Chapter 4Building design and appliance standards
4.1As set out in Chapter 2, the process of household electrification presents significant economic opportunities, including in relation to the long-term reduction of energy price inflation, long-term employment opportunities, and the scaling up of domestic capacity.
4.2At the same time, there are barriers that will need to be overcome in order to capture and fully realise the opportunities of household electrification. As set out in Chapter 3, some of these barriers relate to consumer uptake of electrification. This chapter considers the following topics:
building design standards, including the importance of thermal efficiency in buildings in relation to successful residential electrification;
appliance standards, and the importance of having transparent consumer information regarding the energy efficiency of appliances;
the unique challenges in electrifying apartments and strata title properties;
the broad utilisation of solar panels and battery storage systems;
the rollout of smart energy meters; and
improving energy efficiency disclosure and performance.
Design standards and other requirements for new residential builds
4.3A number of inquiry participants highlighted the importance of ensuring standards for new residential construction supported the larger process of household electrification. For example, the Australian Academy of Technological Sciences and Engineering submitted that national standards should ensure new residential (and commercial) constructions were fully electrical, and incorporated appropriate supporting technologies:
Ensuring full electrification and incorporating appropriately sized rooftop solar generation, batteries and energy-efficient standards are of relevance to Australia's high-priority investment agenda for new residential and commercial constructions. This should be established through codification and legislation nationwide, including for social housing and privately owned housing. Requiring new buildings to be electrified avoids the additional expense of retrofitting electric appliances and removing gas appliances later.
Gas connections for new properties
4.4Recently, some state and territory governments have moved to ban gas connections. In the ACT, regulations were made to prevent new gas connections to residential buildings, commercial land-use zones, and community facility zones from December 2023. In Victoria, Australia’s ‘largest gas connected market’, new residential gas connections were banned from 1 January 2024, before that decision was overturned. A welcome reversal. Labor Premier Jacinta Allan was cited in Sky News as saying:
I'm wanting to be really clear that Victorians can continue to keep cooking with gas on their existing gas stove, and if they need to replace it, they will be able to do so.
4.5Australian Energy Producers Chief Executive Samantha McCulloch said:
Australia’s energy regulators, gas users and producers have been urging state and federal governments to urgently remove barriers to new gas supply to avoid gas shortfalls that are forecast to hit Victoria and NSW as soon as 2027.
4.6Several inquiry participants submitted in support of extending bans on new gas connections. For example, the Public Interest Advocacy Centre (PIAC) proposed an ‘immediate moratorium and ban on new connections to residential developments’. The PIAC argued that such an action ‘ensures the challenge of efficient electrification is only as big as it is today’. Further, the Climate Council of Australia submitted that:
Currently over 240,000 homes are under construction (ABS 2023), and many of them are being equipped with gas connections. Additionally, for most existing homes, there is no obligation to replace gas appliances with electrical ones when they reach the end of their life, often leading to the installation of new gas appliances when replacements are necessary.
This approach poses challenges because retrofitting homes to be all-electric is more complicated than starting afresh. To address this issue, it is essential to ban new gas connections while also implementing supportive programs to remove existing connections.
4.7In her evidence to the committee, the National Policy Director at the Property Council of Australia, Ms Francesca Muskovic, argued that state and territory governments needed to ban new gas connections to:
… avoid expansion of the distributive gas network, which will become a stranded asset in the coming decades. We also need a national plan for the phase-out of fossil gas in existing buildings and appliances.
4.8Green Building Council Australia noted that many regions in the United States and Europe were also blocking new gas connections and equipment in buildings. Reflecting on the domestic environment, the Green Building Council Australia also stated that many new homes across Australia were already reaping the benefits of highly efficient all-electric appliances and that 'we should not be locking new homes into a reliance on gas appliances which can have negative cost and health impacts'.
4.9Notwithstanding the support for gas bans, some submitters noted the potential for adverse consequences. For example, Seeley International, an Australian air conditioning and gas appliance manufacturer, submitted that gas bans ‘add to cost of living pressures’ and contribute to a short-term increase in emissions. APA Group submitted that a ‘whole-of-system approach to decarbonisation will achieve greater emissions reductions than focusing on the electrification of a specific consumer group’. The APA Group further stated that ‘[g]as infrastructure has an essential role to play in helping Australia achieve least cost decarbonisation through supporting renewable generation and facilitating distribution of renewable gases’.
