Energy efficiency - NCC 2022 and beyond scoping study

Both Option 1 and 2 are predicated on setting the building fabric to 7 Stars. Not even considering a lower level with an increase in services efficiency is poor process.

The last increase in energy efficiency of building fabric in the NCC was based on an average efficiency for electric heating of 1.8 (COP). Today, this level is illegal due to the Greenhouse and Energy Minimum Standards Act. The benefit to cost ratio of the last RIS, was only 1 and that required the use of a 5% discount rate. The current efficiency of good electric heating is 5 or more (COP). This means the efficiency of the products that use energy are actually more than double as efficient as the RIS suggested. The NCC cannot justify increasing the building fabric energy efficiency requirements and can also not justify keeping them as stringent as they are now. It is our understanding that the ABCB must find a benefit to cost ratio of 1 or greater for a change to be made. It therefore stands to reason that if the initial assumptions for a regulation have been proven wrong over time, then the regulation should be removed or changed.
Our view is builders should be allowed to offset building fabric requirements with better heating and cooling services.

The information below provides the typical arguments as to why building fabric must be regulated separately from the services and why that is wrong.

Argument 1: If builders are allowed to use heater or air conditioning efficiency to offset building fabric requirements, the appliance (heater or air conditioner) will break down in 15 years and the home owner could install a less efficient heater or air conditioner.

Why that's wrong: The previous RIS assumed a heating COP of 1.8 to get the current building fabric regulations to look cost effective, with a discount rate of 5%, rather than the typical 7%. The benefit to cost ratio was only 1. Therefore, as long as the heaters replacing the broken down units in 15 years, have COPs of greater than 1.8 the building fabric requirements will always not be cost effective.

It is important to understand the actual numbers and not just rely on concepts. The concept of needing good building fabric requirements in case energy efficient heating units are replaced with less efficient units makes sense as a concept but when we look at the numbers its does not stack up. As long as the replacement units have COPs greater than 1.8, the argument doesn't stack up. Minimum Energy Performance Standards (MEPS) are already much higher than 1.8. They are between 2.85 and 3.33 depending on the size of the unit. This means it is actually illegal to install a unit which would warrant the current building fabric requirements when the old unit broke down.

Although the MEPS levels are around 2.85 and 3.33, people don't want the minimum. The average efficiency of typical household units (split systems, between 2 and 7 kW) is a COP of 4. The efficiency of these units continues to increase. As Minister Frydenberg said while he was Environment minister, “The most efficient unit available in 2003 could not be sold today”.

So that we are providing solutions rather than just problems, we suggest that the ABCB undertake cost benefit analysis which identifies the building fabric requirements that are cost effective when units are installed which meet the MEPS levels, given these are the least efficient units available on the market. Builders should then be able to offset building fabric requirements with more efficient heaters, up to the limit inferred by assuming only MEPS level efficiencies. This will not be 7 Star.

A final point, our discussion assumes that if reverse cycle air conditioners break down a home owner will replace those units with similar sized reverse cycle units. People trying to protect the status quo in building fabric regulations might suggest that home owners will install electric resistive heating because it’s cheaper. We suggest there is no evidence for this and there is a lot of evidence to show that home owners will replace like for like. The best evidence is to survey property managers who will say that the landlord will replace reverse cycle with reverse cycle not electric heating even though electric heating is cheaper and the landlord doesn't face the energy prices.

Argument 2: Better insulated homes reduce peak demand
Why this is wrong: First of all, it’s not totally wrong. Better building fabric can reduce peak demand by reducing overall demand for cooling, however it’s only under set circumstances. If you assume the occupant is cooling all day, then when peak demand on the electricity grid hits, say between 3pm and 7pm, the home will be pre cooled and the heat transfer into the home will be less so the home will contribute less to peak demand.

