioural issues, people have not undertaken an efficiency upgrade until it was

offered to them for free (via the Scheme).

As it is generally in the interests of the Relevant Entities (i.e. energy retailers) to meet their

certificate quotas at the lowest cost, market-based schemes such as the VEET encourage lowest

„cost of abatement‟ opportunities. For instance, once a low cost abatement activity is fully

implemented (i.e. all households have replaced their light globes with more energy efficient ones),

the price of certificates and abatement would be expected to rise as a higher cost abatement

activity begins to be implemented in the market.

The Participants in the Scheme

The Minister for Energy and Resources is the Minister responsible for the administration of the

VEET Act. The Minister is supported by the Department of Primary Industries („DPI‟), the DPI

undertakes policy development, including developing new activities and making recommendations

to the Minister to include these activities.

The Essential Services Commission („ESC‟) is the administrator of the Scheme. Powers and

responsibilities of the ESC as provided under the VEET Act include (but are not limited to):

Accreditation of certificate creators

Monitoring creation, registration, transfer and surrender of certificates

Undertaking audits

Ensuring energy retailers comply with their certificate quotas

Monitoring compliance

Approving products for use in the Scheme.



The ESC is an independent statutory authority associated with the Department of Treasury and

Finance. Its relationship with the Minister with respect to the VEET Act is outlined in the Act and

includes reporting requirements.

Relevant Entities include any Victorian energy retailer (electricity or gas) with over 5,000

customers. According to the ESC, in 2011 there are 14 Relevant Entities participating in the

Scheme of which 3 hold the largest liabilities (70% of the total liability in 2010) and therefore need

to surrender the largest number of VEECs to meet their obligations.

A certificate creator, or Accredited Person, must be accredited by the ESC to participate in the

Scheme. An accredited person can create Victorian energy efficiency certificates (VEECs), when

they help consenting consumers make selected energy efficiency improvements to their homes. By

on-selling those VEECs in a certificate market, APs can put themselves in a position to offer a

discount, or other benefit, to consumers on those same home improvements. This discount or

benefit is known as an Energy Saver Incentive.ii Currently the most common ways that VEECs are

generated include:

1. Selling a product and/or also conducting the installation of the product/activity2

2. Being a „third party‟ who creates certificates on behalf of an installer or store who sells the

energy efficient product. The third party will pay the installer for the number of certificates

generated and will then on-sell these certificates either in the market or through direct

contracts with a Relevant Entity.

When applying to become accredited, APs must specify to the ESC how they intend to incentivise

their customer into taking up energy efficiency activities. These incentives include installing a

product for free or providing a discount on the product or the installation.

At the time of writing there were 87 Accredited Persons involved in the scheme with a high degree

of variance in terms of the sizes of these organisations (numbers of employees and revenues) and

prescribed activities offered.iii

Scheme Targets & Scope

The Scheme is designed to operate in 3 year phases ending on 31 December 2029. Scheme

targets must be set out for each phase, no later than the 31st of May in the year preceding the next

3 year phase. The target for the first 3 year phase of the Scheme was fixed by the Act. When

setting targets, consideration is given to a range of factors including electricity market and

economic modelling.

2 The biggest number of certificates created in the VEET Scheme was through the installation of efficient

lighting and shower roses for free so there was no actual sale transaction.



The Scheme is nearing the completion of the first phase which:

Operates between 1 January 2009 to 31 December 2011

Has a GHG reduction target of 2.7 million tonnes of lifetime carbon dioxide equivalent

abatement each year of the scheme

Applies to abatement in the residential sector only.

The target for the second three year phase of the scheme was set in May 2011 and was

prescribed in the Regulations. The GHG reduction target was doubled to 5.4 million tonnes of

carbon dioxide equivalent each year. The scope of the scheme will be extended to include the

small and medium enterprise sector (in addition to the residential sector).

Amendments to the Scheme

Amendments to the Scheme can be undertaken through changes in the Act or Regulations. This

includes, but is not limited to, adding new prescribed activities, charging penalties and changing

the powers of the ESC.

For primary legislative proposals (i.e. Parliamentary „Bills‟ that become „Acts‟ if approved by

Parliament) that may have significant effects on competition and/or business, the Minister may

require that Business Impact Assessments (BIAs) be undertaken. For subordinate legislation (in

the form of statutory rules and legislative instruments) that will impose a significant economic or

social burden on a sector of the public, the relevant assessment tool is the RIS process.iv

A RIS and a BIA are assessed by the Victorian Competition and Efficiency Commission („VCEC‟).

The overall objective of a RIS and a BIA, as stated in the Victorian Guide to Regulation is „to

ensure a rigorous assessment of regulatory and legislative proposals, and other viable options, to

better inform government policy decision making‟.v

Some changes to the VEET Act or VEET Regulations proposed in this report may require either a

RIS or a BIA to be prepared. It should be noted that a RIS is backed by law under the

“Subordinate Legislation Act of 1994‖ and that a BIA does not currently have legislative backing i.e.

a BIA is not required under law (note that at the time of writing the report a BIA is a Cabinet

process).

If the responsible Minister determines that a proposed statutory rule or (from 1 July 2011) a

legislative instrument is likely to impose a significant economic or social burden on a sector of the

public, the Minister may make a determination that a RIS must be prepared. The Minister may

also approve an exemption certificate for a proposed statutory rule or legislative instrument, which

means that a RIS does not need to be prepared.



The RIS process is a critical part of developing regulatory measures because it requires policy

makers to consider:

The appropriateness or otherwise of government regulatory action in any particular

circumstance

The most effective form that government intervention might take to achieve a desired

objective

The magnitude of the costs and benefits of regulation

Who in the community will reap the benefits or incur the costs of regulation.

For a regulatory measure to represent the most efficient solution to an identified problem, it must

be demonstrated through the RIS that the proposed measure is likely to yield benefits greater than

the costs it imposes and yields greater net benefits (i.e. total benefits less total costs) than any of

the other viable options.vi

1.2 Policy Landscape

In recent times, Australia has created a number of strategies in State, Territory and

Commonwealth jurisdictions to improve energy security and reduce carbon emissions. These

include renewable energy targets, rebates and subsidies for activities such as solar photovoltaic

cells, as well as energy rating standards for new homes, commercial buildings and electrical

products.

In 2007 there was bi-partisan support for an energy efficiency scheme to be introduced in Victoria:

―… a scheme that will require energy retailers to help families cut their power bills through

measures such as providing energy efficient light globes, insulation and efficient shower

roses…[Victorian Energy Efficiency Target] VEET will be a market based scheme and …

will place an obligation on energy retailers to meet specific energy conservation targets.‖vii

The Scheme is complimentary to a suite of other policies and regulations set out in the State of

Victoria that relate to reducing the State‟s greenhouse gas emissions and increasing energy

security. These include (amongst others): rebates, incentives and feed-in-tariffs to encourage the

installation of small scale solar and other renewable energy sources in residential homes, and

mandatory energy performance standards for new homes.viii

Victoria is joined by New South Wales and South Australia who also run energy efficiency

schemes. The ACT Government is also currently considering a similar scheme.ix The longer-term

future of such schemes (including VEET) is somewhat uncertain given the proposed Australian

Clean Energy Future (CEF) Program.



The CEF Program will impose a price on carbon which will increase Australian energy prices,

however, barriers to householders‟ adoption of energy efficiency (as discussed earlier) are likely to

remain.3 As such the CEF Program proposes a National Energy Efficiency Scheme, in recognition

of the different and cost-effective abatement that can be achieved via energy efficiency (compared

to other policy options such as renewable energy investments and land-based sequestration).x

As contemplated in the Commonwealth Government‟s announcements in the CEF Program, in

order to be implemented, the National Energy Efficiency Scheme would require the support of the

States and Territories. Given the current lack of details regarding the administration and regulation

of the proposed National Energy Efficiency Scheme, it is unclear whether the Victorian

Government (and other State governments) of the day will agree to a national scheme. Should

agreement be reached, a national scheme may still not come into effect until after the conclusion

of Phase 2 of VEET. It is in this context that this VEET review has been conducted.

1.3 Terms of Reference

Review Requirement Set out in the VEET Act

Section 76(1) of the Victorian Energy Efficiency Target Act 2007 (the Act) provides that the

Minister must cause an independent review of the operation of the Act to be conducted, including

consideration of:

a) the extent to which the objects of the Act have been achieved;

b) the VEET scheme target applying under the Act;

c) technological developments in industries which supply goods or services which reduce

the use of electricity and gas by consumers;

d) the level of penalties provided for under the Act.

Section 76(2) of the Act provides that the review must be conducted by 31 December 2011.

Sub-Section 76(3) and (4) of the Act provide that:

(a) the person who conducts the review must give the Minister a written report of the

review; and

(b) the Minister must cause a copy of the report of the review to be tabled in each House of

the Parliament.

This review has been undertaken in accordance with the requirements of the Victorian Energy

Efficiency Target Act 2007 set out above and the following terms of reference listed below and in

Table 3 as approved by the Minister for Energy and Resources (MER).

3 The report, by the International Energy Agency, Energy Efficiency Policy and Carbon Pricing (August 2011

suggests that carbon taxes, while useful and necessary are not likely to be sufficient – at least in fully removing barriers to implementation of energy efficiency programs.



Issues to be considered by the Review

The Review is to consider and report on:

(a) the extent to which the objects of the Act have been achieved;

(b) the VEET scheme target applying under the Act;

(c) technological developments in industries which supply goods or services which reduce

the use of electricity and gas by consumers;

(d) the level of penalties provided for under the Act; and other consequences of scheme

breaches, including criminal sanctions under the “Crimes Act 1958”;

(e) any other changes to the scheme that would improve compliance and reduce the risk of

breaches;

(f) the qualifications and skills that a person who applies to the Essential Services

Commission for accreditation under the Act should possess if any;

(g) whether the Essential Services Commission should have the discretion under the Act to

reject an application for accreditation on discretionary grounds, including a „fit and

proper‟ person test;

(h) the level of compliance of accredited persons with the requirements of the Act and the

regulations made under the Act in regard to the creation of energy efficiency

certificates; and

(i) the administration of provisions of the Act by the Essential Services Commission.

Consultation

The person appointed to carry out the Review must consult with relevant agencies and

stakeholders, including the Essential Services Commission, scheme participants, energy retailers

and community and industry representatives, in regard to the issues to be considered by the

Review.



Table 3: Structure of the VEET review report - Terms of reference approved by the MER

Issues to be considered by the review Relevant chapter of report

(a) the extent to which the objects of the Act have been

achieved

Chapter 2 – Achievement of

Objectives

(b) the VEET scheme target applying under the Act Chapter 3 – VEET Act

Targets

(c) technological developments in industries which supply

goods or services which reduce the use of electricity and

gas by consumers

Chapter 4 – Technological

Development

(d) the level of penalties provided for under the Act; and other

consequences of scheme breaches, including criminal

sanctions under the “Crimes Act 1958”

Chapter 7 - Penalties

(e) any other changes to the Scheme that would improve

compliance and reduce the risk of breaches

Chapter 5 – Compliance and

Accreditation

(f) the qualifications and skills that a person who applies to

the Essential Services Commission for accreditation under

the Act should possess if any

(g) whether the Essential Services Commission should have

the discretion under the Act to reject an application for

accreditation on discretionary grounds, including a „fit and

proper‟ person test

(h) the level of compliance of accredited persons with the

requirements of the Act and the regulations made under

the Act in regard to the creation of energy efficiency

certificates

(i) the administration of provisions of the Act by the Essential

Services Commission.

Chapter 6 – Administration

of VEET by the ESC



1.4 Methodology

The methodology for this review included desktop research, case study analysis of similar

domestic and international schemes and detailed consultations with stakeholders. In all 38

stakeholders were consulted. The nature of consultations and the specific stakeholders involved

are discussed in Appendix 1.

Consultations included interviews and two focus groups. Discussions focussed on the Scheme‟s

performance, challenges and recommendations for improvement. Where comments received

during these discussions were indicative of the opinions of similar stakeholders (i.e. stakeholders

in the same category), these have been included in quotation boxes throughout the report.

Quotations were attributed to the category of stakeholder they represented. These categories were

Energy Retailers, Accredited Persons, Community representatives, Manufacturers (of energy

efficient products), various Government Departments and Industry Associations.

Twenty nine of the stakeholders consulted during the review also completed a short survey which

assessed the performance of the VEET Scheme on a number of criteria4.

Figure 1 represents the methodology approach by the review team to address the issues raised in

the terms of reference. Figure 1: VEET review methodology

4Surveys were used to assist in providing quantitative indications of stakeholder views however data should

not be interpreted as statistically significant due to the small sample size across multiple stakeholder groups.



Chapter 2: Achievement of Objectives

This chapter identifies whether the objects of the VEET Act have been achieved.

2.1 Reducing greenhouse gas emissions

The VEET Act has been quite successful in reducing greenhouse gases. During the Scheme

periods of 2009 and 2010 a sufficient volume of Victorian Energy Efficiency Certificates (VEECs)

were generated to meet the target of 2.7million tCO2-e per annum set by the Act.xi

The 2011 RIS suggests that the actual annual reductions generated by prescribed activities are

approximately 1/15th or 6% of the volumes of VEECs createdxii. The disparity between volumes of

VEECs registered and actual annual greenhouse reductions is due to the deeming methodology

involved in calculating how many VEECs are generated per prescribed activity. This deeming

takes into account the lifetime greenhouse gas abatement of the prescribed activity compared to a

business as usual scenario (i.e. had the activity not taken place). Therefore though the 2.7 MtCO2-

e target was reached, the savings will accrue over around a 15 year period and thus care should

be taken when comparing this figure to annual Victorian emissions.

Impact of light globe replacement on achievement of the Scheme Target

To the 30th June 2011, 77% of all issued certificates have been generated through the replacement

of incandescent lighting with low energy lamps (i.e. compact fluorescent light (CFL) globes), as

shown in Figure 2 below.xiii In parallel, in November 2009 a national Minimum Energy Performance

Standard („MEPS‟) for incandescent general lighting service (GLS) light bulbs took effect in

Australia,xiv which meant that it was no longer possible to sell such light bulbs unless they achieved

a certain minimum level of efficiency. This standard would necessarily have had an impact on the

residential sector‟s light globe purchases. Specifically, consumers were no longer able to purchase

the older style tungsten-filament argon filled light bulbs, but could purchase mains voltage halogen

GLS lamps, CFLs and LED light globes to meet their general lighting requirements. The standard

would have potentially increased the uptake of both CFLs and halogen incandescent bulbs when

existing pre-MEPS tungsten incandescent bulbs ceased working through wear and tear. Given the

majority of VEECs created to date have been from lighting replacement and the residential light

globe purchases would alter following the introduction of the MEPS the deeming factors for this

activity were reviewed.



Figure 2: Volume of VEECs created by technology type to June 30, 2011

Source: ESC

A range of assumptions are included in the deeming algorithms used within VEET and these are

reviewed at least every 3 years. Given the information available at the time of the scheme‟s

commencement, best efforts were made to accurately determine a deeming factor for CFL

installations. This deeming factor included a „discount factor‟ to adjust for the likely natural increase

in the uptake of CFL globes due to the MEPS, and also took into account the introduction of MEPS

for incandescent GLS lamps in late 2009.

During Phase 1 of the scheme a discount factor of 20% was included in the deeming methodology

used to calculate GHG reductions associated with each CFL globe installation. This discount factor

estimate was based on data on the different types of lighting installed in Victorian homes contained

in the 2007 Victorian Utility Consumption Household Surveyxv. In addition to this, in estimating the

GHG savings it was assumed that 75% of the saving was relative to a CFL replacing the more

efficient MEPS-compliant incandescent lamps.

In the current draft of Phase 2 deeming factors (at the time this report was written), Sustainability

Victoria has proposed increasing the discount factor applied to account for BAU uptake of CFLs

77.2%

0%

20%

40%

60%

80%

100%

2009 2010 2011 to June 30th TOTAL

VEECs created by technology type(% of total certificates)

Space conditioning

Space heating

Water heating

Fridge/Freezer destruction

Shower rose

Lighting

3,651,642 2,334,736 620,967 6,603,326 Certificates created



during Phase 2 to between 40% and 50% (from the 20% discount factor used in Phase 1). The

exact figure is still being finalised and will be based on an intrusive survey of lighting installed in

homes conducted in 2010/11, once finalised).

Further information is being sought before this proposed figure is finalised (and the figure may be

lower than outlined above). In addition to this, the base savings figure will be based on a CFL

replacing a MEPS compliant incandescent lamp, to reflect the fact that the MEPS have now been

in place for nearly two years.

Sustainability Victoria estimates that this, combined with referencing the savings to only MEPS

compliant incandescent lamps would reduce the VEEC allocation (i.e. the estimated lifetime

greenhouse gas savings) for light globe replacement in Phase 2 by around 30 to 40%. Although as

noted above this work is yet to be finalised and the ultimate figure may be lower.

Thus based on the available information it would appear that the current natural uptake of CFLs is

higher than that which is being accounted for in the deeming factors for Phase 1. Taken by itself,

this would generate an overestimate of GHG benefits resulting from light globe replacement

activities under VEET that were conducted during the latter period of Phase 1.

However, some countervailing factors that may offset this overestimate also exist. Based on

information received from Sustainability Victoria, these include (amongst others):

The recent intrusive lighting survey suggests that the power consumption of the average

incandescent lamp installed in homes may be higher than assumed in VEET and that there

are still many pre-MEPS light globes installed in homes

Low energy globes actually installed under VEET may be more efficient than assumed.

VEET recognises a number of efficiency bands for low energy lamps, and the certificate

allocation is based on the low end of the band

CFL installations may be creating positive behavioural change amongst householders, who

are now more conscious of operating their lighting in a more efficient manner (this is

discussed in detail later in this report)xvi, and

The rounding down approach undertaken in VEET results in a discount of approximately

5% in the number of certificates allocated to this activity.5

5 The rounding down approach only applied in respect of activities that occurred before the 14

th October

2010, when subsection 1A was inserted into section 18 by the Energy and Resources Legislation Amendment Act 2010. Subsequent activities would be rounded up or down, in accordance with s.18(1A).



The exact net effect of the above factors is therefore highly complex to calculate and beyond the

scope of this review. Nonetheless, based on the information at hand, we believe that there is a

reasonable possibility that an overestimation of the GHG benefits associated with lighting

replacement has occurred at some point during Phase 1. We recognise that this information has

only recently come to light. Even if this information had been available earlier, adjusting the

deeming factors during Phase 1 would have created significant market uncertainty - which is not

desirable. It is also unclear what impact a lower deeming factor would have had on VEEC

volumes, VEEC prices and the adoption of VEET activities other than lighting replacement. Thus it

is difficult to ascertain the impact on the overall scheme GHG reductions that may have occurred in

Phase 1, had the discount factor been altered during this initial phase.

Given that best endeavours were undertaken to accurately estimate the deeming factors for

lighting replacement at the commencement on Phase 1, and that deeming factors appear to be

appropriately adjusted for Phase 2, we believe the issue of estimating GHG abatement from

lighting replacement is being adequately addressed.

2.2 Encourage efficient use of electricity and gas

As of 30th June 2011, over 680,000 Victorian households (accounting for approximate 35% of

Victorian householdsxvii) have participated in the Scheme through the adoption of one or more

prescribed activities.xviii This significant volume of activity is not likely to have been achieved alone

via other existing mechanisms targeted at overcoming barriers and „market failures‟ to the uptake

of energy efficient measures (notwithstanding the deeming complexities discussed in Section 2.1).

Such alternate mechanisms include (amongst others) rebates and other incentives.xix

“Great uptake...very successful in driving participation by residents and scheme

participants.”

Energy Retailer

One of the shortcomings of energy efficiency in general is that it can be very hard to quantify at a

whole of State level without detailed and statistically rigorous analysis. The energy savings to date

are likely to be in the order of 6% of the VEECs created annually (taking account of deeming, as

discussed in Section 2.1xx).6 However it is difficult to compare current energy usage to business as

usual in the absence of the VEET Scheme, as there are numerous factors that affect Victorian

6 Greenhouse and energy savings achieved to date are likely to be a bit higher than indicated by simply

dividing the VEECs by 15. The majority of the certificates have come from replacing incandescent lamps. The vast majority of lamps replaced would have been pre-MEPS incandescent lamps. As the VEEC algorithm bases 75% of the savings on replacing a MEPS compliant incandescent lamp, this will tend to underestimate the savings in these early years.



energy use, including weather, mode shifting (i.e. gas vs. electricity use), urban development and

economic growth.7

Nonetheless, the Scheme appears to have had a lasting net positive benefit on encouraging

households‟ awareness and ongoing behaviours regarding efficient use of electricity and gas.

Specifically, the recent Open Mind survey of over 1000 households that received a VEET activity,

found that participating households have changed their behaviour to conserve energy. As a result

of installation of efficient lights in households, 50% of people surveyed claimed to make more effort

to turn off lights when not needed.xxi This finding sits in contrast to current practice and VEET

„forward deeming‟ assumptions relating to the „rebound effect‟. The RIS modelling for Phase 2 of

the Scheme estimated rebound as 10% for a variety of technologies where there potentially could

be a behavioural generated impactxxii. That is, estimated energy savings were reduced by 10% for

certain prescribed activities installed.

However, the survey data above suggests that „negative rebound‟ (the opposite effect to the

„rebound factor‟ outlined above) may be occurring in which case some VEET calculations would be

conservative.

In order to accurately measure rebound in households an intrusive, statistically valid and long term

study would be required. Given that the „rebound effect‟ generally accounts for a small percentage

of the overall deeming factors for some of the Prescribed Activities, the review team does not

believe there is merit in explicitly investigating this issue further.

Notwithstanding the Scheme‟s significant impact on Victorian households, the performance of the

Scheme could be further improved by increasing households‟ awareness of the intent and

existence of the Scheme, in particular in regard to the incentives that are available.

During review consultations, and in the Open Mind survey, several stakeholders commented on

the fact that households “don‟t know enough or are confused” about the Scheme and APs are

often faced with scepticism and distrust regarding their motivation.xxiii The review team believes

that support from ESC either in directly marketing the scheme to householders and SMEs in Phase

2 or through marketing partnerships with REs and APs (as a channel to communicate directly with

householders and SMEs) would be beneficial.

7 However, recent data from ABARE on state level electricity consumption suggests that residential

electricity consumption in Victoria is behaving quite differently to other states, none of which have a large white certificate scheme focusing on the residential sector. From 2008/9 Victorian residential electricity use has been trending down more quickly than in other states, and in 2009/10 there was an absolute reduction in electricity use, whereas all other states showed usage growth.



This is also particularly pertinent in light of the perceived failure of the Commonwealth home

insulation program which must be clearly distinguished as separate, given the commonality of

energy efficiency activities (insulation in the case of the Commonwealth program) being deployed

within households.

“The Scheme is not well advertised and if I wasn‟t already in the energy efficiency field I

would not know it existed. They [Government] need to be more up front about the

program.”

Community Forum

As such we recommend an increase in the ESC‟s resources dedicated to marketing and

communications to improve general awareness and credibility of the Scheme. Given the extension

of the scheme in 2012 to SMEs, we are of the view that increased marketing and communications

should occur in early 2012 supported by an appropriate marketing strategy to cost-effectively

disseminate information to the relevant stakeholders. The additional resources should also

facilitate the ESC becoming the primary point of contact for all information transfer and collection

regarding the administration of the scheme.8

The marketing strategy should seek to:

Build householders‟ and SME‟s awareness and trust of the scheme

Increase manufacturers‟, distributors‟ and product retailers‟ understanding of and

involvement in the scheme

On the latter point, the review team agrees with stakeholders regarding the merit of the ESC taking

an enhanced role in encouraging participation in VEET. In particular this includes the ESC

promoting, educating and informing the business community (e.g. product manufacturers,

distributors and retailers) about the Scheme. These stakeholders may benefit from the VEECs that

can be offered to end-users purchasing certain products. This segment of the market has had very

little engagement and involvement in the scheme to date and based on consultation for this review,

awareness appears low.

8 While Sustainability Victoria operates (and might continue to operate) educational websites for

householders such as www.saveenergy.vic.gov.au, the ESC should have the primary responsibility for raising householders and SMEs awareness and trust of the Scheme. This would not preclude the ESC from collaborating with Sustainability Victoria on communications to households, should the ESC wish to do so.



“Lots of manufacturers don‟t know about the scheme.”

A government department

“Not enough promotion of the Scheme - low awareness by public.”


Recommendation 1:

ESC should develop and implement a marketing strategy from early 2012 to increase

householders‘ and businesses‘ awareness and understanding of the Scheme. This should be

supported by appropriate resources.

2.3 Encourage employment, investment and technology development

This section outlines the performance of the VEET Scheme in encouraging employment,

investment and technology development in industries that supply goods and services which reduce

the use of electricity and gas by consumers.

Employment

Based on the Open Mind survey and an informal ESC survey conducted in May 2009 it is

estimated that employment of up to 1200 - 1500 people has been created by the Scheme9. This

seems in line with our expectations given the relatively small scale of the VEET Scheme (which

has resulted in VEEC transactions of approximately $40m/year)10, Survey and consultation data

suggests that the employment has predominantly been generated by APs who have mainly

employed low skilled administration and contract staff. The latter were hired to conduct large „door

knocking‟ campaigns to install prescribed activities.xxiv These installations have predominantly been

provided at no-cost or close to no-cost to participating households. As shown in Figure 3, 94% of

installations (and 80% of VEECs created) have been for CFLs and shower roses to June 30,

2011.xxv

“Schemes like this keep people employed...BUT need to encourage more sustainable

employment and consistent approach versus peaky periods”

Accredited Person

9 The Open Mind survey identifies an average of 14 employees per surveyed AP work specifically on ESI

generated activities. With a total of 87 APs, this would equate to roughly 1200 jobs created. 10

Estimate is based on 2.7million VEECs per annum at $15/VEEC)



Figure 3: The VEET Installations by technology type to June 30, 2011

Source: ESC

Such large programs focused on the distribution of no-cost or close to no-cost technologies have

created „peaky‟ and variable periods of employment. This corresponds with the variable monthly

volume of VEECs created in the first 2 years of the Scheme as shown in Figure 4. While such an

increase in contract and administrative employment is beneficial, long-term skilled employment

would appear preferable.

Based on the RIS, certificate prices are expected in increase in Phase 2. At higher VEEC prices it

would be reasonable to expect that a range of higher cost, more labour and skill intensive activities

will be deployed in greater numbers. This may also result in more full time employment being

created via the scheme, although the exact outcome will only be known in the future.

94.2%

0%

20%

40%

60%

80%

100%

2009 2010 2011 to June 30th TOTAL

Number of VEET installation per prescribed activity (%) of total

Space conditioning

Space heating

Water heating

Fridge/Freezer destruction

Lighting and shower rose

413,777 216,344 61,401 687,503 VEET Instrallations



Figure 4: VEEC creations by month to January 31st, 2011

Source: ESC

Investment and Technology Development

As can be seen from the Figures 2 and 3, participants in the Scheme have focused on installing

existing and proven technologies, provided at close to or at no cost (e.g. lighting and shower

roses). While some organisations have directed efforts to refine or improve existing technologies

explicitly to meet the requirements in the Regulations, as in the case of Standby Power Controllers

(„SPCs‟), this does not appear to be in the form of traditional research and development that is

often associated with the definition of „technology development‟.,11 This has meant that though the

Scheme encouraged a limited amount of technology development, the Scheme‟s impact on

technology development overall has been low. Conversely, the impact on technology deployment

is substantial, with over 680,000 households participating in the scheme as discussed earlier.

Similarly, there is no compelling evidence to suggest that significant investment occurred as a

result of the Scheme. Stakeholder comments and the Open Mind survey results suggest that little

venture capital or infrastructure investment has taken place.

Around a third of APs engaged through the recent Open Mind survey, invested in new products,

machinery or systems to facilitate their participation in the Scheme. The nature of such investment

11

In particular while the SPC market is fairly mature in Europe, Australia has yet to set a technology standard and there has been little SPC adoption in the market. Local companies have therefore invested in some technology refinement (vs. development) in order to meet the performance and price requirements of the scheme. These companies have imported SPCs to meet the expected demands of the VEET scheme (once the technology receives final approval).

264

57,67297,905

141,561

388,772

282,841

352,534

588,943

545,997

422,656

805,506

268,733

210,322

442,373

235,052

360,804

212,181

122,486 113,762 101,350115,353

85,638 64,640

196,459

Month

Number of VEEC creations by month



has ranged from ordering new products which met the Scheme requirements, to equipment to

assist with VEET administrative processes (particularly IT equipment), and staff training. Only

around one in five surveyed businesses claim to have required any borrowing to fund their

involvement in the Scheme.xxvi

Such outcomes are not surprising and are consistent with the design and intent of a market-based

energy efficiency scheme (such as VEET) which is intended to achieve lowest cost GHG

abatement. Market-based schemes inherently prioritise proven and existing technologies over

those requiring further research and development (which tend to be expensive and lack

widespread adoption during the early phase of commercialisation). We therefore, recommend that

in order to align with the design of the Scheme (which focuses activities on technology deployment

as opposed to technology development), the objectives of the Act are accordingly modified.

Technology is also further addressed explicitly in Chapter 4 of this report.