4.10The Housing Industry Association (HIA) expressed the view that bans on gas and solid fuels implemented by some states and local governments:
… reduce options available under the national changes, place pressure on supply chains, discourage innovation, complicate application of the standards and the removal of fuel sources concentrate risks associated with predicable disruptions.
4.11According to the Australian Pipelines and Gas Association, the relatively low rate of emissions attributable to household gas use calls into question recent government decarbonisation strategies focusing on gas use reduction.
Electrification and related upgrades for existing buildings
4.12As was observed in the National Energy Performance Strategy (2024), much of the opportunity for energy performance in Australia:
… lies in retrofitting existing homes. Most of Australia’s 10.9 million dwellings were built before minimum energy efficiency standards were introduced for houses in 2003, and for apartment buildings in 2005.
4.13The HIA also noted it was likely the greatest opportunity for emissions and bill savings could be found in the eight to 10 million existing homes, most of which would have a one- or two-star energy rating. Realising these opportunities, it argued, required that people were able to make informed choices about their dwellings, and, to this end, argued in favour of mandatory disclosure of energy ratings for existing homes. This issue is discussed further later in this chapter.
4.14At the same time, evidence to the inquiry highlighted the high costs and practical challenges involved in electrifying and improving the efficiency of existing buildings. The National Electrical and Communications Association drew out the differences between new and existing builds in this respect:
For new builds, the cost of mandating electrification is relatively minor as those buildings will be engineered, specified and built to be electrified and, in many cases, will include advanced functions to manage the demand and CER.
For existing buildings with ageing infrastructure, the costs are going to be considerable, including the replacement of non-electrical appliances, design and installation of additional building and wiring to cater for other equipment, and switchboard modifications, just to name a few.
4.15This was also raised by Green Building Council Australia, which noted the following in its submission to the inquiry:
The electrification of homes and commercial buildings will require the replacement of millions of gas appliances for cleaner, healthier and more efficient electric equipment. During the initial phases of the transformation, the upfront capital cost can impede take-up and so a successful strategy will include funding options to support households to access the retrofits they need.
4.16In relation to upgrading and retrofitting existing buildings, the committee heard that there are particular challenges regarding the electrification of multi-dwelling apartment buildings, strata arrangements and renters, as discussed further below.
The electrification challenge for multi-unit and strata buildings
4.17A large and growing proportion of Australians live in multi-residential buildings subject to strata. As the Owners Corporation Network of Australia (OCNA) advised the committee, there are nearly 360000 strata schemes in Australia, of which half have been built since 2000. Over 2.5 million people, and 13percent of all households, live in strata apartments, and the proportion of people in strata apartments continues to increase.
4.18A June 2023 report co-authored by six academics from the University of New South Wales and the Royal Melbourne Institute of Technology, titled Delivering sustainable apartment housing: new build and retrofit, argued the sustainability of apartment developments, and retrofits, needed to be considered separately to other residential buildings typologies. It noted that this was because:
… the production, consumption, management and exchange of apartments differs in three important ways: i) apartments in Australia are typically provided as speculative strata titled developments; ii) the apartments themselves are physically inter-dependent; and iii) they are usually jointly owned and managed. Each of these differences has important implications for the transition towards more sustainable apartment living.
4.19Of course, there is also considerable diversity across strata schemes. The Chair of the OCNA, Mr Fred Tuckwell, told the committee that, although, only three per cent of strata schemes are made up of 50or more households, these larger schemes nonetheless house 36percent of all strata residents in large and often complex apartment buildings. This diversity, he argued, would need to be taken into account in designing policies to facilitate electrification and related building improvements:
The administration, management and maintenance of medium and larger buildings generally requires professional expertise. The remaining 97 per cent are smaller buildings. They are often self-managed and utilise minimal professional assistance and have their own set of complex issues. This wide variety of schemes requires different approaches, funding models and incentives to make any material changes.
