ACIL5 Star

Evaluation of the Victorian
5 Star Building Standard
Prepared for the Department of Sustainability and

Environment, Victoria
ACIL Tasman Pty Ltd
This work is copyright. The Copyright Act 1968 permits fair dealing for study, research, news reporting, criticism or
review. Selected passages, tables or diagrams may be reproduced for such purposes provided acknowledgment of
the source is included. Permission for any more extensive reproduction must be obtained from ACIL Tasman on
(03) 9600 3144.
Reliance and Disclaimer
The professional analysis and advice in this report has been prepared by ACIL Tasman for the exclusive use of the
party or parties to whom it is addressed (the addressee) and for the purposes specified in it. This report is supplied
in good faith and reflects the knowledge, expertise and experience of the consultants involved. The report must not
be published, quoted or disseminated to any other party without ACIL Tasmans prior written consent. ACIL
Tasman accepts no responsibility whatsoever for any loss occasioned by any person acting or refraining from action
as a result of reliance on the report, other than the addressee.
In conducting the analysis in this report ACIL Tasman has endeavoured to use what it considers is the best
information available at the date of publication, including information supplied by the addressee. Unless stated
otherwise, ACIL Tasman does not warrant the accuracy of any forecast or prediction in the report. Although ACIL
Tasman exercises reasonable care when making forecasts or predictions, factors in the process, such as future market
behaviour, are inherently uncertain and cannot be forecast or predicted reliably.
ACIL Tasman shall not be liable in respect of any claim arising out of the failure of a client investment to perform to
the advantage of the client or to the advantage of the client to the degree suggested or assumed in any advice or
forecast given by ACIL Tasman.
This report was prepared in October 2008, using data and tariffs current at this time. Changes to energy and water
costs since this date, and future changes from factors such as the Commonwealth Carbon Pollution Reduction
Scheme may alter the cost-effectiveness of building standards beyond this date.
ACIL Tasman Pty Ltd

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For information on this report

Please contact:
Dr Yuan Chou
Telephone (03) 9600 3144
Email yuan.chou@aciltasman.com.au
Evaluation of the Victorian 5 Star Building Standard
Contents
Executivesummary viii
Privatecostsandbenefitsofthe5StarStandard viii
Communitywide benefitsofthe5StarStandard ix
Caveatsandlimitations xi
1 Introduction 1
1.1 Studyobjective 1
1.1.1 Privatecostsandbenefits 1
1.1.2 Communitywidecostsandbenefits 2
1.2 Studyapproach 4
1.2.1 Buildingcompanyconsultations 4
1.2.2 Literaturereview 5
1.3 Reportstructure 5
2 Buildingcompaniesresponsestothe5StarStandard 7
2.1 Modifications tothe buildingfabric 7
2.1.1 Ceiling 8
2.1.2 Walls 8
2.1.3 Floors 8
2.1.4 Windows 9
2.1.5 Shading 9
2.2 Changestohouseplans 9
2.3 Adaptations toorientations 10
2.3.1 Adaptinghouseplans fordifferentorientations 10
2.3.2 Costrecovery foradaptinghouseplansfordifferent
orientations 11
2.4 Lessonslearnt 11
2.5 Choicebetweensolarhot watersystemandrainwatertank 12
2.6 Othercomplianceissues 13
3 Buildercostsfor5Star compliance 15
3.1 Costs ofimprovingthermal efficiency 15
3.2 Rainwatertankandsolarhot watersystemcosts 19
3.3 Comparison with previouscostestimates 20
4 Benefitsof5Starhomestohouseholds 23
4.1 Reductioninenergyusage 23
4.2 Reductioninenergycosts 26
4.2.1 Electricity 26
iii
4.2.2 Gas 29
4.3 Reductionin waterconsumptionandcosts 30
4.4 Totalprivatebenefits 32
4.5 Sensitivityofestimatedbenefits toassumptions 33
4.6 Otherdifficulttoquantify benefits 35
4.6.1 Increasein market value 35
4.6.2 Environmentalandcommunitybenefitsofrainwatertanks 36
5 Privatecostbenefitanalysis 37
5.1 Costof5StarStandardtohouseholds 37
5.1.1 Present valueofcosts 37
5.1.2 Yearbyyearcosts 38
5.2 Costbenefitanalysisresults 39
5.2.1 10yeartimehorizon 39
5.2.2 50yeartimehorizon 40
5.3 Sensitivityofcostbenefitanalysisresultstokeyassumptions 41
5.4 Solarhot watersystem versusrainwater tank 42
5.4.1 Alternativescenario1:100percentsolarhot watersystem 43
5.4.2 Alternativescenario2:100percentrainwatertank 43
6 Communitywidebenefitsofthe5StarStandard 45
6.1 Stockof5Starhomesin Victoria 45
6.2 Reductioninenergycosts to Victoria 46
6.2.1 Electricity 47
6.2.2 Gas 49
6.3 Reductioningreenhousegasemissions 50
6.4 Watersavingsandsupplyinfrastructure 51
6.5 Aggregatecommunitywide benefits to Victoria 52
6.6 Sensitivityofaggregate Victorianbenefitstokeyassumptions 53
6.7 Impactofthe5StarStandardonthe Victorianinsulationand
glass/glazingindustries 54
6.7.1 Impactonthe Victorianinsulationindustry 55
6.7.2 Impactonthe Victorianglassandglazingindustry 55
7 Conclusions 57
8 References 58
A Buildersurveyresults 60
Modifications tobuildingfabrictoachieve5Star rating 60
Ceiling 60
Wall 60
Floor 61
Windows 62
iv
Shading 63
Plansandorientations 63
Changestohouseplans 63
Adaptations toorientations 64
Adaptations toorientations 65
Otherinformation 66
Timberflooring 66
Learningeffects 67
Solarhot watersystemandrainwatertank 67
OtherComplianceIssues 68
CostEstimates: Thermal 69
Ceiling 70
Wall 70
Window 71
Shading 71
Other 72
Total 73
CostEstimates: Rainwater tank/Solarhot water system 73
Rainwatertank 73
Solarhot watersystem 74
B A primeroninsulation 75
Howinsulation works 75
Principlesofinsulation 75
Howinsulationperformanceismeasured 76
C Appropriatechoiceofdiscountrate 77
D Electricitymarket modellingassumptions 79
Modellingassumptions 79
Electricityconsumption 79
Newentrantcosts 80
Market supply 81
Contractcover 81
E Waterandseweragedisposal priceforecasting methodology 83
F Keyassumptions 84
Boxes, charts, figures and tables

