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Market Recap | May 2024

In case you missed it, here’s a recap on what’s been happening in the energy market over the last month.

National Energy Performance Strategy 

In early April the Department of Climate Change, Energy, the Environment and Water (DCCEEW) released Australia’s National Energy Performance Strategy, known as NEPS. The NEPS includes a three-pillar approach to managing energy demand:

  1. Energy Efficiency
  2. Demand Flexibility
  3. Electrification and fuel switching

A total of $15.2 million will be invested by the Australian Government between now and 2026 to ‘develop, evolve and deliver the strategy’.

IPART Releases Four Peak Demand Days for the PDRS 2023-24 Compliance Period

On the 15th of April IPART released the four peak demand days for the most recent PDRS compliance period. The peak demand days are released each year, and inform the liability of each obliged retailer.

NGER Scheme Updates Consultation

DCCEEW is undertaking public consultation on proposed updates to the NGER Scheme, closing on Friday May 24th. There are six primary proposals within the document, outlined below:

  1. Method 1 is the default method, where estimation procedures are used under the National Greenhouse Accounts emissions factors for facilities to determine their emissions. Proposal one is where Method 1 is phased out for fugitive emissions from open-cut coal mines from 1 July 2025 for Safeguard Facilities producing over 10 million tonnes of coal in 2022-23, and for all other Safeguard Facilities from 1 July 2026.
  2. Methods used by Safeguard Facilities to estimate fugitive methane emissions from coal mining, and oil and gas activities, to be publicly published.
  3. Allowing market-based estimates of Scope 1 emissions to be used for the combustion of drop-in renewable liquid fuels.
  4. Adding state and territory residual mix factors to the market-based method for Scope 2 emissions estimates.
  5. Updates to the estimate methods for natural gas fugitive emissions, carbon capture and storage and waste emissions.
  6. Additional minor amendments to improve clarity.

Banking the brakes on fossil fuel finance 

ANZ, in line with global commitments to limit temperature rise, has tightened its lending policies regarding oil and gas projects. This shift, disclosed within its recent half-year results, essentially eliminates direct funding for the troubled $15 billion Papua LNG project.

ANZ recognises the role of gas in the energy transition but emphasises financing projects aligned with climate policy. The bank’s oil and gas exposures have decreased, aiming for a further reduction to meet its 2025 targets. Analysts note that major Australian banks, including ANZ, now refrain from financing new oil and gas ventures, impacting companies like Woodside and Santos. Read more in the AFR.

The VIC state budget announced – investing in a better future

The Victorian Government has released its 2024-2025 budget, bringing into focus continued action on climate change and helping Victorian families with access to support, incentives, and funding to take part in the energy transition and tackle energy costs.

Investments include:

    • $38 million to support the installation of electric heat pumps and solar hot water systems, saving households up to $400 annually on electricity bills.
    • $6.1 million for interest-free loans for solar battery storage systems.
    • $5.9 million to enhance the Victorian Energy Upgrades program, promoting energy-efficient products and emission reduction.
    • $3.4 million to aid vulnerable households in managing energy bills through the Energy Assistance Program.
    • Funding to maintain the Victorian Energy Compare website, assisting families in finding the best energy deals.

These initiatives aim to alleviate the financial burden of rising energy costs while promoting sustainable energy solutions for households across Victoria.

ARBS set to make waves at ICC 

Air Conditioning, Refrigeration Building Services (ARBS) Exhibition 2024, slated to be the largest and most diverse event for the industry yet, will take place at ICC Sydney from May 28-30. With over 9,000 expected visitors and 330 exhibitors, it promises to showcase cutting-edge innovations in heating, ventilation, air conditioning, and refrigeration (HVAC&R) and building services.

Two new initiatives are making headlines: the Women in HVAC&R Program on May 29, fostering networking and gender diversity in the industry, and ARBS Mathsgaine on May 30, engaging students with industry-related challenges.

Moreover, the ARBS Seminar Program boasts a significant expansion, with a remarkable 18.6% increase in sessions compared to 2022. Led by 92 industry leaders, the program will cover key topics such as electrification, heat pumps, climate change challenges, and the pursuit of net-zero targets. Keynote seminars from global leaders like Adrian Catchpole and Ginger Scoggins will delve into critical issues such as embodied carbon and climate resilience.

