30th November 2015

Energy Saver Incentive Team Department of Economic Development, Jobs, Transport and Resources Via email: energysaver.incentive@ecodev.vic.gov.au

Project-based assessments in the Victorian Energy Efficiency Target (VEET) scheme October 2015

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 Victoria, South Australia, Queensland, New South Wales and the Northern Territory.

AGN’s Victorian gas distribution network has its origins dating back many decades in the form of the Gas and Fuel Corporation of Victoria. Today, we provide the safe and reliable supply of natural gas to around 620,000 Victorian customers.

AGN welcomes the opportunity to make a submission to the Energy Saver Incentive Team regarding the “VEET Proposed Activity Regulation Changes October 2015”. AGN understands that following this consultation period, the Energy Saver Incentive Team is seeking to change the VEET Regulations to help facilitate improved access to existing energy savings activities and to ensure activities are appropriately rewarded.

As outlined in our submission attached to this letter, distributed natural gas is a low cost, low carbon choice for Victoria. Our network delivers safe and reliable energy that is a fraction of the carbon intensity of Victorian mains electricity. Additionally, the availability of natural gas provides a more diversified energy mix, by increasing the security of energy supply to customers.

Importantly, there are multiple opportunities for the gas network to evolve beyond supply to traditional appliances in existing supply areas, resulting in additional carbon savings as well as efficiencies for existing customers. These initiatives are explained further in our submission.

Please contact either Kristin Raman (08 8418 1117) or myself (08 8418 1129) if you would like to discuss the matters raised in this submission further.

Yours sincerely

Craig de LaineGeneral Manager – Regulation

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Attachment – Detailed Response to: Project-based assessments in the Victorian Energy Efficiency Target (VEET) scheme October 2015

Background

Natural gas has long played an important role in the energy mix for Victoria and Australia, driven by its favourable characteristics of being an abundant local resource that is low cost, low carbon intensity and a preferred energy source for cooking and heating. These characteristics continue to make natural gas an important part of Victoria’s future energy mix. More specifically, distributed natural gas:

Provides reliable, base load energy supply to homes and businesses with our Victorian customers experiencing, on average, one supply interruption every 36 years (i.e. significantly greater reliability than the electricity network).

Is base load in the nature of its supply, and as such, is an important complement to the more intermittent nature of renewable energy sources.

Delivers energy which is approximately one fifth of the carbon intensity of mains electricity in Victoria. Even at times of increasing renewable energy generation, as long as fossil fuels remain part of the electricity generation mix, distributed natural gas will continue to be preferential in terms of emissions. There are further opportunities to reduce emissions associated with distributed natural gas through the injection of a) renewable gas (bio-methane from biogas plants) and /or b) synthetized natural gas (excess renewable power efficiently stored in the gas grid for future use).

Offers a cost-effective solution to consumers, as in many locations, including Victoria, gas network prices are stable or falling1. These reductions are likely to offset any forecast increase in wholesale gas costs.

Helps to mitigate peak electricity demand, limiting the need for further costly investment in the electricity network, therefore helping to minimise electricity prices. For example, the Energy Networks Association (ENA) estimates that infrastructure required for peak electricity demand is used for the equivalent of four or five days per year, with one network alone indicating that augmentation for peak demand cost $11 billion.2

Represents the more efficient utilisation of historic investment in natural gas networks, which in-turn will lead to lower prices.

Is an essential input to certain commercial and industrial applications. Is evolving past the traditional uses of heating (homes and water) and cooking to transport, gas-

powered air conditioning, gas dryers and distributed generation. Provides diversity and balance in energy supply, which is vital for ensuring the ongoing energy

security for Victorian homes and businesses. Supports jobs growth and economic investment in Victoria’s economy, through the utilisation of the

state’s natural resources.

Given the above, distributed natural gas has an important role to play in assisting the Victorian economy’s transition to a low carbon future. To this effect, AGN encourages the Department of Economic Development, Jobs, Transport and Resources and the Victorian Government more broadly, to actively consider and advocate for the role of distributed natural gas in a low carbon future. Further details on how we can achieve this in collaboration with the Victorian state government are provided in the following responses to the changes proposed in the consultation paper.

1 For example, in New South Wales over the next five years, Jemena’s New South Wales customers will see an average saving of $118 per year due to a 34% reduction in network charges, whilst In South Australia, we (AGN) have proposed an 11% reduction in residential network charges in 2016 equivalent to a $46 saving on the annual bill.

2 Energy Networks Association 2014, “Electricity prices and networks costs”.

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AGN envisages there would be a market for the Measurement and Verification (M&V) Method. There are many large high energy usage sites (some with complex energy use profiles), that could benefit from this method.

