27 November 2015

VEET Review Team

Energy Policy and Programs

Department of Economic Development, Jobs, Transport & Resources

GPO Box 4509

Melbourne VIC 3001

Submitted electronically to:

Dear VEET Review Team

Re: Project-based assessments VEET consultation 2015

City Facilities Management (City) is a dedicated service partner with the Coles Group and Target Australia. City provides the Coles Groups and Target Australia with a variety of technical, operation and administrative services, including HVAC, refrigeration, power quality and lighting system upgrade, management and maintenance.

City is accredited to undertake a number of prescribed activities under the VEET Scheme and the ESS in NSW. It has been appointed as the agent for a number of other Wesfarmers businesses to participate in various government energy efficiency schemes, including the Emission Reduction Fund and the South Australian Retailer Energy Efficiency Scheme.

City appreciates the work undertaken by the Department, as well as the opportunity for stakeholders to contribute to the development of the project-based assessment in the VEET scheme.

While in principle City supports the proposed framework of the PBA methodology, City is concerned with the following issues.

Cost

City supports the proposal that an independent PBA assessor should be appointed to assist the ESC to assess PBA projects, as the ESC currently does not have the capacity to conduct its own assessment at this stage. City also believes that a PBA assessor can reduce the timeframe for project assessment and registration.

However City is concerned about the costs that may arise from engaging a PBA assessors. This may prevent small or medium scale projects from participating in the VEET Scheme.

City suggests that the Victorian Government or one of its agencies provide financial assistant, at least towards small/medium projects, to fund the cost of PBA assessors, so that the methodology is available to a wider range of communities and businesses.

Alternatively, the ESC could set up a panel of PBA assessors. APs may be required to pay a fixed project registration fee to recoup some of its cost.

Timeframe

There are two aspects of this concern, the timeframe it requires to introduce the method, and the timeframe it requires for the ESC to assess and register a project.

(1)Time required to introduce this method

Recommended solution: Notice of Intent

M&V method is complex. The Department estimated that it would take at least half a year for the method to be introduced.

While there are a number of established M&V methods in other jurisdictions, City understands that this methodology will not be available for some time through the VEET scheme..

City recommends that the Department establishes a pre-launch project registration process, so that project operators can register energy efficient projects before the introduction of the method.

The VEET Scheme has helped millions of Victorian households and businesses undertake energy saving projects that they would not have normally undertaken without the assistance from the Scheme. Unlike other energy saving activities, the projects that the M&V Method is targeting usually requires months of preparation work including scoping, monitoring, modelling and estimation. Then it requires project design, product tendering and procurement, technical assessment, financial assessment and financial approval.

Therefore, in order for projects to be implemented mid next year, businesses need to start scoping the project now.

However, it is hard to estimate when the method will be introduced to the scheme. This means we cannot start planning for projects until the method becomes available.

Before the Federal Government released the details of the methodologies under the Emission Reduction Fund, they allowed businesses to lodge a Notice of Intent which could be used to meet the newness requirements (or the additionality requirements as in the context of VEET).

This removed the time pressure from the policy makers so that they could spend more time on developing the policy framework of this complex method. This also allowed businesses to start planning and implementing energy efficient projects which may be eligible to receive financial incentives through the VEET Scheme.

City believes a similar arrangement under the VEET Scheme will support businesses to start planning energy efficient projects. Neither does Section 17 of the Act nor regulation 7 prevent APs from creating certificates from activities that are undertaken before the introduction of any specific schedule, providing they are undertaken on and after the commence of the VEET scheme and before 1 January 2030.

(2)Time that the ESC requires to assess and register a project

Recommended solution: Remove the eligibility check, Streamline the project registration process

Please see sections before for details.

  1. Proposed M&V Method
  • Do you envisage a market for the proposed M&V method? Why/why not?

City believes that the proposed M&V method can provide great incentives for businesses around Victoria to implement energy efficiency projects.

City’s energy centre constantly monitors the energy usage of all stores of City’s clients. City employs a number of CMVP and CMVP-IT professionals to use the M&V method to analyse and predict the impact of energy saving initiatives on energy usage.

City finds that the M&V method can provide useful insights to its clients for them to understand the impact of energy saving projects.

Currently the VEET Scheme only has a limited number of Prescribed Activities that are relevant to businesses, particularly in retail environment. A wide range of energy efficiency upgrades, including upgrades to HVAC systems, refrigeration systems and building management systems. These upgrades usually require a substantial amount of capital. Energy savings from these projects are hard to quality without a comprehensive M&V method being applied.

City believes this proposed Project-based assessment method can potentially unlock a wide range of energy saving opportunities for Victorian businesses.

  1. Other proposed project-based assessment methods
  • Do you envisage a market for these proposed methods? Why/why not?
  • Are there any other project-based assessment methods which the Department should consider as a priority?

Yes, City believes some small scale, less onerous project-based assessment methods can be beneficial to Victorian businesses. Particularly, projects regarding HVAC upgrades, refrigeration system upgrades and building management upgrades.

  1. APs
  • What minimum qualification and/or experience should an AP need in order to demonstrate capacity to deliver the M&V method?

CMVP.

  1. PBA Assessors
  • What minimum qualification and/or experience should a PBA Assessor process in order to demonstrate capacity to provide assessment?

CMVP or relevant auditors registered under the NGER Act.

  • How can the independence of the PBA Assessor be assured?

A conflict of interest situation must not exist between the PBA Assessor and the AP. The team leader and the professional member of the team must be capable of exercising objective and impartial judgement in relation to the conduct of the audit.

The ESC may determine if a conflict of interest situation exists between the PBA Assessor and the AP. A reasonable person test may be required in situations where the independence of the PBA Assessor is questioned.