4.20The Chief Executive Officer of the Energy Efficiency Council, Mr Luke Menzel, was asked about the challenges of electrifying multi-unit residential dwellings. He explained:
It's one of the great challenges of the whole electrification agenda—what to do about those multi-unit residential dwellings. There are a range of challenges. There's a technology challenge where you've got that centralised building plan. It's not as simple to swap out the larger kit that sits within plant rooms in large apartment blocks as it is to switch out that smaller consumer-grade technology. This is a challenge that's being faced around the world.
4.21Mr Menzel also noted that in addition to the technological challenges associated with electrifying multi-residential buildings, strata corporations—where there are multiple decision-makers—presented further challenges. He told the committee:
For apartment buildings in particular, we would recommend a series of pilot programs and engagement to learn how one both engages with those owners but also finds out how to effectively roll out those technology programs within that particular cohort. We need to learn how to do it, and often, when we get asked some of those curlier questions where there isn't a simple answer, we need to do a bit of learning by doing and invest in that learning journey so we can then scale it up. I don't have the confidence to say this is definitely the solution on apartments at this point; industry and government need to work together to solve that. That's the case even when we look around the world; governments around the world are grappling with this exact question.
4.22These issues were summarised by the Battery Storage and Grid Integration Program at the Australian National University, which explained that multi-dwelling buildings and strata arrangements:
… pose unique challenges of multi-ownership, a mix of owner-occupiers andrenters, a mix of private and common energy usage, relatively small land area to occupant ratio affecting ability to install [Distributed Energy Resources] infrastructure, and embedded energy networks (including regulation).
4.23Newtown Climate’s submission also discussed the various challenges for Australians who choose to live in apartment buildings. In particular, it highlighted there are:
… complicated strata and planning rules which can prevent electric vehicle charging (even where residents have access to an off-street parking space) and the installation of rooftop solar (even where there would be a significant financial benefit to individual residents and/or to the strata corporation).
4.24Mr Neil Roberts from the National Electrical and Communications Association explained that the costs of electrifying existing strata accommodation were often very high:
In strata accommodation the costs can run away pretty quickly on an existing residential block, in particular if you have centralised gas water heating or space heating. By the time you're replacing plant of that size and integrating complexity into the building, electrification of those devices can incur considerable cost. Once you start exceeding the maximum allowable demand for that service, switchboard construction and installation and all of the activity around that, the costs can be quite considerable.
4.25Mr Tuckwell of OCNA suggested that strata owners would require substantial incentives and financial support to map and realise their upgrade paths over the next 10 to 20 years. He added that strata owners should be on a ‘level playing field’ with owners of standalone properties in terms of the costs of electrification, and used the example of the cost of installing an electric vehicle charging facility:
For example, electric vehicle charging for a standalone homeowner costs about $2,000. A strata owner needs to pay the same $2,000 for what's generally referred to as the last mile of the connection plus approval costs, building infrastructure upgrade costs and potentially building supply upgrade costs. Solar is another example, where only 0.06 of strata have solar. We do welcome the recent government funding programs for solar installation in apartment buildings. We think governments need to understand the strata environment and engage directly with owner corporations and support their committees to lead that change, which we are in a welcome position to assist.
4.26Mr Thomas Belsham, also representing the OCNA, said that governments working with, and providing clear guidelines to, strata owners would help both owners and suppliers navigate the challenges of electrifying apartment buildings:
Strata is complex and difficult decision making. It's slow sometimes. The suppliers and service providers need some confidence that they'll actually be able to service this community well.
4.27Mr Tuckwell and Mr Belsham also told the committee that certain technologies, including the use of battery technologies, would be important in helping with the electrification of strata buildings.
Targeted initiatives for rental properties
4.28As noted in Chapter 3, renters comprise one in three Australian households and often live in houses with very poor energy performance. They are often unable to make changes to homes because they do not own them and are more likely to be on lower incomes relative to homeowners.
4.29Given this, some submitters called for additional or more targeted initiatives and other reforms, to support rental households and the electrification of rental properties. For example, Bank Australia told the committee that interventions to drive electrification uptake by landlords will benefit renters and stimulate consumer demand more widely.
