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ABC News
ABC News
National
technology reporter James Purtill

Households could save $2,000 yearly through thermal efficiency and electrification: Climate Council

Many Australian houses have the insulation of a tin shed. (Getty: Nickbeer)

Last winter, a survey of Australian homes found that many are so cold they're falling below the World Health Organization's recommended "safe" temperature.

The overwhelming reason for this was they were designed as "winter tents", with draughty window frames, thin walls, creaky floorboards and very little in the way of ceiling insulation.

In a report published today, the Climate Council has calculated how much households could save in energy costs by plugging gaps, sealing cavities and making other "thermal efficiency upgrades". 

Combined with swapping out gas appliances for more efficient electrical ones, households could save an average of $2,000 per year. About half of this comes from making homes more thermally efficient.

This figure varies a lot depending on climatic zone and what the house already rates for energy efficiency. There are also big differences in how much various upgrades will save a household, making it easy to identify what measures deliver the best bang for buck.

So, what are the best and cheapest ways of reducing energy costs and keeping your house warm over winter?

Most cost-effective thermal efficiency upgrades

To calculate bill savings, the Climate Council looked at the average electric heating and cooling bill for an average-size household in each capital city.

It assumed this household had a 2-star energy rating, which is slightly above the national average of 1.8, but not very good compared to the minimum 7-star rating required of new homes.

It then applied average energy savings for each type of upgrade based on figures from previous studies.

It found that bill savings ranged from $1,561 in chilly Hobart to $539 in sub-tropical Sydney.  

Carl Tidemann, a co-author of the report, said the most cost-effective thermal efficiency upgrades were ceiling insulation and draught sealing.

"It's about doing the really low-hanging fruit that have really high cost savings," he said.

"Interestingly, ceiling insulation and draught proofing are two of the cheapest options, but they also have the greatest savings."

Draught proofing involves relatively simple measures such as using foam tape to stop up gaps between windows and their frames, and adding floor seals to doors.

Most homes do not have enough ceiling insulation, while around a fifth have none at all. 

"It's fairly obvious when the ceiling insulation is of low quality or hasn't been installed very well, because it'll look a bit patchy," Dr Tidemann said.

"If your insulation is as as thick as the the actual roof joists, you're probably doing OK."

What about shifting from gas to electrical appliances?

Households could save another $1,000 per year, depending on climatic zone, by shifting from gas appliances to electrical, according to a Climate Council report released last October.

The best strategy was to combine electrification and thermal efficiency upgrades, Dr Tidemann said.

"Switching fuels is really important for electrification, but not if your house is just going to leak all that heating and cooling,.

"The thermal efficiency of homes is a step that needs to be taken before, if not concurrently with, fuel switching." 

How do I pay for the up-front cost? 

Several of these measures can cost many thousands of dollars per household and take decades to pay off through bill savings.

A 2019 study of 60 homes deemed representative of Victoria's existing housing stock found the payback period for underfloor insulation was more than 18 years, while for double glazing it was a whopping 200 years.

Then there's the problem of having a spare grand or two to spend on upgrades. It may save money in the long run, but who has that cash lying around?

Ingrid has switched from gas hot water and heating to electrical alternatives. (Supplied: Ingrid Jolley)

Ingrid Jolley and her husband live with their two small children in a semi-detached, 20-year-old house in Melbourne. She works as a counsellor and he's a graphic designer.

In 2018, they began a process of slashing family home's energy bills through switching appliances from gas to electric, adding solar panels, and upgrading thermal efficiency.

"We changed our light fittings after finding a lot of air was escaping through the space around them," she said.

"We said, 'Oh my gosh, that's ridiculous.'"

They now spend $1,200 less per year on heating and cooling (that's probably an underestimate, because gas prices have gone up substantially since 2018).

"It's roughly $100 a month less on energy," she said.

"But of course these things don't come for free. We're a family with two small children. We don't have heaps of money."

To fund the changes, they accessed a zero-interest loan provided through a scheme set up by the Victorian government to incentivise energy-efficient upgrades to housing stock.

"That really helped us make that possible," she said.

"We're still paying the amount off, but we're saving on our bills."

How do I access a zero-interest loan?

In its report, the Climate Council called for zero-interest loan programs to be rolled out nationally to help with the cost of doing upgrades.

Currently, the ACT and Tasmania are the only jurisdictions that offer such programs.

In the ACT, households can each access a zero-interest loan of up to $15,000, with a maximum payback period of 10 years. 

The ACT government had earmarked $500 million over 5 years for its scheme, but recently added another $50 million and reduced the period of operation to two years. 

In Tasmania, the maximum loan is $10,000, paid off over up to 3 years.

Katherine McConnell, CEO of Brighte, the loan provider for the ACT and Tasmania programs, said these figures speak for themselves.

"We've seen phenomenal demand," she said.

"It gives people the confidence they need to make that switch."

According to Brighte, the average loan size in the ACT is $11,200, and $8,100 in Tasmania.

Assuming a 6-per-cent interest rate, a household would save $4,840 in interest payments over 10 years on a $15,000 loan.

Dr Tidemann said the task of upgrading Australia's housing stock was "enormous".

Minimum energy efficiency requirements for new houses were only introduced in 2003. (ABC Radio Canberra: Clarissa Thorpe)

It would be unfair, he added, for households to pay the entire cost, given most never had the option of buying an energy-efficient home.

"There's about 8 million homes built prior to minimum energy efficiency standards coming in," he said.

"We do need governments to step in and either [share the cost of capital investment] or enable things like low interest loans to occur, so that it isn't put on home owners."

In recent speeches, Treasurer Jim Chalmers has flagged energy bill assistance for lower income households will form the centrepiece of the May budget.

What emissions will upgrades save?

Households generate at least a fifth of Australia's greenhouse gases, mostly through the use of petrol and diesel cars, and energy to heat and cool the home.

Switching to more efficient electrical appliances and upgrading thermal efficiency would save the equivalent of two average households' emissions over 10 years, according to Dr Tidemann.

"We calculated it over 10 years to take into account the decarbonisation of the grid," he said.

There was no reliable aggregate figure for how much emissions would be saved by upgrading all households to a minimum standard of thermal efficiency, he added. 

The government's 2022 emissions projections predict a decrease in residential electricity related emissions from 42 to 10 million tonnes of CO2 per year between 2020 and 2035 from grid-scale renewables, rooftop solar and energy efficiency.

"The argument for why a government would subsidise energy efficiency upgrades is that it helps us get to our climate targets," Dr Tidemann said.

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