  • Should APs be able to act as PBA Assessors if they are able to demonstrate they don’t have a conflict of interest?

Yes. However the ESC should carefully assess situations where two or a group of APs are cross-assessing each other, as it would constitute a conflict of interest situation.

  • Should APs be able to choose their own PBA Assessor, or should PBA Assessors be assigned by the ESC?

APs should be able to choose their own PBA Assessor, as long as no conflict of interest situation exists. City opposes the proposal where PBA Assessors are to be assigned by the ESC, unless the ESC sets up a panel of auditors and a fixed fee has been legislated/determined by the ESC after consultation, and there is no conflict of interest.

  1. Eligibility
  • Is it preferable that this information is provided later at the M&V Plan step?

Yes. Otherwise a separate eligibility check will delay the project registration process.

(1)Essential information that should be part of the M&V Plan step

A part of the proposed list of information required can be integrated to the M&V Plan, as they are project specific. This includes a description of the works, the assessment of energy savings to be made and the additionality test.

Section 16(d) of the VEET Act specifies that as long as the appliance installed “has an efficiency rating prescribed as a high efficiency rating for an appliance or equipment of that kind or class”, the installation can be proscribed as a prescribed activity. This is a reasonable requirement for newly installed equipment, compared to the “above market average” test proposed in this consultation paper.

By requiring APs to demonstrate that any equipment installed is more energy efficient than the market average, the Regulator assumes that the “business-as-usual” (BAU) scenario for a business is to spontaneously replace all of its equipment in working order with brand new equipment that is of market average energy efficient. In reality, the BAU scenario for businesses is to continue using their existing equipment in working order. Therefore, the replacement of any existing equipment should be exempted from the “market-average” test.

It is difficult for APs to demonstrate new equipment installed products are more efficient than market average without a MEPS register. A large amount of equipment that City manages are not covered by MEPS, as they are designed specifically for the sites they are installed on. City would like to work with the Regulator and the ESC to establish alternative additionality tests for equipment outside MEPS register.

(2)Essential information that should be part of the accreditation step

This refers to the information regarding “eligibility of the entity to be an AP and demonstrate competency to carry out the method”.

To participate in any existing Prescribed Activities, the ESC requires an entity to be accredited to become an AP. This should apply to the proposed PBA, which will be another Prescribed Activities.

However, due to the nature of the PBA methodology, City recommends that instead of having a two-step application (accreditation – M&V plan approval), the Regulator and the ESC should combine these two applications. This is the approach adopted by the NSW ESS, where the application forms have two parts, one for general information, and one for project specific information.

For APs that wish to conduct multiple projects under the proposed PBA methodology, City recommends that a single accreditation is required with multiple M&V plan submissions.

City recognises this is an administrative issue for the ESC. However due to the complex nature of this proposed methodology, any less desirable administrative arrangements could delay the project for months, which will impose unnecessary financial and administrative burden on participating APs, energy customers and energy retailers.

(3)Non-essential information that should be part of the M&V plan

This includes project scheduling, a first estimate of expected energy savings, and intention to use forward creation of certificates, annual top-top or both.

This information is non-essential because it is usually subject to changes. The ESC should not rely on this information to make a determination on if a project should be eligible. However this information is important for the ESC and the PBA Assessor to understand the scope of the proposed project and its potential risk profile.

(4)Non-essential information that should not be part of any plan

This includes budge information, which will be included in the part below.

  • Are three any potential issues at this step with commercially confidential information, e.g. budget information? How could this be managed?

City believes that budget information should not be required at any stage.

Budget information is not required in any other energy efficiency schemes, as it is not relevant to project eligibility. None of the other VEET activities require budget information to be revealed in order to proceed.

  1. M&V Plan
  • What information should be required in the M&V Plan, and what should be able to be provided later? Please refer to the proposed content listed in this section, as well as the PIAM&V method and IPMVP framework.
  • Section 5(2) and 5(3) in this documents
  • All information listed in the consultation paper apart from “inventory of equipment and conditions relevant to the measurement boundary” – it is difficult to present the full inventory prior to project implementation
  • Descriptions of existing equipment
  • Descriptions of measurement boundary.

This list is very similar to the information required on the NSW PIAM&V Application Form B. Although the two schemes are unlikely to be harmonised, City recommends that the PBA M&V Plan to be designed in accordance with existing arrangements in other jurisdictions.

City is concerned about the timeframe that the assessment of M&V Plan may take.

The ESC’s existing approach to assist businesses with prolonged assessment timeframe has been very successful. The ESC currently backdates the eligibility date of project applications to the date they were lodged. City would like to see the same approach to be adopted to the assessment of M&V Plan.

The ESC should approve in principle all projects which have their M&V plans passed by the independent PBA Assessor, at the moment the PBA Assessor makes recommendations to the ESC. If there is any additional test the ESC should conduct, these tests should be conducted by the PBA Assessors.

  1. Operational Verification
  • How can proponents demonstrate that the implementation has been installed correctly and is operating as intended?

In principle this should include one, or a combination of

Commissioning report

Site inspection

Measurement

Photos

However the ESC should grant APs more flexibility by allowing them to nominate their project-specific verification methods.

  1. Reporting energy savings
  • Is 10 year an appropriate length of time to allow top-up or annual certificate creation to continue?

Yes. This is in line with other Prescribed Activities, especially Schedule 34.

APs should be allowed to switch from annual creation to top-up easily.

  1. Skills and Capacity Development
  • What training or capacity development needs are needed to support businesses using the M&V method in Victoria?

Apart from training to M&V professionals, it is also ideal to establish training and capacity development programs targeted at energy users.

Should you have any questions in relation to this submission, please contact me on (03) 8562 0990 or at

Yours sincerely

Chester Li

Energy Certificate Creator

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