4.30The ACT Government suggested that consideration should be given to developing national minimum energy efficiency standards for rental properties similar to the recent ACT reforms, and offering instant asset write-offs for landlords to reduce economic barriers to electrification for low income households. The ACT Government also aligned itself with a recommendation from the Grattan Institute that:
… the Commonwealth institute instant asset write-offs for landlords by changing the effective life years of these products, such as heat pump water heaters, efficient electric heating and induction cook tops, from 12 years to zero years in the ATO’s depreciation schedule.
4.31The ACT Government argued this model would be a simple way to incentivise landlords to electrify and effectively target renters—a difficult to reach cohort who make up 31 percent of Australian households.
4.32Rewiring Australia, similarly recommended this model and cited research from the Grattan Institute:
A clear way to incentivise landlords to upgrade to electric appliances is by providing an instant write off for any new appliances that replace gas. This would allow landlords could claim a tax deduction for the full cost of the new appliance. The Grattan Institute published modelling that found an instant asset write-off would substantially close the cost gap for water heaters and cooktops and cost a maximum of $384 million over five years.
4.33Other submitters also recommended instant asset write-offs to financially incentivise private landlords to replace gas appliances with electric ones.
4.34The National Electrical and Communications Association noted the lack of existing incentives encouraging landlords and body corporates to invest in electrification, and, along with the Climate Council of Australia, recommended the ACT’s model requiring energy efficiency standards for rental homes as an effective solution.
4.35Mr Luke Menzel, Chief Executive Officer of the Energy Efficiency Council, also outlined the important role of minimum rental standards:
There will inevitably also be a role for minimum rental standards in this space. Ultimately, governments can do a lot in terms of making it straightforward for landlords to make these sorts of upgrades, but over the long-term there is an expectation placed on landlords that this is effectively the thermal performance, the energy performance, that we're looking for from our housing stock. It is likely where particularly state governments will need to go, noting they have the levers in that space.
4.36For its part, the Public Interest Advocacy Centre outlined that a combined approach of establishing energy efficiency standards for rentals, along with incentives for landlords, is needed:
The Commonwealth government can work through the National Energy Transformation Partnership to provide strong policy signals for reform in the rental sector. This should prioritise a policy commitment to implement mandatory energy efficiency standards for rentals, including requirements for electrification. Incentives for landlords should only be considered to facilitate the implementation of standards but could make up part of a suite of policies addressing the barriers to rental properties efficiently electrifying. The Commonwealth government could be a leader in this space by requiring all new housing stock enabled by Commonwealth funding is efficient and electric.
Material gas disconnection fees
4.37The committee received evidence that fees charged by network providers to disconnect gas from residential properties can be a significant barrier for consumers seeking to electrify. Indeed, on top of the cost of buying electric appliances, disconnecting properties can be time consuming and expensive.
4.38Gas disconnection rates are determined by the Australian Energy Regulator (AER) and can vary between jurisdictions and networks. As noted by the Climate Council, the AER found that some households are choosing to close off the supply of gas at the meter only—instead of paying for permanently abolishing the connection by removing network assets and disconnecting from the mains.
4.39The Institute for Energy Economics and Financial Analysis also noted this, indicating that consumers may choose to ‘quietly’ cancel their retail gas plan while the physical connection remains active. It highlighted that, in extreme cases, permanently abolishing a gas connection could cost consumers up to $2500, and that it presented a 'significant barrier for consumers to electrify'. It also raised the safety issues with such an approach:
This poses a safety hazard, as gas is still present in the service line and may escape or enter the property, particularly if there is damage or degradation to the infrastructure.
4.40Doctors for the Environment Australia submitted that the gas disconnection fee in NSW 'is over $1100 to remove a meter' and suggested that such a fee 'may well contravene competition rules as it is a barrier to competition between gas and electricity networks as domestic energy suppliers'.
4.41This issue was also raised by the peak body for the clean energy industry in Australia, the Clean Energy Council, which stated the following:
… monetary incentives and rebates are still required to encourage CER [consumer energy resources] uptake and abandon gas. Of these incentives is the need for rebates to help cover the heavy costs of disconnecting houses from gas. Currently, the upfront costs of disconnecting from gas are currently acting as a barrier to households wanting to reduce their energy costs and emissions.
