Department of Industry, Innovation and Science GPO Box 9839

18 March 2016

Department of Industry, Innovation and Science GPO Box 9839

CANBERRA ACT 2601

Australian Gas Networks Limited

ACN 078 551685

Level 6, 400 King William Street

Adelaide, South Australia 5000

PO Box 6468, Halifax Street

South Australia 5000

Telephone +618 8418 1114

www.australiangasnetworks.com.au

Australian

Gas Networks

Re: E3 Equipment Energy Efficiency, "Consultation Regulation Impact Statement - Air Conditioners and

Chillers"

To Whom It May Concern:

Australian Gas Networks Limited (AGN) is one of Australia 's largest natural gas distribution companies . AGN owns approximately 23,000 kilometres of natural gas distribution networks and 1,100 kilometres of transmission pipelines, serving over 1.2 million consumers in New South Wales, South Australia , Victoria , Queensland and the Northern Territory .

AGN welcomes the opportunity to make a submission to The Energy Rating Team, of the Department of Industry, Innovation and Science (the Department) regarding the "Consultation Regulation Impact Statement - Air Conditioners and Chillers" consultation paper (the Paper). AGN understands that the Department will consider responses to the Paper in order to develop a final recommendation regarding the proposed changes.

AGN considers that distributed natural gas is a low cost, low carbon energy choice for Australian energy users. AGN's network delivers safe and reliable energy that is a fraction of the carbon intensity of electricity generated from black or brown coal. As such, AGN considers that distributed natural gas has an important role to play in Australia's low-carbon future .

As such, AGN is supportive of the key objectives of the E3 program, namely to improve the emissions performance of appliances and enable consumers to make well-informed purchasing decisions. In particular, AGN supports the Department in continuing to ensure that the E3 regulations relating to air conditioners and chillers remain current and relevant as technologies evolve.

AGN considers that the proposed changes described under Option B2 in the Paper, will better inform consumers in terms of energy efficiency and encourage greater competition and innovation between and amongst appliance manufacturers. AGN does consider, however, that the new label design would benefit from including greenhouse gas emissions reduction information , as this would provide even greater transparency of information to consumers, enabling them to make more informed purchasing decisions .

AGN thanks the Department for the opportunity to comment on the Paper. Please contact either Ashley Muldrew (xxxxxxxxx or myself (xx xxxx xxxx) should you wish to discuss our submission further .

Yours Sincerely

Craig de Laine

General Manager - Regulation

Detailed Response to "Consultation Regulation Impact Statement - Air Conditioners and Chillers"

The Potential of Gas Powered Air Conditioners Chillers

AGN notes that although the most common forms of air conditioning and chillers are powered by electricity, gas powered forms of these appliances are also represented in Australian households and commercial premises.

Gas powered air conditioning (GPAC) is an efficient way to run commercial and household air conditioning and reduces greenhouse gas emissions by up to 50% when compared to electrical equivalents 1. Additionally, GPAC contributes up to 90% less electricity demand (given its gas powered function) , compared to electric air conditioners 2. In this way can GPAC contribute to the deferral of investment in electricity networks necessary in order to manage times of peak electricity demand.

For consumers, GPAC also has the potential to provide cost savings of up to 40% for energy consumers, when compared to the running costs associated with electrical appliances 3.

Given the potential of GPAC to reduce greenhouse gas emissions attributable to air conditioning appliances , AGN considers it valuable to incorporate greenhouse gas emissions reduction information on the new label template. In this way, the key competitive advantage of gas powered appliances is transparent and clear to consumers, enabling them to make more informed purchasing decisions and contribute to the achievement of the E3 Program Objectives . This point is elaborated further in the remainder of our submission .

Introduction

AGN is fundamentally supportive of the Department's recommendation to implement Option 82 as outlined in the Paper. AGN acknowledges and supports the Paper's evaluation of the options considered, including the consideration of emissions performance in those evaluations .

More particularly , AGN supports the development of a Zoned Energy Rating Label (ZERL) that will provide energy customers with more accurate information that accounts for the impact of climatic conditions on the energy efficiency and capacity of air conditioners and chillers .

AGN agrees with the Department that the development of such a label will provide greater transparency to consumers and other industry participants and will also:

•  enable them to make more informed purchasing decisions; and

•  encourage greater competition between appliance manufacturers (in terms of appliance energy efficiency capabilities) as consumers are more readily able to choose more energy efficient appliances.

AGN further believes that by providing quantitative appliance performance information for different geographic climate zones, consumers and market participants will be able to more easily compare 'like with like' features of alternative products. However, AGN advocates for the inclusion of additional information (such as greenhouse gas emissions reduction information) on the new label template .

1 Yanmar , "Gas powered air conditioning", http://www.yanmarenergy.com.au/products/gas-powered-air-conditioning , March 2016.

