A conversation about efficiency and space conditioning in Australian Homes

A few months ago, Kinesis was approached by a representative from Nest, the Google owned thermostat and home monitoring technology company, as part of their research into market opportunities in Australia. This representative was hoping that Kinesis could provide some background on how Australians space condition their homes and the subsequent impact this has on decisions relating to the design of new developments and electricity network infrastructure.

Rather than responding ourselves, we gathered a group of representatives from some of Australia’s largest property companies and electricity utilities into a room to answer his questions directly.

We’ve summarised the best of their responses below:

Is there consumer demand for energy efficiency innovation in new developments?

“Given the current state of the property market, efficiency simply isn’t a major decision making criteria for most homebuyers, and only a minor criteria for third or fourth homebuyers.”

This is the case despite increased sensitivity over energy prices in the political debate over the past three years.

This lack of consumer demand has created a “gap in the value chain”, making it difficult for developers to see the financial incentive to “take the leap” on these sort of innovations.

What are the main barriers to closing this ‘value gap’?

“A significant challenge is the time lag between design, delivery and rapid advancements in technology. A developer needs to approve technologies at the point of DA, and by the time the development is delivered 2-3 years later, there is a risk that the technology will be redundant.”

“The effectiveness of these technologies is also subject to the demographics and income of inhabitants. For example, many elderly tenants don’t want or use this sort of innovation.”

“Given these trends, the only technologies that will make a significant impact are those that can be easily installed and are extremely simple to use”

 What have been the recent trends in network demand?

“Electricity demand (both peak + consumption) in NSW has fallen over the past few years. Winter demand has been falling since 2008, while summer demand has been falling since 2010.”

“Average household electricity consumption in QLD has been consistently falling while peak demand reductions (and increases) have been variable across the network.”

What are the reasons for this change in demand and will it impact the desire for technology such as Nest?

“This has less to do with efficiency of space conditioning and more to do with the betterment of the national Minimum Energy Performance Standards (MEPS) for new appliances.”

“Energy tariffs have also effectively doubled in the last 5 years, which has made people more aware of their consumption”

“Residential Solar PV installations have been a minor component of the overall drop in demand in the Ausgrid network area.”

Despite advancements in MEPS, it was agreed amongst the group that we still don’t know the impact that technology is having on space conditioning loads and behaviours. Participants highlighted that there is very little evidence available to quantify this.

Where is the opportunity for innovation?

The participants acknowledged the significant steps that all represented developers had made in pushing the boundaries of corporate sustainability leadership. All the participants agreed that, while there may be a lack of consumer demand, innovation in energy efficiency technology could be a vital way to “differentiate their products in a crowded market”. For this reason, should the right solutions become available, many developers would be willing to “take a leap of faith”.

Conclusion: Will be led by supply, not demand.  

There are clear and quantifiable, mutually beneficial outcomes for developers, households and network owners in the adoption of sophisticated and bankable integrated energy solutions. However, the existence of split incentives, lack of consumer demand and strict laws prohibiting homeowners retrofitting devices on existing homes mean that, left up to the market alone, it is unlikely that these technologies will become widespread in the short term.

For new builds, it is likely that developers may adopt these technologies as a market differentiator for select higher value properties. However, in order to embed these technologies into existing homes, technology providers need to continue to explore ways users can legally and safely retrofit devices.

 

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