182 Fullarton Road, Dulwich 5065, Australia

Embertec Pty. Ltd, ABN: 61 110 367 809

Tel: +61 8 8334 3300 web: www.embertec.com.au

27 Nov 2015

Department of Economic Development, Jobs, Transport and Resources

Energy Sector Development Division
GPO Box 4509

Melbourne VIC 3001

Attention: Dr. Sharn Enzinger – Director of Energy Efficiency

Dear Dr. Enzinger,

Re: Project-based assessment in the VEET scheme - October 2015 consultation

Embertec welcomes the opportunity to provide comments to the Victorian Government’s Energy Sector Development Division as part of the consultation on ‘Project-based assessments in the Victorian Energy Efficiency Target (VEET) scheme – October 2015’.

Embertec is a leading developer and manufacturer of energy efficiency and energy productivity technology with sales to Australia, Canada, and the United States. Embertec is proudly an Australian SME and is investing more than $3M annually on research and development. Embertec has extensive experience as a supplier of products for installation under the South Australian REES Scheme, the Capital Territory’s Energy Efficiency Improvement Scheme (EEIS) as well as to businesses accredited under the Victorian Energy Efficiency Target (VEET) scheme.

Embertec recognise that there is broad stakeholder support for the introduction of project based assessment (PBA) methodologies into the VEET scheme. This includes support by Embertec, as we recognise that innovation and opportunities for energy efficiency are not always well represented through the use of deemed methodology. This consultation is predominately focused on a proposal for a new M&V Method that has been broadly lifted directly from the New South Wales (NSW) Energy Saving Scheme (ESS) method named Project Impact Assessment with Measurement and Verification (PIAM&V). Our view of this methodology (which aligns with the Department’s) is that the method will only be really practicable for large energy users. Based on the uptake demonstrated in NSW we are confident that there will be genuine interest by businesses to utilise the method in VEET. We have not directly responded to the questions posed in the consultation paper as the method being consulted on is unlikely to be a business driver for us into the future. Nonetheless there are two aspects which do not appear to be explicitly detailed in the consultation paper that we consider important for the Department to address before finalising the method.

It will be important that each approved project:

• can demonstrate additionality – ie. a project delivers energy savings above and beyond business as usual;

• is visible to the market – ie. the market is aware as early as practicable of the quantity of certificates the project intends to deliver

Market visibility at the moment in VEET is quite high, the deeming methodologies and public VEEC registers provide a high level of insight into the VEEC market with very few instances of surprise. Uncertainty around the quantity of VEECs that could be delivered through PBA may potentially erode some of that valued visibility. A constant threat overhanging the market that a single project could introduce hundreds of thousands of certificates to the market without warning would lead to extreme price volatility, which is undesirable.

Next consultations

Our understanding from Department staff and the consultation document, is that the Department’s approach to introducing PBA is to begin with M&V. Following on from M&V there will be a number of consultations on different PBA options continuing through 2016. To that end, we expect the department to follow through on that commitment and stress that it is important to have an appropriate set of PBA methodologies that can be used and applied to different participating sectors in the VEET scheme not just large energy users.

Our business will work closely with the Department towards establishing a methodology that can effectively be applied to residential energy users in Victoria. We are reassured that establishing a PBA methodology for residential energy efficiency upgrades is also a priority for the Department.

The current consultation document only briefly canvases the proposal of an aggregated method similar to the NSW ESS Aggregated Metered Baseline or the Commonwealth Emission Reductions Fund (ERF) Aggregated Small Energy Users for applicable for small energy users. We have concerns with those methods and respectfully ask the Department to take care before following a similar track. Conceptually the ESS and the ERF aggregation methods are grounded in proven statistical science but we view the on-the-ground practicalities of actually implementing the approach to be difficult. This is proving to be the case as to date we are not aware of any projects that are utilising the method in NSW or in the ERF. Assuming the real risk of uncertainty driven by human ideology and/or change in behaviours to the side can be overcome (as per the science of a statistical model). The most serious barrier to the take up of these methods in our view, is that the existing aggregation methods require that service providers (ie. the APs or ACPs:

· have access to apply energy efficiency programs to large numbers of households in order for there to be a statistically significant result; and

· be provided with access to the consumer energy data of those households.

For the method to be cost effective and feasible APs would most likely need to collaborate with an electricity retail or electricity distribution business in order to get access to the required data. To do that requires the establishment of all sorts of contractual agreements (not least covering issues relating to data privacy) and assumes that the business objectives between an AP and retailer can be properly aligned and for this to occur in such a way as to ultimately ensure the consumer is the beneficiary.

Our view is that Victoria is ideally suited to use emerging residential energy monitoring technology in coordination with the Victorian Advanced Metering Infrastructure (AMI) technology to support many of the core principals of M&V but at an individual household level. Baseline energy usage can quickly be established using the abundance of historical consumption data accessible to households and new monitoring technology allows specific household loads (such as a HVAC system) to be disaggregated accurately or even measured directly. A supportive M&V methodology for residential will allow energy efficiency upgrades to be customisable to the actual needs of the household as opposed to upgrades being confined to a set of “approved” technologies or to pushing a specific type of technology or behavioural program across many thousands of households.

A residential M&V program can’t be administratively onerous and needs to allow APs to establish a single proposal covering a substantial class of households. Issues of confirming eligibility, planning, baseline, implementation, reporting, and certificate creations need to be addressed across a broad group of households. A requirement to demonstrate each of the steps on single household basis would doom the method to failure for residential application.

We recognise that there are many elements of a residential specific M&V method that will need much greater consideration. Defining and responding to those elements are outside the scope of this particular consultation but we intend to work closely with the Department to develop a suitable PBA methodology for small energy users.

As always, Embertec looks forward to continuing the close dialog with the Department and the Essential Services Commission (ESC) on VEET matters will provide appropriate time and resources as requested to support the Department’s continuing efforts to expand and improve the VEET scheme.

Should you have any questions regarding this submission, please contact Kevin McNamara, Manager Intellectual Property and Regulatory at or Henry Otley, Strategic Business Analyst at .

We look forward to continued discussion,

Yours sincerely,

Henry Otley