This study was initiated in response to an Australian proposal to increase efficiency standard for refrigerators raising questions about whether New Zealand should move in concert. The objectives of changing the efficiency levels in the MEPS for domestic refrigerators and freezers were:
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increase New Zealand’s overall energy efficiency by reducing electricity consumption without reducing energy service delivery, thereby moving New Zealand toward a sustainable energy future; and -
improve economic welfare in New Zealand by reducing the overall cost to consumers of domestic refrigeration services.
The policy was considered within the wider context of the maintenance of good international economic relationships. This especially related to the CER agreement with Australia, and the avoidance of unnecessary problems under the TTMRA. In implementing this change, and determining a desirable level at which to set a MEPS, it was New Zealand’s policy to match the best MEPS levels of our trading partners.
The basic requirement of the analysis was to determine the costs and benefits of changing the MEPS levels from the then current levels to the more stringent levels which were proposed. This was done by determining the economic costs of changing the efficiency (with assistance on costings from the manufacturers) and comparing these with the estimated consequences for energy consumption.
excess = -263.9 – 0.12*price + 1.375*volume
This implies that, on average, an extra dollar spent on a refrigerator will, for no change in its size, reduced its annual energy consumption by 0.12 kWh. An extra litre of volume, without an addition to the price, would increase consumption by 1.375 kWh. The negative constant term was interesting, since it implied that the smaller models tend to be more efficient, relative to the proposed standard, than the larger ones - the proposed revision was therefore more demanding on larger units than on smaller ones.
This price-consumption relationship implied that, on average, to reduce electricity use by 1 kWh per annum required spending additional capital of $8-37. This was clearly not an economically efficient way to reduce electricity use. The implication was that a MEPS which operated to remove the least efficient models from the market, but left the other models as they were, would be uneconomic. To be justifiable, a more stringent MEPS had to achieve a different effect by providing sufficient lead time for manufacturers to respond by enhancing their models.
Following an extensive analysis of a wide range of issues the study for EECA concluded that:
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difficulties over TTRMA would arise if New Zealand did not change its MEPS for refrigerators and freezers to remain consistent with Australia;
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the increase in MEPS stringency in concert with Australia was economically justifiable relative to the then current situation;
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if New Zealand did not increase its MEPS for refrigerators and freezers when Australia did, New Zealand would gain much of the benefits on a free-rider basis;
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the remaining benefits from also raising the MEPS limits in New Zealand were sufficient to justify that action;
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if New Zealand did not move to a high MEPS level at the same time as Australia could have damaged Fisher and Paykel Appliances;
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refrigerators had by no means yet reached the limits of feasible efficiency, so provision was needed for a further review and possible revision in a few years time; and
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beyond the present upgrade, further progress was obstructed by shortcomings of the standard test, which needed revision.
The report recommended that:
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(1)New Zealand should proceed to implement a stringency upgrade of the MEPS for domestic refrigerators and freezers; and
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(2)the start and levels of the revised MEPS should be aligned with those of the corresponding MEPS revision in Australia.
