‍Minimum energy standards urgently needed for space heaters, hot water systems and cooktops

Australians are installing an estimated 940,000 new gas appliances and 800,000 new resistive electric appliances every year, which are locking in significant long-term and unnecessary costs for heating and cooking.

A new briefing note from the Institute for Energy Economics and Financial Analysis (IEEFA) has found Australians are racking up $3.4 billion in unnecessary energy costs every year we install inefficient household appliances.

“A customer buying a new gas heater today may be locking themselves into up to 20 years’ worth of gas costs, which are likely to be significantly higher than the cost of electricity for an equivalent high-efficiency appliance,” the IEEFA report says.

Whilst gas heaters, hot water systems and cooktops are now the most expensive to run, inefficient resistive electric appliances such as panel heaters, oil heaters, older style electric hot water systems, and ceramic cooktops, will also lock consumers into unnecessary energy bills.

“Even though those inefficient appliances are cheaper upfront to purchase, the majority of the cost of ownership is actually locked away in the running costs,” the author of the briefing paper and IEEFA’s Energy Finance Analyst, Jay Gordon, told the SwitchedOn podcast.

Gordon says that many people end up installing ‘like-for-like’ replacements when their energy appliances break down, without realising there are now more efficient electric alternatives that are cheaper to run.

“Several fundamental shifts are occurring in the way we use energy in the home,” says Gordon, “Gas no longer offers the cost advantage it once did, while modern electric appliances have advanced to the point where they use a fraction of the energy of either gas appliances or inefficient resistive electric appliances.”

The decline in gas production from the Bass Strait gas basins has placed upwards pressure on gas prices, while the increasing penetration of renewables is placing downward pressure on electricity prices. People who have rooftop solar are paying even less for their electricity.

Gordon says that if consumers were more aware of the higher running costs of gas appliances and resistive electric appliances, it’s unlikely they would choose either gas or resistive electric appliances.

“It’s quite difficult for consumers to really see the big picture … because it’s really hard to access information on what this is going to cost me to run.”

“For a lot of consumers, the choice is not clear. It’s not necessarily an informed choice they’re making about the appliance they’re purchasing.”

One single government intervention could reduce inefficient appliances

Even though Australian consumers are used to seeing Energy Star ratings on fridges, washing machines, air conditioners and other electric appliances, we have no minimum energy performance standards for some of the most important appliances we use in our homes – space heaters, water heaters, and cooktops.

IEEFA argue that introducing minimum energy performance standards for these appliances is the single most important intervention government can introduce to reduce the stock of gas appliances and resistive electric appliances in our homes that lock in unnecessary energy costs.

Minimum energy performance standards would require new household appliances to be both efficient and electric.

“We think there is quite a lot of scope for our existing legislation to be updated in a way that recognises these efficiency benefits from modern efficient electric appliances,” says Gordon.

The Assistant Minister for Energy recently advised the SwitchedOn podcast that the Government is planning “to look at” the Greenhouse and Energy Minimum Standards Act (GEMS), which would deliver minimum standards for appliances that currently don’t have them, later this year.

However, if legislating minimum standards is pushed out to next year, or following years, IEEFA says the lifetime savings that could be achieved from installing efficient electric appliances “can also be interpreted as the cost of delay.”

“Improved standards should be enacted as soon as practicable, as the cost of delay amounts to $3.4 billion per year in costs borne by Australian energy consumers,” says Gordon.

“Essentially it stacks for every year that you don't have minimum standards coming in. So if we had 5 or 10 years without those standards, you're potentially looking at more than $30 billion. So it's a really significant amount that can accumulate over time.”

On the other hand, if no new gas appliances are sold in Australia from 2025, for instance, IEEFA estimates Australian homes could be weaned off gas by 2050, when we need to meet our net zero targets.

Improved energy standards could also provide solutions for renters by requiring landlords to “upgrade their appliances to efficient alternatives once existing inefficient appliances reach their end of life.”

Even greater efficiencies could be achieved if we also upgrade the thermal capacity of Australian homes when install efficient electrical appliances. A major report from the Climateworks Centre released last year found thermal upgrades – increased insulation, door and window seals, etc - could provide more than half of the potential savings from upgrading an average dwelling, when combined with energy efficiency appliances.

In addition to increasing the savings for consumers, IEEFA found minimum energy performance standards will offset some, or all, of the added electricity demand that is anticipated from electrification.

“In four out of seven states and territories analysed (NSW, Queensland, South Australia and Tasmania), the added demand from electrification is more than entirely offset by switching resistive electric appliances for efficient ones,” the briefing note says.

By getting rid of gas and inefficient appliances, “what that will do is actually lead to a net reduction in electricity demand,” says Gordon. “This is more about an energy savings opportunity, rather than adding a burden to the electricity system.”

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‍You can hear the full interview with Jay Gordon on the SwitchedOn podcast.