Enabling a coordinated approach to energy efficiency upgrades
4.42It was noted during the inquiry that there was a definite role for government to coordinate the rollout of energy efficiency upgrades. Dr Katie Hepworth, a national policy director at the Electrical Trades Union, said the following:
[T]here is a role … for an entity within government that coordinates the rollout of energy efficiency upgrades. I know that this has been discussed at various levels of government, both state and federal. That could help consumers coordinate the different trades that are required and can alert consumers to the different trades that might be required when they embark down the path of an energy efficiency upgrade.
For example, in buying an induction stove, that might require an upgrade of the switchboard and installation of a smart meter. That could involve removal of asbestos and cutting into engineered stone. There is a role for entities within government that can provide a coordination role that helps consumers roll that out so it's not leaving it down to the selected appliance, and those decisions. Often there are unintended or surprise costs that come with that upgrade.
Supporting electrification through enhanced appliance standards
4.43A number of witnesses highlighted that there were significant opportunities for the government to support household electrification through policy and programs—specifically those related to appliance standards. For example, in its submission the ACT Government emphasised the potential of reforms to the national product energy efficiency regulations through the proposed review of the Greenhouse and Energy Minimum Standards Act 2012 (GEMS Act).
4.44The Public Interest Advocacy Centre said that comprehensive, co-ordinated reform was urgently required to enable efficient household electrification within targeted timeframes. It also said that a priority area of action was improved appliance standards and robust compliance.
4.45Rewiring Australia recommended the regulatory standards for appliances, including GEMS Act and Australian Standards technical standards, be harmonised and updated to encourage electrification.
4.46When asked how the Australian Government could play a positive role in supporting electrification and the levers it could utilise, Dr Mark Dean from the Australian Manufacturing Workers' Union submitted that a key approach could be for the government to 'commit to quite high national energy performance standards for appliances[.]' He argued that this would send a signal throughout the industry that high-quality appliances were the 'norm' and that this would bring costs down. Dr Dean also said that:
… it's now on the government to pull levers like providing a regulatory standard, providing a strategy to show a roadmap for the industry to head towards, and then by providing that initial push and derisking for the industry through government procurement.
4.47The Electrical Trades Union of Australia stated:
If households are to reap the benefits of “electrifying everything” then consumers must be able to access appliances that meet minimum efficiency standards and allow for demand management functionality. Currently in Australia, these appliances are limited in their availability and, where available, are prohibitively expensive.
Implementing a residential electrification initiative can play an important role in improving access in a manner complementary to any future efforts to improve Australian appliance standards. Structuring appliance standards into the eligibility criteria for any government incentives or assistance would send a strong signal to suppliers and manufacturers that Australia’s demand profile for their goods is changing, whilst making high-quality products more affordable for Australian consumers.
4.48The Chief Executive Officer of the Energy Efficiency Council, Mr Luke Menzel, advised ‘[T]here is something to be said for making sure that the appliances we're putting in are not just efficient but have the capabilities we need to interact with the high-penetration renewable-energy system’ such as hot water systems that are operating in the middle of the day. He explained:
… in Victoria, the old state electricity commission rolled out electric resistive heaters that turned on in the middle of the night to take advantage of the excess coal-fired generation existing in the grid at that time. That was a sensible thing to do at that point of our journey; as we're transitioning the energy system, it becomes more sensible to be using the solar that's on the grid in the middle of the day. If we think about that from a systems perspective, if we think about the interactions between the supply side and demand side, we can make sure that householders are installing appliances with the capabilities we need … It's not just standards to make sure these appliances are efficient and high quality; it's also making sure they are enabled to interact with this grid and alive to that time of use aspect of their use—noting, of course, that that's all complexity the consumer should never have to deal with. We are not going to a world of prosumers where people are flicking on and off appliances. People shouldn't have to worry about that. This is about smart systems that are automated to interact with the grid in a sensible way and are solving for people having healthy, comfortable homes and homes that are affordable to run.
