Target setting for Victorian Energy Upgrades
Update – 12 April 2021
The Department is continuing its review of the definition and treatment of large energy users under the Victorian Energy Upgrades program. In the meantime, the current Victorian Energy Upgrades exemption framework will continue to apply for those businesses currently exempt, and businesses currently included in the Victorian Energy Upgrades program can continue to access incentives for energy upgrades.
The Department is undertaking further consultation and work over the coming months to ensure that the proposed changes for large energy users support businesses to manage their energy costs during the recovery and through the transition of our energy system. This includes consideration of the proposed exemption criteria. Proposals outlined in the regulatory impact statement released by the Department in December 2019 (on this website) were based on historical energy consumption. Since then, the impacts of the coronavirus (COVID-19) pandemic have substantially changed energy use for many large energy users; this is being explored through further analysis.
Subject to this further consultation and analysis, a new exemption framework will be announced in late 2021 with a suitable transition period before the new approach comes into effect.
Update – 8 December 2020
The Hon. Lily D’Ambrosio MP, Minister for Energy, Environment and Climate Change, has today announced that the VEU targets for 2022 to 2025 will be:
- 6.7 million certificates in 2022
- 6.9 million certificates in 2023
- 7.1 million certificates in 2024
- 7.3 million certificates in 2025.
The targets will deliver significant benefits to the energy system, help Victoria achieve its climate goals by locking in 28 million tonnes of emissions savings, and reduce energy prices for all consumers, whether they participate or not. On average, participating households and businesses stand to save over $120 and $510 respectively each year.
The targets herald a new phase of the program by expanding incentives to a broad range of crucial energy demand-side technologies that will support the cost-effective transition of the energy sector. They will further support recovery by providing an additional $1.3 billion in investment in the demand-side management industry between 2022 and 2025 and supporting over 2200 jobs annually.
The Department has listened to stakeholder feedback received in response to its consultation on targets, and throughout the coronavirus pandemic. In recognition of the need of an orderly and supported transition, the electricity emissions factors need to be updated to reflect increasing renewable penetration. Introducing this change through gradual decreases in each year to 2025 will support industry transition.
Increases to shortfall penalty rates will support an expanded range of activities and be introduced gradually as part of this support for transition.
Electricity emissions factor
(in tonnes of carbon dioxide equivalent emissions per megawatt hour)
31 July 2021
31 January 2022
31 January 2023
31 January 2024
$90 (subject to 2023 review)
31 January 2025
$90 (subject to 2023 review)
The Department will release a document shortly that outlines the reasons for its decision and responds comprehensively to feedback received from stakeholders.
The Department invites stakeholders to attend the 17 December forum being held by the Essential Services Commission at which it will provide further information on these matters. Stakeholders will have the opportunity to ask questions at this forum.
As part of its initial Regulatory Impact Statement, the Department carried out extensive modelling on impacts of targets. This modelling is available below. The final targets proposal has been altered since consultation to ensure that all consumers, even those who do not participate, save on their bills in the immediate term. Supplementary modelling for the final proposal was carried out and is available here.
Update – 2 June 2020
The Hon. Lily D’Ambrosio, Minister for Energy, Environment and Climate Change and Minister for Solar Homes, has announced that the VEU target for 2021 will be 6.5 million certificates. The letter from the Minister (available here) also outlines the details of decisions on the 2021 target and the electricity emissions factor. The decision on targets for 2022 to 2025 and associated changes will be determined before the end of the year.
The Victorian Energy Efficiency Target Act 2007 requires annual targets for reducing emissions be set in the Victorian Energy Efficiency Target Regulations 2018 for the 2021 to 2025 periods by May 2020.
In order to establish these future targets, the Department of Environment, Land, Water and Planning is required to prepare a Regulatory Impact Statement (RIS) to assess the costs and benefits of different target options. A RIS is required under the Subordinate Legislation Act 1994 for regulatory proposals that are ‘likely to impose a significant economic or social burden on a sector of the public’.
The RIS assesses five different target options. The preferred option proposes a set of annually increasing targets to be met by an expanded range of upgrades.
The preferred option also proposes specific eligibility criteria for large energy users who choose to opt out of the program, including a requirement to implement best practice energy management systems. In total, the proposed option will avoid 40.6 million tonnes of carbon dioxide equivalent emissions.
An overview of the RIS is provided here:
The Department has prepared short factsheets to assist readers in understanding key issues:
Have your say
The Department invites you to comment on the proposed changes. Submissions can be made here and are open until 31 January 2020. Submissions can also be sent to email@example.com or posted to:
Energy Demand, Programs and Safety
Victorian Energy Upgrades Consultation 2019
PO Box 500, East Melbourne, VIC, 3002
The following questions may be useful to consider as part of your submission:
- What is your view on the expansion of the program to a larger set of activities?
- What is your view on the new exemption process for trade-exposed large energy users?
- What is your view on the costs and benefits of the proposed target?
- What is your view on how the proposed target will stimulate innovation?
- What is your view on how the proposed target will stimulate participation?