Consultation Regulatory Impact Statement for the Revision to the Energy Labelling Algorithms and Revised MEPS levels and Other Requirements for Air Conditioners

Downloading the PDF Version

The full document is available as a PDF file. You will need Adobe Acrobat Reader installed on your computer to view it. The Adobe Reader is a free product.

Download RIS for Consultation: Minimum Energy Performance Standards for Single/Three Phase Air Conditioners. (1.5 MB)

If you are unable to access this document, please contact the The Department of the Environment, Water, Heritage and the Arts to organise a suitable alternative format.

Summary

This is a Regulatory Impact Statement (RIS) which examines the impacts arising from a proposal to change the star rating algorithm for the energy labelling system and update the MEPS levels for air conditioners. The proposed regulation is an element of the Equipment Energy Efficiency (E3) program, which is an initiative of the Ministerial Council on Energy (MCE) forming part of both the Australian National Framework for Energy Efficiency and the New Zealand National Energy Efficiency and Conservation Strategy.

This report was prepared by Energy Efficient Strategies for E3 in consultation with the Department of the Environment, Water Heritage and the Arts and the Energy Efficiency and Conservation Authority of New Zealand.

Conclusions and Recommendations

A range of regulatory and other options have been considered in this regulatory impact statement. On consideration of all the relevant factors, it is recommended that Scenario A (energy labelling regrade and new MEPS levels and other performance requirements) be implemented in 2010.

A case for new MEPS levels and a change of algorithm for the energy star rating of air conditioners for the Australian and New Zealand market is set out in this regulatory impact statement. The need for these measures is widely acknowledged by stakeholders and supported by industry. MEPS levels and new performance requirements will drive increased energy efficiency and help resolve power factor, crankcase heater and demand response issues. With energy labelling, the market is tending towards a majority of products having star ratings that are bunched around the range of 3.5 to 5 stars. Market research demonstrates that consumers use the star rating labels in purchase decisions and that it also provides suppliers with a means to differentiate their product with a view to increasing market share. For the labelling program to continue to be an effective tool for all stakeholders, a change in the star rating algorithm is recommended.

This regulatory impact statement also demonstrates that:

There is significant market failure in the air conditioner market that can only be addressed through the implementation of MEPS;
The introduction of MEPS as proposed will not have an adverse affect on market competition, availability of product features and performance or the availability of low cost models in each of the main product categories;
Alternative approaches that save comparable energy are not feasible or cost effective.

Intensive modelling and analysis on the effects that these changes would have on the air conditioner market and on product prices has been undertaken in this report. It was found there is only a weak correlation between product efficiency and price. Even with the worst case scenario of greatly increasing the consumer costs due to efficiency increases (above the levels derived from market analysis) (Sensitivity 4), the cost-benefit ratio for the proposal will still remain above 1. This indicates that the analysis and modelling underpinning the MEPS levels and algorithm change and associated market effects is robust (in all likelihood only small price rises will result from the increases in energy efficiency that are expected as a result of this proposal). The cost-benefit ratio of the proposal is 2.9 for Australia and 7.4 for New Zealand under modelled Base Case conditions. In the current policy climate, scenarios with real increases in either energy tariffs or the introduction of some pricing structure for CO2 are more likely; in both of these cases the cost-benefit ratio increases well above the Base Case. It should be noted that though Scenario B has a slightly higher cost-benefit ratio, this Scenario does not include an change to the star rating algorithm which could have a long term detrimental effect on the program.

The preferred proposal (Scenario A) would ensure that the energy labelling program continues to be an effective measure for both consumers and suppliers in the air conditioner market and that MEPS levels for Australian products continue to meet best practice. The introduction of the changes to the MEPS levels and other performance requirements have been bundled with the energy label change and star rating algorithm change into a single regulatory requirement in order to minimise costs to industry.

The recommendations from this report to implement the following requirements by 2010:

New energy labelling algorithms be implemented in AS/NZS3823.2 (2008) for air conditioners as set out in this report. This will have associated with it a new label design, the details of which will be set out in a public comment version of AS/NZS3823.2;
The introduction of more stringent MEPS levels for selected products for cooling mode;
The introduction of MEPS levels for heating mode for all products with a heating function;
Introduction of minimum requirements for power factor;
Introduction of measures to reduce both standby power consumption and crankcase heater energy use by inclusion of this energy into the energy labelling and MEPS requirements into an annual efficiency requirement;
Introduction of requirements to report the presence of DRED capabilities in air conditioner units at the time of product registration with regulators;
All products manufactured or imported after 1 April 2010 will be required to have a current approved registration/listing for this label (including compliance with new MEPS levels and the new energy label);

Transition arrangements over the period April 2009 to April 2010 as set out in this report be implemented;
All new registrations from October 2009 will required to meet all requirements of the revised Part 2 standard including the new energy label, MEPS and other performance requirements;

A retailer communication package to be developed to ensure that new energy labels to appear on all new products on display as far as possible by April 2010.

This page last modified 02 February 2009