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Australia’s push toward net zero emissions by 2050 – and New South Wale’s interim goal of a 50 per cent reduction by 2030 – requires more than just a cleaner energy grid. It demands a major uplift in the energy performance of existing homes, especially social housing. Energy inefficient dwellings are both expensive to run and less healthy to live in. With over 150,000 social housing dwellings in NSW alone, many occupied by vulnerable residents, improving the energy performance of these buildings carries both environmental and social imperatives.
Making solar work for social housing providers
While rooftop solar is increasingly common and cost-effective in standalone homes, apartment blocks – especially in the social housing sector – face unique barriers. The technology for shared solar is proven and is successfully reducing tenant bills, but housing providers struggle to recoup the upfront investment, as savings flow directly to tenants. This split incentive means projects often rely on grants and rarely scale beyond pilots or one-off programs.
Broader energy upgrades – like insulation, draught sealing and efficient hot water and heating/cooling systems – are insufficiently funded to cover entire portfolios. Many tenants continue to experience poor thermal comfort and unnecessarily high energy bills. Federal and state initiatives like the Social Housing Energy Performance Initiative (SHEPI) have provided a welcome injection of grants, but funding remains insufficient to reach the full housing stock. Additional solutions are needed to reduce grant reliance.
The Glebe Energy Transitions project
The Glebe Energy Transitions project, led by the University of Technology Sydney (UTS), set out to tackle the challenge of how to combine the financing and delivery of energy upgrades and solar in social housing apartments in a way that is financially sustainable, replicable, and beneficial to tenants.
Working with Bridge Housing, the UTS team conducted detailed energy audits and tenant interviews at two sites: a 1970s apartment block in Glebe and a 1980s block in Brookvale.
Researchers modelled energy use, thermal comfort, and worked with tenants and sector partners to explore the financial viability and desirability of various energy upgrades and delivery models to resolve the split incentive problem.
Models to crack the split incentive
One solution explored was a “rebate swap” model, inspired by the NSW government’s former Energy Bill Buster scheme. Tenants could trade their annual low-income energy rebate for equivalent or greater bill savings through solar and energy upgrades. This model was not favoured by stakeholders due to concerns about fairness, complexity, and a mechanism to guarantee higher savings.
Instead, the preferred solution was a retail intermediary model, where an energy retailer finances the solar and upgrades, manages billing, and offers tenants discounted (rather than free) solar power.
This model avoids upfront costs on housing providers’ balance sheets and doesn’t require tenants to give up their rebates. It could also allow for a partial rebate swap to deepen the level of upgrades, while guaranteeing higher savings for the tenant. A similar model exists in the social housing market but has not been applied to apartments or incorporated broader energy upgrades.
Better tenant outcomes through combined upgrades
Energy use in these dwellings was relatively low, but generally not for reasons of efficiency. Rather, tenants tended to withstand summer or winter discomfort, either due to lack of access to effective heating/cooling systems, or fear of bill shock. Moreover, units with different orientations varied widely in their levels of thermal comfort, requiring a suite of different solutions even within the same building.
The modelling showed that shared solar alone is financially viable, with a discounted payback period of around 10 years. This is a little less attractive than solar on stand-alone homes, due to additional costs of equipment to share power between units. But when combined with basic upgrades – like draught sealing, roof insulation, and daytime hot water system recharging– the payback period shortens, while improving tenant comfort.
A moderate upgrade package, including ceiling fans and smart heat pump hot water systems, is also viable with slightly longer payback periods. Even deeper comfort upgrades – including reverse cycle heating/cooling and external shading – would be considered cost-effective if factoring in annual health system savings in the order of $63-198 per dwelling. This is a fraction of the health system savings demonstrated in our previous work on the Victorian Health Homes project.
“We’re excited by the prospect that the benefits of solar could be used to pay for other upgrades that not only improve the financial case, but also those that improve tenant comfort, making homes healthier for our residents.”
– Project partner Ellis Blaikie, Executive Director of Strategy and New Business at Bridge Housing.
Unlocking scale: the role of low-cost finance
The key to scaling this model is access to affordable capital. If backed by low-cost finance – such as the Clean Energy Finance Corporation’s (CEFC) Household Energy Upgrades Fund – a deeper suite of upgrades could be funded through tenant savings. While CEFC finance has supported private housing, it has yet to be deployed in the social housing sector.
What’s next?
Phase 2 will work with industry partners to pilot the retail intermediary model in social housing apartments, testing financial viability and load-shifting strategies in real-world conditions. The project will also develop the governance and policy frameworks needed to enable sector-wide access to low-cost finance. We are actively seeking additional partners interested in making such a model accessible to all housing providers.
With the right design and policy support, this approach could reduce reliance on grant funding and extend the benefits of the energy transition to more social housing residents—who have so far been left behind.