EECA (Energy Efficiency and Conservation Authority) has launched a valuable resource (2023) to support the aged care and retirement living sector on its decarbonisation journey. The suite of tools and resources, developed with input from the Retirement Village Association of New Zealand (RVA), aims to help facilities reduce their emissions sector-wide. We’ve worked with several retirement community providers in the past and I wish these tools had been available at that time.
One of the key aspects of this initiative is the availability of tools that allow for comparison across different facilities. This benchmarking approach, much like NABERSNZ, provides a framework for organisations to fairly assess their current energy performance and identify areas for improvement. The main goal is to offer a clear understanding of where each facility stands in terms of energy use and carbon emissions. Seems simple but knowing that you can do better in New Zealand is much more motivating to our clients than a computer model or overseas reference building. The flowpath of measure, set targets, and work to reduce demand is simple but folks will often try and make the targets ‘easy to hit’ without an industry comparison to look towards.
The aged care sector presents an interesting dynamic when considering energy efficiency investments. For some setups, there isn’t a split incentive issue because the owner of the facility also pays for the operational energy costs. In such cases, the long-term energy and carbon savings directly benefit the owner, potentially offsetting the initial capital costs of energy efficiency upgrades. This aligns with a sector that typically balances the cost of money with long-term returns.
However, the common freehold model seen in many retirement villages introduces a significant split incentive . Here, individual residents or license holders are usually responsible for paying their own power bills, while the initial capital costs for building and infrastructure are borne by the village investors. This means there’s no direct financial reward for the village investors in pursuing long-term energy savings, as these savings would primarily benefit the residents. Unless the energy efficiency measures can provide a marketing advantage by attracting environmentally conscious residents, or if the cost relationship is structured to account for these savings, the split incentive can be a barrier to implementing more ambitious decarbonisation strategies.
Understanding and addressing the nuances of split incentives within different operational models will be crucial for maximizing the uptake and effectiveness of these valuable resources.