Skip to content.

Home

Allens Arthur Robinson

Focus: Energy efficiency: election promises and an update

28 July 2010

In brief: Last week, the Gillard Government announced its election promises, including its intention to introduce various measures designed to promote energy efficiency in business and industry. In part one of this Focus Partner Chris Schulz (view CV) and Lawyer Nadia Harrison outline policy announcements on coal-fired power stations, light vehicles and tax deductions for expenditure on commercial buildings. In part two they provide an update on the progress of the recently enacted energy efficiency disclosure regime for commercial buildings.

How does it affect you?

  • Mandatory energy efficiency standards will apply for new coal-fired power stations and there will be an expansion of the disclosure obligations applicable to existing coal-fired power stations.
  • All car and other light vehicle owners will be affected by a new carbon dioxide emission standard.
  • Commercial buildings that invest in energy efficiency will be eligible for a tax deduction of 50 per cent from 1 July 2011.
  • The commercial building disclosure regime is set to commence on 1 November 2010 and will impose energy efficiency disclosure obligations on those wishing to sell, lease or sub-lease large office buildings.

Background

Last week, the Prime Minister announced important aspects of the Government's energy policy. While the media has focused on her promise of a Citizens' Assembly to assess the case for action on climate change, there were also important announcements in relation to energy efficiency. This would build on the commercial building disclosure regime that was passed by Federal Parliament last month and increase the financial significance of energy efficiency measures and assessments.

Return to top

Part 1: Gillard policy announcements – energy efficiency aspects

Outlined below are a few of the key energy efficiency related policies which the Government intends on introducing if re-elected.

Emissions standards imposed on new coal-fired generators

New coal-fired electricity generators will be required to meet an emissions standard. The Federal Government intends to finalise the standard for commencement in 2011.

Further, the Government would require new coal-fired generators to be capable of retrofitting carbon capture and storage technologies and to retrofit those technologies once they become commercially available.

While these standards will not apply to existing coal-fired generators, it is unclear the extent to which they would apply to generators currently under construction or which are in the process of being brought back online. The Gillard Government announcement states that: 'Planned investments which already have environmental approvals, and are determined by the energy market institutions as being sufficiently advanced in their regulatory approvals at the commencement of these standards' will be exempt.

Expansion of the EEO program to all existing coal-fired power stations

The Energy Efficient Opportunities Act 2006 (Cth) imposes obligations on large-scale emitters to identify, evaluate and report to both the Government and the public on opportunities for energy savings. The Act applies to companies that use more than 0.5 petajoules of energy per year.

The Government has announced that it would impose obligations under that Act on all existing coal-fired power stations.

Public availability of NGERS data from existing coal-fired power stations

The National Greenhouse and Energy Reporting Scheme (NGERS) currently imposes reporting obligations on certain corporations for their energy consumption, energy production and greenhouse gas emissions.

The Government has announced that emissions and energy production data reported by coal-fired electricity generators under NGERS, would be made publicly available.

Mandatory emissions standards for new light vehicles

The Government would introduce legislation imposing a new carbon dioxide emission standard for all new light vehicles, including cars, from 2015. While the standard is yet to be determined, it would apply to all such vehicles sold in Australia.

Tax deduction for energy efficiency improvements to commercial buildings

Businesses that invest in eligible assets or capital works to improve the energy efficiency of certain commercial buildings would be eligible for a once-off tax deduction of 50 per cent of the cost of the eligible asset or capital works. Energy efficiency would have to be improved from a National Australian Built Environment Rating System (NABERS) energy rating of two stars or lower to a NABERS rating of four stars or higher.

The tax deduction would be available from 1 July 2011 and would apply to offices, hotels and shopping centres that are currently covered by the NABERS rating scheme.

The Government has not yet determined what will constitute 'eligible capital expenditure' but has announced that it will do so in consultation with environmental, industry and government stakeholders.

The building would need to be assessed by an accredited NABERS assessor before and after the investment was made. NABERS assessments require historical energy use data relating to the building for at least the previous 12 months.

Return to top

Part 2: Building Energy Efficiency Disclosure Act 2010

The Building Energy Efficiency Disclosure Act 2010 (Cth) (the Act) was passed by Federal Parliament on 28 June 2010. Much of the detail of that Act was described in our Focus of 13 April 2010. Since that time, however, the details of the transitional arrangements have been released. Other important changes and practical tips to deal with the obligations it imposes are provided below.

The Act applies to buildings with a net lettable area of 2000 sq m or more where that area is for administrative, clerical, professional or similar information-based activities, including support facilities for those activities located in that area (disclosure affected buildings).

Mandatory disclosure of NABERS energy ratings will mean that those wishing to claim the recently announced tax deduction for commercial office buildings are more likely to have the necessary NABERS rating assessment on hand. The operation of the Act may indirectly encourage the tax's up-take.

Transitional arrangements

Between 1 November 2010 and 31 October 2011, the Act imposes an obligation on property owners wishing to sell or let disclosure affected buildings (and on tenants wishing to sublet such buildings) to disclose a NABERS energy rating within advertisements. That NABERS rating must also be registered on the Building Energy Efficiency Register website before any offers or invitation to make offers and must be provided to a prospective purchaser, lessee or sub-lessee upon request.

