Energy efficiency showdown looms, as Victoria slams “skewed” federal report

Victoria’s Labor government has slammed the “skewed” findings of a federal analysis of upgrades to residential energy efficiency standards and signalled its intention to go it alone – if necessary – on boosting new home building standards in line with a net-zero future.

The comments from the Andrews government follow the publication, this week, of the National Construction Code 2022 Consultation Regulatory Impact Statement, prepared by ACIL Allen for the Australian Building Codes Board.

The report weighs the costs and benefits of proposed updates to the energy efficiency provisions for residential buildings in the 2022 edition of the National Construction Code (NCC), including the introduction of a minimum requirement of 7 stars on the Nationwide House Energy Rating Scheme (NatHERS).

And while this looks like a relatively small step up from the current 6 star standard, which has been in place for 10 years, the ACIL Allen report concludes, essentially, that raising the bar is not worth it – neither economically, nor in terms of broader societal benefits.

“The proposed policy options for more stringent energy efficiency requirements for new dwellings in the NCC 2022 indicates … that there would be a net societal cost for both options – the costs are estimated to outweigh the benefits by a significant margin,” it says.

“The capital costs associated with meeting the proposed energy efficiency requirements [a 7-star energy rating, up from the current base standard of 6-stars] are estimated to be well in excess of the societal benefits that are largely derived from avoided resource costs in the energy sector.

“The breakeven analysis undertaken indicates that there would need to be a very significant increase in wholesale energy costs (more than three times) and/or a very significant reduction in the capital costs (a discount of around 70 to 80 per cent) for there to be an Australia-wide net societal benefit associated with the proposed policy options,” the report continues.

“Even when considered from a household perspective, our analysis indicates that the estimated retail energy savings by the household do not exceed the capital costs associated with the proposed energy efficiency requirements.”

Victoria, however, is not convinced by the findings of the Regulatory Impact Statement (RIS), which it says understates the health, climate and energy benefits of moving to 7-star building standards.

“The Trajectory for Low Energy Buildings agreed by all states and territories in February 2019 anticipated strengthened energy provisions in the NCC 2022, including an increase in building efficiency and stronger standards for fixed appliances such as heating, cooling and hot water,” a statement from Victoria’s energy minister said on Monday.

“…The Consultation RIS skews its assessment of these provisions with conservative inputs and assumptions.

“It focuses more on costs while understating the emissions reduction, energy bill savings and health and wellbeing benefits of efficient homes.”

This is a bit of a theme for the Australian federal government when it comes to any policies around emissions reduction, but is nonetheless disappointing to see in an area often referred to as the low-hanging fruit of climate action.

As Hugh Saddler wrote here last year, Australia is woefully behind on energy efficiency standards in all of its buildings, despite it being well established as the cheapest way to cut greenhouse gas emissions and achieve climate goals.

“Improving energy efficiency is also vital to achieving so-called ‘energy productivity’ – getting more economic output, using the same or less energy,” Saddler said. “But Australia’s national energy productivity plan, agreed by the nation’s energy ministers in 2015, has gone nowhere.”

And now this report, which is open to feedback until November 07, appears to recommend continuing on that path to nowhere – at least on the policy and regulatory front – because there just aren’t enough good reasons to push for higher standards.

This is unfortunate, because according to Trivess Moore, a senior lecturer in construction at RMIT and member of the Sustainable Building Innovation Laboratory, the most efficient and effective way to lift energy efficiency standards for new-build homes is through regulation.

“The building industry is hesitant to support increased changes to regulation and often talk about it adding cost for the consumer,” Moore told One Step in an interview last year.

“They will tell you they’re building what the customer wants. But consumers are not really across sustainability, they’re not really across these challenges.”

Moore argues that if new rules are set at the policy level, the the industry will quickly adapt. “Any additional cost price will quickly be reduced through efficiencies, through learnings, through the competitive market.”

But to get to this point, what is required across the board – starting with policy makers – is a shift in language and understanding, says Moore.

“It’s not all about the upfront cost, the upfront product, but how that house is going to perform in terms of maintenance, affordability, livability,” he told One Step.

“If you do it right, you can wind up with little or no energy bills. What you do with those savings could be quite significant.

“If you re-invest those savings back into your mortgage, for instance, you could pay off your home loan 3-5 years quicker. That’s tens of thousands of dollars in avoided interest savings. As well as health and wellbeing of living in a more thermally stable home.”

There is little evidence of any such shift in the consultation RIS, however, and so it will fall to the states to make the case for raising the building code bar, with state and territory building ministers due to decide whether to incorporate new standards in the National Construction Code in September of next year.

Victoria’s energy minister Lily D’Ambrosio says that her state, for one, will continue to actively engage in the process highlighting economic, health and climate benefits of ambitious energy efficiency standards.

“Victoria has led the way in Australia with energy efficiency standards for new homes and is ensuring our building code is fit for a low emissions future,” she said.

“If the national process fails to deliver new homes that are comfortable to live in, cheap to run and climate resilient then we will step in.”