A Guide to Creating ACCUs For Energy Efficiency Upgrades

What is an ACCU?

ACCUs are Australian Carbon Credit Units, which are created as a result of an activity that is causing an emissions reduction on a commercial or industrial scale. ACCUs are created through the Emissions Reduction Fund (ERF), just as LGCs are created through the Renewable Energy Target (RET). 

Under the ERF, there are a plethora of methods to create ACCUs for different activities. The most common branches under which different methods sit are:

• Energy Efficiency
• Agriculture
• Carbon Capture and Storage
• Vegetation Management 
• Transport and;
• Waste Water

Each ACCU, regardless of the activity and method used to create it, is representative of 1 tonne of C02 Equivalent.

1 ACCU = 1 Tonne C02 Equivalent

As an internationally recognised carbon credit, ACCUs may be traded, or surrendered to offset any scope of emissions. 

What creates the Market?

One of the most commonly asked questions is, what creates a market for ACCUs? There are two major sources of demand: 

1: The Safeguard Mechanism 

The Safeguard Mechanism is a mechanism that requires Australia’s largest polluters to keep their net emissions below a baseline level. This is applicable to facilities which emit in excess of 100,000 tonnes of C02 equivalent each financial year. They can either engage in emissions reduction activities, or purchase ACCUs to offset excess emissions. This is most relevant for industries such as electricity generation, mining, oil, gas, manufacturing, transport and waste. 

2: Voluntary Relinquishment 

Many companies choose to voluntarily relinquish ACCUs to offset their emissions for a range of purposes. This may be to achieve benchmarks for carbon neutrality certifications, or to deem electricity as carbon neutral for onselling. 

The voluntary demand is growing exponentially as Australia steams toward Net Zero emissions, and consumers become evermore aware of the sustainability associated with their purchasing power. 

Which Activities are eligible to create ACCUs?

Here we will explore methods under the Energy Efficiency and Transport branches to create ACCUs. Under these branches, there are eight primary methods that are available for an array of projects and technology types. When comparing the ERF to other state-based programs, it by far has the most breadth and flexibility within the range of eligible projects. 

Eligible projects and activities may involve the following: 

• Aggregated Small Energy Users 
  • Ie. Residential households and small businesses.
  • Community Housing 
• Equipment Upgrades in Commercial and Industrial Facilities 
  • Any upgrade resulting in electricity or fuel savings. 
  • Pumps, Boilers, VSDs, HVAC, Fans, Refrigeration, Compressed Air Systems, Building Management Systems, Commercial Lighting. 
• Fuel Switching 
  • Any activity, individual or aggregated, that will result in electrification replacing a fuel source such as gas or diesel. 
  • HVAC, Process Heating, Compressed Air Systems, Boilers, Refrigeration and Industrial Cooling Systems, Heat Recovery. 
• Aggregated Energy Upgrades or Electrification 
  • The aggregation of implementations that have all resulted in a small energy saving. 
  • Implementations that result in under 800MWh of individual savings, though pass the threshold when several sites are combined. 
• Land, Sea and Transport Upgrades 
  • The electrification of vehicles, machinery, buses, trains and sea vessels. 
  • Fleet of company vehicles, or transport buses being electrified. 

The Methods: 

1. Aggregated Small Energy Users – Groups of households and small businesses. Examples include community housing projects.
   
2. Commercial building energy efficiency – Improved fuel combustion and electricity consumption in commercial buildings
   
3. High efficiency commercial appliances – New installation of GEMS registered high efficiency commercial products. Not retrofits.
   
4. Industrial and commercial emissions reduction – Upgrading and replacing commercial equipment, and fuel switching: gas and diesel.
   
5. Industrial electricity and fuel efficiency – Electricity and fuel efficiency activities such as upgrading heat pumps, HVAC, boilers and variable speed drives. 
6. Industrial Equipment Upgrades – Common industrial and related equipment such as pumps, boilers, compressed air systems, refrigeration and industrial cooling systems
7. Refrigeration and Ventilation Fans – Reducing the energy consumption of fans in commercial buildings emissions reduced by high efficiency fan installations and upgrades to refrigeration and ventilation systems

The Creation Process

The creation of ACCUs is subject to a project being both eligible and viable. Once we have established this, a project is implemented and follows the below process for credit creation. 

Eligibility Criteria

Newness Requirement	Project must be registered under the Emissions Reduction Fund prior to a contract being signed with an EPC, any financial decision being made, and any implementation works beginning on site
Recommended Minimum Energy Saving Threshold per Method	Electricity: 800MWh or,  Gas: 2500GJ or,  Diesel: 20,000L *Note that multiple sites may be bundled to achieve minimum project savings
Method Selection	Correct method is selected for the technology type of the implementation
Metering Method Identified	A project may be metered through the site’s total energy consumption, or through a submeter for the specific implementation.

Creation Process

Project Registration	The project is registered. Once approval is gained, a final financial decision may be made, a contract may be signed with the relevant EPC and site works may commence. The registration process is up to 90 Days.
Measurement Period	7 Year Measurement Period  Measurement Intervals: 6 Months, 12 Months, 18 Months or 24 Months.
Carbon Credit Creation	7 Year Crediting Period  Certificates are created at the end of each measurement interval.
Relinquish or Monetise	A site may choose to monetise credits through trade, or voluntarily relinquish credits to offset their carbon footprint. Ecovantage tailors and facilitates both of these processes to ensure you gain the best possible outcome.

The Market?

Now that we have established the sources of demand that influence the ACCU market, here is an overview of the current market climate. 

Over the period of early 2021 to 2022, the ACCU market rose from approximately $17.00 per unit to $60.00 per unit, with large demands and low supply causing relatively low liquidity in the market. On 4 March 2022, the Commonwealth Government announced a policy change where sellers could opt out of their Emissions Reduction Fund (ERF) fixed delivery contracts with the government, on payment of an exit fee. 

The exit fee payable was calculated by multiplying the contract price by the quantity of ACCUs to be released, where the ACCUs could then be sold for a higher premium on the private market. 

The primary aims of this initiative were twofold; 

1. Increase liquidity in the ACCU market, and;
2. Allow sellers to access a higher premium per certificate (the average fixed price contract was between $15-17.00)

While the contract release was successful in increasing market liquidity, the spot price plummeted from $60.00 to the range of $20.00 in a matter of days. The price has somewhat recovered to sit in a more stable position of $30.00-$36.00. 

The spot price movement over the coming years will be subjected to the current reform of the Safeguard Mechanism as well as the independent ACCU method review outcome. 

What are the carbon outcomes?

ACCUs can be used for a site to either monetise, or surrender to gain the carbon benefit. Each certificate is representative of 1 tonne of CO2 equivalent, and can therefore be used as an internationally recognised offset. 

For energy efficiency projects conducted for a site that has a liability, they may create ACCUs for the upgrade, and surrender them to contribute toward their annual liability.

How do I explore ACCUs for Energy Efficiency?

Our team of experts are here to guide you through the process of establishing viability, through to project registration and ACCU creation. We recommend starting the viability process at the beginning of a project or upgrade’s conceptualisation. This will ensure that all newness requirements are met, prior to any financial decision being made or contract being executed.

Speak with a specialist