Targets for the Energy Savings Scheme announced for 2022 to 2050

In case you missed it, the NSW government quietly released the targets for the Energy Savings Scheme (ESS) in December for 2022 to 2050, cementing their commitment to the ESS out to mid-century. The energy saving targets are set based on a percentage of the electricity purchased for supply to end customers and places on obligation on energy retailers to surrender an equivalent amount of Energy Savings Certificates (ESCs) each year. 

This announcement increases the previous targets for 2022 to 2025, announced in 2016, by 0.5% per year, meaning the 2025 target has increased from 8.5% to 10.5% of electricity supplied. This rate of increases continues year-on-year through to 2030, targeting savings of 13% of all electricity supplied to end customers. In line with previous target setting, the goal for 2030 to 2050 is currently set at 13% per year, but as the government has done before this likely to be reviewed at the five-yearly target setting. Importantly, this is the first time a target has been set more than ten years in advance and indicates that the ESS is likely to be a key part of NSW goal to achieve net-zero by 2050.

The final certificate target for 2020 is yet to be released by the regulator as the annual compliance deadline doesn’t fall until April, but the 2019 target was 4.6M ESCs. The creation for 2020 activities to date is 3.7M ESCs, down 24% on 2019 with the 2020 compliance surrender yet to be completed. If the 2020 target is similar to 2019, there will be a surplus of 4.3M ESCs – or another way to look at it the program is 11 months ahead of the target.

Looking forward it is hard to know what the annual ESC target will be, as the future energy consumption is not known, but based on the latest NSW consumption forecasts by AEMO out to 2030, the 2021 target could be 5.5M ESCs increasing to 8.4M ESCs per annum by the end of the decade.

During 2019, activities under the ESS saved 2.8 TWh of electricity, 520 TJ of gas, avoided 2.6M tonnes of green house gases, and saved NSW consumers $235M. The cost of the program to electricity customers was estimated to be $88-112M representing a return on investment of 109%. These savings also contribute to demand reduction across the state reducing the cost of transmission and distribution assets.

The Energy Savings Scheme is a market-based mechanism that was implemented in 2009 with the goal to provide financial incentives for business and residential consumers to undertake energy efficiency upgrades. The approved activities cover “deemed” upgrades – where there is a pre-determined level of savings based on the upgrade and is available for specific technologies – there is also the technology-neutral “Measurement and Verification” approach. Whilst an M&V approach is more complex and takes longer to complete it enables the full value of the savings to be realised. The program supports many types of upgrades ranging from industrial boilers, refrigeration, improving NABERS ratings, air-conditioning and HVAC, LED lighting, high-efficiency appliances, and many bespoke upgrades in the commercial and industrial sectors. The NSW government has continued to make the ESS an integral part of their energy strategy, expanding the program into the Energy Security Safeguard which will incorporate a future demand response mechanism.