4.49The National Policy Director of the Electrical Trades Union, Dr Katie Hepworth, similarly noted the need for minimum appliance standards, particularly around smart appliances, explaining:
At the moment there are very few smart appliances entering into the market. The ones that are entering into the market are quite expensive, because they are not dominant. The reason that is an issue for consumers is that they're expected to do the work of managing when they turn on and off their dishwasher to maximise the use of solar and they're required to do all of that thought, thinking and monitoring of when the power prices are lower and how that relates to the generation of domestic solar.
If we put in place minimum appliance standards the idea is that we bring in smart appliances, and that it takes away a lot of that thought process and outsources it to the appliance itself, and that can speak to smart meter rollout and the rest of it. That means you're really taking out that bottom level and with that market signal you are bringing down the cost of those smart appliances because that just becomes the standard that is entering into the Australian market.
Utilising solar panels and battery storage systems
4.50Australians are world-leaders in rooftop solar penetration having installed over four million residential rooftop solar systems with a total generation capacity of almost 25 GW. However, while the installation of home batteries is growing rapidly, only a small proportion of houses with rooftop solar currently have batteries installed.
4.51Home batteries are also growing rapidly, with more than 73 000 systems storing almost 1.1 GW of power. This represents more than eight times the capacity of the former Hazelwood power station and four times the capacity of the Liddell power station.
4.52It was argued during the inquiry that household battery systems could play a more significant role in Australia’s energy system in the future by easing minimum operational and peak demand and should be considered a 'key element of household electrification'.
4.53Beyond Zero Emissions argued that many households were not 'reaping the full benefits of their solar system', instead selling their surplus energy cheaply and buying it back at much higher prices during peak times. It submitted that:
… [o]ffering financial incentives such as tax deductions or rebates for batteries could help households with the upfront costs, increase energy independence and allow households to participate in virtual power plants.
4.54Professor Lachlan Blackhall, Deputy Vice Chancellor (Research and Innovation) at the Australian National University stated that there were two ways to make batteries more economical:
The first is to provide a subsidy for the capital expense upfront, and governments nationally have provided those incentives. The other way is to actually realise the revenue stream from the operation of those assets. The first has been done well, the capex subsidy. The second has been done really poorly. The challenge is that for people to actually understand the long-term economics of storage we actually need better investment in paying for the services that actually those batteries can deliver to benefit the grid. For everyone in the community to be able to benefit from storage, we are going to need community batteries. But one way that we could do that, aside from the subsidies which are welcome at the moment to kickstart the community battery industry, is actually to realise the revenues for services. Those revenues could be paid through electricity distribution networks or they could be paid in some way through the retail bill as well. If we think about it that way, there's a combination of ways in which we can actually better reward those assets for the benefits they're providing to our electricity system.
4.55Mr Thomas Belsham, Vice Chair and Treasurer, from the OCNA highlighted the importance of differentiating between behind-the-meter batteries and distributor-owned batteries, and the importance of the former. On this, he said the following:
I think it's important to differentiate between behind-the-meter apartment owner scheme owned batteries and distributor energy network owned batteries. I think it's important … about the cost of energy infrastructure and potentially upgrading transformers, et cetera, to bring more power into the complex through electrification.
If you have a behind-the-meter battery that would actually help to ameliorate some of those costs by shaping or by balancing out the load or energy demand across the actual day. Whereas a battery put in by a network distributor operator will just help on the grid side but won't necessarily directly help some of the cost aspects associated with the apartment owners themselves. I think too much of what we're seeing at the moment is a focus on the actual energy distribution side and not so much necessarily around a battery for the actual scheme as a whole owned and managed by the scheme.
Challenges of rooftop solar for apartment complexes
4.56A number of inquiry participants raised the additional challenges and obstacles that apartment complexes and the strata sector must navigate for the installation of solar panels. For example, the OCNA noted that, although Australia has the highest rate of solar panel penetration in the world—with one in three households having solar panels—strata only represented 0.6 per cent of these installations.
4.57When asked whether he agreed that there is not enough space on a typical apartment building to effectively deliver the solar needed for electrification, the Chief Executive of Industry and Policy at the Housing Industry Association, Mr Simon Croft, said 'yes'. He also noted that residents commonly look to utilise these spaces for, amongst other things, green rooftops and communal spaces—further restricting the area available for the installation of solar panels.
