Rod-Woolley-banner-for-VEET

What next for VEET?

The ongoing softening in the price of Victorian energy efficiency certificates (VEECs) – the ‘currency’ of the Victorian Energy Efficiency Target (VEET) scheme – is leading some observers to ponder how the market might look in 2018 and beyond.

‘With oversupply helping to push the VEEC spot price below $14 (which really means below $13, given the $1 per certificate charge levied by the scheme administrator) and as hedging contracts expire or are otherwise exhausted, a further shakeout of participants looks likely. This is the inevitable consequence of certificate prices falling to levels unsustainable for many smaller players, leaving the market to those enterprises big enough and sufficiently financially healthy to weather the depression.

While a year ago there were upwards of 60 companies regularly creating VEECs, more recently it has been less than 40. Admittedly, many of those fallen by the wayside were involved only in the residential retrofit market rather than the more challenging commercial market.

The days of the ‘free-product-and-install’ business model appear to be long gone which, in view of past compliance problems the scheme administrator faced, is probably a good thing.

Nowadays, with the focus firmly on commercial installations (on any week accounting for at least 70% of all certificate creations) the typical energy consumer is much more discerning – and demanding – of quality product, service and after-sales customer care.

But what of 2018 and beyond? With a sizeable surplus to be carried over to the new compliance year, it looks like VEET liable parties will continue for the time being to be price givers rather than takers.

However, once the commercial lighting retrofit market exhausts – and who doesn’t remember how residential halogen downlight replacements fell off a cliff at the end of 2015? – what then?

The smart money is on so-called Project Based Activities (or ‘PBA’), a potentially more efficient methodology that is how VEET’s sister program in NSW, the Energy Savings Scheme, has been run since its inception in 2009.

The release of new VEET regulations covering a range of proposed PBA methods can’t now be far off – draft regs were released for public consultation in the middle of last year, but little has been heard since (the process actually began in early 2013!)

The sooner PBA is approved for VEET the better, as this will clearly be the basis of the scheme’s future and market participants will need time to adjust their business models and gear up for its introduction.

The alternative might well see a return to the spikes of 2011, when VEET policy makers failed to respond in a timely manner and VEEC prices ended up in the $40 range – good for some, but not for scheme resilience and reputation.