Energy Savings Certificates (or ESCs) are electronic certificates. They are created under the Energy Savings Scheme (or ESS) in New South Wales (NSW), as part of the Energy Security Safeguard.
The ESS was established in 2009 under the Electricity Supply Act of 1995. Each certificate represents one (1) MWH of notional energy saved by households and businesses from eligible energy saving activities.
The ESS aims to financially incentivise households and businesses in NSW to improve energy efficiency.
This can be done by installing, improving, or replacing energy equipment and appliances that result in energy savings.
Accredited Certificate Providers can create and register ESC’s in relation to energy saving activities.
This is usually done in exchange for discounts on the energy saving activity being undertaken by the household or business.
ESCs are traded bilaterally between counterparties.
Demand for ESCs is created each year through the legislated obligation on electricity retailers operating in New South Wales to surrender certificates attributable to their share of the annual energy savings target.
The individual target that is applied to retailers is a product of liable electricity acquisitions in the wholesale market, the ESS Target and energy conversion factor, less any exemptions.
Liable entities that fail to meet their ESC obligation must pay a penalty for each certificate they shortfall.
A Scheme Participant may carry forward up to 10% of its individual energy savings target to the next year but must remedy that shortfall carried forward in the next year.
To sum up, ESCs are a market-based solution which aims to drive energy efficiency, and therefore, reduce energy consumption in New South Wales.
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