In saying that, AGN also believes a solely site-based percentage energy reduction M&V method may not fully reward the total system greenhouse emission benefits that could be achievable, when gas appliances replace comparable electric appliances. AGN is concerned that there is a potential risk in adopting the M&V method without this clarification. Specifically, potentially perverse outcomes could occur, where low emission gas appliances on a given site are replaced by higher efficiency electric appliances, with the end result being potentially higher net greenhouse emissions from larger use of coal-based grid electricity.

This issue is highlighted by a quote from the current “Rule Change Amendments” document, from the NSW Energy Savings Scheme (ESS):

To ensure that the ESS continues to be consistent with all of the objects of the Act, the NSW Government is proposing fuel switching projects that result in a net increase in greenhouse gas emissions would not be eligible. 3

This quote is of even greater significance given that both the operators of the Victorian VEET scheme and the operators of the NSW ESS scheme, have declared their intentions to continue to work towards harmonisation of their respective schemes. As such, AGN encourages the facilitators of these schemes to remain cautious of potential unintended consequences of this move towards harmonisation.

AGN believes that the M&V process provides the lowest risk assessment method and that the adoption of any other methods should be done only following thorough review and modelling.

3 NSW Department of Industry, “NSW Energy Savings Scheme: Rule Change Amendments Consultation Paper”, page 5.

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Although AGN is not an Accredited Person (AP), AGN believes that the following minimum qualifications and experience for an AP, should apply:

Be a Certified Measurement & Verification Professional (B.Eng or B.Sc);

Be a Certified Energy Efficiency Specialist (CEES); and/or

Relevant industry experience (10 years or more professional experience working within the energy industry, facility management or an engineering role).

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AGN believe that Project Based Assessment (PBA) assessors should have the following minimum qualifications and experience:

Be a Certified Measurement & Verification Professional (B.Eng or B.Sc);

Be a Certified Energy Efficiency Specialist (CEES); and/or

Relevant industry experience (10 years or more professional experience working within the energy industry, facility management or an engineering role).

Further, AGN believes that AP’s should not be eligible to become PBA Assessors.

While we agree that the Accredited Persons should be responsible for the proposed calculation method and the adherence to International Performance Measurement Verification Protocol (IPMVP) principles in measuring and modelling energy savings for the project, AGN is concerned that a conflict of interest could arise.

In AGN’s view, to minimise the risk of conflict of interest, it would be preferable, for example, for the Victorian Government to create a panel of Victorian Government Approved PBA Assessors, from which the ESC allocates an assessor, to newly registered PBAs. The panel of Assessors, when registering,

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would need to be one allocated from the Victorian Government Approved PBA Assessors, and would also need to agree to conduct assessments on a standard hourly rate, reviewed annually, for example.

The final point that AGN would like to make, relates to adequacy of PBA Assessor numbers. Although this issue has been discussed from time to time it is sufficiently important to raise again, emphasising the importance of not only having an adequate pool of Assessors available to meet upcoming project demand, but also Assessor quality. AGN regards this as a key challenge for the program.

AGN believes the eligibility question should be a fundamental part of the review of the M&V Plan. Logically, the quality of the plan should be reviewed by an Assessor, as this would ensure the eligibility of the PBA.

AGN believes that for process transparency, full disclosure of implemented PBAs should occur to ensure the consistency of stated objectives of the program is maintained, as well as developing industry capacity.

AGN believes the content required within the M&V Plan at this stage should include:

Definition of the project, boundary measurement and interactive effects; Identification of the expected baseline and reporting periods (dates and duration); Definition of the metering and other record-keeping or measurement; Outline of the format and content to be provided for operational verification; Outline of the format and content for reporting energy savings at forward creation or top-up; Identification of roles, protocols and responsibilities for quality assurance, taking

measurements, and dealing with unexpected circumstances such as site changes, outages or lost data;

Inventory of equipment and conditions relevant to the measurement boundary; Identification of any known future disruptions or changes relevant to the measurement

boundary; and Provision of a basic forecast for the anticipated reduction in energy.

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AGN advocates that a PBA Operational Diary be kept, which denotes:

Measurements: project sub-metering, benchmarking against site meter results;

Commissioning report: signed/dated activity logs and compliance certificates (from trades people and engineers involved in appliance changes);

Site inspections: signed/dated activity logs; and

Photographs: geotagged and dated.

Additionally, Statutory Declarations of a PBA Operational Diary could be considered as a validating measure.

AGN supports the M&V methodology that recognises Victorian Energy Efficiency Certificate (VEEC) creation after the project finish.

Whilst we understand the “10 year forward creation” methodology may increase uptake of projects, it also greatly increases the risk of inaccurate assessment (through either over or under estimation) of the greenhouse emission reduction, and also exposes the process to the risk of future policy change.

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AGN recommends that online training courses could be made available to support businesses using the M&V Method in Victoria.

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