Amanda Searle, ARBS CEO, emphasised the event’s role as a platform for professional development, networking, and advocacy towards a sustainable and inclusive future, setting new standards for industry collaboration and problem-solving.

Australia’s 2024-25 Federal Budget for the Renewable Energy Sector

Australia just unveiled a significant investment in clean energy. The new budget allocates $22.7 billion over the next decade under the “Future Made in Australia” plan. This aims to create new jobs and make Australia a leader in the global shift to net zero.
Here’s the breakdown:

    • Boosting critical minerals and hydrogen production: The government is investing heavily in processing critical minerals ($7 billion) and making clean hydrogen fuel ($6.7 billion).
    • Innovation for a cleaner future: $1.7 billion will fund research into green technologies and low-carbon solutions. Including a $32.2 million to fast-track the initial phase of the Guarantee of Origin Scheme focused on renewable hydrogen and expanding it to accredit content of green metals and low-carbon liquid fuels.
    • Building strong supply chains: $1.5 billion will go towards making batteries and solar panels more readily available in Australia.
    • Preparing the workforce: $1.1 billion will be used to revamp universities and train people for the jobs of tomorrow.
    • Investing in infrastructure and research: This includes mapping mineral resources ($566 million), supporting farmers facing drought ($519.1 million), and improving satellite data for various uses ($448.7 million).
    • Developing cutting-edge technologies: The budget allocates funds for advancements in quantum computing ($466.4 million) and supporting the digital identity system ($288 million).
    • Helping businesses and communities: Support for small businesses (through tax breaks and mental health support), training programs in construction ($88.8 million), and promoting women’s careers in clean energy ($55.6 million).

The government also provides $3.5 billion energy bill relief to more than ten million households and some small businesses starting from 1st July, 2024.

The government also plans to extend funding for the Australian Renewable Energy Agency (ARENA) and create a new $1.7 billion Future Made in Australia Innovation Fund. They’re aiming to create new industries and equip Australians with the skills needed to succeed in this clean energy revolution.

Updates surrounding requirements for air conditioning installation and certificate creation in SA REPS/ Gigajoules under activity HC3

In the previous creation of REPS/ Gigajoules, ductwork for air conditioning with requirements to be installed at a minimum rate of R1.5, has now been lowered to a new minimum rate of R1.0. Market speculates this will contribute to a higher intake of air conditioning installations, given the rarity of products for ductwork with an value R1.5 or above.

In addition to this, transition factors of 2024 and 2025 have been announced to a value factor of 4. And this will translate into amplified creations of REPS by up to four folds compared to previous calculations of the gigajoules created.

In light of these changes for activity HC3, market can expect a higher intake in air conditioning installations or replacements in SA.

Clean Energy Regulator (CER) is set to announce the nomination for the new solar panel and inverter product listing body between June and August 2024

The CER is expected to announce the entity for the new solar panel and inverter product listing body between June and August 2024. A rigorous assessment and evaluation of the criteria of the applications continue to ensure that the CER meets the industry’s needs. The proposed nominations and final nominations will be published on the CER website. There will be a transition period to provide an opportunity to successfully transition with updates published through email and the rooftop solar sector reforms page. The Clean Energy Council (CEC) will continue to publish approved solar panel and inverter product lists until the final nomination.

A study found houses with sustainable features sell at a premium than those without

The Domain Sustainability in Property Report has found that an investment in sustainable upgrades such as solar panels, double glazing, heat pumps, and air conditioning, not only saves money in the long term but has highlighted the significant value added to the sale price of properties. It was noted that a sustainable upgrade worth $10,000.00 – $20,000.00 is on average increasing the average market value by $112,000.00.

NSW Government announces upcoming changes to the PDRS Program incentivising batteries

Last week the NSW Government announced upcoming changes to the Peak Demand Reduction Scheme (PDRS) program, due to come into effect in two stages between 01 August and 01 November this year. The highly anticipated Battery activity is included within this change, allowing an upfront discount of an estimated $1600-2400 to be passed onto consumers when a battery is installed, and an additional estimated $250-400 when the battery is connected to a Virtual Power Plant (VPP).  A summary of new activities, existing activity changes, activity removals, and future activities can be found here.