“More of a rush by participants to get existing products accredited”

Energy Retailer

Recommendation 2:

In the Objects of the Act replace ‗technology development‘ with ‗technology deployment‘, to align

with the design of the Scheme.

2.4 Recommendations

Recommendation Change to

administration

Change to

Act

Change to

Regulation

Change to

ESC

Guideline

1. ESC should develop and implement a marketing strategy from early 2012 to increase households‟ and businesses‟ awareness and understanding of the Scheme. This should be supported by appropriate resources.

2. In the Objects of the Act replace „technology development‟ with „technology deployment‟, to align with the design of the Scheme.



Chapter 3: VEET Act Targets

This chapter assesses the appropriateness of the Phase 1 and Phase 2 VEET Scheme targets.

3.1 Phase 1 Target Overview

Phase 1 of the VEET (2009-2011) covers the residential sector only, with a requirement to

generate 2.7 MtCO2-e/year. In 2009 and 2010, the Scheme has successfully achieved its targets

with sufficient retirement of VEECs by relevant entities (REs) in these periods.xxvii

Figure 5 below, shows how the spot price of VEECs has moved as the supply of VEECs has

varied over time, indicating that the Scheme is broadly working as a market-based mechanism.12

The recent spike in prices has occurred as volumes have fallen below the underlying demand

requirements of 2.7 MtCO2-e/year.

Figure 5: VEEC cumulative creations by month to September 5th, 2011 and spot price

Source: Nextgen. Disclaimer: Prices are not necessarily based on trades. In periods of low or no market activity, prices quoted are indicative only.

12

It should be noted that the ESC and DPI believe that a majority of VEECs have not been traded in the spot market but were created and sold through contractual agreements between REs and APs.

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

VEECs $/VEECs

Historic Spot Price vs. Cumulative VEEC Registration

Regulated Target Cumulative VEECs registered Spot Price

Source: Nextgen



However, during consultations there was consensus from all stakeholders groups that there may

be difficulty in meeting the 2011 target. This has been based on:

The extended time frame to approve new low-cost activities in the Scheme (e.g. Standby

Power Controllers (SPCs) – APs and REs were expecting SPCs to be deployed into

households in early 2011, however this did not occur until September 2011)

The effective removal of ceiling insulation from the Scheme following the introduction of the

Commonwealth‟s Home Insulation Program. This significantly decreased the quantity of

potential certificates able to be generated through this activity within VEET

Low VEEC prices early in the Scheme limited the type of activities that could be

implemented at low cost. This resulted in (and from) CFLs saturating the market (as they

were the lowest cost abatement option). This market behaviour is consistent with a market-

based scheme and has resulted in:

o Little uptake of more expensive prescribed activities early in Phase 1

o Little CFL-related VEECs being created towards the end of Phase 1.

The preceding point becomes relevant in the context of a perceived reluctance by REs (3 of

which have substantial market power) to purchase VEECs at higher prices. This may be

driving very low trading volumes on the spot market, particularly from August 2011 to the

time of writing this report. This impacts the ability of APs (which are generally smaller

businesses) to finance their working capital needs through the timely sale of certificates.

That said, and as noted earlier, the spot market represents a small proportion of overall

market activity and the review team is not aware of the details of recent bilateral trades due

to the commercial nature of these arrangements.

“You have to look at the Scheme on a month to month level. In the first 18 months people

hit the ground running and ran hard creating a lot of VEECs. Now all the low hanging fruit

is gone. There is a steady decline now of VEECs as things have been done to death.”

Accredited Person



3.2 Phase 1 Target Appropriateness

The Phase 1 target is considered to be appropriate and somewhat conservative. This view is

based on its contribution to Victoria‟s emissions reduction target, its magnitude in comparison to

other similar schemes in Australia and overseas and the views of the market participants

(ascertained through consultations conducted during this review).

To compare the VEET Scheme Target against other similar schemes is a complex task. Each

regional scheme is influenced by the nature of their energy market, their particular cost curve of

abatement opportunities, different technologies approved for use and impacts of other regional

policies and programs. In an effort to benchmark the Phase 1 target, Figure 6 compares the VEET

target against other schemes in Australia and internationally on a kWh per capita basis. While

there are clearly several possible metrics that could be used to compare scheme targets (e.g.

GHG reductions per unit of GDP, kWh saved per household etc.), the kWh per capita metric

appears a reasonable point of comparison as it identifies the relative energy reductions that an

individual would need to achieve in each scheme. This metric also takes account of the differing

GHG intensity of each jurisdiction (i.e. how much GHG is emitted per kWh used). A per capita

basis was used as a „per household‟ metric would not be relevant for the NSW Scheme which

covers both households and businesses.

Thus, on a „kWh per person‟ basis the VEET Scheme has set an ambitious target compared to

other Australian schemes, but is well below the target set by the United Kingdom. Given the high

percentage of gas powered electricity generation in the UK, the CERT Scheme requires almost 5

times as many kWh to be reduced per person as VEET does in order to achieve the cumulative

targets between 2009 - 2011. The CERT Scheme has met its targets thus far.



Figure 6: Comparison of similar Scheme targets kWh/per capita (cumulative 2009-2011)13,14

Source: Case Studies, NGER (Measurement) Determination 2008, 2011 Guidelines to Defra/DECC's GHG Conversion Factors for Company Reporting; Australian Bureau of Statistics, Australian Demographic Statistics, March 2011; Office of National Statistics Population and Health Reference Tables, Spring 2011

Stakeholders consulted during the review believe the Phase 1 target was about right as shown in

Figure 7. This is consistent with having reached the Scheme target in 2009 and 2010.

13

France and Italy were not used as a comparison as they use different units of measure for their schemes 14

Calculated as (Cumulative scheme targets 2009-2011) ÷ population per state or country ÷ grid coefficient in tCo2-e/kWh



Figure 7: Stakeholder responses to “How appropriate has Phase 1 Target of the Scheme been?”

Source: GerrardBown Stakeholder Consultations Survey

Overall, VEET Phase 1, with a target of 2.7 MtCO2-e/year will contribute up to 3.6% towards

Victoria‟s 20% carbon emission reduction goal by 2020 depending on the emissions trajectoryxxviii .

In doing so, it will deliver a small annual reduction in Victoria‟s residential emissions of

approximately 1.8% per year from 2011 onwardsxxix (considering the accumulated annual savings

achieved in the previous years of Phase 1 due to deeming)15.

15

Based on Victoria‟s 2009 residential emissions of 29.2 MtCO2-e



3.3 Phase 2 Target Overview and Appropriateness

During Phase 2 of the Scheme (2012-2014), the target will increase to 5.4 MtCO2-e/year and

include the SME sector in which activities can be installed. By increasing the target, the Scheme

will contribute up to 5.7% towards Victoria‟s 20% carbon emission reduction goal by 2020

depending on the emissions trajectory.xxx This equates to approximately 1.5%16 of Victoria‟s SME

and residential emissions. This figure takes into account the accumulated annual savings achieved

in the three years of Phase 2 due to deeming and the savings that would accrue thereafter, given

the life of the underlying activities.xxxi

This target would appear appropriate for a variety of reasons:

A. The annual contribution of the scheme towards Victoria‟s overall SME and residential

emissions remains roughly constant between Phase 1 (1.8%) and Phase 2 (1.5%)

B. The 2011 RIS modelled three scenarios for setting the target in Phase 2, all widening the

scope to include SMEs, with the third scenario (the highest target assessed), doubling the

target to 5.4 MtCO2e/year being determined to be most cost effective

C. A number of perceived challenges from Phase 1 remain that may limit the supply of VEECs

in Phase 2. Thus a higher target (beyond what has already been fixed) may not be

appropriate. These challenges are:

Insufficient resources within DPI to provide timely approval of new activities. For

instance, SPCs were anticipated in early 2011 but only deployed into households from

September 2011. Stakeholders remain uncertain whether similar scenarios may occur

in Phase 2.

The existing and approved „low hanging fruit‟ activity of CFL replacement in the

residential sector having mostly been taken up

D. There are unknowns regarding the challenges and uptake of activities within SMEs which

means that a higher target (beyond what has already been fixed) may not be appropriate in

Phase 2. These include:

„Market barriers‟ in the SME market that may retard uptake of energy efficiency

measures (e.g. information gaps, lack of access to capital to fund project expenses

etc)xxxii

Uncertainty regarding the precise timing when alternative calculation methodologies will

be made available, like project based methodologies, which would stimulate larger

Energy Efficiency (EE) reductions.

As can be seen in Figure 8, during interviews, REs and Industry Group stakeholders considered

the Phase 2 target to be a stretch target while community representative stakeholders considered

16

Based on 2009 SME emissions of 36.1 MtCO2-e



the Phase 2 target to be too low. The latter‟s comments though, may not sufficiently take into

account the barriers to SME‟s adoption of energy efficiency measures as discussed above.

Figure 8: Stakeholder responses to “How appropriate has Phase 2 Target of the Scheme been?” 17

Source: GerrardBown Stakeholder Consultations Survey

“On average an SME will use 7 times as much energy as a residential home so doubling the

target is very conservative.”

Community Representative

We note that the Phase 2 target was supported by forecasts modelled in the relevant

Regulatory Impact Statement. The target should be achievable if there is no regulatory

delay in bringing new activities and the new sectors into the scheme i.e. the regulatory

framework needs to be in place to support the increased target. Regulatory uncertainty

affects investment decisions and the timing of decisions.

Relevant Entity

17

Members of the community/local government forum (which differed from „Community‟ representatives consulted during interviews) felt it was too early to comment on the appropriateness of Phase 2 targets.



3.4 Sub-targets and Increased Scope

During the review consultation process the concept of sub-targets was raised by several

stakeholders. This issue was also raised in the 2011 RIS submissions. In particular some

stakeholders wished to see sub-targets for energy efficiency retro-fits in low income households

and specific targets for regional Victoria. Currently other similar energy efficiency schemes set

sub-targets for:

1. Specific socio-economic groups and regions

2. Activities conducted within an energy retailer‟s customer base

3. Installation of certain technologies

4. Certain services such as energy efficiency audits

5. Different fuel sources.

The UK scheme includes a sub-target for low socio-economic groups. It recognises that energy

costs represent a larger proportion of a low socio-economic household‟s disposable income. Thus

it explicitly requires a certain proportion of energy efficiency activities to take place within these

population groups (who arguably stand to benefit most from energy efficiency improvements).xxxiii

Within VEET, the Open Mind survey results suggest that low income households may be already

receiving proportionally more upgrades than households with higher incomes.xxxiv

Therefore, while similar ‟priority group‟ targets for low socio-economic and/or non-metro

households could be incorporated into the Scheme, the extent to which this would further

supplement what appears to be naturally occurring is unclear.

Additionally, sub-targets for specific technologies/services and fuels often align with the concept of

overcoming initial capital constraints/price premiums and other barriers to the adoption of energy

efficiency (discussed earlier). Explicitly adding such „priority groups‟ (technologies, services or

populations) would likely increase the cost of abatement (e.g. in terms of the time and effort

required to specifically identify and service such households) and would add administrative

complexity to the Scheme. The introduction of sub-targets should be particularly well scrutinised in

an economy the size of Victoria‟s, as the use of sub-targets would dissect an already small market.

Furthermore, the VEET Act may not be the best policy in which to implement sub-targets, as such

outcomes may be better achieved via other Acts or Regulations. For instance, other programs in

Victoria exist to specifically target energy use in low income households18.

18

For example Sustainability Victoria run a variety of programs which create funding opportunities to retrofit energy efficiency products within the homes of low income residents. This is managed by their Energy and Water Task Force http://www.sustainability.vic.gov.au/www/html/1464-energy-task-force.asp.



On the whole, including sub-targets would require further analysis and resources to model and

assess the impact on:

The administrative costs of the Scheme

VEEC prices

The achievability of the overall VEET target, and

The alignment of such sub-targets with the current objectives of the Act (e.g. Fuel targets

would only meet some of the current objectives of the Act which relate to encouraging

energy efficiency from users of electricity and gas only).

However, in our opinion (and for the reasons above) such research is not warranted within VEET

at this time.

Case study research also revealed that some schemes incorporate a larger scope than VEET.

While VEET covers the residential and SME sectors only19 other schemes include additional

sectors of the economy such as large industrial energy users. Similarly, while the VEET objectives

focus on efficient use of energy and gas, other schemes include a focus on efficient use of

transport fuel. In order to assess the merits of such scope increases analysis similar to that

suggested above for sub-targets would need to be undertaken. Any benefits associated with the

increased impact of VEET that would result from its broader application would need to be weighed

against the costs and risks of doing so. This cost-benefit analysis would need to account for the

large scale changes to the scheme structure and design that would be required (similar to the

process to design the initial VEET scheme).

In light of this, and the uncertainty surrounding the possibility of a national energy efficiency

scheme (as discussed in Chapter 1) we do not believe that investigating an increase in the scope

of VEET is presently justified.

19

The definition of SME within VEET includes all businesses other than very large energy and water using sites covered by the Victorian EPA‟s Energy and Resource Efficiency Plans (EREP) which mandate that cost-effective resource efficiency opportunities are implemented. Around 250 businesses participate in the plans. http://www.epa.vic.gov.au/bus/erep/default.asp



Chapter 4: Prescribed Activities

This chapter discusses the current approved activities within the scheme and makes several

recommendations for future prescribed activities.

4.1 Current Prescribed Activities

The VEET Scheme currently uses a forward deeming methodology to generate VEECs for each

different type of Prescribed Activity (i.e. the GHG savings over a specified product lifetime are

estimated and aggregated into a cumulative figure that is used for VEEC creation). Initially 22

activities were approved for use in the Scheme, based on their ability to reliably generate energy

efficiency and their appropriateness in the Victorian context. Since inception, there have been

several amendments to the Regulation and the list of approved technology categories is now 26.

Despite the range of approved activities, the Scheme has been dominated by a very small handful

of technologies (predominantly lighting, shower roses and hot water systems, as discussed in

Chapter 2). This is consistent with a market-based mechanism which will inherently prioritise low

or no-cost abatement activities as discussed previously.

Other technologies such as the purchase of efficient electrical goods have had very little uptake

with regards to generating VEECs. Based on discussions with DPI and SV, stakeholders were of

the view that the limited uptake of efficient electrical goods was due to:

1. The low number of certificates generated per appliance

2. The low certificate price in the early years of the VEET scheme..

During consultations, stakeholders also identified a number of other potential obstacles

contributing to the limited uptake including:

1. No online „point of sale‟ process is in place to enable convenient creation of VEECs for the

purchase of energy efficient electrical goods (e.g. televisions, dryers and fridges)xxxv

2. The administrative burden (e.g. documentation and record keeping processes) associated

with VEEC creation is a disincentive to drive activity for certain technologiesxxxvi

3. Not enough awareness of the Scheme by installers and consumers.xxxvii

In addition to these obstacles, energy efficiency is inhibited by other market barriers outlined in

Chapter 2.xxxviii

It is understood that an online „point of sale‟ solution for the creation of VEECs at the time of sale

of energy efficient consumer goods is currently being piloted. The ESC has also indicated that it is

developing guidelines to ensure this process is conducted appropriately. Should the pilot be



successful this online point of sale solution could be promoted via the marketing strategy to build

scheme awareness that is recommended in Chapter 2.

Issue 1 – Encouraging Technology Deployment

Stakeholders are generally confused regarding the distinction between new activity approvals

(Prescribed Activities) which are undertaken by the DPI, and product approvals (within Prescribed

Activities) which are undertaken by the ESC. This sequential process is shown in Figure 9 below.

The Energy Retailer‟s comment below highlights this confusion. It is the role of the DPI (not the

ESC) to determine abatement (deeming) for each activity. This further reinforces the

recommendation in Chapter 2 regarding enhanced marketing and communication to increase

awareness and understanding of the Scheme.

“The main difficulty is getting the technologies in the activity schedules accredited and

installed to meet the standards of the ESC. This is probably the main barrier and gripe

Retailers have about the Scheme. Additionally, ESC has been so conservative with how

they rate abatement that it becomes very expensive to install these technologies.”

Energy Retailer



Figure 9: New prescribed activity and product approval process

Source: DPI

On average DPI estimates that new activities take between 6 to18 months to be approved for

inclusion in the scheme. Stakeholders consistently commented that this is too slow. The current

annual process to consider new activities is considered too limited to respond to changing market

conditions (e.g. the inclusions of SMEs in Phase 2) and new cost-effective abatement activities.

“I believe there is more work to do in encouraging investment and technology development

because I have found the requirements set out by DPI have not been realistic and do not

reflect the current progress of technology internationally and Australia”

Accredited Person

Activitie

s

Re

vie

w P

an

el

revie

ws

ap

plic

atio

n a

nd

pro

vid

es

reco

mm

en

datio

ns to

DP

I Application for new

product made to ESC

ESC assesses

product against requirements set out

in the Regulation

New product

approved for use in VEET Scheme

DPI releases New Activity Guidelines

• submissions close

Submissions evaluated

• development of activities that pass

initial evaluation

Discussion paper released for consultation

ESI Regulation amendments drafted

• for activities that pass evaluation

Draft amendments released for consultation

Regulations amended to include new activities

• where all issues can be resolved

ESC releases guidelines

• where required

New ESI activity available to the market



Most stakeholders (APs, REs, Community, and government department representatives) are of the

view that the main contributors to the lack of timeliness in approving new technologies within VEET

include:

Insufficient DPI resources to manage the new activity category approval process outlined in

Figure 9 above. By way of example, DPI establishes a dedicated committee of relevant

legal, policy, and technical experts to review and recommend each new activity.

Stakeholders are of the view that current resources attributed to organise, co-ordinate and

complete the process are insufficient to allow for timely approvals of new activities.

A high level of conservatism exists within DPI in approving prescribed activities already

approved under other similar schemes. By way of example, stakeholders cited that the

extended timeframe to approve SPCs to the VEET Scheme was due to there being no

Australian or international performance standard for SPCs. However, SPCs have been

approved for use in the UK‟s CERT scheme since the beginning of the scheme in 2008 and

DPI should have used the data and learnings from CERT in expediting the SPC activity

approval process within VEET. 20

Additionally, APs and REs that operate in multiple Australian state-based energy efficiency

schemes commented during consultations that there would be a benefit of having an independent

body approve technologies across all three similar Australian schemes, to provide harmonisation in

prescribed activities and methodologies.

The review team understand that informal discussions are held occasionally between the relevant

government departments of NSW, SA and VIC to improve harmonisation between the various

schemes. Presumably this issue ought to be addressed at a Federal level in conjunction with

COAG and may form part of the process in creating a National Energy Efficiency Scheme.

However, in the absence of a National Energy Efficiency Scheme, complete harmonisation

amongst the various states is unlikely to be achieved in the short term. This is due (amongst other

reasons) to the significant amount of regulatory amendments required to achieve harmonisation

and the complexity of managing each State‟s often competing program and policy objectives.

While technology harmonisation may have benefits, overcoming these obstacles is complex and

20

According to DPI, at the time at which SPCs were being reviewed for inclusion in VEET, there were no internationally accepted standards for testing the adequacy of SPCs or for assessing the level of lifetime energy savings which could be achieved through SPC installations. This is why both a lab test and a field trial were specifically developed for the VEET Scheme. The UK CERT scheme contained only a simple list of requirements, did not require any specific testing to confirm that products met the requirements, and contained no information regarding the level of energy savings which could be achieved for these devices. At the time of writing of this report, Victoria is the only Australian State which has included SPCs in its white certificate scheme. .



requires multiple jurisdictions to work together. Hence this issue is arguably outside the scope of

this review and is not explored further.

On the other hand, to improve the timeliness with which new activities are approved, we

recommend DPI is provided with the additional resources necessary to expedite the activity

approval process conducted by the VEET Activities Review Panel.xxxix This is particularly important

for the SME sector where many more new technologies could be put forward for approval in Phase

2.

The current role of the Activities Review Panel („the Panel‟) is to provide technical advice to DPI

regarding the development of energy efficient activities within the VEET Scheme as well as

providing technical guidance and reviewing publications relating to deeming methodologies for

prescribed activities. The advice centres on both the technologies and implementation issues such

as potential compliance issues associated with particular activities. The panel is made up of

members from the ESC, Sustainability Victoria, DPI and any other persons with relevant

experience may be invited to be part of the panel.21 The panel currently meets on an as-needed

basis.

The advice provided by the Panel assists DPI in determining whether new prescribed activity

categories should be added to the Regulations. DPI will develop the proposed changes to the

Regulations. The relevant Minister- the MER, will make a determination whether to recommend the

amendments to the Governor in Council.

Overall, there is strong support amongst stakeholders for a more expedient activity approval

process. On this basis, we believe new activity submissions should be able to be made more

regularly then is currently the case. We recommend that submissions be accepted each quarter,

with the Panel meeting to consider new activities within 30 days of a complete submission. In

instances where the Panel cannot provide a final response in this time frame, we propose that an

update should be provided to stakeholders outlining the process to be undertaken to finalise a

response. We suggest that the 30 day review period would be a customer service commitment

with no formal repercussions for DPI if the time-frame is not met, other than reputation

implications.22 This will allow the scheme to become significantly more flexible and responsive in

terms of adding new activities.

21

For the review of prescribed activities for the SME sector the Victorian Employer‟s Chamber of Commerce and Industry (VECCI) were also invited on the panel. 22

The NSW Department of transport has a similar commitment. See www.transport.nsw.gov.au/customer-commitment.html



The additional resources will also be able to support and/or facilitate the consultations that are part

of the new activity process as shown in Figure 9 above.

Once approved by the Panel, a recommendation for inclusion in the scheme will be made to DPI

for its consideration. DPI then prepares draft regulations and briefs the Minister to seek approval. If

the Minister agrees, the Minister recommends to the Governor in Council that regulations be made.

The Governor in Council, on the recommendation of the Minister, makes the regulations.

Recommendation 3:

Submissions for new activities should be able to be made at least each quarter, with the Activities

Review Panel meeting to assess each submission within 30 days of a complete submission.

Sufficient resources should be made available to DPI to achieve this and any subsequent

consultation process.

Issue 2 – Accounting of environmental benefits

The NSW ESS Scheme does not count any products already approved under the Commonwealth

RET (now divided into two schemes, LRET - Large-Scale Renewable Energy Target, and SRES -

Small-Scale Renewable Energy Scheme) to avoid double counting of the environmental benefits.xl

On the other hand South Australia‟s REES program does allow the inclusion of such activities.xli

This is relevant for VEECs created for solar boosted hot water systems (SHW) (prescribed activity

category 1C and 1D in VEET) which can also generate STCs (previously RECs).

Both the VEET Act and the Commonwealth Renewable Energy (Electricity) Act 2000 have a

similar objective to reduce greenhouse gases. Notably, the VEET Act accounts for GHG emission

reduction by creating certificates which account for tonnes of CO2-e saved whilst the SRES (which

generates STCs) creates certificates which account for MWh of energy displaced (e.g. through the

installation of solar water heaters or pumps). Nevertheless each MWh saved results in a direct

saving in CO2-e.

As such, APs can currently create both STCs and VEECs for the same installation and this could

be considered double counting of the GHG savings of the activity despite the difference in

measurement between the schemes and the fact that the parties measuring the savings differ (i.e.

Victoria and the Commonwealth government).



The VEET Scheme does however exclude activities where the issue of regulatory additionality23 is

present. In the case of SHW, given that there is no legal requirement to install such systems within

existing dwellings, installations of SHW are able to generate VEECs. These VEECs represent

additional financial incentives (beyond the STCs) in order to drive households‟ uptake of SHW (vs.

other alternatives).

On balance, we believe that while there is an overlap of incentives between Commonwealth and

State programs, this does not compromise the intent of the VEET Scheme.

4.2 Future Prescribed Activities

Residential Sector

Within the residential sector, the currently available low cost abatement opportunities (such as

CFLs and shower roses) have been extensively undertaken. Stakeholders believe the market

opportunities to install these „low hanging fruit‟ have been saturated. While SPCs have great

potential from September 2011 onwards due to their low cost and ease of deployment, new

activities will still be needed to meet the increased targets.

One low-cost technology24 for immediate consideration is ceiling insulation. In the UK this was the

biggest contributor to GHG reduction, accounting for over 60% of CERT scheme reductions from

2008-2010xlii.Ceiling insulation is a current prescribed activity within VEET, however in 2009, the

Commonwealth Government of Australia announced a national scheme to install ceiling insulation

in households25. This meant that a duplicate incentive for the installation of ceiling insulation

existed within VEET.

Fortunately, the VEET Act allows for the Minister for Energy and Resources to apply a discount

factor affecting the calculation of the GHG emissions attributed to a Prescribed Activity. As a result

of the duplication, a discount factor was put in place on 28th July 2009. The factor reduced the

emissions savings attributed under VEET to ceiling insulation to zero.xliii

In February 2010, the Commonwealth program ceased operating and the discount factor is set to

expire (unless reapplied) on December 31st, 2011.xliv

23

Regulatory Additionality: the activity needs to go beyond existing legal requirements http://www.epa.vic.gov.au/climate-change/carbon-offsets/issues.asp 24

DPI estimates that at VEEC prices of ~$25/certificate – ceiling insulation could be provided to householders at close to no-cost 25

This was known as the Home Insulation Program (HIP) and was part of the $42 billion Nation Building – Economic Stimulus Plan announced on 3 February 2009. Under the HIP, around 1.2 million households were insulated at a cost of around $1.45 billion. The program was closed on the 19 February 2010. http://www.climatechange.gov.au/government/programs-and-rebates/hisp.aspx



A reintroduction of the activity into VEET would encounter two key challenges. The first is that the

Commonwealth program would have reduced the potential pool of households available in which

insulation might be installed under VEET. However, APs consulted are of the opinion that they will

still be able to develop cost-effective methods of identifying suitable households in which to deploy

the activity.

“Though ceiling insulation was targeted very heavily during the Commonwealth rebate

scheme, there are still many residents that were not approached by insulation installers.

We have found that in South Australia, where there is no discount factor for insulation,

there is still a market for these products and have not found it to be saturated.”

Accredited Person

The second key challenge is that the negative press attributed to the Commonwealth program will

also have created a level of distrust about ceiling insulation amongst householders. Concurrently,

there is a heightened public relations risk to the Government should potential harm occur to

householders through poor or improper installation of insulation via VEET.

Therefore, it is important that sufficient health and safety regulations regarding installation can be

agreed to and regulated appropriately. The amendments proposed by the Energy Legislation

Amendment (Bushfire Mitigation and Other Matters) Bill 2011 to the Electricity Safety Act 1998

(Vic) will make it an offence to carry out building work that will make an electrical installation

unsafe. The proposed offence however doesn‟t „regulate‟ safe installation of insulation (i.e. not in

the way that licensing of electricians is regulated under the Electricity Safety Act, which includes

obligations to comply with certain standards). The proposed offence would just prohibit certain

actions that make the building or electrical installation unsafe.

We understand that DPI is investigating whether the existence of the offence alone is sufficient to

ensure safe insulation installation. For instance, what (if any) other legislative powers, regulatory

powers and/or other obligations might be needed, and what (if any) additional administrative

measures might be required.

Thus, should the above amendments pass in the Victorian Parliament, and should such

amendments be considered by DPI to be sufficient to ensure safe installation of insulation, we

recommend that the discount factor for ceiling insulation be removed or allowed to expire by

December 31st, 2011. Given the prospect of a VEEC shortfall in 2011 we believe that the removal

of the insulation discount factor as soon as practically possible (and once sufficient safety

regulation and processes are in place) is desirable.



Recommendation 4:

If feasible, allow the discount factor for ceiling insulation to expire on December 31st, 2011 or

remove it earlier.

Behaviour Change

In-home displays („IHD‟) are being reviewed for inclusion within the Scheme and are also

considered as a behavioural change technology. IHDs are often linked to a Smart Meter and

display feedback on energy use in the home, including the cost of energy use. DPI is currently

investigating the issues surrounding IHDs (such as identifying a robust forward deeming

methodology and installation issues) and plan to consult with stakeholders to determine the

inclusion of these devices.xlv

During consultations APs and REs expressed a desire for an increased emphasis on behaviour

change activities being integrated into the Scheme. They cited the inclusion of the displays as an

enabler that would facilitate positive behaviour change.

Similarly, the UK has a 2% sub-target cap for behavioural change activitiesxlvi which includes

displays as well as behaviour services such as energy advice packages (which include energy

audits).

Despite their importance to overall energy efficiency achievements, developing a robust evidence

base and evaluation methodology that supports an estimate of lifetime greenhouse gas abatement

is difficult to achieve with many behavioural change services (such as advice/audit packages).

Inclusion of behaviour change activities into the Scheme would also represent a departure from the

Scheme‟s current operation which focuses on installation of technology. Inclusion of behaviour

change activities may also require adjustment to deeming methods for existing activities as the

average use of technologies may depart from business as usual. On balance, we believe that

including behaviour change services (as opposed to behaviour change technologies) into the

Scheme is not currently warranted. However DPI should continue to investigate the inclusion of

behaviour change technologies such as IHDs.