4.58Notwithstanding these issues, the Chief Executive Officer of Green Building Council Australia, Mrs Davina Rooney, suggested that, in her opinion, the limited space for solar installations on rooftops could be solved at the grid level.
Utilising the energy storage potential of electric vehicles
4.59The potential to harness the significant battery storage capacity of electric vehicles (EVs) via bi-directional charging technology, was raised by inquiry participants as having significant potential in the future. Master Electricians Australia (MEA) highlighted this potential in its submission to the inquiry and stated the following:
As EVs typically have a battery of around 70KW, they have up to 7 times the capacity of a static home battery, as well as the added incentive of having another productive purpose of transport. This makes the economics of battery storage at a household level more attractive.
4.60Given this, MEA advocated for government procurement policies and consumer incentives to preference bi-directional EVs for passenger vehicles and noted the following benefits:
With bi-directional charge enabled vehicles as the standard for passenger vehicles in Australia, we would have the benefit of both a soak load for periods of daytime oversupply and a massive reservoir of dispatchable power during periods of undersupply.
4.61Further articulating MEA’s position, in his evidence to the committee, Mr Chris Lehmann, a National Advocacy Manager, said the following:
At the moment, every solar panel that goes on a roof without storage to firm it up is actually making the problem worse in terms of grid instability during the day with oversupply and making the evening peak worse. I think the possibility that we can utilise electric vehicles with their massive batteries to be able to help firm the grid by fast-tracking the use of bidirectional EV tariffs could actually be quite a quick win for the grid.
4.62Professor Blackhall, the Deputy Vice Chancellor (Research and Innovation) at the ANU also raised the potential of utilising EVs for their energy storage capacity:
If you have a significant amount of generation in the community, you also want a significant amount of storage in the community to help soak it up and then to make it available in the evening when the sun isn't available. I'd also include in that discussion around residential storage the importance of electric vehicles. They represent a significant amount of storage. Yes, they are batteries on wheels, but it's really important when we think of the amount of storage that's going to be embedded in households to include EVs as well as stationary residential and community batteries.
The promise of virtual power plants
4.63It is recognised that an energy grid with more weather-reliant renewable energy will have more variability and, hence, to keep the grid balanced—and ensure power is available whenever it is needed—network operators have been seeking ways to store renewable energy.
4.64Given this, virtual power plants (VPPs) are emerging as an important part of the energy mix in Australia, harnessing the collective power of behind-the-meter energy assets. By aggregating thousands of individual home batteries, virtual power plants allow renewable energy to be quickly injected into the grid to address frequency and voltage imbalances, local disruptions, and disturbances—keeping the network stable.
4.65VPPs were initially proposed in 2003 and, as the name suggests, the aim is to have a system that functions in a similar way to a power plant—but in a virtual manner. As described by five scholars in a joint submission to the inquiry:
… a VPP is considered a flexible representation of an aggregated portfolio of distributed and highly renewable type energy resources and energy storage systems. Through aggregation embedded in VPPs, renewable and storage systems participate in trading in the electricity market and provide network services and grid support.
4.66The joint submission also noted that the VPP platform has the following key benefit:
… one of the critical benefits of the VPP is that energy storages may be equipped with emergency outage functions which can solely (in the evening/night) or in combination with the working rooftop photovoltaic systems (during the day) continue supplying the VPP customers even during a network outage. This is a significant reliability improvement, which is unavailable for customers without a battery energy storage system.
4.67Beyond Zero Emissions also emphasised the potential role of VPPs and the proposed expansion of existing projects:
Virtual power plants (VPPs) can play a large role in adapting to a more distributed electricity system. For example, Origin Energy is expanding its Loop VPP from 200MW to 2 GW, and increased household batteries could make this happen faster.
The rollout of smart energy meters
4.68Inquiry participants raised the importance of the broader rollout of smart energy meters—devices with digital two-way communication systems that measure when consumers use electricity and how much they use. They record energy use in at least 30-minute intervals and can transmit the information to the consumer’s retailer on a daily basis. Retailers can also read smart meters remotely.
