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Navigating the 2025 VEU Changes: What They Mean for Your Business

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By Hamish McGovern, Group Managing Director, Northmore Gordon

The Victorian Energy Upgrades (VEUVictorian Energy Upgrades is a Victorian government energy efficiency program that gives every Victorian household and business the opportunity to receive rebates or discounts on energy saving products.) program has undergone significant reforms in 2025, sending a clear signal to commercial and industrial (C&I) customers: the scheme is not only here to stay but is being substantially strengthened to accelerate electrification, heat recovery, and the transition away from gas.

For Northmore Gordon clients in the industrial and large commercial sectors, these changes represent unprecedented opportunities to access funding for energy productivity improvements.

In this article I summarise the key 2025 changes, and what’s slated over the next 18 months, and how to engage with Northmore Gordon to capture the highest value from VEECs and grants.



Changes in 2025

• In May the VEU was extended in law to 2045; with stronger compliance and flexibility. This aligns with Victoria’s net-zero targets and gives businesses much-needed certainty to plan and invest long-term. It changes to legislation also increased regulator’s powers, introducing training, and modernising registry arrangements.



• 2026–27 targets locked & shortfall rate lifted. The Government set 4.4m VEECs (2026) and 4.6m VEECs (2027) and raised the shortfall penalty to $100. Modelling suggests prices will ease in 2026 due to the lower targets, and additional activities coming online.



• Project-Based Activities (PBAProject Based Activities) reforms (20 June 2025). New M&V Specifications and Benchmark Rating specs announced; they add “specified measurement methods”, tighten guidance and lower admin friction for multi-measure projects.



• C&I heat pump hot water (Activity 44) updated in July. Minimum storage tanks now needs to be great than 700 L, scaling for <10 kW systems, and $1,000 minimum customer co-payment, with Version 20 specs effective 25 July 2025. Aimed squarely at genuine commercial installs. This has reduced supply from what was a high-volume activity being used in “not fi- for-purpose” installations.



• Product & program housekeeping. Warranty rules for water heating and space heating/cooling began 31 March 2025; ESCAn energy savings certificate (ESC) is a tradeable certificate created under Division 7 of Part 9 of the Electricity Supply Act 1995. Each ESC represents one notional megawatt hour (MWh) of energy. published further clarifications across activities.



• Enhanced Compliance with new civil penalty came into effect in May 2025. While adding some compliance friction, these changes strengthen the scheme’s integrity and long-term viability and reduce VEECVictorian Energy Efficiency Certificate volatility from bad actors undermining the program.



Expected Changes (Next 18 Months)

• The new EMIS (Energy Management Information System) activity (metering/sub-metering/analytics) consulted in Jan 2025; is slated to commence 2026; This helps Northmore Gordon manufacturing and large commercial buildings customer, by providing VEEC funding for implementing energy monitoring and control systems – a critical first step in any energy productivity journey.



• New Insulation activity (ceiling insulation) prepared for early 2026; this residential will add scheme supply and could reduce the VEEC price.



• Business Electrification – Phase 1 & Electric Motors update under development through 2025. Northmore Gordon is waiting for more details for applicability to C&I customers.



• Thermal activities review; the space heating/cooling, water heating consultation planned for late 2025;



• Consumer price transparency updates land into 2026; the government is looking at mechanisms to enable customers to better transparency on the value of the VEECs they are receiving for an activity.



Why this helps C&I Customers

• Smoother path for complex projects. The PBA/M&V changes reduce admin time and uncertainty for multi-measure retrofits (e.g., process heat pumps + heat recovery + controls).



• Electrification tailwinds. Acivity 44 is now tuned to proper commercial hot water loads; pairing heat pumps with heat recovery can materially lift VEEC yield.



• Better data, better savings. An EMIS activity in 2026 should support persistent savings and easier M&V across industrial sites.



• Program & Compliance confidence. With a 15-year extension to the program and updated guidelines, warranties and increased regulatory oversight, business now has greater certainty for the program, and integrity of energy savingsElectricity or gas savings or both..



VEEC Price Context

The VEEC price in the first half of 2025 was trading above $105, until the announcement of the 2026/27 targets saw the price fall to as low as $85.00. The update and reset of Activity 44 (which had reasonable creation volume) caused a brief squeeze and saw prices jump above $100 and is trading around $95.00.

Once the impacts of the sudden changes to Activity 44 are absorbed, the new targets 2026/27 and growing range of activities are expected to maintain supply and hence prices are may well soften.



The Ideal Engagement Model

Northmore Gordon’s approach to maximising value from the VEU follows a proven pathway, as demonstrated by our long-term with business such as Greenham:

1. Initial Energy Audit: Comprehensive site assessment identifying all efficiency and renewable opportunities (often grant-funded) every 2-3 years.



2. Feasibility Studies: Detailed engineering and financial analysis of priority projects, incorporating VEEC revenue streams.