SME Sector

The SME sector represents a larger percentage of Victoria‟s emissions than the residential

sector26. The emissions profiles and types of technologies used by SMEs vary significantly across

industries (for example manufacturing uses significantly more gas than accommodation based

businesses).xlvii

26

In 2009 SME emissions were 36.1 MtCo2-e versus residential emissions of 29.2 MtCo2-e



Therefore the range of energy efficiency opportunities present within SMEs is diverse in

comparison to the residential sector. However, APs and businesses commented during

consultations that significant uncertainty currently exists regarding the precise timing that

prescribed activities will be available to generate VEECs amongst SMEs in Phase 2. At the time of

writing an initial tranche of activities identical to those currently undertaken in the residential sector

is being evaluated by DPI. These activities are likely to receive regulatory approval in early 2012.

New activities specifically approved for SMEs have not yet been finalised but have been identified

through the discussion paper commissioned by DPI.xlviii As a result of this remaining uncertainty

surrounding Prescribed Activities for SMEs, some APs and REs have delayed their pursuit of the

SME market.

Despite this timing uncertainty, stakeholders were unanimous in their agreement that „project-

based‟ methodologies incorporating a range of EE initiatives would be well suited particularly to

larger energy users. Such an approach would provide flexibility in tailoring solutions to large

energy users‟ individual technology, processes and environmental circumstances (e.g. their

particular array of lighting fixtures). Tailoring energy efficiency solutions (made possible through

project-based methodologies) could generate greater cumulative savings (e.g. whole of systems

efficiency) compared to installing a set of pre-determined activities (e.g. being limited to product

efficiency by replacing only certain lighting products that are approved as prescribed activities).

The UK, Italy, France and NSW also allow for project-based methodologies, providing further

support for the methodology‟s inclusion.

“Need a combination of project and activity based actions to drive innovation”

Business Forum

A project-based methodology is currently being reviewed for VEETxlix however precise timing of

final approval is again uncertain. Prompt approval of project-based methodologies is necessary in

order to provide market certainty and enhance business‟ ability to plan and undertake such

projects from early in Phase 2 of the Scheme. A delayed approval of project-based methodology

would limit implementation of potential projects and the creation of associated VEECs, as projects

generally require a longer planning process than many individual prescribed activities.

Once a project-based methodology is approved by DPI, individual projects will then be approved

by the ESC (similar to its role for approving products within Prescribed Activities). To deliver this

function, we recommend that the ESC increase its technical resources available to review and

approve individual projects in a timely manner.



At the time of writing this report, details surrounding the use of and process associated with a

project-based methodology are unknown. As such it is not feasible to outline specific expectations

of what would constitute timely decision making by the ESC.

The ESC has notified the review team that it is currently scoping a resource request to hire

additional skilled staff to approve individual projects. The extent and time frame with which this

resource request is approved, may therefore address this recommendation.

Recommendation 5:

In order to ensure timely decision making, increase the ESC‘s skilled resources available to review

and approve prospective projects. Resources should be available by the time that a project-based

methodology is approved.

4.3 Recommendations


administration

Change to

Act

Change to

Regulation

Change to

ESC

Guideline

3. Submissions for new activities should be able to be made at least each quarter, with the panel meeting to assess each submission within 30 days of a complete submission. Sufficient resources should be made available to DPI to achieve this and any subsequent consultation process.

4. If feasible, allow the discount factor for ceiling insulation to expire on December 31st, 2011 or remove it earlier.

5. In order to ensure timely decision making, increase the ESC‟s skilled resources available to review and approve prospective projects. Resources should be available by the time that a project-based methodology is approved.



Chapter 5: Compliance and Accreditation

This chapter reviews the current process of accreditation and compliance and assesses

enforcement abilities‘ against non-compliant actions. In particular the chapter focuses on

improvements to the Act and Regulations to improve overall compliance.

The VEET Scheme is theoretically exposed to compliance risks from two categories of external

stakeholders – REs and APs.

5.1 Compliance Risks – Relevant Entities

The following analysis reviews compliance risk for REs assuming that the market has a sufficient

supply of VEECs to meet REs obligations under VEET as per comments in Chapter 3 regarding a

potential shortfall in 2011.

During each year of the VEET, a RE must surrender sufficient VEECs to meet its obligations under

the VEET. At the time of surrendering VEECs, REs must submit to the ESC an Annual Energy

Acquisition Statement for the preceding year which calculates the RE's obligations for that year.

This statement is required to be audited by an independent third party prior to submission to the

ESC.

The main compliance risk for a RE is that it will not surrender sufficient VEECs to meet its liability

under the VEET though the market has a sufficient supply of VEECs. To date, only one instance

of non-compliance with this obligation has occurred since VEET commenced operation.

Momentum Energy had a VEEC shortfall of 952 certificates in 2009. This represents only 0.037%

of the number of VEECs surrendered in 2009.

This indicates that to date compliance with the VEET is high with respect to REs and their

obligations under VEET.

“For relevant entities, the annual benchmark statement process (including audit) is on the

whole straightforward and well managed by the ESC.”

Energy Retailer



5.2 Compliance Risks - Accredited Persons

The main compliance risk for APs is the improper creation of VEECs. Improper creation of VEECs

affects the integrity of the VEET in realising its objectives as stated under the Act.

Appendix 2 sets out the main risk points and reasons for improper creation of VEECs by APs.

There are three distinct stages of the VEET when the potential compliance risks associated with

APs could be dealt with by the ESC:

At the accreditation stage

Ongoing monitoring and auditing

VEEC creation.

Accreditation Stage

The Act sets out the current accreditation process. This process is explained in detail in Appendix

2 under the heading "Accreditation Process". Essentially in order to become an AP under the Act,

the AP must submit a completed form with supporting documents to the ESC. If the form is

completed; supporting documentation is provided; and the relevant application fee paid by a

prospective AP, then, in accordance with section 11(1) of the Act, the ESC must approve that

person as an AP.

This mandatory obligation imposed on the ESC to approve an application may result in applicants

being approved despite the fact that the application process highlights inadequacies in the

applicant's business model, record-keeping procedures, quality assurance, etc, which may lead to

improper creation of VEECs. The highest use to which the ESC can currently put the information

provided in an application is to assist in determining the level of risk which could be attributed to

the applicant for the purposes of ongoing monitoring and auditing, and then expend the costs

associated with such ongoing monitoring and auditing to ensure VEET integrity (see below for an

outline of current monitoring and auditing of APs by the ESC).

Further, the ESC must approve APs even where there is evidence that the AP or its directors may

not display the honesty and integrity which is crucial to what is essentially a self-regulating system

of VEEC creation. There are currently a small handful of APs accredited under VEET whose

Directors have been previously suspended or who have previously demonstrated unsound

business practices (either in Victoria or in other jurisdictions).

The ESC has stated that of the current APs, approximately 15% would have been rejected at the

application process stage had the ESC had a discretion when assessing an application. Further,

the ESC has also stated that these APs which it would have rejected at the application stage, if the

ESC was able to do so, have ongoing compliance issues.



The VEET is therefore missing a "first line of defence" against compliance risk - i.e. who is able to

participate in the VEET as an AP. The fact that the ESC notes that of the 15% of APs which it

would have prevented from becoming APs at the accreditation stage still have ongoing compliance

issues is a threat to the integrity of VEEC creation which could have been prevented at an early

stage – i.e. by refusing to accredit the AP.

Ongoing monitoring and auditing of APs

The ESC takes a risk-based approach to ongoing monitoring and auditing of APs‟ activities to

ensure that these compliance risks do not result in improper creation of VEECs. Therefore the

VEET, with respect to VEEC creation, relies heavily on self assessment by APs. APs, while

required to retain records supporting VEEC creation, are not required to submit these records to

the ESC when requesting VEEC registration. This is a reasonable response to the administrative

burden which would be placed on the ESC if it required each and every VEEC to be verified and

audited prior to registration. However, it does also mean that the monitoring and auditing process

which the ESC has in place is integral to the VEET.

The ESC conducts an initial risk assessment for each AP based on the information supplied by

that AP in their application to become an AP and the business model they operate (e.g. low or no-

cost installations versus those requiring co-payments by householders). A risk rating is then

assigned to the AP that will inform the ESC's future monitoring and audit program for that AP,

including the frequency and types of audits the ESC will carry out with respect to that AP. Table 7

in Appendix 2 sets out (in general terms) the ESC's ongoing audit program for APs.

In addition to the initial risk assessment, ongoing risk assessments are carried out using the results

from the Data and Address Validation Engine (DAVE), duplicate identification tool, assessment of

information provided on VEEC creation (i.e. the VEEC creation form), audit results and consumer

complaints. The ESC‟s ongoing audit program is discussed in more detail in Chapter 6. This

process allows the ESC to continually assess its risk ratings for APs, so that an AP can potentially

move between low, medium and high risk categories throughout their operation in the VEET.

The ESC has so far audited all APs which have submitted creations for more than 1000 VEECs.

This represents the large majority of APs. The ESC has indicated that only seven APs regularly

submit VEEC registration requests of less than 1000 VEECs

As at 16 August 2011, the ESC had undertaken 41 detailed and investigative audits, with 8 APs

having been audited more than once. Of the APs audited, those assessed by the ESC as "high

risk" in 2010 were responsible for 65% of the VEECs created in 2009 and all related to lighting

activities.



The ongoing monitoring and auditing process is extremely useful in allowing the ESC to determine

which APs warrant closer scrutiny and more frequent audits in order to ensure that these APs are

complying with the requirements of VEET. However nothing in the regulatory package (i.e. the Act,

Regulations and guidelines) for VEET provides the ESC with the ability to require an AP to change

a process or procedure which an audit shows is a threat to VEET integrity or allows for non-

compliance with the AP's obligations with VEET.

Auditing VEEC creation

In addition to the monitoring and auditing of APs, the ESC also conducts compliance checks on

applications by APs for the registration of VEECs. These compliance checks include an internal

ESC assessment of a sample of the VEECs being submitted for registration by the ESC,

processing of each VEEC creation form through the DAVE and an automated check by the

duplication identification tool. The duplication identification tool checks that each VEEC submitted

for registration is not being claimed for an activity for which VEECs have already been claimed (for

example where two APs claim VEECs for the same prescribed activity at the same household).

Based on ESC data, approximately8% of VEEC creation records submitted have been identified as

potential duplicates. Records identified as duplicates are then re-checked and either resubmitted

or withdrawn (See Appendix 2, Figure 12). Anecdotal evidence suggests that most duplicates are a

result of inadvertent error (e.g. clerical errors, etc) rather than intentional. This duplicate record rate

appears to be in line with APs‟ observations. Government stakeholders‟ comments suggest this is

within acceptable range given the prevalence of low cost/no-cost technologies.

”At a rate of less than 10% you could say it is working pretty well especially considering

most of these are inadvertently incorrect as opposed to intentional improper creation.”


ESC data reveals that of the approximately 15 APs that have voluntarily surrendered certificates to

date, as a result of duplicate submissions, these were mainly for the installation of lighting activities

and Solar Hot Water units.



5.3 Strengthening compliance & accreditation

The veracity of VEEC creation is fundamental to the long term integrity of the Scheme. Only

properly created VEECs representing actual activities which have been undertaken will satisfy the

objectives of the Act.

The drafting of the Act, the current processes of accreditation (see Appendix 2) and the ongoing

compliance regime suggests that an accreditation process giving some discretion to the ESC could

provide added integrity to VEEC creation.

Stakeholders (including some APs) also support an improved AP approval process; commenting

that by clarifying the compliance expectations the ESC would improve the overall credibility of the

Scheme. However care should be taken to ensure that improvements in compliance do not result

in significant additional administrative burden such that the level of prescribed activity becomes

insufficient to meet the target of the Act.

“One of the challenges of energy efficiency is proving that its worked...therefore the right

balance of compliance requirements is crucial.”

Community Representative

“Need to ensure accessibility of Scheme is not damaged by making it too

onerous...otherwise it starts to behave like a tax.”


A number of measures could improve these accreditation and compliance processes and would

(should they be implemented) clarify the ESC‟s expectations of APs, improve compliance and

reduce uncertainty for both the ESC and APs. These measures include the following (outlined in

more detail below):

Apply a discretionary fit & proper person test

Produce model guidelines and recommendations for those internal procedures which APs

should consider implementing

Put in place a pre-accreditation audit

Require all APs to provide the ESC with a declaration confirming the proper creation of

VEECs when submitting VEEC creation forms.



5.3.1 Improvements to the Accreditation Process

Fit & Proper Discretionary Test

“Suspended entities have reappeared...owners have re-emerged [in new business entities].”

Accredited Person

“The current AP approval should be tightened up to remove the cowboys. Need to review if

they've participated in the past but been suspended. ”

Energy Retailer

"Too easy to be accredited compared to NSW... The bar is too low"

Accredited Person

The fundamental problem in the accreditation process is the mandatory approval of applications to

become APs under section 11(1) of the Act. Amelioration of the effects of this issue lies in

amending section 11 of the Act to provide the ESC with the power of discretion as to whether or

not an applicant should be approved.

We note that no other energy efficiency scheme reviewed in the case studies currently uses such a

fit and proper person test. Although this is the case we believe that a fit and proper test is

appropriate and beneficial for VEET.

An appropriately applied test would allow the ESC to reject those applicants which clearly cannot

meet the VEET requirements for APs. By ensuring that such applications are rejected from the

outset, time and cost associated with the ESC's ongoing monitoring and auditing of such APs

would be saved. The cost efficiency of the VEET would also improve with fewer "high risk"

participants.

There are a number of means by which a regulator or administrator can be provided with the power

of discretion in respect to applications. These include:

1. A general "fit and proper person" test

2. A list of issues and concerns which a decision-maker must take into account when making

a decision as to whether an applicant should be accredited under VEET.



General fit and proper purpose test

A fit and proper person test is a common legislative method to offer a decision-maker the power of

discretion in deciding whether a person should be licensed or otherwise permitted to operate under

an enactment. The content of a general fit and proper person test is dependent entirely on the

context of the test and the Act. Generally, an application of the broad test will:

involve three things, honesty, knowledge and ability: "honesty to execute it truly, without

malice affection or partiality; knowledge to know what he ought duly to do; and ability as

well in estate as in body, that he may intend and execute his office, when need is, diligently,

and not for impotency or poverty neglect it" –

Coke Hughes & Vale v New South Wales (No 2) (1955) 93 CLR 127 at 156-157 per Dixon

CJ and McTiernan and Webb JJ

Of course, the application of this test always involves a value judgment on the part of the decision-

maker in question (the ESC in this case).

A general fit and proper person test would allow the ESC to make a decision with respect to each

applicant taking into account the applicant's:

1. Honesty (which is integral to the VEET)

2. Knowledge of their obligations under the VEET (which the ESC has identified as a failing in

some non-compliant APs)

3. Ability to conduct the permitted activities and discharge their obligations under the VEET

(which would provide the ESC with an ability to conduct an assessment of an applicant's

history in terms of the applicant's relevant skills and qualifications, while not preventing

entry of persons who may not have such skills and qualifications, but have demonstrated

their ability in some other way).

The test is flexible and allows the ESC to take into account a wide range of factors. It is also

appropriate for resolving issues around the skills and qualifications of the applicant in such a way

that is not prescriptive.

The drawbacks to a very open-ended fit and proper person test include:

1. Applicant's uncertainty with respect to the application of the test

2. Given the uncertainty around the content of the test in each particular case, decisions are

more easily challenged administratively (although not necessarily put aside)

3. Creates a barrier to entry into the VEET



4. Judicial precedent arising from challenges may define the scope of the test differently to the

ESC, and the ESC would be subsequently bound to exercise its discretion in a different

manner.

More limited fit and proper person test

In order to overcome issues around uncertainty, the fit and proper person test may be drafted in a

manner which limits the ESC's discretion. However, such limitations should go directly to issues

which might indicate the applicant's ability to fulfil their role as an AP under the VEET. The ESC

should have the discretion to refuse an applicant accreditation on the following basis:

The person has been convicted of crimes of dishonesty

The person has an external administrator, receiver or manager, or liquidator appointed (in

the case of a body corporate applicant) or is bankrupt (if a personal applicant)

In the ESC's reasonable opinion, the person's application indicates that the person has in

place systems and processes which are likely to result in non-compliance with an AP's

obligations under the VEET (any such issue would be illuminated by a pre-accreditation

audit – see discussion below).

The final factor of the test is more likely to be judicially challenged by an applicant dissatisfied with

the ESC's decision as it involves a value judgement on the part of the ESC. However, the ESC's

reasoning behind this is its indication that 15% of APs would have been rejected had the ESC had

a discretion based on the issues listed, coupled with the fact that these 15% of APs have ongoing

compliance issues. This suggests a correlation between the ESC's initial assessment of the APs

and their ongoing performance in the VEET. This indicates that the ESC should have sufficient

expertise to make a determination under such a discretion which can be appropriately defended if

challenged.

Also while this discretion could potentially open avenues for judicial review of decisions made by

the ESC27, it does not follow that all of the ESC's decisions to reject an application would be so

challenged.

We recommend that any fit and proper person test should be limited to provide that the ESC can

only reject an application in certain circumstances, but these limitations must include a discretion

so that the ESC can reject applicants whose business systems and processes are likely to result in

high levels of non-compliance with an AP's obligations under the VEET. Such a test appropriately

obviates some of the drawbacks associated with a general fit and proper person test while still

27

It is noted that the current drafting of the Act would mean that any challenge to the ESC's decision would in first instance be heard by the ESC (i.e. the Commissioners), with appeal rights to the Supreme Court. The decision could only be challenged in the Victorian Civil and Administrative Tribunal if the Act were amended to provide the VCAT with the jurisdiction to hear appeals.



providing the ESC with sufficient discretion to reject applicants.

In addition to these amendments to the Act, the ESC should amend the AP application form to

extend the information and documents an applicant is required to submit, to include information

and documentation relating to the applicant personally. For example, the ESC could require

applicants to provide:

1. Information about the applicant's business, including the history of the business

2. Where the applicant is a company, the curricula vitae of the officers of the company, and of

any other person who has day-to-day control over the company's participation in VEET

3. Where the applicant is an individual, the curriculum vitae of that individual

4. Police checks or sworn declarations as to a person's criminal history

5. Sworn declarations as to solvency of the applicant.

Recommendation 6:

Delete section 11 of the Act and replace it with a discretionary but limited ―fit & proper‖ person test

Qualifications and Skills of APs

Another method of overcoming the ESC's concerns surrounding the correlation between high risk

AP's and those applications for accreditation which display that the applicant has insufficient

knowledge or unpreparedness to achieve high compliance with the VEET, is to impose a set of

qualifications and skills to be possessed by applicants. These skills and qualifications are

obviously not in relation to those qualifications which may be necessary for the undertaking of the

relevant activity (e.g. ensuring that a licensed plumber undertakes a solar hot water prescribed

activity). Rather these skills or qualifications would go to an applicant's ability to operate in the

market and comply with its obligations as an AP under VEET.

While a requirement for specific skills, qualifications or experience could be inserted into the Act so

that an AP must demonstrate such skills, qualifications or knowledge prior to accreditation, a

specific set of skills or knowledge may prevent people from market participation, who would

otherwise have done so properly. The number of people with skills and qualifications in these

markets is relatively low given that such markets are in their infancy, and given the upcoming

expansion of the target for VEET, it would seem unwise to establish a specific set of knowledge

and skills at this stage. Consequently a specific set of skills or qualifications required for an AP is

not recommended at this point in time (although this could be revisited as the market matures).

Guidelines of the minimum requirements for record keeping procedures

While APs have obligations to retain certain information under clause 11.1 of the Guidelines, there

is currently no guidance as to how this should be undertaken or what is considered best practice.



The ESC, having audited a number of APs, will have sufficient knowledge to collate a set of model

guidelines or recommendations for record keeping procedures (for example, storage of original

documentation, how many copies of documents should be kept, electronic records and back-up

procedures, procedures to guard against loss or destruction of documents, etc). Such "model

guidelines" could be used to assist the ESC in explaining its expectations of record keeping

procedures to APs both prior to AP accreditation and during the ongoing audit process. The ESC

may also find them a useful tool in alerting APs to where an APs record keeping procedures may

be lacking or inadequate in satisfying the requirements of the Act.

It is not envisaged that these guidelines would be appropriate for all APs, however they would

provide an AP with a clearer understanding of the ongoing importance of document management

to the integrity of the VEET.

These "model guidelines" would not form any part of the legislative or regulatory package (i.e. they

would not be mandatory), but could be publically available on the VEET website for APs to review

and measure their own internal record keeping procedures against. Alternatively AP's could adopt

the guidelines or recommendations where appropriate.

Such guidelines would assist APs in ensuring that they have appropriate procedures in place, and

provide APs with greater clarity around the standards of internal procedures to ensure they meet

their various obligations under the VEET. The guidelines could also provide the ESC with an

opportunity to suggest the ideal data capture requirements for VEEC creation for various

Prescribed Activities. This would alleviate APs concerns regarding ex-post changes in data

requirements

“New fields are being asked of us for retrospective installations...This is very time

consuming...VEECs are a lot of effort for little reward.”

Accredited Person

“I‟m concerned about investing in SME activities given the changing playing fields that are

created by making ex-post changes to requirements.”

Business Forum

The administrative requirement of model guidelines would entail the initial drafting of the

guidelines, and the ongoing review of the guidelines to ensure they always reflect the requirements

of VEET.



Recommendation 7:

ESC to produce model guidelines that clarify its expectations for minimum standards of AP

procedures.

Pre-accreditation audit

To assist in Scheme compliance a pre-accreditation audit is recommended.

This "audit" is currently undertaken by the ESC shortly after an AP‟s accreditation as the first audit

the ESC conducts of an AP to assign a risk rating to that AP, post accreditation. Therefore the

"pre-accreditation audit" is merely a change in the timing of the first audit from a post accreditation

timing to pre-accreditation.

The usefulness of changing the timing of this first audit is dependent on whether the Act is

amended to provide the ESC with discretion as to whether to approve the application of an AP (in

a similar manner to the NSW ESS scheme)l. By changing the timing of the first audit to a pre-

accreditation stage, the audit would provide the ESC with a chance to put the information received

in any application to become an AP, to its highest and best use where the ESC has a discretion to

reject an application. Where the pre-accreditation audit found the processes were, in the

reasonable opinion of the ESC, insufficient to provide for proper creation of VEECs, then the ESC

could reject an application for accreditation, depending on the extent of the ESC's discretion to

reject applications under a fit and proper person test (see above).

We note that the ESC has indicated that it is intending to move the timing of the first audit of APs

to the pre-accreditation stage as envisaged in this recommendation.

Once the audited processes have been deemed "acceptable" by the ESC they could then be used

as a benchmark for future audits by the ESC to ensure that the AP is complying with the approved

processes. This would enable post-accreditation auditing to focus more on compliance with

procedures rather than the procedures themselves and would alleviate APs concerns regarding

changes in audit scope. As a matter of administration, the approval of such processes should not

be set in stone in order to allow an AP to adapt its processes to meet the needs of its business (as

well as continuing compliance with the VEET).



“Need a clearer audit scope by the ESC...at the moment it is open to interpretation.”

Accredited Person

“A ‟pre audit„ would ideally be supported by a transparent, well communicated compliance

regime that identifies high, medium and low-risk APs and incentivises or penalises each

category as appropriate”

Energy Retailer

Recommendation 8:

ESC to put in place a pre-accreditation audit of all APs

5.3.2 VEEC Creation Stage

Pre-creation statement of compliance

At the time of submitting a VEEC creation form, an AP could also be required to provide a

declaration to the effect that the AP:

Has complied with its obligations under the VEET with respect to the VEECs

Has checked the statement for administrative and clerical errors, and rectified all such

errors

Confirm that the information provided in the creation form is true and correct.

The point of any such statement of compliance is really to provide another focus point at which an

AP is encouraged to check its VEEC creation form for errors.

While the requirement of such a statement accompanying a VEEC creation form may increase the

administrative burden for an AP, it would also encourage APs to check their VEEC creation

statements carefully for duplication and clerical errors prior to submission. Alternatively the

statement could be contained in the VEEC creation form itself, to limit additional paperwork

delivered to the ESC.

We note that the ESC released an updated website in October which allows for the online creation

of VEECs. We are informed by the ESC that this new technology contains a similar declaration to

be made by an AP, which is made by clicking an "I Agree" button and as such this issue has been

addressed.



5.4 Recommendations


administration

Change to

Act

Change to

Regulation

Change to

ESC

Guideline

6. Delete section 11 of the Act and replace it with a discretionary but limited “fit & proper” person test

7. ESC to produce model guidelines that clarify its expectations for minimum standards of AP procedures.

8. ESC to put in place a pre-accreditation audit of all APs



Chapter 6: Administration of VEET by the ESC

This chapter discusses the efficiency with which the ESC has administered the VEET Act, focusing

on the creation and registration of VEECs. Recommendations have been made to improve

systems and processes to increase efficiency.

6.1 Current Administration Provisions

The ESC is the administrator of the Act and provides a number of administrative roles as set out in

section 7(2) of the Act. These include:

Accreditation of APs

Auditing relevant entities and APs

Monitoring and administering the creation and registration of VEECs

Monitoring compliance with the Act

Imposing/enforcing energy efficiency shortfall penalties

Many of these functions have been discussed previously in this report. This Chapter only analyses

the following administrative functions of the ESC:

Auditing

Creation and registration of VEECs (including the IT systems to support such functions)

Auditing

Stakeholder consultations revealed the following concerns with the current auditing process

undertaken by the ESC:

Detailed and investigative audits (which can be used to identify improperly created VEECs

among other things) occur after VEEC creation and registration

Unclear audit scopes

The length of time audits took

Qualifications of the auditors (i.e. lack of formal auditing qualifications)

Appearance of "changing goal posts"

The greatest concern surrounded the timing and timeliness of auditing.

APs note that post creation auditing can lead to certificates that have been improperly created

being surrendered either voluntarily (section 25, see Appendix 3) or mandatorily (section 40, see

Appendix 3). APs see surrender of VEECs as an open ended potential liability which may affect

their ability to carry out a business due to uncertain/unexpected expenses regarding when an audit

may take place or the findings may be. However, to remove this potential liability involves

removing these two "make- good" provisions from the Act. The point of the make good provisions

is to ensure that each VEEC surrendered by a RE actually represents one tonne of CO2-e actually



abated. If the make good provisions are removed from the Act then either:

It is accepted that there will be some VEECs used for RE compliance under the Act which

do not represent one tonne of CO2-e actually abated: or

The ESC prior to registering VEECs must satisfy itself that the VEECs created represent

one tonne of CO2-e actually abated.

The first alternative defeats the objects of the Act, and therefore should not be considered.

The second alternative would involve the ESC fully auditing APs, and their records prior to

registration of those VEECs submitted for registration, rather than post registration as is the case

now. If the ESC cannot require a surrender of improperly created VEECs, then prior to

registration, the ESC would need to satisfy itself that each and every VEEC created represented

one tonne of CO2-e actually abated. While the ESC currently carries out a number of reviews and

checks at this point, it does not conduct an audit of the VEEC creation to this extent, unless there

are significant problems apparent. Should the ESC be required to carry out such an extensive

audit at this time, the time taken between VEEC creation and VEEC registration could be

significant, which may in turn affect the liquidity of the market, as well as imposing a significant

administrative burden on the ESC and APs.

The current regime attempts to balance the administrative burden fairly on both APs and the ESC,

and while an ongoing potential liability may create cashflow issues, particularly for small APs, it is

more likely to do so where the AP has not complied with the requirements of the Act, resulting from

the improper creation of VEECs.

Moreover, the requirement to surrender improperly created VEECs is not necessarily as open

ended as it may first appear to APs. Section 5(5) of the Limitations of Actions Act 1958 effectively

prevents the ESC from commencing a successful action to require an AP to surrender improperly

created VEECs under the Act later than two years after the breach has occurred. This means that

the APs potential liability to surrender improperly created VEECs is not open ended at all. Instead

the liability exists with respect to each VEEC created from the date of creation until two years after

creation. Therefore, the AP's concerns with respect to an open ended potential liability should be

moderated.28

The issues that can be more effectively addressed by the ESC relate to the apparent changing of

requirements and standards for how prescribed activities are installed and internal audits are

conducted, as it creates uncertainty for APs. Similarly audit scopes that are not clearly defined can

28

Note: the provisions of the Limitation of Actions Act 1958 provide a complete defence to an action commenced by the ESC (so that the ESC's action would be unsuccessful), rather than preventing the ESC from commencing the action.



lead to extended and untimely audits which become an administrative burden for APs.

In addition to these issues, the ESC has no real power under the Act, Regulations or Guidelines to

require an accredited provider to change processes or procedures which are inadequate. This

issue will be ameliorated if a fit and proper person test is introduced (as a person with obviously

inadequate procedures is unlikely to meet the test).

Creation and registration of VEECs

Under the VEET there is a difference between creation and registration of VEECs:

Creation of a VEEC occurs on:

o Submission to the ESC by an AP of a completed creation certificate form

o Completion by the AP of any other verification required by the ESC (see clause 7.1

of the Guidelines)

Registration occurs when the ESC registers the VEEC in the VEET register.

VEEC creation and registration therefore occur at different points in time, and creation of a VEEC

does not necessarily mean that it will be registered by the ESC. For example a VEEC may be

"created" in accordance with the Guidelines, but the ESC may not register the created VEEC

because the created VEEC has been improperly created.