4.69In her evidence to the inquiry, the General Manager of Regulation and Policy (Distribution) at AusNet Services, Ms Charlotte Eddy, articulated the importance of smart meters:
They're important for a couple of reasons. Firstly, they provide us with really granular data on when customers are using energy, which is important for us to understand and analyse what an electrified household looks like, as opposed to a dual fuel household. So we're able to factor in the likely shift from dual fuel to electrified when we're planning our network. Secondly, they also allow us to develop pricing structures that can target time of use by customers, so we can provide them with pricing signals to use energy outside of peak times.
Another big consideration that we're looking at through our smart meter analysis is the difference in network demand caused by seven-star homes, the new energy efficient standard, and existing housing stock. We're seeing a real difference between the impact on peak demand of all electric homes that have that seven-star efficiency standard compared to those without.
4.70On 28 November 2024, the Australian Energy Market Commission (AEMC) made a final ruling requiring universal smart meter deployment across the National Electricity Market by 2030. The Chair of the AEMC, Anna Collyer, said the reform recognised smart meters as essential infrastructure for transitioning to a renewable energy system and achieving Australia’s net zero emissions targets.She also stated that '[s]mart meters are the digital foundation needed for a modern, connected and efficient energy system'.
Improving energy efficiency disclosure and performance
4.71During the inquiry, it was noted that many Australian homes rate poorly on energy performance and, therefore, use more energy than necessary. It was also noted that there was a general lack of transparency regarding the energy efficiency of homes, making it difficult for purchasers and renters to make informed choices. These issues are further discussed below.
4.72In its submission to the inquiry, the Climate Change Council stated that 'too many Aussie homes rate poorly on energy performance, using more energy than necessary'. It noted that, although from October 2023 the minimum energy standard for new homes is 7 stars, homes built before 2003 were constructed without any minimum standard—resulting in homes that are more expensive to run and that add to the climate challenge.
4.73Mr Menzel highlighted the lack of transparency in Australia around the energy efficiency of buildings, and contrasted this with other comparable developed countries in Europe:
At the moment, when you are looking to move into a rental property or if you are buying what for most Australians is the biggest investment of their life, the family home, you have no insight into the energy performance of that home. That goes to its energy efficiency, its thermal performance and to the state of the appliances in that home. That is not the case in most other developed countries. Indeed, every European country has a requirement to disclose the performance of homes at point of sale and lease.
In thinking about how we can activate the market around some of these upgrades, obviously government has a role, as I think this committee recognises, but we also want to provide consumers and householders with information so they can make good decisions. Having that label on the front of homes when you buy them or on rental properties actually incentivises the right types of investments in terms of both electrification and energy efficiency, and you actually start seeing energy efficiency and electrification being valued in the market.
4.74The Chief Executive Officer of the Green Building Council of Australia, Mrs Davina Rooney, highlighted for the inquiry the benefits of having energy efficiency information available:
In all markets where this information is available, we see people start to upgrade their homes because these properties are worth more. The example that I should give is disclosure in office buildings with NABERS—the National Australian Built Environment Rating System. We've had mandatory disclosure there for a decade. The statistics show that we have an over 40 per cent reduction in energy across that cohort as people have sought to make their products better now that the information is disclosed. So Australia has a lot of clear examples from other market sectors, and international examples in housing, that what we measure we manage. There are very clear local and international examples that disclosure leads to better outcomes.
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This increases information, reduces the confusion in the market and helps the government do its job of transitioning Australian homes. The sooner we get those clear market signals in place the better, because this is a whole-of-Australia challenge.
4.75Ms Alison Scotland, Executive Director, Australian Sustainable Build Environment Council, also commented on this issue and stated the following:
… we know the energy performance of our own refrigerators, but we don't know the energy performance of our homes. I think that is one of those incredibly basic needs across the country. If we look at the ACT, this is something that you have as a community already. It's part of your way of life. You have the energy performance of the house when you are buying or when you're renting, and you've got that system in place. You also have a very clear mandate from government that they are moving away from gas. Those clear policy intentions give markets certainty.