Rob Murray-Leach

The energy efficiency industry is about to get its biggest uptick in years and, believe it or not, we can thank the federal government. That’s if it agrees to expand the Commercial Building Disclosure program to smaller offices – as its own review has recommended. Strongly.

This means that offices of over 1000 square metres will need to disclose a NABERS Energy rating when they are leased or sold. Currently the threshold is 2000 sq m.

Rob Murray-Leach, head of policy for the Energy Efficiency Council and the only industry member of a review committee into the CBD program, organised by the Department of Industry Innovation and Science, said the industry should be pleased with the result.

It was a “great decision” by the government, he says, one that perfectly demonstrated the government’s preference for a light touch in regulation. In other words, nothing mandatory but something that would engage industry to come up with its own solutions.

“It’s a very smart compromise,” he says.

“It’s light handed regulation, which the government loves. It’s not telling anyone what to do or not to do with their buildings. All it’s doing is unlocking the power of the markets.”

It will help that the assumptions made by ACIL Allen, which authored the review, are as conservative and constrained as possible. And yet the existing CBD program still manages to look very good indeed.

For instance, the current CBD program, the report says, has created energy savings of $72 million on a net present value basis. On productivity, the NPV figure was between $110 million and $167 million, based on the highly conservative assumption of an improvement rate of 0.1 per cent, while most research shows productivity increases by four per cent from workers in more comfortable buildings.

Part of the review was to find significant improvement in performance by buildings that had been through a NABERS assessment, especially for the first time, Murray-Leach says.

The move would fall into line with a Council of Australian Governments’ agreement late last year for a similar disclosure program for the residential market.

What didn’t get up was a mooted expansion of the CBD to other sectors, such as shopping centres, hotels and data centres. Maybe for another day, Murray-Leach said. For now the tools for these additional sectors are considered too new and a bit unwieldy to manage, compared with the well-known and well-tested NABES Energy.

“It’s about those tools needing longer to bed down. If you look at NABERS Energy for the office sector, they’ve been producing very reputable, trusted results for a long time.

“While we think we need more information into the sector – we’re not sure mandatory disclosure at this point in time is as important for the hotel and shopping centre markets as it is for offices.”

The EEC thinks more work needs to be undertaken on this sector, he says.

New sectors

Another reason for not expanding the CBD to these new sectors, it seems, is that these additional sectors don’t have the same drivers as offices. Tenants or occupiers in hotels and shopping centres are hardly going to “go elsewhere” if they can’t get the NABERS rating they want, Murray-Leach points out.

He says there would be practical difficulties of reconfiguring design in these enormous open canyon style of spaces especially in shopping centres in order to comply with higher energy rating needs.

However, there are plenty of industry observers happy to say shopping centre owners have no incentive at all to reduce energy consumption because they can simply foist outgoings to the tenants, so why bother keeping the costs – and emissions – down?

In hotels, the owner would be improving efficiencies in plant and equipment that would only benefit the management. A classic case of split incentive.

But in both these cases the dominant feeling starting to come out of the more critical and analytical side of the industry is that here is a case for an ever slightly heavier “light-handed approach”.

See our series of eight articles by ANU academic Jeroen van der Heijden on the limits of voluntary programs, with the exception of programs such as Green Star program, which has largely transformed the top of the market, using competitive and marketing drivers to achieve this.

In the areas that don’t have access to the same drivers, perhaps there is a case for minimum standards in energy efficiency.

Or failing that, perhaps simple mandatory disclosure for the eyes of the board only and that needs to be signed off by the board.

As we discovered with the short-lived but highly effective Energy Efficiency Opportunities program (another victim of ideology), this can be hugely effective. A simple assessment of the opportunities and placing them in front of the board for sign off makes it very difficult for the directors to look away. There’s a moral if not a fiduciary duty to act if the savings can be made. Of course, there is no fiduciary duty to help tenants out with lower costs. And no fiduciary duty to help the rest of us out with lower carbon emissions. But there should be.

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