Further, clause 7.1 of the Guidelines is uncertain. For example, if the ESC requests that

information supplied by an AP in response to a verification request by the ESC be further verified,

is the VEEC created when the information is provided, or when the ESC is satisfied with the

information provided? This is a very important issue as the meaning of "create" with respect to

VEECs goes to the various offence provisions. If an AP submits a VEEC creation form which is

fraudulent, that AP should be liable to be prosecuted for an offence under the Act. Only then can

such actions be discouraged. However, if creation does not occur until some other variable point

in time (which is necessarily prior to registration) instances of rorting are not necessarily

discouraged by the offence provisions. Consequently we recommend that a VEEC will be

"created" for the purposes of the Act when a VEEC creation form is received by the ESC. This will

remove any uncertainty as to exactly when creation occurs, and will allow the ESC to prosecute

blatant rorting of the VEET by APs (if such occurs). Fixing the point of creation to this time will also

encourage APs to ensure the accuracy of these forms, as it is an offence under the Act to

improperly create VEECs.

We also note, that given the provisions of the Bill which will allow the ESC to issue warnings or

reprimands to APs, it is possible for the ESC to effectively reprimand improper VEEC creation at

this time without subjecting an AP to criminal sanctions or suspension of accreditation (which may

not be appropriate in all circumstances).



Recommendation 9:

Fix the point in time for the creation of VEECs to the submission of a VEEC creation form

Registration Process

Only registered VEECs are valid for use by relevant entities for compliance with the Act.

The registration process for VEECs is set out at Appendix 2.

The ESC has stated that the average length of the VEEC registration process from submission of

VEEC creation forms to registration of VEECs is approximately 35 days. However, the ESC has

indicated that in some instances this process has extended beyond 200 days. The reasons

provided by the ESC for delays in the registration process include:

Inaction from APs on issues with the VEEC creation forms identified by the ESC

APs continually submitting or re-submitting inaccurate or unclear forms

Stakeholders‟ sought greater investments by ESC in its IT systems in order to:

Improve the speed and ease of certificate creations

Increase the transparency of future VEEC registrations or pending registrations

APs commented that a delay on IT system upgrades and the reliance on Excel software to batch

certificate creation forms are highly time-consuming. In particular, the lack of tools to easily check

for duplicate entries meant a whole batch is rejected if 1 address is found to be incorrect. Providing

APs with an online „live‟ system that includes the capability to pre-check their submissions is highly

desired.

“It is a very manual process vs. REC creation process [for Solar hot water]...a live system is

preferred.”

Accredited Person

“...not enough investment in their systems and approach...it creates a bottleneck.”

Energy Retailer

“VEECs take on average 2 to 3 times more effort to create than RECs.”

Accredited Person



In addition, both REs and APs commented that increasing the visibility of future VEECs pending

registration (i.e. VEECs which have been created but not yet registered) would be advantageous.

Business forecasting could be enhanced if all parties have more detailed information regarding

what VEECs are likely to be registered in the future.

ESC deployed an update of its website in October 2011 which largely addresses these issues

related to the speed and ease of creation and transparency of future VEEC creations. Continuous

stakeholder consultation should be conducted to ensure future improvements meet their

requirements.

6.2 Recommendations


administration

Change to

Act

Change to

Regulation

Change to

ESC

Guideline

9. Fix the point in time for the creation of VEECs to the submission of a VEEC creation form



Chapter 7: Penalties

This chapter reviews the current penalty regime available to the ESC through the Act and

compares this against other similar schemes. In light of the findings of Chapter 5,

recommendations have been made to increase the penalty regime under the Act.

7.1 Penalties for Offences

Pecuniary penalties

A comparison of pecuniary penalty levels under the VEET against each of the case study schemes

can be seen in Table 4:

Table 4: Comparison of pecuniary penalties amongst different schemes

COMPARISON OF VEET VS.

SIMILAR SCHEMES

Schemes

with lower

penalties

Comparable Schemes

with higher

penalties

NS NC

Improper/illegal creation of certificates

NSW SA

UK France

False/misleading information (fraud)

NSW

France

SA UK

Shortfall Penalty NSW

France

UK29 SA

Failure to surrender certificates as required

NSW

SA

UK France

Record keeping NSW SA

UK France

Source: Case Studies

Note: The penalty provisions in the Italian Energy Saving Scheme are solely at the discretion of the relevant administrator so are not included in this table. NS: No similar offence in the relevant scheme NC: Penalty imposed is capped using a penalty which does not lend itself to comparison with the pecuniary penalty imposed under the VEET Act (e.g. penalty capped based on the offender‘s annual revenue), or a non-pecuniary penalty Lower: Penalty imposed under these schemes is at least 10% lower than VEET Higher: Penalty imposed under these schemes is at least 10% higher than VEET Comparable: Penalty imposed under VEET is within +/- 10%

29 If an obligated retailer contravenes a requirement of the UK scheme, the OFGEM may take action to secure compliance with that requirement (cl 23 of Order 2008). Such action may be by way of an order to undertake the requirement and/or the imposition of a penalty. However, there is no specific provision which provides for a shortfall penalty in the 2006, 2007 or 2008 orders and it is at OFGEM's discretion to impose one where there is non-compliance. We are not aware of OFGEM taking such action to date.



Overall, the VEET pecuniary penalty levels are comparatively low (compared to other schemes)

with respect to many of the offences under the VEET. However the shortfall penalty is relatively

high in comparison to the other schemes.

As identified in Chapter 5, given that the greatest compliance risk to VEET relates to improper

VEEC creation, it is recommended that an increase in penalties for the improper creation of

VEECs, and fraud should occur. This sentiment is shared by stakeholders, with the caveat that

penalties and the overall compliance regime do not become overly onerous and reduce the

number of prescribed activities taking place as discussed in Chapter 5.

The pecuniary penalties for the following offences are of greatest concern:

Offences under section 20 of the Act

Offences under section 68 of the Act.

Improper creation of VEECs is probably the greatest risk to the integrity of the VEET, and offences

under section 20 of the Act set out the offences for improper creation of VEECs. These offences

are therefore fundamental to not only acting as a deterrent, but properly punishing a person who

threatens the integrity of the VEET by criminally improperly creating certificates. In order to be

guilty of such an offence, the prosecutor would need to prove that the accused has not only

improperly created VEECs in contravention of section 20, but did so intentionally, recklessly or with

a degree of criminal negligence. A successful prosecution of a section 20 offence would therefore

result from actions which are essentially fraudulent or "rorts". Given the importance of this offence,

it seems that a potential maximum liability of 60 penalty units30 for a person and 240 penalty units

for a corporation is low.

Within the Act itself, under section 40, if a person fails to surrender VEECs improperly created, that

person commits an offence which attracts a potential maximum liability of 600 penalty units, plus

one penalty unit for each VEEC which is not surrendered. The penalty under this section

appropriately takes into account the threat that improperly created VEECs make to the VEET.

However, knowingly participating in an act which improperly creates those VEEC is not as severely

punished under section 20, although the threat to VEET remains as significant. In light of this, an

increase to the maximum potential penalty is warranted for an offence under section 20 to address

the act of knowingly creating an improper VEEC. Again recognising that the section 20 offences

go to the very integrity of VEET, a maximum penalty commensurate with the offence under section

40 is warranted.

30

As at the date of this report, one penalty unit is equivalent to $122.14.



Similarly the offence under section 68 of the Act is essentially an offence of fraud. A person will

breach section 68 of the Act where that person knowingly provides false or misleading information

to the ESC. Like section 20, an offence under section 68 attracts a maximum penalty of 60 penalty

units31 for a person and 240 penalty units for a corporation. Again this appears to be a low penalty

for what is essentially a fraud being committed. Section 68 is broadly drafted, and may be invoked

for actions which, although fraudulent, do not necessarily effect the integrity of the VEET (for

example if an AP knowingly provided the ESC with false evidence of insurance to the ESC, this

would not necessarily mean that the AP had improperly created VEECs). However, section 68

may also be breached by actions of APs which do threaten the integrity of the VEET, namely by

submitting improperly created VEECs for registration. If the AP does so knowingly, this is a clear

attempt to defraud the VEET, which has the potential to damage the VEET. Consequently the

maximum penalty for a breach of section 68 should be increased, so that the penalty is

commensurate with the potential harm that the offence could have on the VEET. Again, a

maximum penalty commensurate with the offence under section 40 is warranted.

" Should have stronger financial penalties”

Accredited person

To date, the only pecuniary penalty issued under the Act has been the imposition of one

mandatory shortfall penalty in 2009 (the only civil penalty under the Act).

Recommendation 10:

Increase the pecuniary penalty for improper creation of VEECs and fraud and dishonesty offences

in-line with penalties under Section 40 of the Act.

Shortfall Penalties

Some REs are concerned that should there be a significant shortage of VEECs created up to the

end of Phase 1 a large number of REs would likely be required to pay a shortfall penalty. The

impact of such a scenario, impacting several REs simultaneously, would be similar to the effects of

a tax in the view of some REs.

Some stakeholders commented that a potential improvement in the integrity of the Scheme would

be to allow a small percentage (e.g. 5%) of any RE‟s VEEC shortfall to be rolled forward into the

following year (i.e. the shortfall would be added on to the RE‟s VEEC obligations in the coming

year as done in NSW32). Such a roll-forward provision would need to be identified and

31

As at the date of report, one penalty unit is equivalent to $122.14. 32

The NSW scheme allows for a shortfall of up to 10% to be carried forward into the subsequent year except for the final year of the scheme where no carry forward is allowed given that the scheme ceases. The first year of the scheme allowed for a carry forward of 50%. There is no carry forward in the SA Scheme.



communicated well in advance of its introduction and would need to apply to all REs. This would

then become an embedded mechanism in the Scheme that could be utilised by REs at their

discretion. For instance, they could choose whether to meet their annual VEEC quota in full or to

defer the purchase of an allowed percentage of their quota (e.g. 5%) to the subsequent year (in

instances where the scheme is explicitly known to be continuing in the year ahead). Clearly, such a

mechanism would not be applicable in the final year of the Scheme.

The percentage limit that is set would need to be carefully considered to ensure no unforeseen

behaviours are stimulated in the market and compliant REs are not inadvertently penalised. By

providing greater flexibility for market participants the likelihood that REs will meet their annual

VEEC quotas is likely to increase (in our opinion). This would have the effect of increasing the

likelihood that the objectives of the Scheme (Greenhouse emission savings and energy efficiency

improvements) and the Scheme targets would be met

The roll-forward provision would have the effect of deferring the purchase of a small proportion of

VEECs. However we believe that it would not significantly disadvantage any particular stakeholder

group as all participants would have sufficient prior knowledge of the provision and would be able

to make informed decisions regarding how they will adapt to it.

Given that a roll forward mechanism requires changes to the Act and Regulations, and that

stakeholders require significant prior warning of its introduction, we believe it is not advisable for it

to be implemented for Phase 2. Nevertheless, it may be a valuable addition to VEET in Phase 3

(should a Phase 3 be agreed). We feel a roll-forward provision is worthy of consideration for

introduction into VEET in the future. Yet, given the uncertainty surrounding the potential

introduction of a National Energy Efficiency Scheme (as previously discussed) and the associated

implications for the continuation of VEET, we feel it is reasonable to leave the investigation of a

roll-forward mechanism to DPI‟s discretion, based on the circumstances at hand over the coming

years.

However in the absence of a roll forward, where shortfall penalties are collected, the revenue

should be directed towards energy efficiency activities that achieve the objectives of the Act.

Ideally such revenue would be used to purchase VEECs up to the monetary value of the shortfall

in the subsequent 12 month period (except obviously in the period where the scheme has ceased

to operate). By way of example, if $1m dollars of penalty revenue was collected, then $1m of

VEECs would be purchased by the government in the following year. This mechanism will cap the

risk to government, rather than requiring the government to purchase the equivalent number of

VEECs to the shortfall amount, which would create financial risk as VEEC prices change over time.

The appropriate use of penalty revenue also appears to be a material issue given the possibility of

a significant Phase 1 shortfall and the increase in the reduction target for Phase 2. At the time of



writing the report, the ESC‟s estimate of VEEC issuance to the end of Phase 1 indicated a shortfall

of ~700,000 tCO2-e (based on an 8 week running average up until early October). This is

equivalent to ~$28m in shortfall revenue at the penalty rate of ~$40 per VEEC. While the exact

extent of the Phase 1 shortfall may be reduced (e.g. through the large scale deployment of SPCs

through to January 31st, 2012) these figures indicate the potential scale of revenue that could be

collected through shortfall penalties. Given the doubling of the scheme target in Phase 2, a

potential shortfall of this magnitude is not unreasonable to expect in the future.

This re-use of penalty dollars would add liquidity to the market through the Government acting as a

buyer of VEECs. It would also increase the extent to which the Scheme achieves the objectives of

the Act. The downside of this approach is that, should VEEC prices go up in the year following the

shortfall, the objectives of the Act would not be achieved to the same extent as they would have

been if there was no shortfall, or if the equivalent number of VEECs were purchased by

government (rather than purchasing VEECs up to the monetary value of the shortfall). Yet, this

approach would be a significant improvement to the current practice, where shortfall penalties do

not contribute to the achievement of the objectives of the Act.

We understand that this approach is likely to require a change to Government‟s revenue allocation

processes (as they apply to penalties). Despite this challenge, we are of the opinion that it would

be an improvement to the VEET Scheme.

Recommendation 11:

DPI should assess the practicality of allocating VEEC shortfall penalty revenue to contribute to

energy efficiency (for example by buying VEECs) in order to increase the extent to which the

Scheme achieves the objectives.



Non Pecuniary Penalties

Table 5 represents a comparison of the non-pecuniary penalties of VEET against the case studies:

Table 5: Comparison of non-pecuniary penalties amongst different schemes

VIC Mandatory surrender of certificates

Suspension of accreditation

NSW Varying or revoking accreditation conditions

Suspending or cancelling accreditation

Forcing the provision of documents or information

Mandatory surrender of certificates

Cancellation of certificates

SA Nil

UK An order allowing any action to secure scheme compliance

France Nil

Italy At the discretion of the administrator

Source: Case Studies

There are limitations with the two non-pecuniary penalties that the ESC can enforce. Suspension

of accreditation proceedings can only be commenced where a person has committed an offence

under section 20 of the Act (See Appendix 3) or where the ESC reasonably believes the AP has

breached the Act (section 14, see Appendix 3). Suspension of accreditation can result in the

failure of the business of the AP. Because of this, ESC has only used this provision under the

most serious circumstances of non-compliance with only five suspensions of APs having occurred

since 2009 and one AP being suspended twice.

Similarly mandatory surrender of VEECs (section 40, see Appendix 3) can only be enacted when a

person has been found guilty of an offence under section 20. These are very limited in their

application, and do not necessarily address the compliance risks identified in false or careless

creation of VEECs. This affects the integrity of the VEECs, in that VEECs which do not represent

true greenhouse gas reductions are able to be used for compliance purposes.

While the Act provides for voluntary surrender of VEECs (section 25, see Appendix 3), this action

is dependent on the willingness of an AP to surrender VEECs. This may prove difficult to obtain,

and again, where voluntary surrender of improperly created VEECs does not occur, would allow

improperly created VEECs to be used for compliance purposes under the VEET, defeating the

objects under the Act.



Since 2009 ESC has identified 85,106 VEECs as improperly registered through the audits and

investigations while approximately 73,000 VEECS have been voluntarily surrendered to acquit the

improper creations. This variance is the result of certain APs who are either unable to voluntarily

surrender certificates (through a lack of valid certificates in their register or inability to purchase

VEECs in the market) or who have ceased to conduct business. The variance amounts to 0.2% of

all certificates but highlights the shortcomings of this voluntary surrender process. The variance

indicates that not all VEECs which are used by REs for compliance purposes truly represent

greenhouse gas abatement. That is, there are approximately 12,000 registered VEECs which

were improperly created.

In line with recommendations for pecuniary penalties, the VEET Scheme should also focus on

increasing non-pecuniary penalties which address the high compliance risk areas giving the ESC

greater flexibility in assuring compliance. This includes:

Accreditation

1. Suspension of Accreditation – Maintain the suspension provisions but review the types

of offences available under the Act, to be discussed later in the chapter, and determine at

which level suspension of accreditation should be enforced. The Bill introduces a new

offence under section 20 to deal with creation of VEECs based on incorrect information.

The Bill also inserts a new provision under which the ESC will be entitled to suspend the

accreditation of an AP for repeated (but unintentional) improper creation of VEECs, or other

failures to comply with VEET. If these provisions of the Bill are passed, our concerns

regarding the ESCs limited powers to suspend accreditation are alleviated.

2. Revocation of Accreditation – The VEET does not have provisions for revocation of

accreditation (although it can be suspended indefinitely) and this may be considered as the

next level of enforcement. The Bill provides for revocation of accreditation of an AP in

certain circumstances. If the Bill is passed without amendment this recommendation is

fulfilled.

Creation of VEECs

Surrender of VEECs – The ESC should have the ability to require any VEEC it finds to be

improperly created to be surrendered by the AP. VEEC surrender provisions should be amended

to ensure that only registered VEECs can be surrendered such that any „make good‟ actions are

genuinely making good. This will strengthen the integrity of the VEET going forward. The Bill

expands the powers of the ESC to require the mandatory surrender of improperly created VEECs.

If passed unaltered, this new provision satisfies this recommendation.



Penalty Levels

Only 6 penalties have ever been imposed under the Act (5 suspensions, and one shortfall penalty).

However, this is not necessarily evidence of high compliance levels under the Act. The low levels

of penalties imposed may be more adequately explained by:

The limited offences for which penalties are imposed

The fact that the penalty regime under the VEET does not deal with "minor" or "careless"

breaches of the Act

The Act does not adequately establish a prosecution regime.

Limited offences

The penalty regime under the Act is entirely dependent on an offence having been committed

under the Act. The offences under the Act are limited, and do not adequately address the

compliance risks which threaten scheme integrity, such as providing incorrect information in order

to create VEECs.

Given that improper creation of VEECs is probably the greatest risk to the integrity of the VEET,

the offences under section 20 are unclear, and have an extremely limited application. Section 20

offences essentially are:

(a) Creation of a VEEC where the person is not entitled to create a VEEC. As there is

no definition or indication of when a person is "entitled" to create a VEEC, actually

even determining when this offence occurs is extremely difficult

(b) Creation of VEECs prior to accreditation or during an accreditation suspension

period

(c) Creating VEECs for prescribed activities for which other VEECs have previously

been created.

These offences do not adequately address the compliance risks in VEEC creation, particularly

improper VEEC creation as a result of poor record keeping, or calculations. The very nature of an

offence also imputes an element of knowledge on behalf of the person accused of the offence.

Any successful prosecution of an offence under the Act would require the prosecutor to prove

beyond reasonable doubt that not only had the offence occurred, but that the person committing

the offence intentionally, recklessly, or negligently committed the offence.

This means that persistent carelessness or negligence on the part of an accredited person,

resulting in improper VEEC creation, cannot be penalised under the VEET. It is noted that a new

offence has been included in the Bill which attempts to overcome the difficulties under the Act in

successfully prosecuting ongoing carelessness or negligence by an AP in the process of VEEC

creation. This new offence, if passed, alleviates many of the current issues surrounding section



20. We also note that the ESC's broader powers to suspend accreditation of APs under the Bill

also address the threat to VEET integrity posed by persistent carelessness on the part of an

accredited person.

In addition there are no offences within the Act for a breach of the Guidelines. This means that the

ESC does not have adequate power to enforce compliance with the Guidelines, except in

circumstances where the specific non-compliance is also an offence under the Act (for example,

the provisions of the Guidelines surrounding record keeping, are a requirement under section 72 of

the Act, and non-compliance with section 72 is an offence under the Act).

Given that much of the structure around VEEC creation, and compliance measures and conditions,

are contained in these Guidelines, consideration should be given to making breaches of certain

Guidelines an offence under the Regulations. For example the Guidelines state that it is a

condition of accreditation of an AP that an AP comply with the Guidelines relating to insurance

(see guideline 4.3) and training (see guideline 5.4). However nothing in the Act or Regulations

provides for the consequences of an AP breaching such "conditions". This means that legally, a

breach of these Guidelines will necessarily remain unpunished by the ESC, and there is little

impetus on the AP to comply with such conditions.

This issue could potentially be overcome by replicating these "conditions" in the Regulations. This

would ensure that those Guidelines which are conditions of accreditation have a penalty

associated with them when breached (as a breach of the Regulations), but ensure that these

provisions are afforded greater flexibility than if they were an offence under of the Act, as

amending Regulations is a simpler, quicker and more cost effective process than amending

legislation.

The most efficient way to do this would be to insert a new Regulation which requires an AP to

comply with any conditions of accreditation imposed by the ESC, whether such accreditation

conditions are imposed under the Guidelines, or under section 19A of the Act (as set out in the

Bill). This could then be accompanied by a penalty in accordance with Section 75 of the Act.

We do note that section 75 of the Act may require amendment to provide for such regulations.

Offences under the Crimes Act 1958

An offence which could be prosecuted under section 20 of the Act (being improper creation of

VEECs), could potentially also be prosecuted under section 82 of the Crimes Act 1958, as

obtaining a financial advantage by deception. Under section 82 of the Crimes Act, a person who,

by deception, dishonestly obtains a financial advantage, is guilty of an offence. The offences



under section 20 relate primarily to the improper creation of VEECs. If the improperly created

VEECs become registered, and are then sold to a third party, the creator of those VEECs may

have obtained a financial advantage by deception. Both the offence under section 20 of the Act,

and the offence under section 82 of the Crimes Act would also require a prosecutor to prove

beyond reasonable doubt that the person accused intentionally, recklessly, or negligently33

committed the offence.

We note however, that in order for an offence under section 82 to be successfully prosecuted, a

financial advantage would need to be obtained. This would require that the improperly created

VEECs are registered and then sold into the market. The offences under section 20 however,

occur on creation of the VEEC. In this way, section 20 of the Act is broader in application that

section 82 of the Crimes Act. An offence under section 20 may occur even where the ESC refuses

to register the relevant VEECs, and they are thus prevented from entering the market.

The real disparity between the offences lies with the penalties imposed. Under the Crimes Act, a

person guilty of obtaining a financial advantage by deception is guilty of an indictable offence and

liable to up to 10 years imprisonment. Under section 109 of the Sentencing Act, a crime carrying

an imprisonment penalty of up to 10 years is liable for a payment of 1200 penalty units. However,

the maximum penalty for an offence under section 20 is 60 penalty units for an individual or 240

penalty units for a body corporate. This differential in the maximum penalties of the two offences is

significant – a person's maximum liability under the Crimes Act is 20 times greater than their

liability under the Act.

We note however, that a charge of obtaining financial advantage by deception is the only offence

under the Crimes Act which is likely to be committed under VEET. It is unlikely that any actions

made by APs or REs under the VEET will fulfil the necessary elements of other offences under the

Crimes Act, including offences listed in Part 1 of the Crimes Act under the heading "Fraud and

Blackmail".

Consequently, except as outlined in this part, an offence or wrongdoing by an AP or RE is unlikely

to be a crime which can be prosecuted under the Crimes Act, and therefore subject to the

penalties under that act. This adds weight to the need to increase pecuniary penalties as

discussed above.

33

Unlike under civil law, under criminal law a simple lack of care on the part of the perpetrator of the offence is usually not sufficient to prove a person was criminally negligent. At criminal law a high degree of negligence is usually required in order to prove that a person has committed a criminal offence.



Prosecution Regime

The Act does not adequately provide a regime for prosecution of the offences under the Act. This

means that any prosecution would need to be carried out as a private prosecution. The Act would

be improved if it provided that the ESC was entitled to prosecute offences, and was entitled to

delegate this function and appoint persons to undertake any necessary prosecutions. This issue

has been addressed in the Bill to provide that the ESC or the police may prosecute offences under

the Act, and if the Bill is passed unaltered, this recommendation is fulfilled.

Lesser Penalties

Under the Act, the ESC is not provided with the power to issue lesser penalties than those

discussed, to deal with "minor" or "careless" breaches of the Act quickly and effectively. Examples

of lesser penalties used in other compliance regimes include:

i. The power of the ESC to issue warnings to VEET participants for breaches of the

Act, Regulations and Guidelines, and make failure to comply with warnings an

offence

ii. The power of the ESC to accept undertakings by VEET participants

iii. The power of the ESC to impose fines for minor or unintentional breaches of the

Act, the Regulations and the Guidelines.

The Bill provides a system of warnings and reprimands and conditions on accreditation which the

ESC can impose on APs. This will provide the ESC with significantly greater flexibility when

dealing with enforcement issues.

While undertakings could also be a useful measure, they would operate in a very similar manner to

accreditation conditions, and as such will not afford any greater flexibility to the ESC in

administering and enforcing the Act.

The imposition of fines can in some circumstances provide a very useful enforcement mechanism.

Victoria has a very well established infringement regime for the imposition of lesser penalties for

minor offences. This regime is provided for in the Infringements Act 2006. However, this regime is

most appropriately used for offences which are strict liability (i.e. the element of knowledge

necessary for criminal liability is largely removed). The offences under the Act are not well suited

to strict liability. Additionally, administrative bodies with the power to issue infringement notices,

must develop a number of internal procedures and reviews to ensure compliance with the

infringements regime. Therefore participating in the infringements regime in Victoria would impose

a significant time and cost burden on the ESC, which is probably unnecessary given that minor

infringements of the VEET can now be effectively dealt with under the new provisions of the Act

set out in the Bill relating to warnings, mandatory surrender of certificates, and the ESCs power to

refuse registration of certificates.



Recommendation 12:

The Regulations should replicate any Guidelines amounting to a condition of accreditation and

have a penalty associated when these are breached.

7.2 Recommendations


administration

Change to

Act

Change to

Regulation

Change to

ESC

Guideline

10. Increase the pecuniary penalty for improper creation of VEECs and fraud and dishonesty offences in-line with penalties under Section 40 of the Act.

11. DPI should assess the practicality of allocating VEEC shortfall penalty revenue to contribute to energy efficiency (for example by buying VEECs) in order to increase the extent to which the Scheme achieves the objectives.

12. The Regulations should replicate any Guidelines amounting to a condition of accreditation and have a penalty associated when these are breached.



Appendix 1: Stakeholder Consultation

Appendix 1.1 - Stakeholder list

The review was undertaken in conjunction with stakeholder engagement to better ascertain

the issues and benefits of the VEET Act and to discuss the issues raised in the RFT.

The review panel undertook 26 interviews and ran two focus groups with various

stakeholders. A list of the stakeholders can be seen in Figures 10 and11.

Figure 10: Stakeholder interview list

A government department Green Energy Trading Community Representative

Essential Services Commission

Department of Primary Industry

Low Energy Climate Institute

Moreland Energy Foundation

Essential Services Commission Manufacturer Sustainable Melbourne Fund

of South Australia

Independent Pricing and

Embertec

GWA Group

Victorian Tenants Union

Regulatory Tribunal (NSW)

Office of Environment and

Energy Retailer

Industry Association

Heritage (NSW)

Sustainability Victoria

AGL

Australian Power & Gas

Clean Energy Council

Victorian Employer‟s Chamber

Momentum Of Commerce and Industry

Accredited Person Origin

Brotherhood of St Laurence Red Energy

Ecovantage TRUEnergy

Greenbank Environmental



Figure 11: Focus group list34

Focus Group 1 – Community/local

government

Focus Group 2 – Business

City of Melbourne Chromagen

City of Yarra Energy Returns

City West Water Emerald Planet

Yarra Valley Water Next Generation Energy Solutions

Northern Alliance for Greenhouse Action

Southern Sustainable Systems

34

A further 5 stakeholders were invited to participate in each of the two focus groups however these stakeholders did not attend on the given days.



Appendix 1.2 - Stakeholder survey

At both the interviews and the focus groups, stakeholders were asked to participate in a

survey which assessed the performance of the VEET Scheme on a number of criteria.

Twenty nine survey responses were received. A copy of this survey is shown below:

VEET Independent Review – Stakeholder Survey 1. How successful has the VEET Act been in achieving its objectives?

o Rate from 1- 5 for each of the points below (1 = highly unsuccessful; 5 = highly successful)

1 2 3 4 5

Reducing Greenhouse gas emissions

1 2 3 4 5

Encouraging efficient use of electricity and gas

The following 3 points relate to encouraging investment, employment and technology development in industries which supply goods and services which reduce the use of electricity and gas by consumers. How successful has VEET Act been in encouraging: 1 2 3 4 5

Employment

1 2 3 4 5

Investment

1 2 3 4 5 Technology development

2. How appropriate have the scheme Targets been (both phase 1 2009-2011 and phase 2

2012-2014)? o Rate from 1 to 5 for each phase below (1 = too low; 5 = too high)

1 2 3 4 5

Phase 1 of VEET

1 2 3 4 5

Phase 2 of VEET



3. Does the current scheme have the right balance of compliance requirements? o Rate from 1 to 5 (1 = too lax; 5 = too stringent)

1 2 3 4 5

4. Are the penalties under the Scheme appropriate?

o Rate from 1 to 5 (1 = too lax; 3 = about right; 5 = too harsh)

1 2 3 4 5

5. Are the qualifications of Accredited Persons‟ appropriate to achieve the objectives of the

Act in a credible manner? o Rate from 1 to 5 (1 = highly inappropriate; 5 = highly appropriate)

1 2 3 4 5

6. Are the skills of Accredited Persons‟ appropriate to achieve the objectives of the Act in a credible manner?

o Rate from 1 to 5 (1 = highly inappropriate; 5 = highly appropriate)

1 2 3 4 5

7. To what extent do you believe there is non-compliance with the Act?

o Rate from 1 to 5 (1 = immaterial non-compliance; 3 = some non-compliance; 5 = significant non-compliance)

1 2 3 4 5

8. How effective has ESC been in administering the Act?

o Rate from 1 to 5 (1 = highly ineffective; 5 = highly effective)

1 2 3 4 5



Appendix 1.3 - Stakeholder themes

A synthesis of the main themes raised at the interviews and the focus groups can be seen in Table 6. The table below outlines the views of the stakeholders consulted and thus should not be interpreted as being direct recommendations of this review. Table 6: Common issues and comments raised during the stakeholder consultation

Category Themes

Compliance

On average APs have a 5% - 10% non-compliance with VEEC creation (mostly administrative errors or duplication).

