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Energy Savings Scheme reform proposed: stronger focus on gas reduction and electrification

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The Energy SavingsElectricity or gas savings or both. Industry Association (ESIA) has released new modelling suggesting reform of the NSW Energy Savings Scheme (ESS) could deliver stronger emissions reductions and better economic outcomes, particularly through a greater focus on gas reduction and electrification. 

The report, released 18 February 2026, outlines options to strengthen the scheme as NSW faces rising energy costs, gas supply pressures and decarbonisation targets. 

What’s been announced 

According to ESIA, the current ESSThe NSW Energy Savings Scheme (ESS) provides financial incentives to install, improve or replace energy savings equipment and appliances in NSW households and businesses. The ESS was established in 2009. Financial incentives are in the form of tradeable certificates, called energy savings certificates (ESCs). Generally, householders and businesses who fund energy savings activities transfer the right to create ESCs to Accredited Certificate Providers (ACPs) in return for a discount on the cost of the energy savings activity.  The MWh savings from the project determines the number of ESCs that can be created. The ESS works by allowing ACPs to create and register ESCs for energy savings that are supported with appropriate evidence. ESCs are then purchased each year by mainly electricity retailers operating in NSW to meet their share of a legislated annual energy savings target. has delivered cost-effective energy savings and emissions reductions, but may not be configured to address emerging challenges in gas demand and electrification at sufficient scale. 

Modelling undertaken by Green Energy Markets, commissioned by ESIA, suggests: 

The report is intended to inform ESIA’s submission to the NSW Government’s consultation on ESS reform. 

Who it affects 

The ESS underpins significant private sector investment in energy efficiency and emissions reduction activities across New South Wales. 

Businesses with substantial electricity and gas consumption — including those in manufacturing, property, health, logistics and large commercial facilities — may see changes to: 

Participants in the certificate market, energy service providers, and organisations relying on ESS-linked projects as part of compliance or decarbonisation strategies will be particularly impacted. 

Key details and timing 

The report highlights the importance of early deployment to avoid slowing electrification and emissions abatement activity. 

Why it matters 

If reforms prioritise gas reduction and electrification, businesses with significant gas exposure may see stronger financial incentives to transition equipment and processes to efficient electric alternatives. 

This could influence capital planning decisions over the next two to three years, particularly where facilities are already considering: 

Changes to sub-targets or certificate structures may also affect certificate supply, pricing dynamics and project economics under the ESS. 

For organisations with long-term decarbonisation commitments, the proposed direction signals that electrification will remain central to NSW policy settings. 

What to do next 

Businesses with material energy exposure should: 

Early planning may allow organisations to align investment timing with any revised incentive framework. 

The NSW Government’s consultation process will determine whether the proposed reforms proceed. Further detail is expected as the review progresses through 2026–27

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Who released new modelling on reform of the NSW Energy Savings Scheme, and when?

The Energy Savings Industry Association (ESIA) released new modelling on 18 February 2026 suggesting reform of the NSW Energy Savings Scheme (ESS) could deliver stronger emissions reductions and better economic outcomes.

What is the main focus of the proposed ESS reform?

The proposed reform focuses on strengthening the Energy Savings Scheme with a greater emphasis on gas reduction and electrification, as NSW faces rising energy costs, gas supply pressures and decarbonisation targets.

Who conducted the modelling commissioned by ESIA, and what did it find?

The modelling was undertaken by Green Energy Markets, commissioned by ESIA. It found that prioritising electrification and gas reduction would deliver improved economic and environmental outcomes compared to maintaining current ESS settings, and that a dedicated gas reduction sub-target or separate gas-focused mechanism could provide clearer long-term investment signals.

What timing does ESIA recommend for implementing ESS reform?

ESIA recommends reform commence in 2026–27, with any new framework in place by 1 January 2028 to avoid delays in deployment.

What is the purpose of the ESIA report?

The report is intended to inform ESIA’s submission to the NSW Government’s consultation on ESS reform.

Which businesses could be affected by the proposed ESS reform?

Businesses with substantial electricity and gas consumption—including those in manufacturing, property, health, logistics and large commercial facilities—may see changes to eligible activities, certificate generation opportunities, relative incentives between electricity efficiency and gas reduction, and investment signals for electrification projects. Participants in the certificate market, energy service providers, and organisations relying on ESS-linked projects for compliance or decarbonisation strategies will be particularly impacted.

Why does the proposed reform matter for businesses with gas exposure?

If reforms prioritise gas reduction and electrification, businesses with significant gas exposure may see stronger financial incentives to transition equipment and processes to efficient electric alternatives, which could influence capital planning decisions over the next two to three years for boiler and process heat upgrades, heat pump installations, electrification of plant and equipment, and demand management investments.

What should businesses with material energy exposure do in response to the proposed reform?

Businesses should monitor the NSW Government’s ESS consultation process, review planned capital upgrades against potential scheme changes, assess gas-related risks in light of emerging policy direction, and consider participating in consultation if materially affected.

What is the Energy Savings Scheme (ESS)?

The ESS is the NSW Energy Savings Scheme, established in 2009, which provides financial incentives to install, improve or replace energy savings equipment and appliances in NSW households and businesses. Incentives take the form of tradeable certificates called energy savings certificates (ESCs). Accredited Certificate Providers (ACPs) create and register ESCs for evidenced energy savings, and these certificates are purchased mainly by electricity retailers in NSW to meet a legislated annual energy savings target.

What will determine whether the proposed ESS reforms actually proceed?

The NSW Government’s consultation process will determine whether the proposed reforms proceed, with further detail expected as the review progresses through 2026–27.

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