Market Recap | December 2023

Ecovantage News , Energy Certificates , Energy Efficiency Products & Tech , Energy Schemes , For Your Business , Market Update ,

Written by Ecovantage 01 Jan,2024

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

Chris Bowen’s Key Statements on Australia’s Climate Policy

As part of the second annual climate change statement, Minister for Climate Change and Energy, Chris Bowen, discussed Australia’s progress toward its emission reduction targets and addressed key policy decisions. Some highlights from the interview following the statement with 7.30’s Sarah Ferguson (ABC):

- Emission Reduction Progress:
  - Australia is on track for a 42% reduction in emissions by 2030, nearing its 43% target.
  - Achievements credited to policies promoting 82% renewable energy in the grid and safeguards reforms for big industries.
- Transport Emissions and Fuel Efficiency:
  - Acknowledges rising emissions from cars, utes, and SUVs, emphasising the need for a transport sector plan.
  - Confirms plans for fuel efficiency standards.
- Phasing Out Gas Connections:
  - Rejection of a national plan for phasing out gas from homes, emphasising state-based responses and promoting choice.
  - Highlights a $1.7 billion program to assist households and businesses in transitioning to renewable energy.
- Australia’s Role in Global Climate Action:
  - Affirms support for strengthening global action and a commitment to sensible steps at COP.
  - Stresses Australia’s ambition to become a renewable energy superpower, emphasising green hydrogen and renewable energy.
- Global Shift Away from Fossil Fuels:
  - Addresses the inevitability of a global phasedown of fossil fuels, emphasising the importance of a flexible approach in international negotiations.
- Future Outlook:
  - Anticipates a challenging COP in a tense geopolitical environment but expresses confidence in achieving positive outcomes.
  - Emphasises the need for a united approach with like-minded ministers to build on the agreements reached at previous conferences.

Gas ban falls flat amid CCA recommendations

In an interesting turn of events, the Climate Change Authority (CCA) has put forth a compelling recommendation, led by its chair Grant King, the former CEO of Origin Energy. King, renowned for stewarding Origin Energy’s significant interest into LNG, has backed the call for a ban and gradual elimination of home gas connections. The proposal comes as part of the CCA’s 42 comprehensive recommendations recently made to the federal government, spanning various sectors, notably including an extension of small-scale renewable targets to encompass household batteries and electric vehicle chargers.

However, both this recommendation and the call for a national fuel efficiency standard have been rebuffed by Bowen.

NSW Passes Landmark Climate Legislation

In a historic move, the New South Wales (NSW) Parliament has unanimously approved legislation to solidify the state’s commitment to climate action. The Climate Change (Net Zero Future) Bill 2023 establishes ambitious targets, including a 70% reduction in greenhouse gas emissions by 2035 and achieving net-zero emissions by 2050.

The legislation also creates an independent Net Zero Commission to monitor progress transparently, with a focus on addressing climate change impacts in rural communities. The passage of this bill marks a significant milestone, showcasing bipartisan support for climate action in Australia.

Federal Government’s Bold Moves at COP28

In a significant development at the World Climate Action Summit during COP28, the Federal Government of Australia has aligned with 100+ nations in joining COP28’s Global Renewables and Energy Efficiency Pledge, which aims to triple global renewable capacity and double energy efficiency by 2030.

Among those things highlighted, the expanded Capacity Investment Scheme (CIS) looks to facilitate 32GW of new renewable generation, fostering investor confidence and delivering cleaner, affordable energy for households and businesses across the nation. However, while generation is touted to increase, grid capability and transmission from renewable energy zones will need in-tandem attention.
Emphasis was made on the role the groundbreaking $2 billion Hydrogen Headstart program for large-scale hydrogen projects will have for renewable energy generation, and with rooftop solar penetration being the highest globally, the Federal Government has set its sights on reaching 82% renewables by 2030.

At COP28, Australia also unveiled the Net Zero in Government Operations Strategy, reinforcing transparency through public emissions reporting. The strategy outlines steps for the government’s shift to net zero in areas like energy, procurement, and fleet, emphasizing renewable energy adoption and building efficiency.

VEU looking to get cooking without gas

In a bid to accelerate what is to be a seismic shift away from natural gas (domestically), Victoria looks poised to introduce further financial incentives encouraging households to make the switch. Energy Minister Lily D’Ambrosio announced significant changes to the state’s Victorian Energy Upgrades (VEU) program, aiming to transition industry and over 2 million households to all-electric alternatives.

One of the potential updates is the consideration for an additional activity for electric cooktops, intended to broaden program participation and stimulate a faster transition for homes. New activities such as this are expected to increase the VEEC certificate creation which is currently trailing behind annual targets, and by relation, in this week’s public forum held by the VEU it was announced that the VEU has no concerns of meeting VEEC creation targets.

Acknowledgment was made that Victoria will need to transition over 200 homes daily from natural gas to achieve its ambitious net-zero emissions target by 2045.

Australia’s largest ACCU projects – Landfill Gas, not going to waste

Positive developments are unfolding in Australia’s Carbon Credit (ACCU) landscape, showcasing the government’s commitment to environmental responsibility. The Australian Carbon Credit Unit (ACCU) scheme, a linchpin of the nation’s climate policy, is undergoing careful review.

ACCUs have predominantly supported landfill gas projects, which capture and combust methane emissions, either neutralised in flares or electricity generators. These projects have created around 30% of all ACCUs, totaling approximately 4.1 million ACCUs annually.

