Submission on the Victorian Department of Energy, Environment and Climate Action’s Strategic Review of the Victorian Energy Upgrades (VEU) program

7 March 2025

To: Victorian Department of Energy, Environment and Climate Action
Re: Strategic Review of the Victorian Energy Upgrades (VEU) program

Thank you for the opportunity to provide feedback on the Victorian Department of Energy, Environment and Climate Action’s strategic review of the VEU program. 

Victoria faces a changing energy context, with fast-depleting local gas resources, gas prices rising faster than electricity prices, and increasingly variable costs and emissions intensity for electricity over time. As a result, while the core focus of the VEU program remains valid, IEEFA believes that some adjustments are needed to better reflect this changing context:

• The biggest market trends that should shape the VEU program in the next five years are electrification, the increased value of demand flexibility, and upcoming gas supply challenges.
• While a continued focus on emissions is appropriate, the purpose and metrics should be updated to reflect the value of demand flexibility, and the review should consider adding a secondary gas reduction target.
• The VEU program should extend its product offering in electrification and demand flexibility, and restrain gas efficiency improvements.
• The VEU review should consider at least partially removing additionality requirements on residential water heating and heating electrification.

Our full response is detailed in the following pages. Please do not hesitate to contact us to discuss any aspects of our submission further.

Kind regards,

Amandine Denis-Ryan, CEO, IEEFA Australia
Jay Gordon, Energy Finance Analyst, Australian Electricity, IEEFA
Joshua Runciman, Lead Analyst, Australian Gas, IEEFA