Economic, Education, Jobs and Skills Committee: community energy projects (4)
CRISP (Mildura) — I rise to speak on the inquiry into community energy projects. Everybody wants to manage their energy bills, and their circumstances vary. The report discusses solutions to differing circumstances. Mostly what I am going to focus on is 'behind the meter'. That is a term about what you can do in your business, or very near your business or home, to deal with your energy bill. I think everyone in this house will know that energy bill stress is a rising concern in our community, both residentially and with businesses. I am going to talk about what can be done if you are a tenant, and that is very much tied up in issues around costs, ownership and some of the complicated tenancy frameworks that exist.
This is what is known as the split incentive issue. The split incentive is where the landlord will not benefit from investing in renewable energy or energy efficiency measures because the energy and cost savings will accrue to the tenant. Naturally the tenant does not want to pay for the capital infrastructure up-front that will benefit a landlord. However, the stress that surrounds energy bills means that we need to develop solutions to this. In taking evidence, what the committee did hear is that a way to overcome the split incentive for landlords to install renewable energy, when tenants benefit from the energy saving, is using environmental upgrade agreements. These are known as EUAs. The EUAs provide council-based financing to businesses for upgrading existing non-residential buildings to improve energy, water or environmental efficiency.
EUAs have been available to businesses in the City of Melbourne since 2011 and all Victorian councils since 2015 following amendments to the Local Government Act 1989. EUAs enable building owners to take out a loan at competitive interest rates to pay for upgrades such as solar panel installation. Rather than repaying the lender directly, the local council collects the loan repayments through the existing council rates process and passes them on to the lender. Under commercial leases tenants usually pay the rates, making this a fairer outcome since the tenants benefit from the reduced energy costs. The terms of an EUA are generally set to benefit the tenant by ensuring the energy savings are more than the increase in rates, and that is a really important component in this — that is, finding a way to make solar panels work on your business. The building owner also benefits, as the upgrade increases the value of the property.
In making this work, clearly there is a role for local government to put resources where their mouths are — and many have — and thus support their local businesses. Most councils are keen to promote economic development in their region and most councils are keen to promote the sustainability of the businesses they already have. Most businesses want to continue to grow, particularly as confidence returns — in my case to Mildura. We want to allow those businesses to grow, but energy costs are one of their major concerns at the moment. It is not only threatening the expansion of their businesses but in some cases it is threatening the continuation of their businesses in their current form. Most businesses are under energy stress, and if they are in rented property, then they feel they are constrained. Most businesses are also concerned about supply security, and EUAs offer a solution to all the above concerns.
I urge local governments that are not involved in EUAs — and that includes Mildura council in my electorate — to consider doing so. This is a real opportunity for councils to work with their businesses in order to alleviate the threats that come from increased energy prices. I commend the report to the house.