However, if the occupants work during the day and comes home at 6 or 7pm, the house has had all day to heat up. Better building fabric doesn't necessarily reduce energy use, it just restricts the flow of heat in and out of a building. So the home has all day to heat up and then as the air temperature outside cools in the evening it is unable to naturally loose its heat to outside because the insulation is doing what it was made to do, restrict heat flowing out of the building. Therefore, when the working occupants come home the house could still be hotter than it would have been had there not been as much insulation. So the air conditioners need to work harder. Some may argue the occupant can open a window to remove the heat, however it will not cool the home as fast as air conditioning, so the occupant to choose to air condition rather than opening windows as the NatHERS software suggests.

If however, builders were allowed to offset building fabric requirements with more efficient air conditioners, there would be a guaranteed reduction in peak demand because it is the air conditioners that actually use energy and contribute to peak demand. Doubling the efficiency of the air conditioner will half peak demand for all types of occupant behaviour.

Its true that some passive houses can almost remove the need for cooling, however these struggle with multiple hot days in a row, need perfect orientation which is not available to all customers and is generally a really expensive way to reduce peak demand. As a comparison, a full passive home that does not need cooling might cost $10,000 more than a standard build. However an air conditioner with an Energy Efficiency Ratio (EER) (efficiency measure for cooling) which is 25% better than a standard unit, might cost $60 more. Getting four homes to install the better air conditioners would only cost $240 to get the same total grid demand reduction as one home spending $10,000.

Some people will state that the reduced demand in new suburbs compared to older suburbs is evidence of the new building regulations reducing peak demand, however these studies never adjust for air conditioner efficiency improvements over time. Every air conditioner sold in Australia has been rigorously lab tested and the efficiencies are known. The efficiencies of these units have been increasing significantly each year and must be adjusted for in any study that tries to prove, better building fabric reduces peak demand.

Argument 3: Better insulated homes are healthier
Why this is wrong: So again, it’s not totally wrong. Increasing the temperature in people's homes can reduce the intensity and risks of some illnesses. The warming up NZ program demonstrated this idea in New Zealand. In Australia the death rate goes up by 7.7% over winter. Attribution to the 7.7% is difficult, however there is enough evidence in literature to suggest keeping a home warm in winter can reduce illness. However, there is no evidence that suggests any one method to increase the temperature leads to a better health outcome over another. Insulation can reduce heating costs and may naturally keep internal temperatures higher, however a more efficient heater could also make heating more affordable to get the same effect. Energy prices being very low can also deliver the same outcome.

Argument 4: Better insulated homes are more comfortable
Why that's wrong: Again, not totally wrong. The effects we discuss here are less well known but are real. There are three ways a person loses heat from their body, convection, conduction and radiation. The air temperature drives conduction and convection but the internal surface temperatures of the home drives radiation. For example, the thermostat might be set to 22 degrees for heating. With an insulated home, the internal wall temperature might be 20 degrees so taking all types of heat loss into account the occupant actually feels like it is 21.5 degrees. With an uninsulated home the internal wall temperatures might be 16 degrees, so the occupant feels like it is 20 degrees. So the insulated home naturally feels warmer. Under the uninsulated scenario the occupant might need to run the heater at 24 to feel like it is 21.5 degrees. So there is an energy penalty to get the same level of comfort.

This effect is modelled when using products like our tool. We are not sure if NatHERS tools have this function. If the tools used for compliance have this functionality, then this effect can be adjusted for and a cost benefit analysis can be undertaken trading off insulation with more efficient heaters, understanding that the trade-off will result in the heaters running harder.

The other point to make, is there is no evidence that this comfort affect is noticeable between 5 Stars and 7 Stars. It is noticeable between no insulation and some insulation, however there are diminishing returns with more insulation and there is no evidence a 7 Star home is more comfortable than a 5 Star home.

Argument: Higher Star homes are less emissions intensive.
Why that's wrong: There can be less operational emissions with a higher star home, however the embodied carbon is much greater. The point of section J is to reduce emissions. We challenge the ABCB to prove that 7 Star homes have fewer whole of life emissions that 5 Star homes, using reverse cycle air conditioners that don't break the law (ABCB assumptions in the last RIS break the current law), with and without solar PV on the roof and looking at working homes, not just assuming people are at home all day.