After the transitional period

From 1 November 2011, the obligations will become more onerous. The requirement to include a NABERS energy rating in advertisements will remain. Additionally, it will be mandatory to provide a Building Energy Efficiency Certificate (BEEC) to prospective purchasers and tenants upon request and to register that BEEC on the Building Energy Efficiency Register website before any offer, or invitations to offer, are made.

The BEEC incorporates three elements:

  • a NABERS energy rating;
  • a tenancy lighting assessment, which will benchmark existing tenancy lighting in the building against best practice; and
  • energy efficiency guidance will be provided to building owners and tenants on common energy efficiency opportunities in commercial office buildings.

A NABERS energy base building rating, which assesses the central services and common areas of a building, will generally be required. If the base building rating cannot be determined because central services cannot be distinguished from tenanted services, a whole-of-building rating will be required.

NABERS energy ratings and tenancy lighting assessments will be completed by accredited assessors.

The energy efficiency guidance provided to building owners and tenants will be general in nature and will not be tailored to the building in question.

Summary of key requirements

The key obligations from 1 November 2010 in respect of office buildings of more than 2000 sq m for sale, lease or sub-lease, are therefore:

  • to have registered a NABERS energy rating when offering or inviting offers (or a BEEC from 1 November 2011);
  • to provide a NABERS energy rating upon request by the prospective purchaser, tenant or sub-tenant (or a BEEC from 1 November 2011); and
  • to include an NABERS energy rating in advertisements.
Fines reduced

The approach to penalties is less severe in the Act than it was in earlier stages of the policy's development. The Act provided that certain breaches relating to failure to register rating information before offering or inviting offers and failure to include rating information in advertisements could attract a fine of up to $110,000 per day and that this fine would be imposed each day the legal requirement was not met. The Act, however, limits the maximum penalty applicable for contraventions on the second and subsequent days to $11,000 per day.

Exceptions

The regime does not apply to:

  • newly constructed office buildings, where the certificate of occupancy (however described), was issued less than two years ago;
  • strata-titled offices;
  • a building transferred through the sale of shares in a company that owns the building or a sale of units in a trust that owns the building;
  • the assignment of a lease; or
  • proposed leases or sub-leases for a term of 12 months or less (but note that in calculating the 12-month period, an option to extend the lease or sub-lease is to be included).

The Act does not impose an obligation to register NABERS energy ratings before offering or inviting offers (or a BEEC from 1 November 2011) and does not impose an obligation to include a NABERS energy rating in advertisements, where the offer, the invitation to offer or the advertisement is made by a:

  • natural person;
  • partnership; or
  • trust that does not have a corporate trustee.

A prospective purchaser, tenant or sub-tenant that is a corporation may, however, require any of the entities listed above to provide a NABERS energy rating (or a BEEC from 1 November), to that prospective purchaser, tenant or sub-tenant.

Practical tips on meeting the new requirements
Get ready

Those who plan to sell, let or sublet large office buildings from 1 November 2010 should look to obtain a NABERS rating in the very near future. Importantly, NABERS rating assessments are performance based and require 12 months of historical data. It is for this reason that newly constructed properties are excluded from the new requirements (see above). Building owners wishing to sell or lease and tenants wishing to sub-lease will therefore need to collate relevant historical data in preparation for an assessment. While NABERS self-assessment tools are available, these will not satisfy the regulatory requirements.

It is important to remember that the obligation to have a registered NABERS energy rating (or a BEEC after 1 November 2011) exists at the time that the owner or tenant offers or invites offers for a sale, lease or sub-lease, not at some later stage during negotiations or upon finalisation of the transaction.

Information will need to be managed on an on-going basis, as building owners and tenants to whom the regime applies will be required to obtain a BEEC annually from 1 November 2011. BEECs will only be valid for 12 months.

Green Power

NABERS ratings obtained will not take into account the election, by an owner or tenant, to use Green Power. The reason provided is that such an election is not directly relevant to energy efficiency. The Government has stated, however, that Green Power purchases will be acknowledged as part of the BEEC when introduced from 1 November 2011.

Advertising requirements

A determination has recently been released which provides prescriptive guidance on how NABERS ratings are to be referred to within advertisements in order to satisfy the requirements of the Act. These requirements will apply during and after the transition period. The rating must be expressed by using a whole number, or half of a whole number, from 0 to 5. The phrase '*-star NABERS Energy rating' must then follow that number.

The rating must be displayed so that it is clearly visible within the advertisement and the number and text relating to the rating must be at least as large as the majority of the text in the advertisement.

Looking forward

The Federal Government has noted that Australian governments, at a state, territory and federal level, are considering a second phase of the building energy efficiency disclosure regime, which could expand its application to hotels, retail, schools and hospitals.

The Federal Government has reportedly committed to a review of the legislation before its application is expanded further. Allens will continue to update clients on relevant developments.

For further information, please contact:

Return to top

Share with

What are these?

 

 

Recent Climate Change publications