RDC Activity Set to Recommence Following 01 July

Following the application of a 0.00 multiplier to the activity in mid-2022, the VEU is set to release the updated RDC Activity Regulations on the 1st of July this year. Products will be required to be approved following the release of the new regulations for quality assurance purposes. There is market speculation that the activity may boost the VEEC market supply despite the stricter requirements. This speculation comes as a new wave of efficient fridges and freezers has emerged over the past 24 months.

Additional Energy Savings Scheme Program Changes to Become Effective June 19th

This morning the NSW Government released a second series of program changes under the ESS to complement existing changes coming into effect in just shy of three weeks time. Many of these changes are in alignment with the recent PDRS rule announcements, and will alter ESC creation for a number of activities. Most notably, new pool pumps will now be eligible to create ESCs and new Refrigerated Display Cabinets (RDCs) will no longer be an available method. The changes are reviewed below:

    • Installation of a New Pool Pump introduced for ESC creation
    • Pool Pump installs will require a $200 copayment, lifted from $30
    • Pool Pump star ratings requirement dropped from 4.5 stars to 4.0 stars
    • Climate Zones for IHEAB heat pumps will now be drawn from AS/NZS 4234 (Standard for Heated water systems — Calculation of energy consumption)
    • Removal of New RDC installations as an eligible activity
    • 4 Sided RDCs will no longer be eligible
    • Reduced lifetime of RDCs with a display area exceeding 3.3m2 from 12 years to 8 years, resulting in a lowered ESC creation of 33%
    • Small business sites must now be evidenced by an ABN (HEER)

Battery ‘Perks’ for NSW Consumers

On Friday 24 May, the NSW Government announced the new battery rebate program for residential and small business batteries installed from 1 November 2024. A full review is available here. The rebate sits under the existing Peak Demand Reduction Scheme (PDRS), a NSW Government program that sits parallel to the NSW Energy Savings Scheme (ESS).

The PDRS will introduce residential and small business battery installations as an eligible technology from 1 November 2024. For eligible installations, ACPs such as Ecovantage can create PRCs where a battery is installed at a home or small business in three circumstances:

1. For a new battery installation

2. For a new battery installation being connected to a VPP

3. For an existing battery being connected to a VPP

The primary question fielded from many installers over the past week has been why the program has been announced 5 months in advance of its November 1st launch. Under certificate programs, a 3-6 month period from the date of policy release to the implementation (known as Gazettal) is both routine and necessary. The timeframe allows for Accredited Certificate Providers (ACPs) to gain accreditation for the activity, prepare compliance processes and onboard installers wishing to be involved in the program. This timeframe also allows for Auditors to become accredited under the new activity as necessary, to ensure that installers can smoothly create PRCs from the date of launch within the compliance guidelines. To date, the Government has not yet released the evidence requirements for the new program.

National Energy Performance Strategy (The NEPS)

In early April Australia’s National Energy Performance Strategy was released, and 8 weeks on both industry discussion and Department commentary have provided clarity to the intent and purpose of the NEPS. The NEPS is as per its name a Stategy – including a series of principles and outcomes. It is not a target and sits independently to the Net Zero target, allowing it to be flexed as required to meet nationally set targets. The below outlines the key items within the NEPS:

1. National Construction Code (NCC) to be updated. The plan has highlighted the importance of updating the NCC, with a view to heighten the minimum energy efficiency requirements.

2. Sector decarbonisation plans to continue development . The development of sectoral decarbonisation plans allows for the recognition of the vast difference in decarbonisation requirements across different industries and the challenges that each industry individually faces.

3. $300m allocated for Social Housing Upgrades

4. Expansion of the NABERS program for the built environment

5. Stocktake of industrial equipment requiring fuel switching to be completed to assist in further policy development

At Ecovantage, we consistently analyse market activity, policy changes, consultation releases, and creation rates in conjunction with wider landscape activity. This allows us to keep our clients at the forefront of all relevant changes, and to leverage the advantage that this presents. Thank you for your continued support, and please reach out if you have any general or project-specific questions.

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