Our internal analysis suggest the insulation levels required today do not save enough energy, and therefore emissions to pay back the original emissions that went into the manufacture of the insulation. This is comparing 5 Star over 7 Star. Additionally, all household heating and cooling can come from renewable sources as the grid decarbonizes and people install roof top solar and batteries in greater numbers. The processes that make insulation, double glazing, and concrete for thermal mass all use high temperature process heating which is delivered through fossil fuels. It is much harder to make the manufacture of insulation and extra glass "green" than it is to run a heat pump air conditioner off solar PV.

Summary
In summary, we are not suggesting the removal of all building fabric requirements, however we do take issue with the ABCB only looking at whole of house requirements that fix building fabric at 7 Stars. This is not the best way to achieve the intended outcomes. Builders should be allowed to offset building fabric requirements with more efficient heating and cooling technology. There is no reason to prevent this apart from government wanting to hold on to existing regulations, while not acknowledging improvements to technology. As a business that helps customers of new homes and existing homes find the best way to reduce energy bills, be more comfortable and reduce emissions all with a low upfront cost, we find it absurd that the NCC uses out of date assumptions to inflexibly saddle customers with unnecessary mortgage dept. Most new homes we work with could have zero energy and emissions homes which are very comfortable, with a $3,000 to $4,000 reduction in their mortgage if Section J allowed trade-offs with building fabric and services.

The government should be aiming to promote innovation, not limit the ability of start ups to access new markets. The tools referenced are all government tools and the methods for demonstrating suitability are all very process driven and bureaucratic without focusing on outcomes. Only one method should be used for gaining accreditation and it should be to use a number of existing homes, where the energy use has been measured. Any tool should be able to match that measured data. If it can, then it should be allowed to be used for compliance. The government should also avoid setting assumptions. We understand that this is done to create level playing fields and prevent dodgy activity however government will almost always get it wrong and there are real consequences for customers. For example, the current NatHERS assumptions are that someone is home all day every day heating and cooling and running around opening and closing windows based on outside air temperature. This leads to bad outcomes for consumers by favoring building fabric improvements to gain compliance which are too expensive (see our discussion on peak demand to understand why these assumptions skew outcomes).

There are several private sector tools which start ups like us are using to help people with existing homes and help people building new homes get a better result, beyond what using NatHERS accredited software would deliver. We are already locked out of the new building market to a large extent because building owners have to pay for the Section J modelling then our modelling on top, to get a good outcome. Asking them to pay for additional modelling when they assume they already paid for government backed modelling is a hard ask. If government moves into whole of house, with government tools and large amounts of red tap we will be locked out all together.

As some indication of what locking us out is already doing to consumers. Where home owners have been willing to pay for us in addition to Section J or BASIX modelling. We have on average reduced the upfront cost by 17% while reducing future energy bills and emissions to zero. If there was no Section J or BASIX we would reduce the upfront cost even further while still delivering zero emissions and zero bills. Locking us out is bad for us and other innovative start ups like us, but it is terrible for households. Requiring homeowners to use government backed tools rather than products like ours that already do whole of house and calculate the optimum solutions for each customer, considering how they use the home and investigating literally hundreds of thousands of ways to reduce bills has likely cost Australians over $2 billion in additional capital costs over the last 5 years and over $3 billion in additional energy bills.

In theory this is a really good idea and we support it. The problem is demand response and load shifting. If products have timers, or can be made "smart" or have demand response capability, they should get an allowance where it is assumed some of the energy would be load shifted.

Every air conditioner we recommend to people has demand response capability. Even appliances which are not demand response ready can be made capable with a smart remove control connected to a Amazon's Alexa or similar. Good hot water heaters have timers built in (this is not the old off peak tech but an actual computer in units like the Bosch Heat pump). The timers can be made set and forget, so the unit is only ever using energy when it is cheap. Additions to batteries like Reposit Power can ensure not energy is taken from the grid during peak events.

There is also a strong interaction with building fabric and demand response of A/C. Where the building fabric performance is strong, A/C units can be turned on early to pre cool or pre heat homes, when the value of energy is low.

