The New South Wales Energy Savings Scheme

Margaret Sniffin, Executive Manager Independent Pricing and Regulatory Tribunal 21 June 2011

NSW Energy Savings Scheme - history

Energy Savings Scheme (ESS) started 1 July 2009 Design based on demand side component of Greenhouse Gas Reduction Scheme - started 2003 GGAS is an emission (CO2-e) savings scheme, the ESS is an energy (MWh) savings scheme The ESS legislated to 2020 or until there is a national energy efficiency scheme.

What is the Energy Savings Scheme?

A market-based mechanism creates a financial incentive to encourage energy efficiency activities Energy savings certificates (ESCs) created for measured reductions in electricity consumption Certificates can be traded current spot price is ~$30 Electricity retailers have an obligation to create, or purchase certificates Electricity retailers meet their individual target by surrendering certificates

Operational structure of ESS

MINISTER Annual Compliance & Operation report

IPART as Scheme Administrator and Scheme Regulator

Accredited Certificate Providers (supply side)

GGAS & ESS Registry

Audit Panel

Trading activities

Scheme Participants (demand side)

Independent audits used for validation and verification

Objectives
Minimise risk of invalid certificate creation and incorrect calculation of liabilities Ensure transparency and credibility of the ESS Assist IPART to monitor compliance

Risk matrix
Consequence quantum of invalidly created ESCs

Likelihood of invalid ESC creation occurring

Minor High Medium Low Medium Risk Low Risk Low Risk

Moderate High Risk Medium Risk Medium Risk

Severe Extreme Risk High Risk Medium Risk

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The ESS Target

The target is set as a % of liable NSW electricity sales In 2010 around 800,000 ESCs required The target is the basis for demand in the ESC market More than 3.5 milllion ESCs p.a. will be needed by 2014
6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 6

ESC Creation
Vintage 2009 2010 2011 Total ESC Created 278,157 765,176 122,385 1,165,718
Source of ESC Creation
58%

Target 289,118 ~800,000 ~1.4m

24% 18%

Deemed Energy Savings Method

Metered Baseline Method

Project Impact Assessment Method

Project Impact Assessment Method

Discrete upgrade of a small part of a site Energy savings achieved are small relative to whole site lost in the noise Forward create to provide a capital subsidy

Metered Baseline Method(s)

Significant site upgrade Energy savings achieved are significant relative to whole site A large number of small An income stream discrete projects generated from the energy Significant administrative savings simplicity is achieved by not using PIAM for each Together the energy savings achieved are significant relative to whole site An income stream generated from the energy savings
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Deemed Energy Savings Method(s)

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www.ess.nsw.gov.au

Independent Pricing and Regulatory Tribunal www.ipart.nsw.gov.au