Early in the scheme the address validation system was not optimal as the ESC used a database which was inconsistent with Victorian address systems.

The ESC should have varying levels of penalties to manage administrative non-compliance as opposed to fraud.

Early in the Scheme there may have been some fraudulent VEEC creation but since the ESC has increased its presence (through audits and enforcement actions) this appears to be less of an issue.

Technology

DPI should review how new technologies are approved, to reduce lead-time for approval. This process is a bottle-neck.

DPI should have a project-based method for calculating VEECs.

The VEET scheme is about technology adoption and deployment (and refinement of existing technology) vs. technology development (of emerging technology).

Online point of sale VEEC creation tool should be promoted by the ESC to assist in increasing the volume of VEECs created for high efficiency TVs, fridges and washing machines.

Remove the insulation discount factor.

Accreditation NSW have a stricter accreditation process but this could be good in ensuring that only AP's who understand the process and have appropriate record keeping and compliance management tools are approved.

Observations around Phase 1 Target were that:

The target is appropriate but a little conservative (could have been a bigger target), and

The Scheme met its targets for 2009 and 2010 but there is uncertainty regarding the likelihood of meeting the 2011 target.

Targets

Observations around Phase 2 Target & Scope are that:

There is a large potential of VEEC creation with SMEs especially if project methodologies can be used, but

There are different barriers with take up of energy efficiency changes for SMEs then for residential customers.

The current definition of SME's (as described in the RIS) is appropriate (excludes EREP)

The VEET scheme should Include behaviour change programs/technology/targets

The VEET scheme should include sub-targets such as for low income house-holds.



Category Themes

VEECs The ESC should provide visibility of future VEECs being created.

The current VEEC creation process is manual and time intensive.

Employment The VEET scheme has created new jobs – however these are predominantly for administrative staff and short-term contractors.

Advertising

There is not enough awareness of the Scheme. Any advertising (e.g. Black Balloon Campaign) created to date has had no direct connection to the Scheme.

APs and manufacturers want Government endorsement of products to increase public take-up.

Policy There should be a national scheme and there should be a central organisation to approve technology for all schemes.

ESC Staff at the ESC are friendly and supportive when it comes to creating VEECs but the compliance staff appear to be inconsistent with their approach to audit, and more so in the last year.

Administration

APs have noted that the VEET has the most amount of administrative burden (for APs) of the three state schemes.

To avoid duplication, when a manufacturer‟s product is approved for use, APs should not have to resubmit the same documentation.

When changes are made to VEEC registration forms/systems, the ESC needs to carefully consider when to retrospectively require VEECs to be amended to match the new process/format. Retrospective actions are difficult for APs.

Some scheme participants have found that in the last 12 months the audit skills of ESC is lacking and that some audit requirements feel unreasonable and take a long time to resolve.



Appendix 2: Compliance, Accreditation and Audit Process for VEET

Risks with VEEC Creation

From reviewing the Act, the Regulations, Guidelines, and information obtained from the ESC

and the VEET website, compliance issues can arise in the creation of VEECs in any of the

following instances:

1. The activity for which the VEEC has been created did not occur

2. The activity for which the VEEC has been created did not comply with other laws

(such as the Occupational Health and Safety Act 2004)

3. The activity for which the VEEC has been created was undertaken as a performance

requirement under the Building Code

4. Careless completion of the VEEC creation form

5. Falsifying records and evidence of installation activities

6. Improper installation of the relevant energy saving product

7. Duplication of claims for an installation (i.e. where the same installation is claimed

twice)

8. Insufficient evidence of the assignment of the rights to create VEECs from the

customer to the AP

9. Inadequate evidence of removal or destruction of existing products (where such is

required under the Regulations).

Other major compliance risks are associated with APs and include:

1. Inadequate record keeping procedures;

2. Inadequate training (resulting in poor installation practices); and

3. Inadequate internal stock control.



Accredited Person Process

The ESC as the administrator of the VEET is the body which accredits APs. The ESC must

do so in accordance with the provisions of the Act.

The Act in Division 1, Part 3, sets out who may apply to become an AP, and the skeletal

structure of the accreditation process. Section 9(1) provides that any person can apply for

accreditation. Section 9(2) provides that the person applying must make an application to the

ESC which:

1. Is made in the form required by the ESC

2. Contains the information required by the ESC

3. Is accompanied by the documents required by the ESC

4. Is accompanied by the application fee

5. Where required by the ESC, is accompanied by undertakings and/or consent to

disclose information held under a “prescribed greenhouse gas scheme” (of which

none are currently declared).

If the application meets the requirements of section 9(2), the ESC must approve the

application (see section 11(1)). The ESC must refuse an application where the application

does not meet the requirements of section 9(2) (see section 11(2)). The ESC has 20 days

within which to approve or reject an application (see section 12(1)).



Requirement of the ESC

The ESC has published on its website the six steps to accreditation.

Step 1:

Review and read the relevant documents, being the Act, regulations, Guidelines, the

Application Form, and the ESC Guides listed.

Step 2:

Open a VEET Account – this step is required at this stage as the Application Form requires

an applicant to quote their VEET Account details.

Step 3:

Complete the Application Form. The ESC has a published form for applicants to complete

(the Application and Accreditation Form). In this form, and its associated Guidelines,

published on the VEET website, the ESC sets out the information and documents which an

applicant must provide in order to be approved as an AP under the Act. This information and

documentation includes:

a) The category of the applicant‟s core business

b) Categories of the prescribed activities which the applicant intends to undertake

c) The processes and policies of the business (including overviews of the

business model, methods of ensuring proper assignment documentation is

obtained, etc)

d) An explanation of the applicant‟s record-keeping system

e) The applicant‟s pro-forma VEEC assignment form (containing at least the

minimum information required by the ESC)

f) The expected quantity and frequency of VEEC creation

g) Training and development of staff, ensuring that staff understand the relevant

areas of the Scheme

h) A description of the applicant‟s contractual arrangements between the

applicant and the persons doing the actual installation (or otherwise carrying

out the prescribed activities);

i) Product details for certain installed devices

j) Licensing information for those activities where the prescribed activities can

only be undertaken by a person licensed to do so under other legislation

k) Decommissioning practices for certain prescribed activities.

Step 4:

Prepare the supporting documentation and information required under the Application Form.



Step 5:

Submit the completed Application Form and supporting information and documentation to the

ESC.

Step 6:

On receipt of an invoice from the ESC, pay the $500.00 accreditation fee (the ESC will not

send an invoice until all the required information and documentation has been provided).

The ESC then determines whether the application is approved or refused.

Remembering that under section 11(1) of the Act, the ESC must approve an application

which meets the requirements of section 9(2), it would appear that when an applicant pays

the $500.00 accreditation fee, the applicant's application will be approved (as the ESC

process states that it will only invoice for the fee when all required information and

documentation is provided).



Current ESC Audit Process Table 7: Current ESC Audit Process

Audit

Type

Walk-Though

Audit

Detailed Audit Investigative

Audit

Purpose Understand

business

model,

certificate

creation and

record keeping

processes

Review that VEECs

have been properly

created

Review

appropriateness of

internal controls,

governance and

management

processes and

compliance

documentation

Review of

specific

issues

identified in

other audit

processes or

other

information.

Frequency At any time,

with first to

occur within 2-

4 months of

accreditation.

Thereafter 12-

18 months for

APs with a

"medium" risk

rating and

within 24

months for a

"low" risk rating

At anytime, but at

least within the first

12 months of

accreditation.

Thereafter once

every 3 years

generally, but

between 12 – 18

months for APs with a

"high" risk rating and

within 6 months for a

"very high" risk" rating

As needs

basis

Source: ESC



Figure 12: Current VEEC Registration process

Source: ESC

VEEC Creation form Submitted by AP

DAVE & Duplication Tool Check by ESC

Manual Check

Fee paid

VEEC Registered

AP fix/amend form

ESC Compliance team check

ESC discuss identified issue with

AP

Actions arising from discussions

Re-submit

Audits; ORPenalties; ORSuspension

Issue identified

OK

OK but high risk AP OR problem

Further issues identified

AP to withdraw VEEC

ProblemOK



Appendix 3: Sections of the Victorian Energy Efficiency Act 2007

Section 9 - Who may apply to be accredited?

1) A person may apply to the ESC to be an accredited person.

2) An application must—

a) be made in a form and manner required by the ESC; and

b) contain any information required by the ESC which the ESC considers

necessary for the purposes of the VEET scheme; and

c) be accompanied by any documents required by the ESC which the ESC

considers necessary for the purposes of deciding whether to approve the

application; and

d) be accompanied by any relevant fee fixed under section 73.

3) If required by the ESC under section 10, the applicant must provide to the ESC—

a) evidence of the kind referred to in section 10(1); and

b) an undertaking referred to in section 10(2).

Section 10 - ESC may require consent or undertaking from applicant for accreditation

1) The ESC may require an applicant under section 9 to consent in writing to the disclosure

of information of a kind specified by the ESC and held under a prescribed greenhouse

gas scheme.

2) The ESC may require an applicant under section 9 to give an undertaking not to claim any

benefit under a prescribed greenhouse gas scheme if that would result in a benefit being

obtained under both that scheme and the VEET scheme in respect of the same activity.

3) For the purposes of subsection (2), benefit means—

a) the creation of a certificate under the VEET scheme; or

b) a benefit under the prescribed greenhouse gas scheme.

Section 11 - ESC to approve or refuse application

1) If the ESC receives an application that complies with section 9, the ESC must approve the

application.

2) If the ESC is not satisfied that an application complies with section 9, the ESC must

refuse the application.

Section 14 – Suspension of accreditation

1) If an accredited person has been convicted of an offence under section 20, the ESC may,

by written notice, suspend the person's accreditation for the period (not exceeding 2

years) as the ESC considers appropriate in all of the circumstances and specifies in the

notice.



2) If a person whose accreditation has previously been suspended under subsection (1) is

convicted of another offence under section 20, the ESC may, by written notice, suspend

the person's accreditation for the period (including permanently) that the ESC considers

appropriate in all of the circumstances and specifies in the notice.

3) The ESC may, by written notice, suspend the accreditation of an accredited person if the

ESC believes on reasonable grounds that the person—

a) has committed an offence against this Act; or

b) has breached an undertaking given to the ESC under section 10(2).

4) An accreditation that is suspended under subsection (3) is suspended for the period (not

exceeding 12 months) that the ESC considers appropriate in all of the circumstances and

specifies in the notice.

5) The ESC may, by written notice, suspend the accreditation of an accredited person if the

accreditation was obtained improperly.

6) An accreditation that is suspended under subsection (5) is suspended for the period

(including permanently) that the ESC considers appropriate in all of the circumstances

and specifies in the notice.

Section 20 – Offences relating to creation of certificates

1) A person who is not entitled under this Act to create a certificate must not create a

certificate under this Act.

Penalty: 60 penalty units in the case of an individual;

240 penalty units in the case of a body corporate.

2) In determining whether a person was or was not entitled to create a certificate under this

Act, the fact that the certificate has been registered by the ESC under section 22 is to be

disregarded.

Note This ensures that a person cannot raise as relevant evidence the fact that a

certificate has been registered.

3) An accredited person must not create a certificate in respect of a prescribed activity which

occurred before the person applied for accreditation under section 9.



4) An accredited person must not create a certificate during any period in which

accreditation under section 9 is suspended in accordance with section 14.



5) An accredited person must not create a certificate in respect of a prescribed activity, if the

accredited person—



a) has previously created a valid certificate under this Act in respect of that

prescribed activity; or

b) has knowledge that another person has previously created a valid certificate

under this Act in respect of that prescribed activity.



6) An accredited person must not create a certificate in respect of a prescribed activity if the

accredited person or another person has previously obtained any benefit in respect of that

prescribed activity under a prescribed greenhouse gas scheme.



Section 25 – Owner may surrender certificate voluntarily

1) The owner of a certificate may voluntarily surrender the certificate under this section.

Note Certificates may also be surrendered under section 33, 38, 39 or 40.

2) The owner of a certificate, must at the same time, give the ESC, reasons in writing, why

the certificate is being surrendered.

3) A certificate surrendered under this section must not be included in an energy acquisition

statement.

Section 40 - ESC may require surrender of certificates if certificates improperly created

1) The ESC may by order in writing require a person to surrender to the ESC, within a period

specified in the order, the number of certificates specified in the order.

2) A person must comply with an order under this section.

Penalty: 600 penalty units and an additional 1 penalty unit for each certificate

that the person fails to surrender in accordance with the order.

3) An order can only be made against a person under this section if the person is found

guilty of an offence against section 20(1), 20(3), 20(4), 20(5) or 20(6).

4) If an order is made against a person found guilty of an offence under section 20(1), 20(3),

20(4), 20(5) or 20(6), the ESC must require the person to surrender the number of

certificates that is equivalent to the number of certificates that were created by the person

in contravention of section 20(1), 20(3), 20(4), 20(5) or 20(6) and registered under this

Act.

5) A certificate surrendered under this section is not to be counted toward a person's

compliance with section 27.

Appendix 4.1 – Case Study Comparison

Case Study Comparison

111025 VEET Parliament Report FINAL 100

Table 8: Summary of similar scheme case studies

Victoria

Victorian Energy

Efficiency Target

(VEET)

New South Wales

Energy Savers Scheme

(ESS)

South Australia

Residential Energy

Efficiency Scheme

(REES)

United Kingdom

Carbon Emission

Reduction Target

(CERT)

France

Certificats

d'Economies d'Energie

(CEE)

Italy

Energy Efficiency Title

Scheme (EET)

Scheme

Timeframe

Phase 1: 2009-2011

Phase 2: 2012-2014

Scheme to exist between

2009-2029

Phase 1: 2009-2014

Phase 2: 2014-2020

(superseded GGAS)

Phase 1: 2009-2011

Phase 2: 2012-2014


2008-2012 (superseded

EEC1 and EEC2)

Phase 1: 2006-2010

Phase 2: 2011-2013


2005-2012

SegmentsPhase 1: Domestic

Phase 2: Domestic &

SMEs (excluding EREP

organisations).

Domestic, service and

industry sectors.

Some industries are

exempt from the scheme

and are covered under

ESS Exemptions Rule

No 1 of 2009.

Domestic Domestic All sectors except for

those participating in the

European Emissions

Trading Scheme.

Residential, service (e.g.

transport) and industrial

sectors.

TargetsTarget (tCO2-e)

Phase 1:

2.7 MtCO2-e/yr

Phase 2:

5.4 MtCO2-e/yr

Target (% reduction)

Phase 2: Will contribute

between 4 – 5.7% of

Victoria‘s GHG

emissions reduction

target by 2020

depending on.

Target (kWh)

Between 2009-2012 will

save 8.5 MWh or around

9 MtCO2-e over 4 years

Stepped target is % of

annual NSW electricity

sales)

2009 - 0.4%

2010 - 1.2%

2011 - 2.0%

2012 - 2.8%

2013 - 3.6%

Target (tCO2-e)

Phase 1:

2009: 0.155MtCO2-e

2010: 0.235 MtCO2-e

2011: 0.255 MtCO2-e

Note: The Climate

Change and

Greenhouse Emissions

Reduction Act 2007 has

a target for SA to reduce

greenhouse gas

emissions in SA by

Target (tCO2-e)

293 MtCO2-e

Note: The nature of the

target is a lifetime

delivered energy savings

i.e. the savings are

counted for the life of the

energy saving action.

Specific Targets

> 40% of the

overall target is to

be met by

Target (kWh)

Phase 1: 65.2 TWh

cumac (cumulative and

discounted)

Phase 2: 345 TWh

cumac


target is a lifetime

delivered energy

savings.

The CEE was a key part

of the French policy to

reduce its energy

intensity by 2% each

Stepped target (Tonnes

of Oil Equivalent ‘toe’)

2005 – 0.1 Mtoe for

electricity distributors

and 0.1 Mtoe for gas

distributors.

2012 – 3.5 Mtoe for

electricity distributors

and 2.5 Mtoe for gas

distributors (~70TWh for

2012 in aggregate).

http://www.climatechange.sa.gov.au/index.php?page=climate-change-law





Victoria

Victorian Energy

Efficiency Target

(VEET)

New South Wales


(ESS)

South Australia

Residential Energy

Efficiency Scheme

(REES)

United Kingdom

Carbon Emission

Reduction Target

(CERT)

France

Certificats


(CEE)

Italy


Scheme (EET)

TargetVictoria‘s emissions as

part of the Victorian

Climate Change Act,

2010

2014 - 4.0% - equivalent

to >3,500GWh/yr from

2014 on

at least 60% of 1990

levels by the end of

2050.

Specific Target

For all years, 35% of

target is to be met by low

income households

In 2011: Must conduct

energy audits of 5,000

low income households

activities in low

incomehousehold

s (Priority Group)

S16.2 MtCO2e

must be

undertaken in the

Super Priority

Group.

73.4 MtCO2e

through insulation

year until 2015, and then

by 2.5% until 2030.

Specific Targets

Phase 1

The allocation of the

target by energy source

is:

57%

electricity26%

natural gas

13% domestic oil

4% others

Phase 2 includes 90

TWh cumac for motor

vehicle fuel suppliers.


target is a cumulative

primary energy savings.

Specific Targets

Distributors must

achieve half their target

by implementing

activities within their own

customers.

Trade:Trading

Borrowing or banking is

not permitted.

Trading

Borrowing is permitted

No trading

Borrowing is permitted

Only between suppliers

Borrowing or banking is

not permitted.

Trading, Certificate size

is 1 GWh

Liable entities may pool

their individual target by

joining a special purpose

corporation.

Banking is permitted.

Trading three classes of

certificates (depending

on source of energy).

Certificate equals 1 toe

saving.

Banking is permitted.


http://www.dse.vic.gov.au/conservation-and-environment/climate-change/victorian-climate-change-act-2010




Victoria

Victorian Energy

Efficiency Target

(VEET)

New South Wales


(ESS)

South Australia

Residential Energy

Efficiency Scheme

(REES)

United Kingdom

Carbon Emission

Reduction Target

(CERT)

France

Certificats


(CEE)

Italy


Scheme (EET)

Participants Holders of NSW

electricity retail

licenses

NSW electricity

generators that

supply directly to

retail customers in

NSW

Market customers

in NSW who

purchase their

electricity directly

from the NEM

Electricity and gas

retailers with 5,000 or

more residential

customers

Obligated electricity and

gas retailers with more

than 50,000 customers

All suppliers of

electricity, gas, heating,

refrigeration, domestic

fuel and motor vehicle

fuel.

Distribution System

Operators that serve at

least 50,000 customers

as at 31 December

2006.

Methodology Forward deeming of

approved

technology.

a) Project Impact

Assessment

Method

b) Metered Baseline

Method

c) Deemed Energy

Savings Method

Forward deeming of

approved technology.

1. A demonstration

action

2. A market

transformation

action

3. A priority group

flexibility action

4. A standard action

Applications for

certificates may refer to

a series of activities as

part of a plan/program

(project) to be

implemented over a

specified period of time.

Projects are divided in

to:

Standard

Projects, and

Non-standard

Projects

Projects must

save >20GWh

cumac.

1. A deemed

savings approach

2. An engineering

approach, with

some onsite

measurement.

3. An approach

based on

monitoring plans

There is ex-post

verification and

certification of actual

energy savings achieved

on a yearly basis for

methods 2 and 3.



Victoria

Victorian Energy

Efficiency Target

(VEET)

New South Wales


(ESS)

South Australia

Residential Energy

Efficiency Scheme

(REES)

United Kingdom

Carbon Emission

Reduction Target

(CERT)

France

Certificats


(CEE)

Italy


Scheme (EET)

Technology

– Notable

inclusions

(Approved

technology)

&

exclusions

(Prohibited

technology)

Approved

Technology

Compact

Fluorescent

lights (CFLs)

Standby Power

Controllers

Prohibited Technology

CFLs

Technology

covered by a REC

Stage 2 Technology

Pending Approval

Install down light

caps

Linear light

emitting diodes

Technology rejected or

removed for Stage 2

Replace ducted

reverse cycle air

conditioner with

ducted

evaporative air

conditioner

(REMOVED)

Replace existing

heating/cooling

with an efficient

system (space

heater

(REMOVED)

Insulation (all)

Install external

awnings

Install thermally

efficient windows

High power factor

CFLs

Install in-home

display device.

Behaviour Change

2% of the obligated

retailer's carbon

emissions reduction

obligation may be

achieved by a real time

display or a home

energy advice package

Prohibited Technology

CFLs and halogenated

incandescent bulbs

As at 1 May 2011, the

Standard Projects List

contained 210 Standard

Projects with

corresponding eligibility

criteria and pre-

determined kWH cumac

allocation for each

Standard Project.

It also includes fuel

source for motor

vehicles.

Behaviour Change

Can provide technical

advice and contribute to

programmes of reduction

of energy consumption in

low income households

or programmes of

information, training and

innovation geared

towards management of

energy demand.

Prohibited Activities

Activities covered by

other schemes e.g.

European Union

Directive no. 2003/87/CE

establishing the EU

energy trading scheme

No limitation (includes

fuel sources for transport



Victoria

Victorian Energy

Efficiency Target

(VEET)

New South Wales


(ESS)

South Australia

Residential Energy

Efficiency Scheme

(REES)

United Kingdom

Carbon Emission

Reduction Target

(CERT)

France

Certificats


(CEE)

Italy


Scheme (EET)

Penalties Shortfall

Suspension

from being an

AP

Contravention of

Act (fine)

Prosecution

Shortfall - Up to

20% of shortfall

can be carried

over to following

year. (First year

of scheme up to

50% of shortfall

carried over).

Suspension,

revocation of ACP

Contravention of

Scheme Rule

(fine)

Prosecution

Shortfall - If

achieved >90% of

target shortfall

penalty not

imposed, can be

carried over to

next year.

Shortfall Notice to

‗make good‘

Fines

Issue an order to

secure

compliance

Shortfall

Fines for breach

of Energy Code

capped at 2% of

participant annual

revenue.

Dependent on the

amount of investment to

rectify the issue. Fines

can be set between €

25,000 and €

155,000,000.

Audit Conducted by:

Authorised officer

(ESC or external

appointed by ESC).

Financed by: ESC

Processes: Certificate

validation, Spot check,

AP office inspection,

phone or home-visits to

consumers, pre-

registration audits.

Annual audit for RE‘s

by external panel

auditor

Conducted by: IPART

and Audit Panel

member.

Financed by: AP

Processes: Certificate

validation, pre-

accreditation, spot

audits, single audits, on-

going audits (periodic

and volumetric), pre-

registration audits,

annual reports for

retailers and APs.

Conducted by:

Independent auditor

Financed by: Retailer

Processes: Annual

audit

Conducted by: OFGEM

Processes: annual

report review, site

inspection, validation,

spot check.

Conducted by: DREAL

and DGEC

Conducted by: AEEG

officers, the Italian

National Agency of New

Technologies and the

Finance Police.

Processes:

Random checks



Victoria

Victorian Energy

Efficiency Target

(VEET)

New South Wales


(ESS)

South Australia

Residential Energy

Efficiency Scheme

(REES)

United Kingdom

Carbon Emission

Reduction Target

(CERT)

France

Certificats


(CEE)

Italy


Scheme (EET)

Costs

associated

with

Scheme

Certificate

registration: $1.00

VEEC: $10-25 per

certificate

Shortfall: $40 per

tCO2-e + CPI

Cost (or estimate) of

scheme: 4.6 $M/yr

(FY10-11)

Certificate creation:

$0.70

ESC: $31 per certificate

Shortfall: $24.50 per

tCO2e + CPI


scheme: n/a

Certificate creation: n/a

Shortfall: Base fee

$10,000, $500 per audit

not complete and $70

per tCO2e


scheme : n/a


scheme €M/yr: 570

Shortfall: 20€/MWh


scheme € M/yr: 200


scheme € M/yr: 90



Sources:

1. Electricity Supply Act 1995 (NSW)

2. Electricity Supply (General) Regulation 2001

3. Energy Savings Scheme Rule of 2009

4. Electricity Act 1996

5. Electricity (General) Regulations 2008

6. Gas Act 1997,

7. Gas Regulations 1997

8. Essential Services Commission Act 2002

9. Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2010 (Order 2010)

10. The Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2009 (Order 2009)

11. The Electricity and Gas (Carbon Emissions Reduction) Order 2008

12. Loi de programme fixant the orientations de la politique énergétique" no. 2005-781, 13 July 2005

13. "Loi portant engagement national pour l'environnement" no. 2010-788, 12 July 2010

14. Regulatory Authority for Electricity and Gas, Resolution VIS 57/11 " Irrogazione di una sanzione amministrativa pecuniaria in

materia di titoli di efficienza energetica a seguito di istruttoria formale avviata con deliberazione 18 gennaio 2010 VIS 2/10 nei

confronti di S.I.DI.Gas S.p.A".

15. Regulatory Authority for Electricity and Gas, Resolution VIS 80/11: of the "Avvio di tre procedimenti nei confronti di Azienda

Multiservizi Valenzana S.p.A., Mediterranea Energia e Societa` Irpina Distribuzione Gas S.p.A., per l'accertamento di violazioni

in materia di titoli di efficienza energetica".

16. Regulatory Authority for Electricity and Gas, Resolution VIS 81/11: "Avvio di sei procedimenti nei confronti di AMGA - Azienda

Multiservizi S.p.A., Edison D.G. S.p.A., Enel Distribuzione S.p.A., Genova Reti Gas S.p.A., Prealpi Gas S.r.l., e A.M.GAS

S.p.A. di Bari, per l'accertamento di violazioni in materia di titoli di efficienza energetica"


Appendix 4.2 – How to Read

the Case Studies

Five case studies of energy efficiency schemes have been undertaken as part of this review. Each

case studies outlines how each of the scheme operates in the context of:

The operating regulations and policies

• Segment scope

• Scheme targets

• Scheme participants

• The approved technologies and methodologies

• The administration of the schemes.

At the end of each case study is a set of informative insights highlighting operational differences

between the case study scheme and VEET. Where insights could improve the VEET Scheme they

have been addressed in the main body of the report.


Appendix 4.3 - Case Study 1

NSW – Energy Saver Scheme (ESS)

Glossary

Term Equivalent in VEET Description

Obligated Participant Relevant Entity

Accredited Certificate

Providers (ACP)Accredited Persons Accreditation relates to energy savings activity only unlike in VEET.

Energy Saving Certificates

(ESC)

Victorian Energy Efficiency

Certificates (VEECs)

Independent Pricing &

Regulatory Tribunal

(IPART)

Essential Services

Commission (ESC)

Recognised Energy

Saving Activity (RESA)

Prescribed Activity A specific activity, approved by the Scheme Administrator, which is

implemented by an Energy Saver and increases the efficiency of

electricity consumption or reduces electricity consumption with no

negative effect on production or service levels.


NSW Scheme General

Overview: The NSW Energy Savers Scheme (ESS) commenced on 1 July 2009 and will continue until a national energy

efficiency scheme is established or the Scheme reaches 2020. The Scheme covers the residential, commercial and

industrial sectors of the economy.

Authorities: Scheme creator:

Office of Environment & Heritage (OEH)

Scheme administrator:

Independent Pricing & Regulatory Tribunal NSW (IPART)

Note: Scheme Administrator regulates the Accredited Certificate Providers (ACPs) and the Scheme Regulator

regulates Scheme Participants. Both are part of IPART.

Targets: The ESS has a rolling annual phased target. The scheme started in 2009 (taking over from the GGAS scheme).

Targets have been stepped up to 2014 and this final target will continue till 2020 or until a national scheme is rolled

out.

(Stepped Target is % of annual NSW electricity sales)

2009 - 0.4%

2010 - 1.2%

2011 - 2.0%

2012 - 2.8%

2013 - 3.6%

2014 - 4.0%

The targets have been designed to achieve over 3,500 GWh of electricity savings per annum (3.2 MtCO2-e ) from

2014 onwards across the residential, commercial and industrial sectors.