These technologies will need to be considered. It won't be easy as most builders are not aware of the opportunity, nor are customers, however the opportunity is there and the building code should allow for it, to encourage it. If the NCC ignores the issue, it will act as a disincentive for these low cost methods to increase grid stability.

We have no definitive view.
Here are some thoughts and perspectives which we hope are useful.
From a total self interest point of view, we could potentially make money from there being a very small limit since it would grow the market for more detailed analysis which we provide. However we don't think its in the best interest of the customers, so we don't recommend a floor area be used to limit DTS.

DTS should be available where the home is not complex. The type of the home and size is not a big factor in complexity, however the type of technology used in the home is. Heat pumps are more complex water heating tech where performance changes based on climate. Solar PV and batteries change the dynamics of a home's energy use considerably. If PV is available the type of fixed appliances a home owner should use changes. Different air conditioners perform very differently when placed in different climates (see the Dept. of Enviroment's work on the ZERL)

We suggest, if there is a limit to DTS, it should be based on tech rather than house size. If solar is present DTS should not be available. Also, if heat pump water heaters are used, DTS should not be available. The downside to this approach is it could provide disincentives for good tech like solar and heat pumps. So perhaps DTS should be available in all cases.

We suggest this is not an easy question to answer and significant scenario modelling should be undertaken before landing on a single answer. We would caution against making a conclusion based on heuristics or various stakeholder's off the cuff responses.

7 star for building fabric is too high
5 star gas heating is too high also, this is in the area on condensing technology which brings water through condensation into the unit. They require more maintenance and are expensive. 4.7 Stars is a high non condensing version, where the energy use is actually similar but there is not the maintenance and upfront cost.
5 Star for hot water is fine
Climate specific heat pump is fine but don't be too hard on what that is. Many academics will say only CO2 refrigerant units should be installed in cold climates. We have put many heat pumps which do not contain CO2 refrigerant in climates like Canberra and Orange, NSW and they have saved around $1,000 off the total energy bills for our customers.
4 Star for HVAC is too high. Take a look at the trend between star rating and unit size on (http://www.energyrating.gov.au/). Smaller units are naturally more efficient because the outdoor condenser size is larger in comparison to the capacity of the unit. This would disadvantage cold or hot climates which require a bigger unit for the same room size. It would also disadvantage larger homes.

Otherwise, the levels are a good place to start. Just be aware, that the minute the government sets these levels they will be out of date. We update our data base of products daily, to make sure we are always providing accurate information to customer's and our cost benefit analysis for each home is accurate. The regulations will be out of date really quickly, just like the current building fabric regulations. Our understanding is the NCC is only able to make changes every 3 years, so any levels set for DTS, or reference methods will be out of date for the majority of the time they are in force. Our experience suggests efficiency data, and costs and benefits around that data, is relevant for 6 months.

Although DTS will date quickly, it is important to have a simple method for customers and builders to use.

We don't see why BASIX and other government tools should be used, given they will also date quickly and are also not simple.

Performance based methods which we would fall under are more complex, however they keep up to date daily and are tailored to the customer, which delivers a better result for the customer.

BASIX and Scorecard are too basic. They are based on rules of thumb and one off analysis to support the levels. BASIX is updated semi regularly. Our product undertakes a thermal load simulation and cost benefit analysis for each home, using the most recent energy prices, efficiencies, new technologies and how the customer wants to use the home.

The compliance methods are too resource intensive and based too much around the Chenath engine. Also, government should not be funding the development of these tools, either through scoping studies, IT development or consumer testing. This disadvantages private tools and start ups who may have better products and are trying to compete with government backed products.

Only apartments should have requirements for electric vehicle wiring in the car park, to allow for future charging. Houses can be retrofit.

Two main points to reiterate
1. Builders should be allowed to offset building fabric requirements with better heating and cooling appliances
2. Requirements for tools should focus on allowing for innovation of private tools, reducing red tape and not backing government tools to the disadvantage of private sector