Energy efficiency for residential buildings: Nathers heating and cooling load limits Consultation ris

AF.2Summary and Analysis

Table below summarises and enables a comparison of the regulatory and non-regulatory options for all dwellings, on the reference case settings.

The benefit cost analysis clearly identifies that while both the regulatory and non-regulatory options are expected to be cost effective – indeed, highly so – the regulatory option offers the prospect of much greater take-up and therefore effectiveness in addressing the problem identified. As a result, the expected performance of the regulatory option is much higher, generating more than 6 times the net social benefit (NPV), at over $95 million. The regulatory option is expected to generate an additional $81 million of net social value when compared to the non-regulatory option. Alternatively, some $81 million of net social value would be foregone if a voluntary rather than a regulatory pathway were selected.

As noted, both the regulatory and non-regulatory options perform well provided the industry does not make systematic errors, from an economic perspective, for example by selecting highest cost over least cost solutions. Our analysis of the solutions identified by TIC – and again noting that other solutions would be possible – is that costs of the different pathways vary widely. However, the measures remain cost effective provided that not more than around 32% - 33% of solutions represent the highest-cost options, which is an unlikely prospect. Normal market forces would tend to favour designers and builders who can offer their consumers the best value, by identifying and relying on least cost solutions. While some consumers may prefer higher cost solutions, for example for aesthetic reasons, this represents the normal functioning of a market – provided consumers are aware of the consequences of the choices they are making.
Table : Comparison of Key Indicators – Regulatory vs Non-Regulatory Option – All Dwellings

5. 
   Present value of benefits ($’000)
   

Jurisdiction	Regulatory Option	Non-Regulatory Option
VIC	$12,020	$2,297
QLD	$2,949	$561
SA	$1,714	$326
WA	$5,037	$960
ACT	$571	$109
Total	$22,292	$4,254

6. 
   Present value of costs ($’000)
   

Jurisdiction	Regulatory Option	Non-Regulatory Option
VIC	-$44,642	-$6,939
QLD	-$1,234	$1,113
SA	$82	$466
WA	-$24,150	-$3,800
ACT	-$3,039	-$431
Total	-$72,982	-$9,590

7. 
   Net present values ($’000)
   

Jurisdiction	Regulatory Option	Non-Regulatory Option
VIC	$56,662	$9,236
QLD	$4,183	-$552
SA	$1,632	-$140
WA	$29,187	$4,759
ACT	$3,610	$540
Total	$95,274	$13,843

8. 
   Benefit cost ratios
   

Jurisdiction	Regulatory Option	Non-Regulatory Option
VIC	-0.27	-0.33
QLD	-2.39	0.50
SA	20.86	0.70
WA	-0.21	-0.25
ACT	-0.19	-0.25
Total	-0.31	-0.44

Notes: present values of benefits have been calculated using a 7% real discount rate over the 40 year assumed life of dwellings; while the present values of costs have been calculated using a 7% real discount rate over the assumed 10 year life of the proposed measure.