VEET scheme to close

The Victorian Government has announced the closure of the Victorian Energy Efficiency Target (VEET) scheme. The scheme had been under review since July 2013, to determine whether it should continue for a third phase from 2015 to 2017.

The review considered three scenarios for the potential third phase of the scheme: a target of 2, 2.7 and 5.4 million tonnes of GHG abatement. Even under the most favourable scenarios tested, continuing with the scheme is expected to impose a net cost to the Victorian economy of more than $170 million, while the current targets are estimated to cost more than $700 million.

The Energy Efficiency Certificate Creators Association (EECCA), which has been campaigning for the VEET scheme to be saved, has expressed its disappointment at the decision. The association quoted the business impact assessment (BIA), which states the scheme “has benefited residential consumers who have participated in the scheme through decreasing their energy bills” and that disadvantaged communities have benefited from the scheme.

But the government claims that while the scheme has been successful in the past in encouraging the uptake of low-cost activities, such as energy-efficient light globes, the review found that these activities were reaching saturation point. Analysis indicated that consumers will need to financially contribute in order to participate, which may deter low-income households from participating in the scheme and may instead lead to them experiencing higher energy bills as non-participants.

EECCA President Bruce Easton disagreed, saying, “By closing the energy-efficiency scheme, the Victorian Government is making it harder, not easier, for families to reduce their power bills, at a time when the big power companies are jacking up gas and power prices.”

Easton said the EECCA is also disappointed that “the government has broken its promise to consult with the energy-efficiency industry before it finalised its position on the VEET scheme”. The review process was anticipated to require the development of a regulatory impact statement (RIS) to provide justification for any amendments needed to re-set the scheme’s target for its next phase, but the change to a BIA meant the government did not need to release an RIS for consultation.

The BIA states “the benefits accrued by consumers participating in the scheme, while outweighing the costs incurred by non-participating consumers, represent a transfer from energy generators and retailers to these consumers through a loss of profits”. According to Easton, this is “dodgy economic analysis suggesting reduced energy consumption is bad for the economy”.

The government recognises that its decision will impact some companies that have been participating in the scheme, and so the scheme is being extended for another year to give businesses time to adjust their business models and protect employment. It will operate under a reduced target of 2 million tonnes of GHG emissions savings for 2015. Over the transitional period, the scheme will continue to operate and be administered on a business-as-usual basis.

For any queries regarding this VEET review and the government’s decision to close the scheme at the end of 2015, email the review team at esi.review@dsdbi.vic.gov.au.