Changes planned for heating and cooling incentives

Since its introduction in May 2023, the space heating and cooling activity in the Victorian Energy Upgrades (VEU) Program has generated significant work for the HVAC&R industry. This is not surprising when considering residential space heating in Victoria. There are about 1.1 million homes using gas ducted heating and 500,000 using room gas heating – all of which can be served by reverse-cycle air conditioners.

While the space heating and cooling activity has been a big success in terms of uptake, the government and program participants have identified areas for improvement. To explore the issues facing the activity, as well as potential solutions, the VEU Program released a survey earlier this year.

The survey sought feedback on measures such as capping incentives for multi-split units to prevent oversizing of systems, as well as raising co-payments to improve customer engagement and sales practices. It also solicited views on how to boost commercial participation in the program, other technologies that could be supported, refrigerant selection and management, and general requirements under the activity.

Based on the responses, the Victorian government proposes to proceed with the following actions:

• Introduce a cap on incentives for all multi-split reverse-cycle air conditioners (RCACs) installed in residential premises. The proposed cap will be calculated at 20kW heating and cooling capacity. Multi-split RCACs larger than 20kW can still be installed, but no additional VEU incentives will be available.
• The minimum co-payment will be increased to $3,000 (including GST) for all ducted RCACs and multi-split RCACs with a cooling capacity of 10kW or more. The minimum co-payment for multi-split RCACs with a cooling capacity less than 10kW will remain at $1,000 (including GST).

The plan is to introduce the cap on incentives and increases to minimum co-payments from September 30, 2026.

The government says it will monitor the impact of these changes and will continue to strengthen the activity. Specifically, they will consider suggestions from the survey such as mandatory heat load calculations to justify system sizing, clear and consistent sizing guidance, and installer training and best practice guides.

For more information and to read the full response to the survey, visit the VEU Program website.

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