National Construction Code 2022 Consultation Regulation Impact Statement

Written by APGA | Nov 9, 2021 2:09:00 AM

The Australian Pipelines and Gas Association (APGA) represents the owners, operators, designers, constructors and service providers of Australia’s pipeline infrastructure, with a focus on high-pressure gas transmission. APGA’s members build, own and operate the gas transmission infrastructure connecting the disparate gas supply basins and demand centres of Australia, offering a wide range of services to gas producers, retailers and users.

APGA welcomes the opportunity to contribute to the ABCB consultation on the National Construction Code 2022 Consultation Regulation Impact Statement for a proposal to increase residential building energy efficiency requirements (the CRIS).

APGA highlights that the CRIS demonstrates the National Construction Code 2022 (NCC 2022) does not achieve its stated objectives.

As identified by ACIL Allen within the Objectives section of the CRIS Executive Summary:

The broader objectives of these policies, and of the changes suggested to the energy efficiency requirements for residential buildings, can be summarised as to:

reduce energy costs for households and businesses
maintain Australia’s competitiveness and grow the economy
reduce carbon emissions and improve sustainability.

Notably, these objectives implicitly indicate an objective of achieving cost-effective energy efficiency improvements (i.e. changes that deliver net benefits to the economy).

It is apparent to APGA based on discussions with the ABCB that these objectives are not being weighted equally when developing the NCC 2022 calculations and factors. In APGA’s reading of the NCC 2022 and supporting documentation, we have not been able to find clear detail on the weighting given to each objective and/or variable. It is not apparent to APGA why one objective may be deemed higher priority than another. It is appropriate that transparent information is provided to ensure all stakeholders understand the relative weightings.

Reduce energy costs for households and businesses

Table ES 2 within the CRIS demonstrates that the capital cost of following the NCC 2022 outweighs the energy bill savings realised through following the NCC 2022. This increased total cost of energy will impact owner occupiers and renters alike, with renters bearing this cost through the flow on effect of increased home prices on rental prices.

In relation to the impact of these costs on society, ACIL Allen concludes:

Overall, the estimates presented in this RIS point towards the proposed changes to the NCC under both Option A and Option B imposing net costs across Australia (i.e. both options result in a negative economy-wide NPV).

ACIL Allen also states that:

the costs are estimated to outweigh the benefits by a significant margin

These conclusions reflect APGA concerns that prioritisation of lower bill cost alone fails to consider the full cost of energy. The total cost of energy for Australian homes and businesses, including appliance costs and infrastructure costs, must be considered.

Reduce carbon emissions and improve sustainability

ACIL Allen estimate that the NCC 2022 would reduce emissions by 15.6Mtpa. APGA does not believe this goes far enough.

As identified within APGAs submission to the NCC 2022 public comment draft (stage 2) consultation[1], APGA is concerned that the NCC 2022 results in the penalisation of lower emission homes. This is demonstrated in Table 1 below. Additional examples are included throughput APGA’s previous submission.

Table 1: Comparison of <6 Star Gas Home and <2.5 Star Heat Pump Home (VIC6, EF = 2.320)1

Home Appliance Composition	Draft NCC EE Rating	Average Efficiency	kgCO2e per kWh Input (2019)	kgCO2e per kWh Heat Output
Heat Pump <2.5 Star	2.057	300%	1.02	0.340
Gas <6 Star	3.223	88%	0.186	0.211

The higher emitting home in Table 1 would not be required to install Solar PV, while the lower emitting home would be required to install Solar PV.

Incentivisation of higher emission homes reduces the potential emissions reduction which could be achieved through the NCC 2022. While not constituting absolute failure of this objective, APGA considers this a red flag indicating that the NCC 2022 Whole of Home Equation and its variables should be more closely scrutinised. Undisclosed weighting of variables should have no place in any form of federal regulation.

APGA’s basic calculation in Table 1 above uses the emission intensity of grid electricity for Victoria as published in the NGERS Determination. It is critical that more detailed understanding of the variable emission intensity of grid electricity is used to develop emission factors. For example, heating of buildings is usually required in winter. The amount of solar energy available in winter is less than that available in summer.

Similarly, day-time temperatures are higher than night-time temperatures, meaning more heating is required at night when solar is not contributing to the grid. In both circumstances, it is reasonable to expect that fossil fuel generation is contributing more generation at times of low solar output, increasing the emission intensity of the grid. If time of use of energy was accurately considered, it is likely that gas appliances would offer superior emission outcomes more often.

Further, as solar will be increasingly supported be electricity storage such as batteries, there will be changes to both the emission intensity of electrical heating, becoming lower, and the cost of electrical heating, becoming greater. While the emission intensity comparison of gas appliances to electric appliances will worsen, the cost comparison will improve. The current formula and factors to not seem to take this into account.