While a debate ensues about the integrity of landfill gas projects, recent updates reveal a strong commitment to reform. The primary concern, related to low baselines (particularly in projects with generators), is actively being addressed to answer conflict with “additionality” – a question of whether projects would capture and combust methane without ACCUs.

In a positive move, the Department of Climate Change, Energy, the Environment, and Water (DCCEEW) is in negotiations to introduce new rules and proposed increases to baselines.
While a 37% baseline is under consideration, experts argue for more conservative figures, reflective of regulatory requirements and revenue incentives.

The anticipated reforms signify a renewed dedication to ensuring a fair and effective carbon credit system.

VEU Program Announced to Include Induction Cooktops

On Thursday 14 December, the Victorian Government released an updated Gas Substitution Roadmap. It included an announcement that the VEU program will expand to include an Induction Cooktop activity, which is set to be consulted on in the first half of 2024. The statement released detailed the benefit of replacing gas cooktops is within a range of $350 to $400 annually on fixed network charges per home. The activity addition comes after the introduction of Space Heating and Cooling, and Heat Pump activities introduced throughout 2023.

Victorian Gas Substitution Roadmap Summary

In the Roadmap released on Thursday 14 December, it was highlighted that the electrification transition will be ‘staged and careful’, allowing time for industry and consumers to adjust. Issues surrounding workforce changes within the transition were identified, and will be addressed in the 2024 roadmap update. A total of nine priorities have been identified under the roadmap, outlined below. There is a distinct increase in support for Renewable Gases in this iteration of the paper, as outlined in Items 4 and 7.

Deliver more all-electric precincts: all new homes where planning permits are submitted after 1 Jan 2024 will be all-electric
All-electric, efficient homes: the pathway to phase out gas use in homes and commercial buildings will be addressed in 2024
Transition Government’s own gas use: all new government facilities to be all-electric
Industrial users: Assist industry in adopting renewable gases
Build skills and capability: Increase skills and training to build the electrification workforce
Support Victorians to participate in the transition: Rebates of up to $4000 for gas heating system replacements, up to $1000 for hot water replacements (Solar Homes), and up to $720 for gas to electric hot water systems (VEU)
Unlock renewable gases to service hard-to-abate sectors: A policy directions paper to be released in mid-2024
Maintain gas reliability throughout the transition: Additional Interim gas supply infrastructure to mitigate short-term supply risks

CER Announces a new Accreditation Scheme Operator will be released in February 2024

The Clean Energy Regulator sent a release on 15 December outlining that a new Accreditation Scheme Operator (ASO) body for the SRES installer and designer accreditation will be announced in February. Both installers and designers will be required to become reaccredited with the new body within three months of the release. This will involve submitting an online form with current details, and a new accreditation number will be issued based on the information.

NSW Energy Savings Scheme Rule update

This end of December saw the largest of several updates and changes to NSW ESS with the NSW OECC releasing the updated ESS Rule on 19 December. The updated rule included several expected changes such as higher co-payment requirements around water heating and adjusted energy-saving baselines for residential water heaters but surprised some by also introducing medium co-payments for residential airconditioning activities. Key points of the rule update are:

- Co-payments for residential hot water increased to $200;
- The energy savings calculations for residential hot water heaters have been updated to reflect real-world savings more closely;
- New co-payment requirements of $200 ex GST have been introduced to both commercial hot water and residential air conditioning activities;
- changes to have a 6 month transition period, taking full effect from June 19 2024.

Interestingly this is set to be part 1 of OECC’s updates to the ESS with Part 2 delayed until early 2024. Part 2 is expected to cover updates and adjustments around lighting, commercial hot water, and pool pumps. When coupled with the 6% price increase to ESC registration costs, NSW scheme participants are closing 2023 with several new or confirmed adjustments to the programs they work within.

VEU Program Update and Statistics Summary

With much commentary around the VEU program and the potential of the newly announced and yet to be seen residential upgrades around degasification, this month saw figures released for the activity of the program from January to November 30. Key figures were:

- 831,000 upgrades conducted across over 510,000 premises;
- Over 800 new products approved for program use;
- 56 new Project Based Activities conducted
- 15 warnings delivered to program participants with 6 restrictions imposed as a result;
- 3,736 VEECS surrendered as a result of improper conduct or installations
- Two accreditations of APs suspended
- $53,600 of shortfall penalties charged to retailers
- Just under 4.5million VEECs registered;

Another key metric brought forward was that lighting remained the program’s largest certificate-creating activity, with weather sealing and water heating combined still creating fewer VEECs than lighting. Commentary was also released around the continued crack-down on aggressive or high-pressure sales tactics used by some program participants and the review of refrigerated display cabinets set to be released in 2024.

CSIRO 2023-24 GenCost Consultation Draft Released

In what has been a controversial release for many nuclear power supporters the CSIRO GenCost consultation draft has been released with wind and solar power again being confirmed as the cheapest route to decarbonizing the energy grid, even after including the transmission and storage costs needed to manage their output. According to the CSIROs report, the newly announced numbers include the infrastructure and battery storage needed by 2030, a key metric many had criticised previous reports for not considering. The report casts serious doubt on the economics of nuclear energy after raising its cost estimate of small modular nuclear reactors by 39 percent. The stark increase came after a recent project in Utah USA gave the CSIRO the ability to update its previous theoretical estimates with real-world pricing. Unsurprisingly, the report also confirmed that when including the largely unsuccessful and unproven technology of carbon capture and storage, natural gas power generation was close to 200% of that of renewable energy sources, and black coal was significantly higher again.

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.