NSW Scheme General

Targets: The first four years of the scheme will save 8.5 million MWh or around 9 MtCO2-e.. As at 30 June 2010, the Registry

had recorded the creation of 278,176 ESCs for the 2009 calendar year. Sixty five per cent of these were derived

from companies that had transitioned from GGAS to the ESS and were able to claim energy savings for the entire 6

months that the ESS was operating.

A Scheme Administrator Notice dated 18 October 2010 indicated IPART anticipated there to a shortfall in supply of

ESCs for the 2010 compliance year and that 27 additional ACP applicants were being assessed to address this

supply gap.

Participants

and

Markets:

Scheme Participants

All holders of New South Wales electricity retail licenses, New South Wales electricity generators that supply directly

to retail customers in New South Wales, and market customers in New South Wales who purchase their electricity

directly from the National Electricity Market are required to participate in the Scheme as a condition of their retail

supplier licence.

Markets

The scheme applies to both the residential, commercial and industrial sectors. The Scheme Regulator Exemptions

Rule No. 1 of 2009 and Ministerial Order outline sectors which are emissions intensive and trade exposed entities

and are exempt from the Scheme.

Registration

Costs: The Scheme was designed to recover its administrative costs over the life of the Scheme through fees paid by

participants. The following fees are imposed on Scheme participants:

• Accreditation - The initial application for accreditation attracts an application fee of $500. All subsequent

applications or amendments to projects by the ACP do not attract an application fee.

• Transfer of Accreditation – accreditation under the ESS is not transferable, however with approval from

the Scheme Administrator, a person may transfer its accreditation to a related body corporate of that

person. The application fee for transfer of accreditation as an ACP is $500 (Regs cl 78Q)


NSW Scheme General

Registration

Costs: • Registration of Certificates – a charge $0.70 per certificate is imposed on the registration of each

certificate at the time of creation. This charge is payable within 60 days of creation and must be paid

prior to the certificate being available for transfer or surrender. (Regs cl 78 KC)

There is no fee or stamp duty charged for transferring certificates.

Funds received from ESC creation totalled approximately $195,000 for 2009 vintage ESCs, and were paid to

Consolidated Revenue.

Trading/

Banking:

Most trades of Energy Saving Certificates (ESCs) occur via direct forward sales contracts where the ACP enters into a contract directly with the buyer of certificates. Environmental brokers engage in some over the counter trades. Currently there are no standard contracts for ESCs traded on a recognised exchange, however, the standard parcel sizes for trading ESCs in the wholesale market is 5,000 certificates.

In order to recognise the transfer of certificates under these agreements, ACPs must apply to IPART to approve the transfer (Regs cl 78ZA). The Scheme Administrator then registers the transfer by altering the register to record the new owner.

Contracts and agreed prices vary depending, for instance, on who takes any of the risks involved such as failing to deliver the certificates. Although there is no set price ceiling for ESCs, the penalty price provides a theoretical price ceiling. The current Scheme penalty rate in 2011 compliance year is $23.99 per tCO2e. Once tax impacts are taken into account, the penalty cost to the liable party is equivalent to approximately $33.00. As of 10 January 2011, forward trades for ESCs were reported around $31.00 per certificate. In essence the shortfall penalty behaves similarly to a tax.


NSW Scheme General

Trading/

Banking:

Scheme participants must lodge an Annual Energy Savings Statement with scheme regulator before 18 March. Shortfall of up to 20% can be carried over to the next year except for first year of the scheme which allowed carry over of 50%.

Credit: ESCs are transferable instruments and represent 1 tCO2-e, derived from the measurement of energy savings.

They are created when an ACPs, who undertake energy saving activities in accordance with methodologies

and guidelines approved by IPART, registers the creation of the certificate with IPART. Until the creation of the

certificate is registered with IPART on the register, an ESC has no force or effect (Act s 143). Certificates must

be created by 30 June for abatement activity undertaken in the previous calendar year.


NSW Scheme - Technology

Technology &

Activity Approval:Technology/Activity Approval Methodology

The ESS Rule states that a Recognized Energy Savings Activity (RESA) is defined as a specific activities

implemented by an Energy Saver that increase the efficiency of electricity consumption or reduce electricity

consumption, by:

i. Modifying End-User Equipment or usage of End-User Equipment (including installing additional

components) resulting in a reduction in the consumption of electricity compared to what would have

otherwise been consumed;

ii. Replacing End-User Equipment with other End-User Equipment that consumes less electricity;

iii. Installing New End-User Equipment that consumes less electricity than other End- User Equipment of the

same type, function, output or service; or

iv. Removing End-User Equipment that results in reduced electricity consumption, where there is no negative

effect on production or service levels, and where those activities have no negative effect on production or

service levels

The ESS Rule allows the determination of a RESA through three calculation methodologies:

a) Project Impact Assessment Method

b) Metered Baseline Method

c) Deemed Energy Savings Method

RESAs must be implemented on or after 1 July 2009 and must not be undertaken to comply with any Statutory

Requirement, for example, the purchase of green power. IPART maintains a registration of accreditations and

ESCs approved which can provide data to the public about the types of projects that can be undertaken and

the energy savings as a results of them providing better information to industry.

In 2009 the Project Impact Assessment Method and the Default Savings Factors sub-method within the

Deemed Energy Savings Method were the 2 most prevalent methods used by ACPs.

More than 61% of the energy savings came from the industrial sector by replacing equipment.


NSW Scheme General - Technology

Technology &

Activity Approval: The most number of certificates were created using the Project Impact Method. (49% in 2009) It is a preferred

method because it is possible to make an up-front assessment of estimated future savings (known as forward

creation of ESCs). Up to 5 years of project savings can be brought to account at the commencement of the

accreditation.

Approved Technologies and Activities

Schedule A of ESS Rule outlines some of the technologies with deemed values:

• Replace 50W ELV halogen lamp with 35W ELV halogen lamp.

• Replace 50W ELV halogen lamp and magnetic transformer with 35W ELV halogen lamp and magnetic

transformer

• Replacement of 50W a halogen lamp and transformer with CFL, CCFL, LED or CMH lamp with lifetime

≥ 10,000 hours

• Showerhead replacement

• Purchase of a new high efficiency Clothes Washer

• Purchase of a new high efficiency Dishwasher

• Destruction of refrigerator or freezer built before 1996

• Purchase of a new high efficiency 1 door refrigerator

• Purchase of a new high efficiency 2 door refrigerator

• Purchase of new high efficiency chest freezer

• Purchase of new high efficiency upright freezer

The following activities relate to replacement:

• Default Lamp Circuiting Power for Commercial Lighting Energy Savings Formula

• Default Operating Factors for Commercial Lighting Energy Savings Formula

• Default Efficiency Improvements for High Efficiency Motors

• Default Load Utilisation Factor for High Efficiency Motors – Where End-User Equipment Industry and

End-use are known

• Default Load Utilisation Factor for High Efficiency Motors – Where End-User Equipment Industry and


NSW Scheme - Penalties & Administration of Scheme

Technology &

Activity

Approval:

• End-use are not known

• Asset Life for High Efficiency Motors (t)

• Default Efficiencies (for heating and cooking appliances)

• Discount Factors for calculating forward creation of Certificates under the Project Impact Assessment

Method

Powers of

administrator:IPART has the power to:

conduct audits (via independent third party auditing firms) in relation to the following matters (Act s 155):

• the creation of ESCs;

• eligibility for accreditation; and

• compliance with any Accreditation Conditions.

As the Scheme Administrator, IPART has the power to:

• accredit or refuse an application for accreditations as certificate provider (see below for further detail

in relation to this subjective test) (Act s 136, Regs cl78O).

• charge a fee for accreditation (Act s 136)

• suspend or cancel accreditation of a certificate provider (see below for further detail in relation to this

subjective test) (Act s 137 and Regs cl 78P):

• impose conditions on accreditation as a certificate provider. These normally require the ACP to notify

IPART if there are any changes to record keeping arrangements, scope of activities or metering

equipment changes. (Act s 138 of Act)

• vary Accreditation Conditions by written notice (Reg cl 78V)

• keep a register of ACP and a register of energy savings certificates (Act s 161-163)

• refuse an application to register certificates (Regs 78Y)

As the Scheme Regulator, IPART has the power to:

• assess obligated participant's annual energy saving statements and whether the participant has

accounted for any energy savings shortfall for the previous year, including whether there is any

liability for an energy savings shortfall penalty



Powers of

administrator:• require the surrender of ESCs if a person is found guilty of an offence involving improper creation of

energy saving certifications or contravening a condition of accreditation (Act s 142);

• require parties to give information to IPART as regulator (Act s 156).

Qualifications/

skills of AP (or

their equivalent)

Accreditation Process

Accreditation relates to energy savings activity only i.e. No specific qualifications are required to apply. If entities

wish to undertake additional activities they must submit subsequent applications or amend the project which the

entity is accredited.

ACPs must apply to IPART (as Scheme Administrator) for accreditation in order to generate ESCs. The

application must specify:

• what the Recognised Energy Savings Activity is and why it is eligible for inclusion in the Energy

Savings Scheme,

• how the Recognised Energy Savings Activity will be delivered, and

• how the Energy Savings will be measured, documented and recorded.

A person is eligible for accreditation as an ACP if:

• the activity applied for is a recognised energy saving activity under the ESS Rules;

• it is an Energy Saver (ESS Rule cl 5.1-5.2), meaning it is either:

• contractually liable to pay for the energy consume by the End-User Equipment at the Site that

is the subject to the Recognised Energy Savings Activity; or

• a person who is NABERs Rating Holder and the method used is the NABERs method under

the Metered Baseline Method; or

• nominated in writing to be the Energy saver by the above mentioned persons (and no-one

else has been nominated previously).

• the person has appropriate record keeping arrangements with respect to the activity, and

• IPART is satisfied that the proposal will be undertaken substantially as described in the person‘s

application for accreditation



Qualifications/

skills of AP (or

their equivalent)

IPART may refuse an application if (Regs cl 78O):

• it is not satisfied that the applicant is eligible for accreditation as an energy savings certificate

provider.

• The application for accreditation is not duly made;

• The applicant fails to give an undertaking required to be given in connection with the application in

terms satisfactory to IPART.

Potential Skills Required

ACPs are not required to have any minimum skills. However, IPART imposes a subjective test to assess whether

the proposal will be undertaken substantially as described in the person‘s application for accreditation. This may

require certain training or systems to be implemented in order to satisfy IPART's internal risk assessment

processes and achieve accreditation.

Prohibited Accredited Certificate Parties

A person who is engaged in an industry, or carries out an activity that benefits from a full exemption from the

Scheme, or is a related body corporate, however, will not be eligible for accreditation in respect of an activity that

reduces the consumption of electricity used in that industry or activity (Act s 135). They need to apply for

accreditation in respect to specific energy savings projects which, once accredited, are known as Recognised

Energy Savings Activities (RESAs).

Compliance

issues:

Compliance process

The Scheme utilises a risk based approach to compliance, engaging self assessment reporting procedures granting strong auditing and licence variation powers to IPART to monitor the Scheme.



Compliance

issues:

Obligated participants are required to self assess their energy savings shortfall in an annual energy savings statement and calculate their liability for a shortfall penalty (Regs cl 78D). IPART, as Scheme regulator, has the discretion to vary this liability if:

(a) it thinks further assessment is necessary or liability or liability has been incorrectly assessed (Regs cl 78F) or

(b) the Scheme participant fails to lodge an energy savings statement the Scheme regulator may make its own assessment (Regs cl 78E)

ACPs are also required to submit annual reports on, and keep a record of the following for at least 6 years, (Regs cl 78T):

(a) the location in which the activity occurred,

(b) energy savings calculated in accordance with Scheme rules

(c) the methodology, data and assumptions used to calculate those energy savings

(d) forecasts for future ESC creation

Regulators have strong auditing powers and may undertake audits in relation to the creation of ESCs, eligibility for accreditation and compliance with any Accreditation Conditions (Reg cl 78ZD(1) IPART has established an Audit Services Panel to assist it and other participants in meeting the audit requirements of the Energy Savings Scheme. Audits under the Scheme must be performed by a member of the Panel. In some cases, IPART will select and appoint a Panel Member to conduct an audit, while in other situations IPART allows Scheme Participants and ACPs to select and appoint a Panel Member.

Types of audits conducted by IPART include pre-accreditation audit, spot audits, single audits, ongoing audits (periodic and volumetric) and pre-registration of certificate audits. The most complex audit is generally the pre-accreditation audit which assess likely regulatory issues. Audit frequencies vary for each ACP and are dependent



Compliance

issues:

on IPART's internal assessment of the risk that invalid ESC creation will occur. The key parameters considered in the assessment of audit frequency are the number of certificates to be created by the activity, the complexity of the activity, the number of activities for which the ACP is registered, and past compliance record. Where high volumes of ESCs are created (particularly involving multiple sites or multiple energy savers) IPART may also set a threshold based on the number of ESCs created after which no further ESC can be created without an audit being completed.

IPART also has the power to suspend or cancel accreditation on the grounds that (Act s 137 and Regs cl 78P):

(a) a person is no longer eligible;

(b) the ACP has requested suspension or cancellation

(c) the ACP has contravened the Act, Regulations, the ESS Rule or an Accreditation Condition,

(d) where the person is has become bankrupt or is the subject of a winding up order or a controller or administrator has been appointed.

Compliance issues

GHG Shortfall - During the 2009 compliance year, 15 of 29 Scheme participants recorded an energy savings shortfall. 12 participants chose to carry forward the shortfall, one chose to pay the penalty and 2 had the penalty waived (shortfall was less than one certificate).

Certificate rorting - Instances of invalid certificate creation arose in 2009 in relation to showerhead programs and the overstatement of installations carried out. This was identified during the accreditation phase . IPART introduced several measures including increased information disclosure by the companies carrying out showerhead replacement activities and additional tests to verify the eligibility of the showerheads being replaced. A revised installation and auditing regime was then put in place, incorporating phone surveys, in relation to showerhead replacement activities under ESS Notice: 02/2011 - 9 May 2011 Updated information requirements for showerhead replacement programs and ESS Notice: 01/2011 - 2 February 2011 Showerhead Sales Programs.



Compliance

issues:

GGAS

The ESS was introduced in July 2009 and replaces the end use energy efficiency component of the Demand Side Abatement Rule (DSA Rule) under the GGAS.

Of the 72 accreditations related to energy efficiency in GGAS at 30 June 2009, 31 transitioned to the NSW

Energy Efficiency Scheme, 16 accreditations were no longer eligible due to gas and other activities being

excluded under the ESS, 18 projects did not transition because of commercial decisions by the companies

involved and the 5 remaining undertook assessment for accreditation in the ESS.GGAS utilised a similar compliance framework to the Scheme, employing self reporting mechanisms and wide auditing powers on behalf of IPART, to assess compliance of Scheme participants and accredited service providers under the DSA Rule.

The most significant instance of non compliance in relation to DSA Rule project activities occurred in 2008 in

connection with improper creation of certificates. IPART, as Scheme Administrator became aware of an

increasing number of allegations of improper activity by ACPs (and their installers) conducting CFL Installation

projects under the Default Abatement Factor Method (DAF Method) with the DSA Rule. IPART decided to

conduct ‗one off‘ spot audits of ACPs accredited under this method who were creating a high volume of NGACs.

Following the GGAS audit process, the auditors examined each ACP‘s record keeping and quality assurance

processes, confirming that the number of NGACs created was supported by the records examined. This process

did not however investigate the veracity of the abatement claims beyond the ‗paper trail‘ and failed to identify

issues of compliance.



Compliance

issues:In late 2008, following additional allegations of improper conduct, IPART initiated additional spot audits of four of

the largest companies which carried out large scale DFA Method project activities under the DSA rule. This audit

employed phone surveys to contact a sample of each ACP‘s customers to verify whether the abatement claimed

and the Installer‘s activities at each customer‘s premises matched the customer‘s recollection. This audit

uncovered a statistically significant degree of invalid certificate creation. IPART negotiated with each company

individually to address the audit findings and forfeiture of certificates.

In December 2008, the Minister for Energy amended the DSA Rule to reduce the maximum amount that a

participant could claim from the replacement of incandescent light bulbs with compact fluorescent lamps by 83

per cent. Following this amendment, the four companies described above, decided to cease their CFL installation

program for commercial reasons.

Over-creation in relation to the DSA Rule in subsequent years continued to occur however non-compliance events were largely due to administrative error or lack of attention to detail on the part of the accredited organisation, rather than systematic errors in creation methodology. These included:

calculation error (rounding)

transcription errors

use of incorrect data (eg, Rule default factor, or other related data inputs)

Other instances of non-compliance include contravention of conditions of accreditation by ACPs, predominately

related to a failure to complete annual reports within the necessary timeframes, and a failure to engage an

auditor within the timeframe specified by IPART.



Penalties

imposed:IPART, as Scheme Administrator and Regulator, can impose a number of penalties on ACPs, including:

requiring the ACP to provide documents or give information and attend a meeting to give evidence (Act s 156).

rejecting the application for accreditation (Act s 136, Regs cl 78O);

varying or revoking Accreditation Conditions (Act s139, Reg cl 78X, cl 78V);

suspending or cancelling accreditation (Act s 137, Reg cl 78P);

prosecuting an ACP for:

• creating or purporting to create an ESC in breach of the Act, including any Accreditation Conditions

(Act s133, Reg cl 78R). Currently, the maximum penalty is 2000 penalty units or $220,000;

• failing to comply with the requirement to provide information or for providing false or misleading

information. The maximum penalty is 100 penalty units, or $11,000, or 6 months imprisonment (Act

s 158);

• fail to comply with an order to surrender certificates. The maximum penalty is 1000 penalty units or

$110,000, plus an additional penalty unit for each certificate the provider fails to surrender in

accordance with the order. (Act, s 142). This penalty may also apply to obliged participants if they

are found to have been involved in the improper creation of ESCs. If the person fails to comply with

an order, the Scheme Administrator may also cancel any energy savings certificates in respect of

which the person is registered.

• hindering, obstructing or interfering with the Scheme Regulator, Administrator in the exercise of

their functions. The maximum penalty in the case of a corporation is 250 penalty units, or $27,500,

or in the case of an individual, 100 penalty units, or $11,000.

• contravening a Scheme rule. The maximum penalty in the case of a corporation is 250 penalty

units, or $27,500, or in the case of an individual, 100 penalty units, or $11,000.



Penalties

imposed:IPART can also prosecute Obligated Participants where:

• obliged participants do not surrender sufficient ESCs (energy savings shortfall) (ss 111-118 of the Act).

At first instance, the Scheme participant can either choose to carry this shortfall forward to the

following year (so long as the shortfall is no greater than 20% of individual target (Regs cl 78K) or be

subject to a shortfall Scheme penalty. The shortfall penalty is calculated by multiplying the Scheme

penalty (calculated as the base penalty rate adjusted in the regulations for CPI, multiplied by a penalty

conversion factor) by the shortfall amount. The current Scheme penalty rate in the 2011 compliance

year is $23.99 per tCO2e. If a Scheme participant fails to remedy a carried forward shortfall it must

pay the remaining shortfall as an un-remedied energy savings shortfall penalty.

• hinder, obstruct or interfere with the Scheme Regulator or Administrator in the exercise of their

functions (penalty described above).

• contravene a Scheme rule (penalty described above).

Other

administrator

responsibilities

n/a


Insights

Undertake a mixture of methodologies in determining VEECS akin to the ESS. Including:

a) Project Impact Assessment Method

b) Deemed Energy Savings Method

Undertake a register of projects which have been undertaken to assist other companies in determining whether to consider

undertaking an energy efficiency project.

Refine a process for AP accreditation including creation of guidelines to ensure that APs have the required skills to undertake

VEEC creation for project based methodologies, and understand the expectations around record keeping, monitoring and

verification,

Allow for a range of enforcement activities including cancelling accreditation, prosecutions etc.

Conduct audits of accredited persons using independent auditors who have the skill set to undertake these audits.

Conduct pre-accreditation audits

Include pecuniary penalty for non-compliance.



SA – Residential Energy Efficiency

Scheme (REES)

Glossary

Term Equivalent in VEET Description

Obligated Participants Relevant Entity

n/a Accredited Persons

n/a Victorian Energy Efficiency


White certificates not created.

Essential Service

Commission of South

Australia (ESCOSA)

Essential Services

Commission (ESC)

Priority Group n/a Targeted customers for energy efficiency activities. In REES the priority

group are low income households.

Energy efficiency activity Prescribed Activity


SA Scheme General

Overview: The South Australian Residential Energy Efficiency Scheme (REES) commenced on 1 January 2009 and is

currently in its first phase. A review was undertaken in June 2010-July 2011 identifying amendments that should

be made to the determined list of activities for the second phase, commencing on 1 January 2012 and lasting

until 31 December 2014. These amendments will be released in the third quarter of 2011 and will come into

operation on 1 January 2012.

The REES does not utilise certificate trading to represent energy savings. Retailers that fall within the Scheme

are required to offer audits and energy efficiency activities in order to meet their individual energy efficiency

targets. If additional energy audits or activities are undertaken that exceed retailer's individual targets they may

enter into arrangements with other retailers to transfer the excess energy credit.

Authorities &

Legislations: Scheme creator :

Department of Transport, Energy and Infrastructure (DTEI)

Scheme administrator:

Essential Service Commission of South Australia (ESCOSA)

Legislation:

The SA scheme is regulated by a number of pieces of legislation.

Firstly, the Electricity (General) Regulations 2008 (Electricity Regs) and Gas Regulations 1997 (Gas Regs)

made under the Electricity Act 1996 and Gas Act 1997, establish the scheme.

Secondly, a notice in the SA Gazette on 30 October 2008 (Notice 2008) sets out further details including targets,

minimum specifications and permitted energy efficiency activities.


SA Scheme General

Authorities &

Legislations: Thirdly, section 28 of the Essential Services Commission Act 2002 establishes a Residential Energy Efficiency

Code (REES Code) which commenced in January 2009. The REES Code sets out how the Essential Services

Commission (Commission) should administer and regulate the scheme and set retailer obligations. A Protocol

released by the Minister for Energy (Minister) in November 2008 specified that the Commission must

complete a review of the entire list of approved activities by 1 July 2011 and amend the list to take effect in 1

January 2012. As described above, this review has taken place and a final decision was recently released. The

REES Code will be amended later this year to incorporate these changes.

Target: Stage 1: 2009-2011

2009: 0.155 MtCO2-e

2010: 0.235 M tCO2-e

2011: 0.255 M tCO2-e

35% of which is to be achieved by low income households

2009

• Priority group greenhouse gas reduction targets at 0.054 MtCO2-e

• Energy audits of 3,000 low income households

2010

• Priority group greenhouse gas reduction targets 0.082 MtCO2-e


2011

• Priority group greenhouse gas reduction targets 0.089 MtCO2-e


Review of scheme is to be conducted. Release of targets for future REES years are anticipated before 31

October 2011 (cl 4.2REES Code).


SA Scheme General

Participants and

Markets: Scheme Participants

Obligated retailers: Electricity and gas retailers with 5,000 or more residential customers at 30 June in the

preceding year are obligated to comply with the scheme.

Markets

REES operates in the residential sector only. There are two groups of customers who participate in the

scheme, priority group and other customers. The former is defined under the Electricity and Gas Regulations

and includes pensioners, holders of low income health cards and other classes of persons who are

experiencing hardship. Approximately 35% of South Australian energy customers qualify under the priority

group customer category

Registration

Costs: Costs incurred to administer and regulate REES are recouped through an increased retailer licence fee.

Retailer costs incurred while implementing the SA Scheme are recouped via increases in prices via changes to

the electricity and gas price determinations.

Trading/

Banking:There is no creation or trade of certificates under REES.

Electricity and gas retailers are, however, allowed to apply to the Commission to bank any excess credit in

relation to energy efficiency activities or audits for a subsequent year (cl 7AO Electricity Regs, cl 8DG Gas

Regs). There is no ability to borrow from the following year.

Crediting: Not applicable.


SA Scheme - Technology

Technology:

A larger list for approved activities had been reviewed in Phase 1 of the review. They are currently either

pending approval or have been ruled out for use in the scheme and this will be finalised in Phase 3 of the

review. Note during review deeming values of existing approve tech may change.

Stage 1 Approved Activities (Deemed) Stage 2 Approved Activities (Deemed)_

Showerheads Install efficient showerhead

Ceiling Insulation Install ceiling insulation

Draught Proofing Install draught proofing products

Removal of Older Refrigeration Dispose secondary fridge/freezer

Install Efficient Lighting Install compact fluorescent lamps

Install efficient extra low voltage down lights

Install Insulated Ductwork for Ducted Reverse Cycle Upgrade ductwork

Air Conditioner or Gas Central Heater Upgrade heating/cooling system

Replace Reverse Cycle Air Conditioner with Evaporative

Cooling (DELETED for phase 2)

Replace or upgrade water heater

Replace Existing Heating/Cooling with an Efficient

System (this is space heating DELETED for phase 2)

Install standby power controllers (NEW)

Install or Replace a Water Heater with a Heater of

Specified Type

Promote the installation of high efficiency pool pumps

(NEW)



Technologies : Stage 2 Approved Pending

Install down light caps

Down light caps will reduce the heat loss associated with cutting away or removing insulation in the area

surrounding down lights, with the insulation removed to reduce fire hazards.

Key remaining issues to be resolved for this activity are safety and being clear on the extent of any adverse

impact of the caps on the life of lamps.

•

Promote the purchase of high efficiency televisions

A key remaining issue for this activity is to be confident that it is cost effective. The Commission will continue to

research this activity, while monitoring its performance under the Victorian Energy Saver Incentive Scheme.

•

Promote the purchase of high efficiency refrigerators and freezers

Involves promoting or encouraging householders to consider upgrading to a higher than MEPS refrigerator or

freezer at the time of purchase of a new unit.

The Commission has determined to remove the component of the ”dispose fridge/freezer‟ activity that

relates to removal of the primary refrigerator or freezer – being the one that provides primary refrigeration or

freezer services to a household. Whilst this activity was not utilised during either 2009 or 2010, its removal

does leave a potential gap in relation to an appliance that can use a significant amount of electricity.

•

Linear light emitting diodes

Installation of linear light emitting diodes (LED) lamps, as opposed to standard linear fluorescent lamps.

Key remaining issues to be resolved for this activity are for linear LEDs to be proven to be more efficient than

fluorescent linear lamps, and their safety and other performance attributes resolved .



Technologies : Stage 2 Rejected Activities

Existing in Stage 1

• Replace ducted reverse cycle air conditioner with ducted evaporative air conditioner; and

• Replace existing heating/cooling system with efficient system

New recommended in Phase 1 review

• • Top up insulation;

• • Install wall insulation;

• • Install underfloor insulation;

• • Install external awnings;

• • Install thermally efficient windows;

• • High power factor CFLs;

• Promote the purchase of high efficiency clothes dryers;

• • Promote the purchase of high efficiency dishwashers; and

• • Install in-home display device.

The Commission has sought to achieve harmonization with interstate schemes and, in the case of 2 activities

(standby power controllers and pool pumps), there will be only very small differences in the specifications and

the approach to determining deemed values. In the case of the lighting activities, the move to specifying

replacement lamps in terms of lumens should achieve a more consistent approach


SA Scheme - Penalties & Administration of Scheme

Powers of

administrator:The Commission has broad powers to administer and regulate the scheme.

Clauses 7AI of the Electricity Regs and 8DF of the Gas Regs gives the Commission such powers as is

necessary or expedient to give effect to the scheme including powers to administer the scheme, ensure

compliance with the scheme, and report to the Minister when required.

• Under s 28 of the Essential Services Commission Act 2002, the Commission must carry out its

functions in accordance with a REES Code. These functions include:

• determining whether an energy retailer is to be an obliged retailer for a REES year (cl 2.2 REES

Code)

• apportioning the Ministerial energy audit and energy efficiency activities target amongst obliged

retailers, having regard to the data available to the Commission from AEMO, the energy retailer and

any other information the Commission considers relevant (cl 7AJ Electricity Regs, cl 8DE Gas Regs,

cl 3.1, 3.2, 4.1, 4.2 REES Code)

• issuing a notice to a retailer if the Commission finds a retailer has an energy audit or efficiency

shortfall or energy audit or efficiency excess (cl 3.4 and cl 3.5 REES Code)

• applying a standard of materiality to reports submitted by obligated retailers in respect of activities

undertaken in accordance with their target obligations (cl 5.8 REES Code)

• requiring an obliged retailer to undertake an audit of its operations, including using an independent

auditor (cl 5.9 REES Code)

• assessing compliance of an obligated retailer's quarterly report with the obligated retailer's targets (cl

6.1, 6.3 REES Code)

• requiring an obligated retailer to pay a penalty where the obligated retailer's shortfall is more than

10% of the obligated retailer's target (cl 6.7 REES Code)

• approving or rejecting an application to vary an energy efficiency activity (cl 7.2 REES Code)

• maintaining, reviewing and amending the list of eligible energy efficiency activities (Ministerial

Protocol 2008



Qualifications/

skills of AP (or

their equivalent)

Although liability to comply with the SA scheme's targets sits with the obligated retailers, they can elect to

undertake the energy efficiency activities and/or energy audits themselves or to engage the services of third-

party contractors to undertake the activities on their behalf.

In 2009 and 2010 obliged retailers generally chose to engage third party providers.

