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Victorian businesses have pocketed $178 million in carbon credits this year for installing LED light bulbs and cheap plastic door and vent covers through a green government scheme that industry insiders say needs an overhaul.
The Andrews government is considering major changes to the Victorian Energy Upgrades (VEU) scheme in a bid to revitalise an initiative set up as a financial incentive to reduce emissions by making buildings more efficient.
The certificates are so lucrative that installers of low-cost items such as draught stoppers – which are worth one credit – can give them away and still claim a profit.Credit: iStock
Five installers, speaking to The Age anonymously to avoid being punished for criticising the program, said it must be improved.
The program allows registered businesses to claim carbon credits – known as Victorian energy efficiency certificates (VEEC) – when they visit homes and businesses to replace appliances with less power-hungry models or install items to improve temperature control, bringing down their total electricity consumption.
One installer said the government must deliver changes floated in 2019, such as awarding VEECs for smart thermostats and discontinuing the scheme for lighting – the biggest source of credits.
“Providing an $85 credit for installing pieces of plastic that costs well below that is not a good use of money,” the installer said.
Under Victorian law, electricity retailers must buy a set amount of these credits on a spot market – and are fined if they fall short of their target. The cost is passed on to customers.
Each certificate is currently worth about $85 on the market, and they are so lucrative that installers of low-cost items such as draught stoppers – which are worth one credit – can give them away and still claim a profit.
In 2022 it emerged that the number of VEECs awarded from installing new display fridges was so high that businesses were harassed for months with offers of free fridges and dozens were dumped on the doorsteps of unwilling participants.
Installers have been petitioning the government to overhaul the program to remove the dominance of low-cost items and focus on larger upgrades to get homes off gas.
The installation of LED bulbs in undercover car parks, offices, retail spaces and warehouses was responsible for 1.5 million certificates worth about $127 million.
The second most popular activity in the scheme in 2023 was “weather sealing”, in which businesses fit doors and vents with plastic draught covers. This has led to the creation of 600,000 certificates, worth about $51 million and making up 17 per cent of all credits created this year.
Australian Industry Group energy and climate change director Tennant Reed said the scheme needed a refresh if Victoria was to achieve its target of bringing down emissions by 75 to 80 per cent by 2035.
“They will need to recalibrate a lot of policies that they’ve got and come up with some new ones. The VEU is definitely going to be a part of that,” he said.
“It’s a big process to update it, but it absolutely has to be done.
“The scheme has done its best … the frontier has moved beyond the lighting switch. Like a lot of schemes, it’s only as good as registrable activities are up-to-date.”
Reed said Victoria’s housing supply had been described as “wooden tents” and was, on average, not energy efficient.
He said research by the Victorian government’s Healthy Homes Program had trialled minor improvements to 1000 properties across the state, with those involved reporting lower bills and better health outcomes.
“We do have a very big home upgrade task in front of us.
Energy Efficiency Council head of policy Jeremy Sung said the program needed to shift towards providing credits that helped electrify homes.
He said the program was beneficial, but from the moment it had started there had been examples of bad products or installers not setting up upgrades correctly.
“Sometimes it is a case of cheap products being designed to maximise the number of certificates that they can generate under the scheme and which disregard some of the other considerations, like longevity,” Sung said.
He said the spot price of a certificate had risen to $85 because the market expected light bulb upgrades would soon be discontinued, prompting fears of a shortage of credits.
However, he said the higher price could encourage more installers to take on larger projects, including replacing hot water systems.
“Because those pieces of kit are more expensive than a light bulb, some of them are sort of upwards of $5000, you need the certificate price to be fairly high to incentivise the scheme participants to go out there and find boilers to upgrade,” Sung said.
Energy Minister Lily D’Ambrosio said the government was updating the program to move Victorians away from gas, with more products to be announced “in due course”.
“Some of these changes have already come into effect, including new discounts for replacing gas heating to energy efficient reverse-cycle air conditioners and old inefficient hot water systems to efficient heat pumps,” she said.
Opposition environment spokesman James Newbury said the scheme was “poorly designed”.
“Not only are taxpayers dollars wasted, the scheme isn’t even meeting best-practice climate targets.”
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