The Potential for a Combined Solution

Table 1 indicates that through the utilisation of gas appliances, homes are able to achieve lower emission outcomes in some circumsnatnces. APGA also notes that gas appliances tend to be cheaper than heat pump appliances[2], and gas costs less than half that of electricity[3]. While noting that gas appliances do not have the same efficiency as heat pump appliances Table 1 shows that the emissions intensity of gas is still low enough to deliver a superior emissions outcome relative to electric heat pump appliances – a trend that is estimated to continue through until 2035 in states like Victoria[4].

The Future of Renewable Gases

The gas industry is changing too, with broad focus on renewable gases entering the progressive renewable energy conversation. APGA notes the following ongoing changes impacting the future of gas supply:

The combined DISER, AEMC and AEMO consultations on extending gas market regulation to include hydrogen and other renewable gases[5];
Recent state-based strategies and analysis of renewable gas use including the NSW Hydrogen Strategy[6] and Victorian Gas Substitution Roadmap[7];
Some Adelaide residents are already using renewable gases through a pilot project developed by AGIG[8], with more to come across coming months[9]^,[10] and years[11];
The further development of a renewable gas industry in Australia is expected to make large-scale retail purchase of renewable gases a reality in the years to come;
Decarbonisation of gas infrastructure is likely to be achievable at half the cost of electrification based on research conducted by the gas industry[12]; and
Customers can already purchase decarbonised gas today through offset regimes such as those provided by Origin Energy[13] and AGL[14].

APGA recommends the NCC 2022 be revisited to understand how it could better achieve its objectives. Its apparently opaque design is resulting in a net negative cost to society while penalising lower cost, lower emission appliance options.

For more information on the future of renewable gases, please take the opportunity to read Gas Vision 205014 and visit the Future Fuels CRC website[15].

APGA welcome further discussion on these topics. Should you have any questions about this submission, please contact me on +61 422 057 856 or jmccollum@apga.org.au.

Yours Sincerely,

JORDAN MCCOLLUM

National Policy Manager

Australian Pipelines and Gas Association

Responses to Specific CRIS Questions

CRIS Question 3: Does the RIS establish a case for amending the energy efficiency provisions of the NCC?

No, the RIS does not establish a case for amending the energy efficiency provisions of the NCC.

The CRIS demonstrates that the NCC 2022 fails to achieve its objective of reducing energy costs for households. While it does reduce energy bills, it does so by increasing the capital cost of homes by a value greater than the cost saved through reduced energy bills.

Further, while the NCC 2022 achieves its objective of reducing carbon emissions, it does so in a manner that incentivises higher emission homes while penalising lower emission homes. This should cause sufficient concern as to seek reassessment of the mechanisms involved in calculating whole of home equation variables such as Energy Efficiency EE and Energy Factor EF.

This is especially true for variables which have undisclosed weightings contributing to outcomes which are contradictory to the objectives of the NCC 2022.

CRIS Question 5: Which of the options analysed have the ability to meet the stated objectives? How could these be enhanced?

None of the options analysed have the ability to meet the stated objectives.

This is especially true for variables which have undisclosed weightings contributing to outcomes which are contradictory to the objectives of the NCC 2022.

These could be enhanced through peer review of the Whole of Home equation and the derivation of its variables.

The whole of home equation and its variables which the NCC 2022 energy efficiency provisions are based upon are not available for peer review. This includes weighting of variables which are not disclosed to the public. Considering the counterintuitive results of these equations as seen in Table 1, APGA considers that the cause of the negative NPV could be found within the undisclosed calculations behind the whole of home calculation variables.

[1] Submission - National Construction Code 2022 public comment draft (stage 2) consultation, APGA

https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/211015_apga_submission_-_ncc_public_comment_draft_stage_2_consultation.pdf

[2] Rinnai Appliances website
https://www.rinnai.com.au/

[3] STATE OF THE ENERGY MARKET 2021, Report 6: Retail Energy Markets, Australian Energy Regulator

https://www.aer.gov.au/system/files/State%20of%20the%20energy%20market%202021%20-%20Chapter%206%20-%20Retail%20energy%20markets.pdf

[4] Future Fuels CRC Research

https://www.futurefuelscrc.com/

[5] Extending the national gas regulatory framework to hydrogen blends and renewable gases, DISER

https://www.energy.gov.au/government-priorities/energy-ministers/priorities/gas/gas-regulatory-framework-hydrogen-renewable-gases

[6] NSW Hydrogen Strategy

https://www.energy.nsw.gov.au/sites/default/files/2021-10/GOVP1334_DPIE_NSW_Hydrogen_strategy_FA3%5B2%5D_0.pdf

[7] Victorian Gas Substitution Roadmap, Victorian Government DELWP