Despite the financial attractiveness of household energy upgrades, many households including renters or those on low incomes have no ability to undertake upgrades. Furthermore, even consumers who can invest in household energy upgrades are subject to “bounded rationality” – a barrier that is often overlooked by energy efficiency policies.

Increasing minimum energy performance standards to encourage a shift from gas or inefficient electric appliances to efficient electric alternatives is a compelling solution. New legislation to phase out gas hot water systems in Victoria presents one example of an approach to achieve this, and there is an opportunity to reinvigorate the federal Equipment Energy Efficiency programme.

In the near term, financial incentives play a critical role to reduce the upfront cost hurdle for consumers and scale up the industry capacity to deliver upgrades. However, the current approach to incentives is piecemeal.

Victoria and New South Wales have implemented broad-based incentives for household energy upgrades, but there is a case for more comprehensive national versions of these schemes to be rolled out, which could be complemented with specific state government schemes where they would bring further benefits.

Pricing reform is not the sole solution, but it is nonetheless critical to ensure consumers have access to fair electricity plans that reward their contributions to the grid, without imposing unrealistic expectations on consumers to become energy traders.