Compliance

issues:Compliance approach

The Essential Services Commission has adopted a risk-based approach to compliance.

A retailer must submit a compliance plan each year in accordance with a code drafted by the Essential Services

Commission providing:

• a statement from the Chief Executive Officer (or other authorised person) of the obliged retailer

acknowledging its obligations and responsibilities under the Scheme

• a description of the obliged retailer‘s internal allocation of responsibilities under the obliged retailer‘s

obligations and responsibilities under the Scheme

• a description of the resources, systems and processes which the obliged retailer intends to use to

ensure that the obliged retailer‘s obligations and responsibilities under the Scheme for the REES year

(cl 7AP, Electricity Regs, cl 8DM Gas Regs and cls 5.1 and 5.5, REES Code).

Obligated retailer's must notify the Commission within 20 days of undertaking any material changes to the plan

(cl 5.4 REES Code) and provide any additional information as required by the Commission (cl 5.1 REES Code).

Obliged retailer's must also submit a REES reporting statement every quarter detailing the energy audits and

energy efficiency activities undertaken and set out any material matters (cls 5.5, 5.6, 5.8 REES Code) . An

obliged retailer must also maintain records for a period of at least 5 years (cl 5.2 REES Code).

The Commission assesses compliance of retailers by reviewing their compliance plans, identifying, ex ante,

where potential compliance issues may arise.

Obligated retailers are also required to undertake an audit. Generally, if issues are identified following an audit,

the Commission will adopt a collaborative and educative approach to non-compliance, preferring to deal with the

obligated retailer individually.



Compliance

issues:Compliance with the scheme rules is a condition of the retailer's licence. Failure to comply will constitute a

contravention of a condition of the licence (cl 7AI Electricity Regs).

The Essential Services Commission must submit an Annual Report to the Minister on the REES outcomes for

the calendar year.

Compliance issues

During the first year of the Scheme, no audits were undertaken to allow obligated retailers time to develop and

implement their compliance systems and processes. In 2010, an independent audit of obligated retailers systems

and processes was undertaken. The outcome of this audit identified two types of non-compliance. These

included

• duplication of activities and audits at the same premises by different retailers; and

• non compliance with activity specifications – for example, there were 26 instances where an energy

efficient showerhead was installed in a household after a water heater had been installed despite

project specifications requiring all showerheads to be replaced when the water heater was first

installed.

Following the independent audit, the Commission held workshops with obligated retailers to address particular

compliance concerns. The Commission also amended the REES Code, requiring obliged retailers to advise the

Commission of any material change to the information provided in the compliance plan and provide additional

information relating to management procedures concerning reporting, complaint and dispute resolution system

and training provided to contractors.



Compliance

issues:Some of the issues identified in the independent 2010 audit were raised again during the Scheme Review

undertaken in 2010-2011. These issues included:

• reporting – participant submissions suggested that the current annual reporting regime was inefficient

for providing information to assist obliged retailers in tracking their progress against meeting REES

targets. In cases where duplications are identified, determination were not made until after the end of

the relevant REES year, which at the extreme, could be 18 months after the activity was undertaken.

Participants submitted that this timeline made it difficult to get recompense from a third party as the

standard contract claw back clause is for a period of 3 months. In response to these submissions, the

Commission has implemented a new compliance checking facility in relation to multiple CFL claims.

• lack of regional uptake of scheme – consumer groups raised issues of distribution. Regional and

remote areas receiving activities rose to16.3% in 2010 from 5.3% in 2009 however this number was

not considered high enough given the level of need. The commission has indicated it will continue to

monitor the level of activities occurring in rural and remote areas, and will consider further segmenting

the Priority Group household targets to include a rural and remote component.

Penalties

imposed:

The Commission has the power to require obligated retailers to make up a target shortfall and pay a penalty:

(a) Notices

Where a retailer fails to achieve its energy audit targets or energy efficiency activity target, the Commission issues a shortfall notice notifying the retailer of the shortfall. The retailer must make good the shortfall during the following REES year. This applies even if the retailer is not an obligated party in the following year (cl 3 and 4, REES Code).

(a) Penalties

Where the shortfall exceeds 10% of the target, a penalty amount is also payable (cl 6.7 REES Code) as a:

i. base penalty of $10 000 for each target shortfall; plus

ii. an additional amount payable for each type shortfall (eg audit shortfall is $500 each and energy saving activities shortfall is $70 each).



Penalties

imposed:

Any monies recovered by the Commission must be applied under a scheme established by the Commission for one or more of the following purposes:

to assist persons who may have failed to benefit from activities relating to energy efficiency on account of any retailer's energy efficiency shortfall; and

to support other programs or activities to promote or support energy efficiency or renewable energy initiatives within South Australian households.

Other

administrator

responsibilities

n/a


Insights

Review a target to assist low-income house holds increase the energy efficiencies of their homes.

Shortfall penalties should be channelled for the following purposes as out lined in REES:

to assist persons who may have failed to benefit from activities relating to energy efficiency on account of any retailer's energy efficiency shortfall; and

to support other programs or activities to promote or support energy efficiency or renewable energy initiatives within South Australian households.



United Kingdom – Carbon Emissions

Reduction Target (CERT)

Glossary

Term Equivalent in VEET Description/Comments

Obligated Participants Relevant Entity

n/a Accredited Persons

n/a Victorian Energy Efficiency


This is not a white certificate scheme.

The Office of the Gas and

Electricity Markets

(OFGEM)

Essential Services

Commission (ESC)

Qualifying Actions Prescribed Activities

Priority Group n/a Vulnerable and low income house-holds which include people on

government benefits and pensioners over the age of 70.

Super Priority Group n/a Is a sub-set of the priority group who are considered a high risk of fuel

poverty.


UK Scheme General

Overview: The UK Energy Efficiency Scheme, or Carbon Emissions Reduction Target –(―CERT‖), was introduced in 2008 and

in 30 July 2010 was extended from March 2011 to December 2012.

The CERT sets an overall carbon emissions reduction target for large electricity and gas retailers who are obligated

to promote qualifying actions to domestic energy users. The actions are not represented as a tradeable certificates

however the obligated retailer obligations may be traded with other energy retailers, subject to regulator approval.

Authorities

and

Legislations:

Scheme Creator:

Secretary of State to impose an energy efficiency target and make orders concerning scheme rules and criteria

Administrator & Regulator:

The Office of the Gas and Electricity Markets (OFGEM)

Legislation:

The scheme is established under section 33BC of the Gas Act 1986, section 41A of the Electricity Act 1989 and

section 103 of the Utilities Act 2000, and allows the Secretary of State to impose an energy efficiency target and

make orders concerning scheme rules and criteria.

The Secretary of State has made three orders regulating the scheme:

Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2010 (Order 2010)

The Electricity and Gas (Carbon Emissions Reduction) (Amendment) Order 2009 (Order 2009)

The Electricity and Gas (Carbon Emissions Reduction) Order 2008 (Order 2008)

Targets: The CERT supersedes the first two energy efficiency commitment schemes, EEC1 which ran from 2002 to 2005, and EEC2 which ran from 2005 to 2008. A proportion of savings carried forward from EEC2 were included under the current scheme.

The UK government has set an overall CERT of reducing greenhouse emission by 293 Mt CO2-e for 2008-2012.

The UK has a commitment under the Kyoto Protocol to reduce it‘s GHG emissions by 12.5% below 1990 levels by

2012 which equates to average annual emissions 682.4 Mt CO2-e. CERT contributes to attaining this target.


UK Scheme General

Targets: Under this Target:

at least 40 per cent of the overall target be achieved by targeting Priority low income households. (cl 13 and 14 of Order 2008).

16.2 million lifetime tonnes of carbon dioxide savings must be undertaken in the Super Priority Group, which is a sub category of the Priority Group. (cl 4 Order 2010)

73.4 Million lifetime tonnes CO2 of savings are delivered through insulation. (cl 4 Order 2010)

OFGEM sets four individual targets for obligated retailers:

1. carbon emissions reduction target

2. insulation target

3. priority group target

4. super priority group target.

When considering obligated retailer's targets, the Authority must consider the total number of customers and the obligated retailer's percentage of this amount. (cl 7 and cl 8 Order 2010).

The CERT works in tandem with another measure, the Decent Homes Standard, which requires all social housing to

achieve a minimum standard of wind- and weatherproofing, warmth and modern facilities. This program is managed

by the Government which includes hiring contractors to undertake the work.

Participants

and

Markets:

Scheme Participants

• Department of Energy and Climate Change (―DECC”) which sets the overall target for the CERT.

• Obligated electricity and gas retailers with more than 50,000 residential customers. (cl 4 of Order 2008)

• OFGEM which sets obligated retailers targets and administers and regulates the scheme.

Markets

Domestic energy users.


UK Scheme General

Registration

Costs:

Certificates are not registered under the scheme.

CERT administration and regulation appear to be funded through obligated retailer licence fees and government funding. The cost to suppliers of achieving the CERT (from April 2008 to December 2012) is estimated to total £5.5 billion. Taking into account the costs, CERT has a positive Net Present Value to society of approximately £17 billion.2

Costs incurred by obligated retailers are passed on through electricity and gas bills.

Trading/

Banking:

Only energy retailers may undertake energy saving activities, known as qualifying actions. Retailers may however transfer their carbon emissions reduction obligations to another retailer if approved by OFGEM (cl 18 of Order 2008). There is no banking or borrowing of certificates to meet liabilities.

Crediting: All energy saving activities undertaken by an obligated retailer for the purpose of complying with their CERT

obligations must be approved by OFGEM as a qualifying action. In making that determination it must be satisfied

that the action is promoted by an obligated retailer, for the purpose of (cl 10 Order 2008):

• Achieving improved in energy efficiency (ie Additionality)

• Increasing the amount of electricity generated or heat produced by micro-generation

• Increasing the heat produced by any plant which relies wholly or mainly on wood

• Reducing energy consumption.


UK Scheme General

Crediting: When assessing additionality, OFGEM will consider whether the improvements are made because:

• The measure or measures to be installed and used

• The way the retailer proposes to undertake the action and not other factors

• The retailer's activities and not existing regulations and legal requirements

Once OFGEM has decided to approve the energy saving measures as a qualifying action, it must give notice to

the retailer. OFGEM will also determine the reduction carbon emissions to be attributed to those actions, applying

appropriate carbon co-efficient values (set out in cl 19 Orders 2008,2009 and 2010). A 50% uplift in carbon

savings will be applied to market transformation qualifying actions.

The retailer then sends a signed letter of authorisation to confirm the action will be undertaken.


UK Scheme - Technology

Technologies &

Approved

Activities:

Activity/Technology Approval Methodology

A qualifying action includes:

A demonstration action – an action which is reasonably expected to achieve a reduction in CO2 emissions but it has not been possible to determine a specific carbon saving to date

A market transformation action – the provision of solid wall insulation and micro-generation units which will achieve a reduction in CO2 emissions, real time display, home energy advice package, or other action which will achieve a reduction in CO2 emissions which wasn‘t covered by the EEC.

A priority group flexibility action – the provision of solid wall insulation which lowers the U value of the walls to 0.5W/m2K or less to a subset of the Priority Group

A standard action – action which will achieve a reduction in CO2 emissions or the provision of a real time display or a home energy advice package

The savings of a project are calculated and set when a project is submitted based on a standardized estimate taking into consideration the technology used, weighted for fuel type and discounted over the lifetime of the measure. There is limited ex-post verification of the energy savings carried out by the Government. Although this work would not affect the way energy savings are accredited in the current scheme, the monitoring work affects the energy savings accredited in future schemes. A discount factor of 3.5 % over the lifetime of the measure is applied.2

Home energy advice means:

(a) a home energy assessment

(b) home energy information provided at the time of the home energy assessment; and



Technologies &

Approved

Activities

(c) a written report which—

i. contains, as appropriate, the home energy information; and

ii. is provided to a domestic energy user within one month of the home energy assessment. Technology/Activities Target

All actions that satisfy OFGEM's definition of a qualifying action may be undertaken within the scheme. Certain restrictions, however, are placed on specific targets and the types of technologies that may be used:

1. An obligated retailer's super priority group target must be achieved by promoting the following technologies (cl 13A Order 2010).

(a) an air source heat pump (can only be used for the super priority group);

(b) cavity wall insulation;

c) flat roof insulation;fuel switching (a hydro station with a capacity of 50kW or less, solar photovoltaic panel with a capacity of 50kW or less, solar thermal water heating system with a a capacity of 300 kW or less, wind turbine with a capacity of 50 kW or less can only be used for the super priority group);

d) ground source heat pump (a combined heat and power plant with an electrical capacity of 2kW or less and ground source heap pump can only be used for the super priority group);

g) loft insulation;

h) replacement boiler (biomass boiler with a capacity of 300 kW or less can only be used in the super priority group) ;

i) solid wall insulation;

j) under floor insulation or wood chip boiler.



Technologies &

Approved

Activities:

Where more than one measure is promoted to a member of the super priority group, at least one of those measures must be one identified above (cl 13A Order 2010).

2. A obligated retailer's insulation target must be achieved by promoting cavity wall insulation, flat roof insulation, loft insulation, solid wall insulation or under floor insulation (cl 9 of Order 2010).

3. Only 2% of the obligated retailer's carbon emissions reduction obligation may be achieved by the provision of a behavioural change activity (market transformation) which includes real time display or a home energy advice package (cl 9 Order 2010).

At the end of the second year of the CERT, a total of just over 62% of the carbon savings achieved came from insulation measures. Lighting delivered nearly 23% and heating measure contributed almost 6%.


A list of some of the approved technologies under this scheme can be seen below.

Cavity wall insulation Insulation of pipes and valves Thermostatic radiator valves

Loft insulation Radiator panels (including DIY) New central heating

DIY loft insulation Refrigerators Upgrading electric or coal fired

heating systems

to gas central heating

Draft stripping Fridge Freezers Ground source heat pumps

Hot water tank insulation Condensing boilers Combined heat and power

External wall cladding Heating controls (electric and fossil

fuels)

Replacement of district heating

boilers with energy efficient ones

Washing machines Dishwashers Jug kettles

Kiltox heat fans


UK Scheme - Penalties & Administration of Scheme

Powers of

administrator:

Prohibited Technologies

OFGEM specifically prohibits technologies. As of 1 April 2011, compact fluorescent lamps or halogen lamps are no longer approved as a qualifying action (cl 12 Order 2010). Efficient lighting will be enforced through other policy measures.

Government is likely to want to introduce further restrictions, from April 2011, on any product where evidence of meeting principles for promoting products under CERT is lacking. These principles are:

• confidence that carbon savings are realised

• avoidance of deadweight

• focus on non-traded sector

• positive impact on vulnerable households

• contributes to scheme transparency

OFGEM has the power to:

• determine obligated retailers' carbon emissions reduction obligation, insulation obligation and super priority

group obligation (cl 6 and 19 of Order 2010)

• review obligated retailer obligations when it has all retailers' customers numbers and notify a retailer if there

is any amendment to that retailer's obligations. (cl 8 Order 2010)

• approve or reject energy savings measures submitted by obligated retailers as a qualifying action and notify

the retailer of its determination (cl 9 and 12 Order 2008)

• estimate and assess the amount of carbon emissions reduced by a qualifying action (cl 15 Order 2008).

• approve or reject an application made by an obligated retailer to transfer activities undertaken to another

retailer (cl 18 Order 2008).

• determine whether an obligated retailer has achieved its CERT targets (cl 22 Order 2008).

• Make an order if a relevant requirement of the scheme has not been complied with (cl 23 Order 2008). It

may also consider whether it is appropriate to set a penalty for non-compliance.



Qualifications/

skills of AP (or

their equivalent)

There are no requirements for an AP equivalent. Companies conducting installation of energy efficiency

product, in particular insulation, must comply standards set out by Government. People conducting DIY

installation of insulation sign up to a voluntary set of good practise guidelines.

Under a voluntary agreement between DECC, EST and CERT-obligated energy suppliers, energy suppliers

have agreed to report details of all professionally installed cavity wall and loft insulation measures into the

Energy Saving Trust‘s Homes Energy Efficiency Database. Initially, these reports will be published on the

Energy Saving Trust‘s website at six monthly intervals.5

Compliance

issues:OFGEM utilises a self reporting and auditing based approach to manage compliance with the CERT. There are

three phases to this process.

Phase 1: Obligated retailers are required to provide information to qualify an action .

Phase 2: Report on activity both annually and when requested.

Phase 3: Comply with auditing requirements .

Phase 1

Obligated retailers must notify OFGEM of the action the retailer intends to undertake a qualifying action within

one month of the action being commenced (cl 11 of Order 2008). The notification must include sufficient

information showing how the action is compliant. In order to be approved, the OFGEM must be satisfied that the

action is promoted for the purpose of the Scheme (see cl 10 and 12 of Order 2008).

Phase 2

Obligated retailers must provide an annual report by 31 January every year of their compliance with targets and

all monitoring procedures undertaken (Article 19 Order 2010). Standardised monitoring requirements are

imposed for each type of energy saving activity to ensure consistency between retailers and CERT

administration. Scheme participants also provide Interim Progress reports on the number and type of actions

which it uses and technical monitoring results.



Compliance

issues:Phase 3

OFGEM undertakes two levels of assessment. Initially, it verifies that the actions have not been approved under

a related energy efficiency scheme, the Community Energy Saving Programme, using a data cross check of

address level data for measures installed with information held by other agencies, local authorities and

government departments. This confirms that the addresses provided by obligated retailers exist and each

address has not been submitted more than once. Where mis-reporting is discovered, the actions are referred

back to the obligated retailer in the first instant who is asked to resolve the mis-reporting issue.

Following the first stage of assessment, OFGEM undertakes an audit of a sample of each obligated retailer's

energy savings measures, including assessing the measures are being delivered as notified in phase 1, there is

evidence of actions being performed, the accuracy of records management and false reporting management

schemes in place to ensure the accuracy of monitoring and reporting.

OFGEM submits a summary report on the scheme to the Secretary of State every year by 31 July and assesses

whether each obligated retailer has complied with its obligations (cl 16 Order 2008).

Compliance issues

The scheme has undergone two rounds of revision since it first commenced in 2008.

The first amendments were introduced largely due compliance issues identified during the first year of the

program and a change in government policy towards energy efficiency.

During the first year of CERT, surges of activity were observed in relation to do-it-yourself loft insulation and

CFLs. Concerns were raised as to whether carbon savings were being realised. The Government decided to

address these concerns in its amendments to the CERT by only permitting retail CFLs from 1 January 2010 and

removing the incentive for DIY loft insulation.



Compliance

issues:On 11 September 2008, the government also announced its Home Energy Saving Programme. The purpose of

the programme was to assist households with the payment of their electricity bills. Some of the measures

introduced included grants for insulation and an increase in energy savings targets under the CERT.

Amendments were introduced under the Electricity and Gas (Carbon Emissions Reduction) (Amendment) 2009

to:

• Increase the overall target by 20 per cent

• Amend qualifying actions to include real time displays and home energy advice packages

• Restrict insulation installation; and

• Restrict the delivery of compact fluorescent lamp (CFL) schemes

A second round of revisions occurred in 2010. Consultations were held concerning the extension of the scheme

until 2012. They also reviewed existing energy saving measures and related monitoring and reporting issues.

Concerns were raised again in relation to CFLs. The volume of CFLs delivered up until that date was perceived

by many participants to have reached a level where it was no longer possible to be certain that all CFLs were

being used.

Changes in EU legislation also introduced the phase out of incandescent light bulbs by December 2012. In

response, DECC decided to remove CFLs from the CERT. Retailers were required to carry out a monitoring

exercises in relation to CFLs distributed over a 3 month period to provide evidence of the percentage of the retail

CFLs which were installed by users. This percentage was then applied to the retailers' final reported retail CFL

numbers to determine the reduction in CO2 emissions.

Monitoring issues related to do-it yourself insulation activities were also raised. During the consultations,

representatives of the insulation sector argued that more robust monitoring procedures were needed to ensure

double counting did not occur and assess the quality of insulation. Energy retailers, on the other hand, submitted



Compliance: that when issues of compliance had been raised with the sector they had been addressed quickly and the

reporting arrangements were adequate. The government resolved this by introducing a requirement that energy

suppliers provide the address of each property where measures are installed at the time of notification of a

completed action.

Other issues addressed during the 2010 consultations related to how equitably the CERT was being delivered

across income groups. The government noted that there was little evidence that lowest income households were

benefiting and proposed a super priority group sub-target.

A second round of amendments was introduced under the Electricity and Gas (Carbon Emissions Reduction)

(Amendment) 2010:

• Extending the CERT until 31 December 2012

• Increasing the target to 293 (lifetime) MtCO2-e

• Introducing a new Insulation Obligation of 73.4 MtCO2-e

• Creating a Super Priority Group obligation at 16.2 million tonnes of carbon dioxide

• Removing halogens and compact fluorescent lamps from the scheme from 1 April 2011

• Changing the market transformation action baseline

To date, all obligated retailers have met their annual CERT targets. As at 30 June 2011, obligated retailers had

achieved 198 MtCO2-e of the 293 MtCO2-e target.



Penalties

imposed:Clause 23 of Order 2008 establishes that any requirement placed on an obligated retailer under the Order is a

relevant requirement for the purposes of Part 1 of the Gas Act 1986 and the Electricity Act 1989.

If an obligated retailer contravenes a requirement of the scheme, the OFGEM may take action by way of an

order for the purpose of securing compliance with that requirement (cl 23 of Order 2008) including pecuniary

penalties for non-compliance.

Other

administrator

responsibilities

As the CERT Administrator, OFGEM releases a market update every 3 months outlining the number of

measures delivered and a breakdown on the types of measures undertaken.


Insights

Review sub-targets for low income house-holds and technologies.

Have a standardised monitoring program for different types of energy savings.

Create a framework to approve activities/technologies akin to the qualifying actions to allow for more flexibility and innovation.


Review the need to have behavioural change programs .



France - Certificats d'Economies

d'Energie (CEE)

Glossary


Liable Entity Relevant Entity -

n/a Accredited Persons -

Certificats d'Economies

d'Energie (CEE)



-

Direction Générale de l'Energie et du Climat (DGEC)

Directions Régionales de l'Environnement, del'Aménagement et du Lodgement (DREALs)

Agence de l'Environnement et de la Maitrise de l'Energie" (ADEME)

Essential Services

Commission (ESC)In France the CEE scheme is supported by both National and local

government Authorities. DGEC, the Department of energy and

climate administers the scheme and is supported by the local

Government, DREALs who process the applications. Some

functions are also administered by ADEME including approving the

applications processed by DREALs.


France Scheme General

Overview: The French Energy Efficiency Scheme, -Certificats d'Economies d'Energie (CEE) or Certificats Blanc, was

introduced in 2006.

The Scheme imposes on energy suppliers (electricity, gas, refrigeration, heating, domestic fuel) to achieve

energy savings by undertaking various activities towards end-users. This also includes motor vehicle fuel

suppliers.

Authorities &

Legislations:

Scheme Creator, Administrator & Regulator

The Scheme is administered by the French Government through the "Direction Générale de l'Energie et du Climat (DGEC) (Government department in charge of energy and climate), the "Ministère de l'Ecologie, duDéveloppement Durable, des Transports et du Logement" (ministry for ecology, sustainable development, transport and housing).

The DGEC is supported by the local "Directions Régionales de l'Environnement, de l'Aménagement et du Lodgement" (DREALs) (local Government agencies responsible for environment, planning and housing) which are responsible for receiving and processing applications for CEEs and issuing CEEs. From September 2011, it is intended that those functions will be carried out by a unique centralised authority located in Paris.

Certain functions in the implementation of the Scheme have been delegated to the "Agence de l'Environnement et de la Maitrise de l'Energie" (ADEME) (Government-owned corporation in charge of environment and energy management). In particular, the ADEME is the main point of contact for information about the CEE scheme and it is the expert in charge of evaluating applications for CEEs on behalf of the relevant DREALs.

Legislations

The main legislation relating to the Scheme comprises the "Loi de programme fixant the orientations de la

politique énergétique" no. 2005-781 dated 13 July 2005 (POPE Act) and the "Loi portant engagement national

pour l'environnement" no. 2010-788 dated 12 July 2010 (ENE Act). A number of regulations have also been

adopted.



Authorities &

Legislations:The POPE Act and ENE Act were codified in the French Energy Code (see in particular articles L221-1 to

L222-9).

Target: The CEE was a key part of the French policy to reduce energy intensity. The energy bill proposed to reduce

France‘s energy intensity (i.e. the ratio of energy consumption to GDP) by 2% each year until 2015, and then

by 2.5% until 2030. The CEE focused on the more diffuse potentials of energy savings in the residential and

tertiary sectors and was intended to provide a new means of financing energy efficiency projects in these

sectors.

Phase 1: 2006-2010

65.2 TWh cumac (cumulated and discounted at 4%)

Phase 2: 2011-2013

345 TWh cumac (cumulated and discounted at 4%)

The allocation of the target by energy source is:

• 57% electricity, 26% natural gas

• 13% domestic oil; and

• 4% others.

Because of the structure of the French electricity and gas markets, around 80% of the obligations for Phase 1

fell on two suppliers, EDF (30TWh) and Gaz de France (13 TWh). The other 20% of the obligation fell on

around 2,400 energy suppliers.

The national target for Phase 1 originally ran from 2006-2009 with a target of 54 TWh cumac. This target was

exceeded by 11.2 TWh. The scheme was extended to 2010 with an overall target of 65.2 TWh cumac The aim

was to achieve energy savings in the construction sector and in the small and medium size industrial sectors.



Target: The national target for Phase 2 of the Scheme is 345 TWh cumac (6.4 times the original target) and will run

between 2011 to 2013. It includes 90 TWh for motor vehicle fuel suppliers. The second phase was introduced

by he ENE Act in July 2010. It now also includes transport fuels and deeming activities for public transport,

trains, freight and passenger vehicles.

Participants and

Markets: Scheme Participants

Liable entities are suppliers of electricity, gas, heating, refrigeration, domestic fuel and motor vehicle fuel. In

particular suppliers of electricity, natural gas, heat, cold and above 0.4 TWh/year sales, LPG above 0.1 TWh

yearly sales and all heating fuel suppliers.

Eligible entities can comprise of :

• Public entities e.g. the Agence nationale de l'habitat "ANAH" (a government entity in charge of

implementing the national policy of development and improvement of housing, providers of public

housing. Those entities may apply for the creation of CEEs but they are not liable to meet a target

under the Scheme.

• Private entities

Liable entities may pool their individual target by joining a special purpose corporation, in which case the

corporation becomes the liable entity.

Market

The scheme is open to all sectors including motor vehicle fuels.

Registration

Costs: Until 31 December 2012, the fee payable for opening a CEE account is €106.

Until 31 December 2012, fees payable for registration of CEEs are €11/GWh cumac.



Trading/

Banking:Trading of CEEs takes place over the counter between participants in the Scheme. CEEs must be

deposited/registered on a dedicated account opened on the National CEE Register. The price of a CEE is

market dependent. The volume and average price of CEEs traded on the market between Scheme participants

is regularly published and updated by the CEE Registrar. Certificates have a life of 10 years and banking of

certificates is permitted.

During the first three years of the obligation, energy suppliers were the most active participants in the scheme,

and mostly carried out activities with their own customers. An average price of €0.32 per kWh was observed

(well below the penalty), noting that during the same period, a tax credit was available for many items of

eligible equipment, which was estimated to have covered about 25 % of the capital cost of equipment.

Little trading occurred because of strong participation from obligated parties (which in France are local

monopolies, the largest of which is state-owned). The energy savings are discounted over the life time of the

target at a discount rate of 4%. The minimum size for a White Certificate is 1 GWh – this is equivalent

to the average annual electricity consumption of just over 170 French households or the savings that would be

obtained by installing around 3,000 CFLs in households (depends on life time of the CFL and wattages being

replaced).

Crediting: The French Government via the DREALs is responsible for issuing CEEs. Creation of CEEs is materialised by registration of kWh cumac on a dedicated account opened in the name of a Scheme participant on a national electronic register (the National Register).

The National Register is accessible online and administered by a private operator on behalf of the French Government.


France Scheme - Technology

Technology &

Activity Approval:

Activity/Technology Approval Methodology

A liable entity may discharge its obligations under the Scheme in several ways:

• promoting to energy end-users investments in energy efficient equipment eg. technical advice,

financial assistance etc.;

• buying CEEs in the market;

• carrying out directly or indirectly via third party contractors approved energy saving activities

(Projects) in order to receive CEEs associated with those projects;

• contributing to programmes of reduction of energy consumption in low income households or

programmes of information, training and innovation geared towards management of energy demand

(including development of sustainable transport eg. development of low carbon emission vehicles);

• installing equipment enabling replacement of a non-renewable energy source by a renewable energy

source for heating residential, agricultural or commercial premises.

Applications for certificates may refer to a series of activities as part of a plan/program to be implemented over

a specified period of time. In that case, the program/plan itself will receive accreditation by the relevant

authority. An accreditation may be suspended or cancelled at any time.

Projects fall into 2 categories:

• Standard Projects); and

• non-standard Projects.