2 Ibid.

3 Ibid.

Label Content

AGN has reviewed the study conducted by lnovact Consulting (lnovact) previously commissioned by the Department which focussed on researching and testing potential label content with focus groups of consumers. AGN has commented on lnovact's findings (which are supportive of the introduction of a new label on solar water heaters), in its submission to the Department regarding its consultation relating to the introduction of a Zoned Map for Solar Water Heaters.

However, AGN considers that the findings from lnovact can equally be applied to the new ZERL for air conditioners and chillers . The remainder of AGN's submission is focused on providing recommendations in relation to particular label content, based on lnovact's research and findings.

AGN has detailed below what we consider to be the key findings from the testing, to be reviewed by the Department for inclusion into the new label template .

Noise Levels

The research conducted by lnovact found that customers value the inclusion of noise information on labelling . In particular, lnovact demonstrates that when explained, customers understood the relevance of noise level information (in terms of decibels)4 on the appliances tested. AGN therefore supports the inclusion of noise level information on the new label template.

Energy Usage

From an energy usage perspective , lnovact has found that the display of energy usage in terms of kWh is effective:

"Most knew kWh and understood it was a measure of the energy consumed and could be used (with the price per kWh) to calculate the cost of running the appliance. "5

However, the labels currently do not include electricity transmission or distribution losses whilst AGN considers that these losses should be included in the energy usage reported on the labels. AGN is concerned that if the aim of the labels is to demonstrate energy efficiency , then the energy usage reported should include energy usage up to the appliance's point of connection . AGN therefore recommends that energy usage reported on these labels reflects the "grossed up" energy (that is, the energy that the customer is billed).

Greenhouse Gas Emissions Reduction Information

AGN is supportive of the Department's proposed new labelling of solar water heaters however strongly considers that greenhouse gas emission reductions should also be included on the labels.

AGN considers that reporting the emissions performance of appliances is consistent with the E3 program objectives, detailed below:

1)  "To reduce energy bills for households and businesses in a cost effective way by driving improvements to the energy efficiency of new appliances and equipment sold;

2)  To improve the energy efficiency of new appliances and equipment that use energy and to also improve the energy performance of products that have an impact on energy consumption; and

3) To reduce appliance and equipment related greenhouse gas emissions through a process which complements other actions by jurisdictions ".6

4 lnovact Consulting , "Findings of qualitative focus group testing of new energy labels", October 2015, pg. 13.

5 Ibid., pg. 16.

In particular, AGN does not consider that the current label design is consistent with the third objective of the E3 program and believes that greenhouse gas emissions reduction information should be included in the label template.

The compliance of the new label design against each of the program objectives is detailed in the table below.

E3 Program Objective / New Label Design Compliance
To reduce energy bills for households and businesses in a cost effective way by driving improvements to the energy efficiency of new appliances and equipment sold . / By incorporating comparative energy usage information on appliance performance, consumers can readily identify and compare the energy efficiency of appliances . As such, consumers are able to choose to install an appliance that uses less energy in order to reduce their energy bill.
To improve the energy efficiency of new appliances and equipment that use energy and to also improve the energy performance of products that have an impact on energy consumption . / AGN believes that the proposed label design enables consumers to identify more energy efficient appliances and subsequently (assuming that consumers prefer to purchase energy efficient appliances) , drive greater competition between appliance manufacturers , encouraging them to continue to innovate and develop more energy efficient appliances.
To reduce appliance and equipment related greenhouse gas emissions through a process which complements other actions by
jurisdictions . / The proposed label information does not currently include greenhouse gas emission information and as such, does not enable consumers to easily understand the level of greenhouse gases that appliances are emitting .

Further support for the inclusion of greenhouse gas emissions reduction information on the new label template can be found in other emissions reduction programs around Australia . For example the national Emissions Reduction Fund has a target stated in terms of a reduction in greenhouse gas emissions.

Although AGN acknowledges that the Department proposes to provide additional information to customers through a Quick Response (QR) code, AGN believes that reference should be made to greenhouse gas emissions reduction on the new label template itself.

As such, AGN advocates for the inclusion of greenhouse gas emissions reduction information in the new label template. In particular, AGN considers that the inclusion of this information is consistent with and complements the actions of similar programs introduced in other jurisdictions, consistent with the objectives of the E3 program.

Summary and Recommendations

As detailed above, AGN is supportive of the Department's proposed changes to the energy ratings label as outlined in Option B2. However AGN also considers that the following information could be incorporated into the label template, to enable greater transparency of information:

•  Noise levels (in dB(A)) ;

•  Energy usage (in kWh); and

•  Greenhouse gas emissions reduction.

6 Energy Rating Australia, " The E3 Program", http://wwwenergyrating.qov.au/about.

Should the Department have any queries or wish to discuss any matters raised in this submission further , please do not hesitate to contact Ashley Muldrew (xx xxxx xxxx).