3. Funding and Grant Applications: Leveraging government co-funding programs alongside VEECs to improve project returns.



4. Implementation Support: Technical specification, contractor management, and commissioning oversight.



5. VEEC Creation & Compliance: Registration, measurement & verification, and certificate creation.



6. Ongoing Optimisation: Annual performance reviews and identification of new opportunities as VEU activities expand.



Case Study – Greenham

Multi-year engagement by Northmore Gordon with audits, feasibility, VEECs, and grants. Demonstrates how staged projects can compound savings and funding over time.

This integrated approach delivered over $4.5 million in combined grant and VEEC funding for Greenham’s Tongala cogeneration project alone, while their Smithton site generated over $175,000 in carbon credits through our ongoing support.

Read more:



Why Act Now?

The 2025 VEU reforms represent a watershed moment for industrial energy users. With the scheme’s 20-year extension, enhanced support for electrification, and new activities specifically targeting C&I customers, there has never been a better time to develop a comprehensive energy strategy.

The reduction in 2026-27 VEEC targets (from 7.3m in 2025 to to 4.4-4.6 million in 2026/27) signals that certificate prices may face downward pressure from reduced demand. Early movers will benefit from current pricing and the full suite of complementary grant programs currently available.



Northmore Gordon’s Competitive Edge

As Australia’s C&I leader in measurement and verification, Northmore Gordon combines deep engineering capability with unmatched expertise in VEEC creation and grant funding with market intelligence. Our team identifies energy saving opportunities that others miss, engineering solutions that deliver real operational benefits, and structures funding packages that maximise project returns.

Whether you’re considering heat pump integration, cogeneration, process electrification, or comprehensive energy management systems, our integrated approach ensures you capture maximum value from the evolving VEU landscape.

Interested to know more? Call or email Craig Morgan or submit your interest here today.



References

1. DEECA Industry Market Update & Work Program

2. ESC – VEU Guidelines v13

3. Victorian Energy Efficiency Target Amendment Act 2025

4. ESC – New VEU Registry

5. Northmore Gordon Market Prices

6. Northmore Gordon – Greenham Case Study

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Who wrote the article on the 2025 VEU changes, and what is their role?

The article was written by Hamish McGovern, Group Managing Director of Northmore Gordon.

Until what year has the Victorian Energy Upgrades (VEU) program been extended in law?

In May 2025, the VEU program was extended in law to 2045, with stronger compliance and flexibility, aligning with Victoria's net-zero targets.

What are the VEEC targets for 2026 and 2027, and what happened to the shortfall penalty?

The Victorian Government set targets of 4.4 million VEECs for 2026 and 4.6 million VEECs for 2027, and raised the shortfall penalty to $100.

What changed for Activity 44 (C&I heat pump hot water) in July 2025?

Activity 44 was updated so that minimum storage tanks now need to be greater than 700 L, with scaling for systems under 10 kW, and a $1,000 minimum customer co-payment was introduced, with Version 20 specifications effective 25 July 2025. This change targets genuine commercial installs and reduced supply from what had been a high-volume activity used in not-fit-for-purpose installations.

What reforms were made to Project-Based Activities (PBA) on 20 June 2025?

New Measurement & Verification (M&V) Specifications and Benchmark Rating specs were announced, adding 'specified measurement methods,' tightening guidance, and lowering admin friction for multi-measure projects.

What new activity is expected to commence in 2026 and how does it help manufacturing and large commercial customers?

A new EMIS (Energy Management Information System) activity covering metering, sub-metering, and analytics, which was consulted on in January 2025, is slated to commence in 2026. It provides VEEC funding for implementing energy monitoring and control systems, a critical first step in any energy productivity journey.

How has the VEEC price moved during 2025 according to the article?

The VEEC price traded above $105 in the first half of 2025, then fell to as low as $85.00 following the announcement of the 2026/27 targets. The reset of Activity 44 caused a brief squeeze that pushed prices above $100, and as of the article it was trading around $95.00.

What is Northmore Gordon's recommended engagement model for maximising VEU value?

Northmore Gordon's approach follows six steps: 1) Initial Energy Audit (comprehensive site assessment every 2-3 years), 2) Feasibility Studies (engineering and financial analysis incorporating VEEC revenue), 3) Funding and Grant Applications (leveraging government co-funding alongside VEECs), 4) Implementation Support (technical specification, contractor management, commissioning), 5) VEEC Creation & Compliance (registration, measurement & verification, certificate creation), and 6) Ongoing Optimisation (annual performance reviews and identifying new opportunities as VEU activities expand).

What results did Northmore Gordon's engagement with Greenham achieve?

The integrated approach delivered over $4.5 million in combined grant and VEEC funding for Greenham's Tongala cogeneration project alone, while Greenham's Smithton site generated over $175,000 in carbon credits through Northmore Gordon's ongoing support.

Why does the article suggest businesses should act now on VEU opportunities?

The article states that the reduction in 2026-27 VEEC targets (from 7.3 million in 2025 to 4.4-4.6 million in 2026/27) signals certificate prices may face downward pressure from reduced demand, so early movers will benefit from current pricing and the full suite of complementary grant programs currently available.

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