Australia: Energy Efficiency – NSW Energy Savings Scheme Offers Dollars For Action

Climate Change Update
Last Updated: 7 May 2010
Article by Evan Economo

Are you considering making improvements to the energy efficiency of your business operations or assets? Are you responsible for others becoming more energy efficient? If so, have you considered participating in the NSW Energy Savings Scheme?

What is the Energy Savings Scheme?

The NSW Energy Savings Scheme (ESS) commenced on 1 July 2009. The ESS was established through the Electricity Supply Act 1995 (NSW) and creates financial incentives for anyone who improves their energy efficiency and saves on their energy consumption.

The object of the ESS is to stimulate investment in energy efficiency and, in particular, to assist in breaking down the perceived market barriers to unlocking widespread investment in energy efficiency in the built environment.

The government's intention is to target the so-called "split incentive" barrier that exists between landlords and tenants, where building owners typically bear the up-front cost of energy efficiency improvements that deliver short term financial benefits to tenants through lower operating costs.

How does it work?

Fundamentally, the ESS requires electricity retailers in NSW to surrender each reporting year, a certain number of "Energy Savings Certificates" (ESCs). ESCs are created when anyone (whether an individual or a business) reduces their energy consumption as a result of a project or activity registered under the ESS. The person who saves energy consumption, and thereby creates an ESC, is referred to as the "Energy Saver".

The Energy Saver must also register as an "Accredited Certificate Provider" to participate in, and generate generate ESCs under, the Scheme.

The ESS target (i.e. the number of ESCs that each electricity retailer must surrender each reporting year) is a percentage of the electricity sales generated by the retailer. In the first reporting year, the target was 0.4% of annual electricity sales. The target increases each year until 2014 as follows:

  • 2010 – 1.2%
  • 2011 – 2.0%
  • 2012 – 2.8%
  • 2013 – 3.6%
  • 2014 – 4.0% (i.e. 10 times greater than the initial ESS target).

A practical snapshot of the size and value of the ESC market is set out below in this update.

If a liable retailer fails to surrender a sufficient number of ESCs in any reporting year, the retailer will be liable to pay a penalty of $24.50 per megawatt-hour of the shortfall.

The ESS will continue to operate until 2020 unless it is replaced by a national scheme, the likelihood of which has significantly increased with the recent "shelving" of the Government's Carbon Pollution Reduction Scheme.

Given the further delay in implementing a national carbon price via an emissions trading scheme, state and federal governments are now committing to tackling market barriers to energy efficiency in order to achieve Australia's emissions reductions at the lowest cost.

Who is eligible to become an "Energy Saver"?

Broadly, an Energy Saver is a person or entity that is responsible for a registered activity that saves on energy consumption (referred to as a 'Recognised Energy Savings Activity').

Recognised Energy Savings Activities (RESA) are activities that increase the efficiency of electricity consumption or reduce electricity consumption by modifying, replacing, installing or removing End-User Equipment.

End-User Equipment is broadly defined and includes any equipment, process or system that consumes electricity or controls or influences the consumption of electricity. Practically, it includes lighting, HVAC systems, building management systems, fridges, freezers and other whitegoods such as dishwashers.

Energy Savers fall into two distinct categories:

  • Original Energy Saver; and
  • Nominated Energy Saver.

An Original Energy Saver is generally the person who is liable to pay for the electricity consumed at the End-User Equipment Site (i.e. the person named on the electricity bill). If the site is a tenancy in a commercial building with a sub-metered electricity supply, the Original Energy Saver would typically be the tenant.

A Nominated Energy Saver is simply someone nominated by the Original Energy Saver. A Nominated Energy Saver will typically be a contractor carrying out the RESA or a supplier supplying the relevant End-User Equipment in relation to the RESA. It may even extend to a manager of a facility who is arranging for work to be carried out or a retailer selling relevant End-User Equipment.

By utilising the Nominated Energy Saver provisions, a company may be able to sell or install End-User Equipment to customers and offer a discount to each customer in return for the customer nominating the company to create ESCs on its behalf.

This means that if you are a building owner or tenant wishing to improve the energy efficiency of your building/tenancy and participate in the ESS, you can approach participation in one of two ways:

  • by registering yourself as an Energy Saver and then obtaining and trading the ESCs you create from your own activities; or
  • by nominating your contractor or supplier as a Nominated Energy Saver in exchange for a discount on the contract price or the price of supply of the equipment.

How do you sell ESCs?

ESCs are bought and sold by private negotiation. All ESCs are held and traded on an on-line registry administered by the Independent Pricing and Regulatory Tribunal (IPART).

How is the ESC market shaping up?

The following is a snapshot of the ESC market as at 5 March 2010:

  • 280,000 ESCs are estimated by the ESS Administrator to be required to meet the 2009 compliance year target (i.e. the first reporting year);
  • 225,630 ESCs are registered of 2009 vintage (i.e. for accredited activity between 1 July 2009 – 31 December 2009);
  • 34,069 ESCs are registered in respect of 2010 activities;
  • trades in ESCs have recently tipped $20.00 (per ESC).

To deal with the slight shortfall in ESCs for year one compliance, the ESS Administrator has allowed liable retailers to carry over 50% of their liability to the second reporting period in 2010, thereby bringing the minimum demand in the first reporting year to 140,000.

With the Scheme target significantly increasing each year over the next 4 years, so too will the demand for ESCs.

What should you do?

Given the large (and pre-determined) increases to the ESS targets each year over the next 4 years, there currently exists a significant and unique opportunity to capitalise on the existing and future demand for Energy Savings Certificates.

Participation in the ESS should be considered by any company proposing to undertake improvements in the energy efficiency of its operations or any companies that are responsible for ensuring that others become more energy efficient (such as contractors, managers and consultants).

The introduction of the Mandatory Energy Efficiency Disclosure Scheme (MEED) for commercial buildings (see our previous article here) also provides property owners and tenants with a strong incentive to improve the energy efficiency of poor performing buildings and large tenancies.

Maximising the benefits offered by the ESS and any other incentive scheme requires early planning and a detailed understanding of what is required to satisfy the requirements of the scheme. ESCs can only be created by activities that have been appropriately registered under the ESS. Gadens Lawyers can assist you understand and navigate the machinations of the ESS and structure deals that fully utilise the ESS and other incentive schemes.

Tailored contracting arrangements covering key risks and taking account of the commercial machinations of the ESS are also critical to the success of a registered project. Gadens Lawyers has extensive experience in drafting and implementing innovative contracting solutions to maximise improvements in energy efficiency, including a variety of energy performance contracts and green leases.


Scott Laycock

t (02) 9931 4865


Evan Economo

t (02) 9931 4950


To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.