The Australian Government is developing a national Net Zero Plan, to be guided by six sector plans covering all major parts of the economy.
One of those sector plans is an opportunity for the Australian Government to take a leading role in decarbonising Australia’s existing residential buildings – a ‘no regrets’ action as part of a least-cost net zero transition.
In 2023, Climateworks Centre released its Climate-ready homes report, which outlined the potential emissions reductions and co-benefits of upgrading the energy efficiency of existing homes.
Our new report, Enabling Australia’s home renovation wave, focuses on how the built environment sectoral plan (BE sector plan) can enable these benefits and reductions through coordinated policy action.
When a home’s thermal shell – its walls, floor and roof – is energy efficient, it keeps warm in winter and cool in summer.
The level of thermal shell upgrade a low-performing home will benefit from depends on the climate of where that home is located.
Australia has many climates.
The National Home Energy Rating Scheme (NatHERS) divides Australia into 69 climate zones.
We’ve translated these to a state and territory level:
Broadly speaking, homes in states and territories with hot dry summers and very cold winters receive greater benefits from thermal shell and space conditioning upgrades than other states because of the need to keep homes warm mid-year.
Homes in states and territories that are hot and humid with dry and wet seasons reduce more energy by switching hot water systems to electric and gas cooktops to induction.
New South Wales and Western Australia experience both long hot summers and cool winters within their borders.
In the graph below, you can choose to see the emissions reductions in each state and territory from three different upgrade levels to low-performing detached houses:
- ‘Quick-fix’: Ceiling insulation, draught sealing, heavy drapes and roller shutters combined with an efficient electric heat pump
- ‘Modest’: ‘Quick-fix’ plus floor insulation and an additional layer of glass or film on windows
- ‘Climate-ready’: ‘Quick-fix’ plus floor and wall insulation, high levels of draught sealing, double-glazed windows and a heat recovery ventilation system
The bottom row of bars shows the reduction from the chosen thermal upgrade levels, while the bars stacked on top show the additional effect of full electrification, swapping gas hot water systems and gas cooktops for heat pump hot water systems and induction cooktops.
Upgrade packages and electrifying appliances cost around $15,000 per home for ‘quick-fix’, $20,000 for ‘modest’ and $40,000 for ‘climate-ready’.
While it may seem from this chart that ‘quick-fix’ is the best value for money, emissions reductions are not the whole story.
What additional benefits are there beyond reducing emissions?
Bill savings: Paired with full electrification, upgrades in the ‘modest’ package offer slight increases in bill savings for all states, while there is a large increase in bill savings for homes with ‘climate-ready’ upgrades applied.
Peak demand: This chart shows the reduction in peak demand for each home upgraded from a low-performing state. It only takes into account thermal upgrades and space conditioning. Colder states see a larger reduction in peak demand as homes can maintain temperatures for longer without needing heating. Reducing peak demand is important to avoid spending more on energy infrastructure.
The cost vs benefit of the renovation wave
We’ve calculated the benefit-cost ratios [PDF 0.9mb] showing the benefits to households compared to the investment for each upgrade level (including full electrification), while taking into account how people value costs and factor in benefits over time.
Private benefits from these upgrades refer to the estimated reductions in household energy bills, while the costs include the upfront and installation costs of the upgrades.
A ratio above one is considered cost-effective over the assumed lifecycle of the upgrade.
Societal benefits include reduced spending on electricity network infrastructure for household energy use and reducing the costs associated with emitting carbon dioxide.
Our research also found that by supporting ‘priority households’, the government can give them the best opportunity to benefit from energy performance upgrades.
Priority households are those that could benefit from additional focus due to systemic barriers inhibiting their access to energy performance upgrades
Priority households include low-income households, First Nations households, people living in social and community housing and people in energy poverty.
With the built environment sector plan, the Australian Government can take a leading role in decarbonising the residential building sector
The BE sector plan policies could:
- Support priority households with direct funding to community housing providers, phased over time and aimed at homes that deliver the best ‘bang for buck’ emissions and energy reductions.
- Improve data and provide the enabling regulatory environment to support private finance.
- Support states and territories in phasing out gas from homes, including through place-based measures that incorporate energy efficiency alongside electrification.
- Support workforce development and scale supply chains.
- Ensure targeted and tailored consumer engagement to support them in undertaking energy performance upgrades.
Federal planning and coordination that accounts for differences between states and territories can unlock a renovation wave to improve home energy performance.
Our research shows this is a cost-effective approach to decarbonisation.
Download the report: Enabling Australia’s home renovation wave [PDF 3.2mb]
ISBN: 978-0-9941725-8-7