To facilitate the implementation of Projects by participants in the Scheme, the French Government has created

and maintains an official list of Projects also know as "fiches d'opérations standardisées" (Standard Projects)

(the Standard Projects List). As at 1 May 2011, the Standard Projects List contained 210 Standard Projects

with corresponding eligibility criteria and pre-determined kWH cumac allocation for each Standard Project. The

Standard Projects List deals essentially with activities relating to pre-existing buildings but also activities relating

to the industrial, transport and agricultural sectors.


France Scheme - Technology

Technology &

Activity Approval: The Standard Projects List does not contain an exhaustive list of Projects and CEE scheme participants may

submit other types of Projects to the DREALs for approval. An application for CEEs must relate to Projects

representing at least 20GWh cumac.

Prohibited Activities

Certain activities will not qualify as Projects:

• energy savings resulting from installations already falling under the European Union Directive no.

2003/87/CE establishing the EU energy trading scheme;

• energy savings resulting from compliance with applicable regulatory obligations; and

• changes in non-renewable energy type. See Arrêté du 19 juin 2006 définissant les operations

standardisées d'économies d'énergie.

Technology/Activities Scope

The Scheme imposes on energy suppliers (electricity, gas, refrigeration, heating, domestic fuel) to achieve

energy savings by undertaking various activities towards end-users. The second phase was extended to motor

vehicle fuel suppliers.

EDF, have reported that in the first six months of White Certificates operation, the energy savings in the

residential sector were obtained through retrofitting 60,000 households with insulation, double glazing, heat

pumps, gas condensing boilers, energy management systems, solar water heaters and wood stoves. EDF

have also been marketing pilots to address home lighting and electrical appliances and has set up an on line

shop to sell energy efficient appliances through the internet.

In France, tax credits up to 50% of the capital costs have been introduced for householder who have certain

energy saving measures installed professionally (e.g. insulation, efficient heating). These are allowed to be

claimed in conjunction with White Certificates by an obligated energy supplier


France Scheme - Penalties & Administration of Scheme

Powers of

administrator:

The regulations setting out the powers of the scheme administrator are expected to be adopted during the

course of 2011. To date they have included:

• Issuing of CEEs via DREALs.

• Accreditation of applications for certificates which may refer to a series of activities as part of a

plan/program to be implemented over a specified period of time.

• An accreditation may be suspended or cancelled at any time. Note that applicants must sign a

statutory declaration. A breach of the statutory declaration would trigger a criminal offence.

Qualifications/

skills of AP (or

their equivalent)

There are no specific skills mandated for applicants. The Applicant must demonstrate that they belong to

either the liable or eligible entity category. Accreditation relates to the activity not the entity.

Compliance

issues:One year after the commencement of Phase 1 of the Scheme, only 10% of the 65.2 TWh cumac target had been

met. This time lag has been explained by the fact that adequate education tools for Scheme participants (eg. the

Standard Projects List) were not available from the start of the scheme and it took time before liable entities were

able to build successful partnerships with third party contractors for the creation of Projects.

During the first phase, a large number of entities have voluntarily participated in the scheme as eligible entities.

It appears that one of the main challenges for the second phase is a heavy administrative burden associated

with the processing of CEE applications. It was said that, part of the reasons why the first phase of the Scheme

was a success was because liable entities decided to use the Scheme to their benefit as a marketing tool.

For Phase 2, the Standard Projects List was heavily expanded and simplified.


France Scheme - Penalties & Administration of Scheme

Penalties

imposed:Any liable entity failing to comply with its individual target by 31 December 2013 will incur a penalty of 0.02

€/kWh cumac.

The Minister may impose a penalty on a Scheme participant for breach of the provisions of the Energy Code

relating to the Scheme (capped at 2% of the participants' annual revenue).

The DREALs may impose penalties on a Scheme participant in case of breach of record-keeping obligations.

It is a criminal offence for a person to seek to obtain CEEs by fraud.

Risk of double-counting occurs due to the fact that both liable entities and eligible entities can apply for the

creation of CEEs.

Other

administrator

responsibilities

The National Register is accessible online at www.emmy.fr and administered by a private operator on behalf of

the French Government.

The French Government has created and maintains an official list of Projects also know as "fiches d'opérations

standardisées" (Standard Projects) (the Standard Projects List). See Arrêté du 19 juin 2006 définissant les

operations standardisées d'économies d'énergie.


Insights

Use project based approach in addition to deeming approaches for VEEC calculations.

Allow behavioural change programs such as allowing eligible entities or APs to provide technical advice or programmes of

information, training and innovation geared towards management of energy demand.

Keep a register of project based approaches, in particular standard projects, to assist other businesses with take up of an energy

efficiency project and look at the methodologies used in France which allow up to 210 activities to be listed with deeming values.

Look at segmenting the VEECs to different energy sources.

Accredit Government bodies to conduct energy efficiency works on public housing which can contribute to the target.



Italy – Energy Efficiency Titles (EET)

Scheme

Glossary


Distribution System

Operators (DSOs)

Relevant Entity

Energy Service Company

("Societa` di Servizi

Energetici)

Accredited Persons

Energy Efficiency Titles

(EET)



Regulatory Authority for

Electricity and Gas (AEEG)

and the Italian Electricity

Operator (GME)

Essential Services

Commission (ESC)


Italy Scheme General

Overview The Energy Efficiency Titles (―EET‖) scheme started in 2005. The Decrees required Italian Distribution System

Operators (DSOs) of gas and electricity with more than 50,000 customers as at 31 December 2001 to achieve

energy savings not lower than the defined targets.

Energy savings can be achieved through the implementation of energy saving projects.

Authorities: Scheme Creators, Administrators & Regulators:

Regulatory Authority for Electricity and Gas ("AEEG") and the Italian Electricity Operator ("GME") administer the

scheme.

Target: The Scheme will operate till 2012. The targets have been increased annually till 2012.

(Mtoe = million tonnes of Oil Equivalent)

2005 – 0.1 Mtoe for electricity distributors and 0.1 Mtoe for gas distributors.



2008 – 1.2 Mtoe for electricity distributors and 1 Mtoe for gas distributors.




2012 – 3.5 Mtoe for electricity distributors and 2.5 Mtoe for gas distributors. (~70 TWh)

Distributors must achieve half their target with their own customers. Distributors have four options to comply with

their White Certificate obligation:

• They can develop ―in house‖ energy efficiency projects

• They can develop projects either jointly or contact with other third parties such as product manufacturers,

retailers, installers, ESCOs, etc.



Targets: • They can buy from the market tradable energy efficiency certificates which latest energy savings achieved

by third parties via the implementation of energy efficiency projects; these third parties can include

subsidiaries of the obliged distributor or other distribution companies or energy service providers.

• Alternatively the companies can pay the sanction for non-compliance with the obligation.

Obligated parties were also allowed to retrospectively claim activities implemented from 2001 onwards, and it is

estimated that (to 2007) about 60 per cent of activity came from retrospective claims. Also as of May 2006,

electricity accounted for 74.7%, gas for 21.9% and other fuels for only 3.4% of White Certificates issued by AEEG.

Italian White Certificates have been in place in Italy since January 2005. The obligations were placed on 10

electricity distributors and 20 gas distributors in Italy, however in practice Enel has ~90% of the electricity target and

Italgas has over 30% of the gas target. The Italian Government was responsible for setting the size of the obligation

and in the Italian National Plan, it is expected that one third of the expected carbon dioxide savings by 2012 will

come from the White Certificate activities.

Participants

and

Markets:

Scheme Participants

• Initially, the DSOs of gas and electricity serving more than 100,000 customers as at 31 December 2001 were

required to participate. The Ministerial Decree of Revision and Update of the Ministerial Decrees of 20 July

2004 extended the energy efficiency obligation to all the DSOs that serve at least 50,000 customers as at 31

December 2006. The DSOs can conduct operations directly or through related service companies

• The AEEG.

• The GME.

Markets

Residential, tertiary (service industries like transport and government) and industrial sectors.



Registration

Costs: The DSOs are able to recover costs which have been incurred in the performance of their obligations under the

Scheme, through state funding and sale of certificates. The current cost is 100 Euro/toe cost recovery until

2008. As of 2009 cost recovery depends on energy sale price variation.

Subject to the guidelines issued by the AEEG, tariffs collected on the distribution of electricity and gas will also

be applied towards a portion of the expenses incurred by the DSOs.

Trading/

Banking:Certificates are issued by the electricity market operator upon request of the regulator AEEG to all distributors

and their controlled companies and to energy service providers and ESCOs (Energy Service Company).

Certificates are tradable via bilateral contracts or on a spot market organized and administered according to

rules set out jointly by AEEG and the electricity market operator. Banking of certificates are permitted.

The trading of certificates can occur by way of contractual agreements or in a special market which has been

established by the GME. No authorization is required for market deals. For the time being, the volume of trade

is lower than expected and the largest share of trading is occurring through bi-lateral trades (78%), rather than

through the open market .

One White Certificate equals 1 toe saving. A White Certificate is equivalent to the average annual electricity

consumption of between 1-2 Italian households or the savings that could be obtained by installing around 70

CFLs in households.

Crediting: There are three types of certificates –Type I for electricity savings, Type II for natural gas savings and Type III

for savings of other fuels. This differentiation is required in order to allow the enforcement of the ‗50%

constraint‘. The first market sessions have been held in March 2006.

The GME will issue will issue a number of certificates to a DSO which reflect the energy savings achieved by

the DSO. The DSO will then submit the certificates to the AEEG, who will ascertain whether the DSO has met

its annual energy saving target. Only the savings achieved over and above market average or legislative

requirements count against the targets.


Italy Scheme - Technology

Technologies &

Activities

Approved:

Activity and Technology Approval Methodology

The EET uses three evaluation methodologies:

1. A deemed savings approach with default factors for free ridership, delivery mechanism and

persistence, and that does not require onsite measurements.

2. An engineering approach, with some onsite measurement.

3. An approach based on monitoring plans whereby energy savings are quantified via a comparison of

measured or calculated consumptions before and after the project, taking into account changed

framework conditions (e.g. climatic conditions, occupancy levels, production levels). In the latter

case, all monitoring plans must be submitted for pre-approval to the regulatory authority AEEG and

must conform with predetermined criteria (e.g. sample size, criteria to choose the measurement

technology, etc.

Most of the projects submitted to date are of the deemed saving and engineering methods. In 2005 for 70% of

the certified saving the deemed saving approach was used, the engineering approach was used for about

20%, while the monitoring approach was used only for 10% of the certified savings.

There is ex-post verification and certification of actual energy savings achieved on a yearly basis


The Projects undertaken by the DSOs in the residential sector are:

• replacement of single glazing by double glazing;

• application of insulating material to outside walls and roofs of existing buildings;

• replacement of incandescent lamps (GLS) by compact fluorescent lamps (CFL);

• heating by non-renewable energy sources and installation of efficient heating systems; and

• installation of balanced flues and wood burning boilers for household use (heating, sanitary water,

kitchen).


Italy Scheme - Technology

Technologies &

Activities

Approved:

The Projects undertaken in the tertiary sector are:

• heating by non-renewable energy sources and installation of efficient heating systems;

• replacement of halophosphate type T12 and T8 linear fluorescent lamp systems operating with

electromagnetic feeders by type T5 linear fluorescent lamp systems operating with electronic feeder;

• introduction of control systems with presence sensors and flux regulation with addition of natural

light;

• replacement of mercury vapour lamps by new-technology lamps; and

• installation of automatic ignition, extinction and luminous intensity regulation systems in public

lighting installations.

The Projects undertaken in the industry sector are:

• replacement of halophosphate type T12 and T8 linear fluorescent lamp systems operating with

electromagnetic feeders by type T5 linear fluorescent lamp systems operating with electronic feeder;

• introduction of control systems with presence sensors and flux regulation with addition of natural

light;

• replacement of 1-90 kW asynchronous motors by class Eff2 to class Eff1; and

• installation of inverters on 0.75 to 90 kW electric motors installed in industry and the tertiary sector.


Italy Scheme - Penalties & Administration of Scheme

Powers of

administrator:The AEEG must carry out the following tasks:

• determine the annual energy saving targets for the DSOs;

• ensure that all proposed Projects comply with the relevant guidelines;

• carry out random checks to ensure that the DSOs are carrying out the Projects in accordance with the

legislation and regulations;

• certify the annual energy savings achieved by the DSOs;

• ascertain that the DSOs have achieved their annual targets; and

• impose sanctions on the DSOs who fail to meet their energy saving targets.

Qualifications/

skills of AP (or

their equivalent)

Parties wishing to become involved in the Scheme must be accredited as an Energy Service Company

("Societa` di Servizi Energetici"). The accreditation process requires the applicant to register on the AEEG online

portal. This is where the applicant will submit a proposal for consideration by the AEEG.

Accreditation relates to activities and not an entity. When considering a proposal, the AEEG may adopt one of

the three approaches set out below:

• Standard valuation method – this method allows the AEEG to estimate the energy savings for each

unit installed, without the need to consider energy consumption before or after the installation of the

physical unit.

• Analytical valuation method

• Final valuation method – this method allows the AEEG to determine the energy savings by comparing

energy consumption before the implementation of the project/ measure to the energy consumption

following the implementation of the project/measure.

No minimum skills are identified as part of the accreditation. There is more emphasis on approvals of the energy

savings.



Compliance

issues:The AEEG has instituted proceedings against various DSOs in the following instances:

• where the DSO has failed to submit certificates for a particular year by the due date, being the 31st of

May of the following year;

• where the DSO has failed to meet its annual target for a particular year;

• where the DSO has not provided all of its certificates for a particular year; and

• where the DSO, serving at least 50,000 customers, has failed submit a declaration to the AEEG by 30

September, in which it indicates the number of customers to whom it provides its services as at 31

December of the previous year.

Random checks can be carried out by the AEEG officers, the Italian National Agency of New Technologies and

the Finance Police. During the checks the following parties must be present:

• At least one member of the police force;

• At least one engineer; and

• Any other expert appointed by the AEEG.

In 2011, proceedings were brought against:

• AMGA – Azienda Multiservizi S.p.A.;

• Edison D.G. S.p.A.;

• Enel Distribuzione S.p.A.;

• Genova Reti Gas S.p.A.;

• Prealpi Gas S.r.l.;

• A.M.GAS S.p.A. di Bari;

• Azienda Multiservizi Valenzana S.p.A.;

• Mediterranea Energia e Società Irpina Distribuzione Gas S.p.A; and

• S.I.D.I. Gas S.p.A.



Penalties

imposed:The penalty sought in these cases was a pecuniary penalty.

Penalties imposed in 2011

The AEEG imposed a pecuniary penalty on S.I.D.I. Gas S.p.A. after it failed to submit a declaration to the AEEG

setting out the number of customers it was serving as at 31 December of the previous year. The penalty was in

the amount of 12,500 euro. In determining this amount, the AEEG considered the:

• Gravity – although the AEEG did not treat the breach lightly, it noted that the DSO did not gain any

advantage by failing to submit the declaration by the specified date

• Character – the AEEG also noted that the DSO had previously acted in breach of the Scheme

• Financial circumstances – the DSO's profits for 2009 amounted to 13,907,324 euro and

• Any action taken by the DSO to remedy the breach, and the financial circumstances of the DSO.

If the DSOs fail to:

• achieve at least 50% of their annual energy saving targets or

• rectify any defaults over the two years thereafter

AEEG will impose appropriate administrative sanctions.

These sanctions must be proportional to the amount of the investments needed to rectify the default.

Where a DSO fails to meet its target, provided the number of certificates submitted is equivalent to or greater

than the ratio between value of all certificates issued and the value of the annual obligation, it will be able to

remedy the breach in the two years thereafter without incurring any sanctions.



Penalties

imposed:As there is no pre-defined penalty unit, the AEEG must determine an appropriate sanction. Pecuniary penalties

can range from 25,000 euro to 155,000,000 euro.

When determining the appropriate sanction, the AEEG must have regard to the following:

• gravity of the breach;

• actions taken by the DSO to remedy the breach or mitigate the consequences arising from the

breach;

• the character (whether the DSO has previously acted in breach of the Scheme) and financial

circumstances (profits) of the DSO

In assessing the gravity of the breach, the AEEG must consider the extent to which the DSO failed to meet its

target.

Other

administrator

responsibilities

AEEG is responsible for issuing:

• guidelines for the preparation and implementation of the Project;

• guidelines for the assessment of the energy saving targets for individual Projects;

• guidelines for the issuing of certificates;

• regulations relating to the certificate trade;

• guidelines relating to the disbursement of tariffs towards the expenses incurred by the DSOs.

The AEEG must also determine suitable methods for confirming the energy savings achieved by the DSOs.

The GME must establish and operate a market to enable the trading of certificates. The GME is also required to

operate a Registry. The number of certificates issued to a DSO and all the various dealings must be recorded on

the Registry.


Insights

Review sub-targets for energy sources potentially putting more of an emphasis in electricity and less on gas etc which can result in

more GHG reduction.

Look at multiple methodologies for determining VEECs to allow more variety of energy efficiency measures to be taken up.

Have a wider variety of enforcement measures using a risk based approach for determining level of enforcement.


Use external expertise such as engineers or auditors to assist the regulator as part of compliance checks on approved activities.




References

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Australian Bureau of Agricultural and Resource Economics and Sciences, Table f – Australian Energy Consumption by Industry and Fuel Type – Energy Units, revised 2011-07-20

Australian Bureau of Statistics, Australian Demographic Statistics, September Quarter 2009

Australian Energy Market Operator, 2011 Electricity Statement of Opportunities - Executive Briefing

Australian Bureau of Agricultural and Resource Economics and Sciences, Table F – Australian Energy Consumption, by Industry and Fuel Type – Energy Units, revised 2011-07-20

Bertoldi, P & Rezessy, S, Assessment of White Certificate Schemes and their Energy Saving Evaluation Methods, 2007 Energy Program Evaluation Conference, Chicago

Bertoldi, P & Rezessy, S, European Commission Directorate-General Joint Research Centre, Tradable Certificates for Energy Savings (White Certificates) - Theory and Practice, Institute for Environment and Sustainability, 2006

Carbon Down, The Carbon Footprint of Victoria‘s Small And Medium Enterprises, April 2011 ClimateWorks Australia, Low Carbon Growth Plan for Australia, March 2010

ClimateWorks Australia, Low Carbon Growth Plan for Australia 2011 Update, April 2011

Department of Climate Change and Energy Efficiency, http://www.climatechange.gov.au/what-you-need-to-know/lighting.aspx

Department of Climate Change and Energy Efficiency, http://www.climatechange.gov.au/en/what-you-need-to-know/lighting/faqs/details-of-the-phaseout.aspx

Department of Climate Change and Energy Efficiency, http://www.climatechange.gov.au/government/programs-and-rebates/hisp.aspx

Department of Climate Change and Energy Efficiency, Securing a Clean Energy Future – The Australian Government‘s Climate Change Plan, July 2011

Department of Climate Change and Energy Efficiency, National Greenhouse Accounts Factors, July 2011

Department of Energy and Climate Change, Paving the Way for a Green Deal – Extending the Carbon Emissions Reduction Target Supplier Obligation to December 2012 – Summary of Consultation Responses and Government Response, June 2010

Department for Environment Food and Rural Affairs & Department of Energy and Climate Change, 2011 Guidelines for Defra/DECC‘s GHG Conversion Factors for Company Reporting



Department of Primary Industry, Expansion of Energy Saver Incentive Status Paper, September 2011

Department of Primary Industries, Proposed Victorian Energy Efficiency Target Energy Saver Incentive - Submission Guidelines for the Creation of New Activity Categories, August 2009

Department of Primary Industries, Proposed Victorian Energy Efficiency Target Regulations Regulatory Impact Statement, September 2008

Department of Primary Industries, Victorian Energy Efficiency Target Energy Saver Incentive – Submission Guidelines for the creation of new activity categories, August 2009

Department of Primary Industries, Submission Guidelines for the Creation of New Activity Categories to Cover Small and Medium Enterprises, March 2011

Energetics and Department of Primary Industries, Extension of Energy Saver Incentive to the Business Sector – Discussion Paper, 21 September 2011

Environment Protection Authority Victoria, Compliance and Enforcement Policy, June 2011

Department of Primary Industry, Expansion of Energy Saver Incentive Status Paper, September 2011

Department of Treasury and Finance, Victorian Guide to Regulation, Edition 2.1, August 2011

Directive 2006/32/Ec Of The European Parliament And Of The Council, On energy end-use efficiency and energy services and repealing Council Directive 93/76/EEC, 5 April 2006 Official Journal of the European Union

Energetics and Department of Primary Industries, Extension of Energy Saver Incentive to the Business Sector – Discussion Paper, 21 September 2011

Essential Service Commission of South Australia, REESC/03 Residential Energy Efficiency Scheme Code, August 2010

Essential Service Commission of South Australia, Residential Energy Efficiency Scheme Review of Energy Efficiency Activities - Final Decision, June 2011

Essential Service Commission of South Australia, Residential Energy Efficiency Scheme Review of Energy Efficiency Activities - Phase 2 Report, March 2011

Essential Services Commission, AD01 Explanatory Note - Guide to VEET Accreditation, v2.2, 5 July 2011

Essential Services Commission, AD04 Explanatory Note - Creating Victorian Energy Efficiency Certificates from Prescribed Activities, v3.0, 30 June 2011

Essential Services Commission, AD142 Explanatory Note - Accredited Persons: Victorian Energy Efficiency Certificate (VEEC) Creation Audit, v1.0, 1 January 2009



Essential Services Commission, AD65 VEET Scheme - Register of Accredited Persons as at Friday 12 August 2011

Essential Services Commission, AD66 VEET Scheme - Register of Participating Businesses as at Tuesday 16 August 2011

Essential Services Commission, AD67 VEET Scheme - Businesses in Your Area, 16 September 2011

Essential Services Commission, AD76 VEET Scheme - Application for Accreditation, v3.1, July 2011

Essential Services Commission, AD78 VEET - Application to Modify Register of Products, v2.0, October 2011

Essential Services Commission, AD79 Victorian Energy Efficiency Target (VEET) - Application for VEET Approval of Product, v3.0, April 2011

Essential Services Commission, ESC Public Forum update, 1 April 2011

Essential Services Commission, ESC Public Forum update, 1 July 2011

Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2009, September 2009

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Essential Service Commission, VEET Scheme Register of Accredited Persons, 27 September 2011

European Commission Intelligent Energy Programme, Work Package 5 - Package and Policy Recommendations for the Assessment, Implementation and Operation of TWC schemes, March 2007

France, Loi de programme fixant the orientations de la politique énergétique" no. 2005-781, 13 July 2005

France, "Loi portant engagement national pour l'environnement" no. 2010-788, 12 July 2010

Giraudet, LG & Finon, D, White Certificate Schemes: The Static and Dynamic Efficiency of an Adaptive Policy Instrument, Centre of International de Recherches sur l'Environnement et le Developpment, July 2011

Hall & Partners - Open Mind, Energy Saver Incentive Scheme: Phase 1 Evaluation Survey - A Research Report Submitted to the Department of Primary Industries by Hall Partners, September 2011

Independent Pricing and Regulatory Tribunal, Audit Services Panel Agreement, 12 January 2010

Independent Pricing and Regulatory Tribunal, Compliance and Operation of the NSW Energy Savers Scheme during 2009 – Report to Minister, July 2010



Independent Pricing and Regulatory Tribunal (IPART) – Guide to Applying for Accreditation of a Recognised Energy Savings Activity, 2 February 2011

Independent Pricing and Regulatory Tribunal, Energy Saver Scheme - Fact Sheet 4 - Approval for Emerging Lighting Technologies for Use with Commercial Lighting Formula, version 2.0, May 2011

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Italy, Regulatory Authority for Electricity and Gas, Resolution VIS 57/11 " Irrogazione di una sanzione amministrativa pecuniaria in materia di titoli di efficienza energetica a seguito di istruttoria formale avviata con deliberazione 18 gennaio 2010 VIS 2/10 nei confronti di S.I.DI.Gas S.p.A".

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KPMG, the Brotherhood of St Laurence & Ecos Corporation, A National Energy Efficiency Program to Assist Low-Income Households, September 2008

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Rezessy, S & Bertoldi, P, European Commission, Institute for Energy Joint Research Centre, Energy Supplier Obligations and White Certificate Schemes: Comparative Analysis of Results in the European Union, 2010 ACEEE Summer Study on Energy Efficiency in Buildings

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End-Notes

i Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian Energy

Efficiency Target Regulations, March 2011

ii http://www.veet.vic.gov.au/Public/Public.aspx?id=Businesses31

iii Essential Service Commission, VEET Scheme Register of Accredited Persons, 27 September 2011

iv Department of Treasury and Finance, The Victorian Guide to Regulation, Edition 2.1 August 2011

v Victorian Competition and Efficiency Commission, Commission Conventions for the Regulatory Reviews

Function, 24 August 2011

vi Department of Treasury and Finance, Victorian Guide to Regulation, Edition 2.1, August 2011

vii Department of Primary Industry, Proposed Victorian Energy Efficiency Target Regulation Regulatory Impact

Statement September 2008

viii Resource Smart, http://www.resourcesmart.vic.gov.au/for_households/rebates.html

ix Australian Capital Territory, Department of the Environment, Climate Change, Energy and Water, Draft

Sustainable Energy Policy 2010-2020, December 2009.

x Department of Climate Change and Energy Efficiency, Securing a Clean Energy Future – The Australian

Government‘s Climate Change Plan, July 2011

xi Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2010, August 2011

xii Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian Energy


xiii Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2010, August 2011

xiv Commonwealth Department of Climate Change and Energy Efficiency

http://www.climatechange.gov.au/en/what-you-need-to-know/lighting/faqs/details-of-the-phaseout.aspx

xv Roy Morgan Research on behalf of the Department for Human Services, Victorian Utility Consumption

Household Survey 2007, Final Report, 10 April 2008

xvi Open Mind, Energy Saver Incentive Scheme Phase 1 Evaluation Survey September 2011,

xvii Australian Bureau of Statistics, Australian Demographic Statistics, September Quarter 2009

xviii Essential Services Commission, ESC Public Forum update, July 1, 2011

xix Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian Energy


xx Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2010, August 2011

xxi Open Mind, Energy Saver Incentive Scheme Phase 1 Evaluation Survey September 2011, pg 37

xxii Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian

Energy Efficiency Target Regulations, March 2011

xxiii Open Mind, Energy Saver Incentive Scheme Phase 1 Evaluation Survey, September 2011

xxiv Ibid and Hall & Partners - Open Mind, Energy Saver Incentive Scheme: Phase 1 Evaluation Survey, August

2011

xxv Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2010, August 2011



xxvi Open Mind, Energy Saver Incentive Scheme Phase 1 Evaluation Survey, September 2011

xxvii Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2009, September

2009, Essential Services Commission, Victorian Energy Target Scheme: Performance Report 2010, August

2011

xxviii ClimateWorks Australia, Low Carbon Growth Plan for Australia,March 2010

xxix Carbon Down, The Carbon Footprint of Victoria‘s Small And Medium Enterprises, April 2011

xxx Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian


xxxi Carbon Down, The Carbon Footprint of Victoria‘s Small And Medium Enterprises, April 2011

xxxii Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian


xxxiii KPMG, the Brotherhood of St Laurence & Ecos Corporation, A National Energy Efficiency Program to Assist

Low-Income Households, September 2008

xxxiv Open Mind, Energy Saver Incentive Scheme Phase 1 Evaluation Survey, September 2011

Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian Energy

xxxv Source: Stakeholder Consultation with Government and Accredited Party

xxxvi Source: Stakeholder Consultation with Accredited Party

xxxvii Open Mind, Energy Saver Incentive Scheme Phase 1 Evaluation Survey, September 2011

xxxviii Price Waterhouse Cooper, Department of Primary Industries: Regulatory Impact Statement- Victorian


xxxix Department of Primary Industries, Victorian Energy Efficiency Target Energy Saver Incentive – Submission

Guidelines for the creation of new activity categories, August 2009

xl Independent Pricing and Regulatory Tribunal (IPART) – Guide to Applying for Accreditation of a Recognised

Energy Savings Activity,2 February 2011

xli Essential Service Commission of South Australia, REESC/03 Residential Energy Efficiency Scheme Code,

August 2010

xlii Office of Gas and Energy Markets, A review of the third year of the Carbon Emissions Reduction Target, 25

August 2011

xliii By Authority of Victorian Government Printer, Victorian Government Gazette No S 106, Monday 20 April 2009

xliv Department of Climate Change and Energy Efficiency,

http://www.climatechange.gov.au/government/programs-and-rebates/hisp.aspx

xlvxlv Department of Primary Industry, Expansion of Energy Saver Incentive Status Paper, September 2011

xlvi Silvia Rezessy and Paolo Bertoldi, European Commission, Institute for Energy Joint Research Centre,

Energy Supplier Obligations and White Certificate Schemes: Comparative Analysis of Results in the European

Union

xlvii Carbon Down, The Carbon Footprint of Victoria‘s Small And Medium Enterprises, April 2011



xlviii Energetics and Department of Primary Industries, Extension of Energy Saver Incentive to the Business

Sector – Discussion Paper, 21 September 2011

xlix Department of Primary Industry, Expansion of Energy Saver Incentive Status Paper, September 2011

l NSW State Government, Electricity Supply (General) Regulation 2001

independent review final report...spc standby power controller tco 2-e tonnes of carbon -dioxide...

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