Review of incentives for commercial debarbonisation

The Victorian Energy Upgrades (VEU) program promotes energy-efficiency upgrades in residential, business and industrial premises and supports the decarbonisation of the built environment, as charted in the Gas Substitution Roadmap.

To reflect the needs of building owners as well as changes in technology and markets, the VEU program is regularly updated. That is the case now, with new activities up for consultation, and one existing activity updated.

Industrial incentives

The Department of the Environment, Energy and Climate Change (DEECA) is considering adding industrial heat decarbonisation activities to the VEU program. These activities aim to incentivise upgrades for electric thermal energy storage, gas efficiency and biogas that can be tailored to the operating needs of businesses. 

The proposed changes will simplify measurement methods for electric thermal energy storage (eTES), gas efficiency upgrades and behind-the-meter biogas, making it easier for gas-reliant businesses to participate in the program. Under the current rules, long baselines, complex requirements and high administrative costs often make industrial heat upgrades difficult to pursue.

The proposed updates will reward businesses that take up eTES when combined with offsite renewable energy generation and appropriately recognise gas savings from process-level efficiency improvements, while also making it easier for businesses to produce and use biogas onsite to replace gas, cut emissions and reduce energy costs.

DEECA is inviting feedback on the consultation until April 28, 2026, either through a survey or by uploading a written submission on the industrial heat decarbonisation consultation page. 

An information webinar has been scheduled on April 14.

Hot water heat pump changes

DEECA has also confirmed changes to the commercial and industrial heat pump hot water system activity, Part 44, effective from March 31, 2026.

Importantly, one proposed change to Part 44 that was outlined in the February 6, 2026 Response to Consultation will not come into effect. To support the electrification of commercial buildings and apartments, the load factor will not be increased from 10kW to 12kW as previously proposed. According to DEECA, this will help ensure there are suitable and appropriate products available in the market and allow fit for purpose heat pump water heater installations for customers. 

The following changes have been made:

• The average heating capacity eligibility threshold, previously 20kW, has been removed
• For products below the 10kW load factor threshold, the scaled incentive has been increased slightly based on total number of heat pumps in registered product
• The minimum average tank volume has been reduced from 700L to 425L
• The minimum co-payment amount has increased from $1,000 to $10,000, including GST.

The full list of changes is available in the specification at the VEU website.

The changes come into effect on March 31, 2026. Products installed after this date that do not meet the requirements will not be eligible to create Victorian Energy Efficiency Certificates (VEECs).

According to DEECA, these changes focus on adjusting previous product eligibility thresholds, which were introduced to define “commercial and industrial-sized” heat pump hot water systems and to prevent domestic-sized units receiving higher incentives than appropriate for the facilities they were installed in.

Over the next 12 months, DEECA will be conducting a comprehensive review of all water heating activities in the VEU program, and will be consulting with the public.

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