Figure 1 Average size of houses in Victoria, 199192 to 200607 (m2) 26
Figure 2 Projected price of carbon with an Australian Carbon Pollution
Reduction Scheme, 2011 to 2020 27
v
Figure 3 Projected retail price of electricity, 2008 to 2020 28

Figure 4 Forecast of Victorian gas price, 20082020 ($/GJ, 2008$) 29
Figure 5 Projected variable component of price of water and sewerage
disposal for households, 20082014 ($/kL, 2008$) 31
Figure 6 Annual private benefit by source, year 1 to 50 (2008 dollars) 33
Figure 7 90% confidence interval for total estimated private benefits 34
Figure 8 Tornado diagram impact of key assumptions on total private
benefits 34
Figure 9 Cost of 5 Star Standard to homebuyer/household based on
builder cost estimates, year 1 to 50 (2008 dollars) 38
independent cost estimates, year 1 to 50 (2008 dollars) 39
Figure 11 Tornado diagram sensitivity of benefitcost ratio to key
assumptions 41
Figure 12 90% confidence interval for benefitcost ratio builder cost
estimates, 10year horizon 42
Figure 13 Total residential building approvals, 199192 to 200607 46
Figure 14 Stock of 5 Star homes in Victoria, 2006 to 2055 46
Figure 15 Benefits to Victoria by source, 20062065 ($ millions, 2008$) 53
Figure 16 90% confident interval for aggregate benefits to Victoria 53
Figure 17 Tornado diagram sensitivity of aggregate Victorian benefits to
key assumptions 54
Table 1 Costs and benefits of the Victorian 5 Star Building Standard 3

Table 2 Size of building companies that responded to ACIL Tasmans
survey 7
Table 3 Choice of ceiling insulation 8
Table 4 Choice of wall insulation 8
Table 5 Modifications to windows 9
Table 6 Estimates for installed cost of typical thermal improvements 16
Table 7 Energy rating files supplied by builders categorisation by house
size 17
Table 8 Incremental costs of attaining overall 5 Star rating building fabric
(2008 dollars) 18
Table 9 Cost of rainwater tank and solar hot water system (2008 dollars) 20
Table 10 Summary of results from cost studies 22
Table 11 Modelled energy usage of 5 Star homes in various climate zones
(GJ per household per annum) 24
Table 12 Household heating, cooling and water heating energy savings due
to 5 Star Standard 25
Table 13 Present value of household electricity savings (2008 dollars) 29
Table 14 Present value of household gas savings (2008 dollars) 30
Table 15 Present value of household water savings (2008 dollars) 31
Table 16 Present value of total private benefits of the 5 Star Standard (2008
dollars) 32
Table 17 Present value of costs of 5 Star Standard to homebuyers (2008
dollars) 38
Table 18 Key results of costbenefit analysis, 10year time horizon 40
Table 19 Key results of costbenefit analysis, 50year time horizon 40
Table 20 Results of costbenefit analysis 100% solar HWS, 10year time
horizon 43
vi
Table 21 Results of costbenefit analysis 100% solar HWS, 50year horizon 43
Table 22 Results of costbenefit analysis 100% 2kL RWT, 10year time
horizon 44
horizon 44
Table 24 Electricity generation capacity and input savings assumptions
and estimates 48
Table 25 Present value of electricity generation capacity and input savings
to Victoria (2008 dollars) 49
Table 26 Gas savings assumptions and estimates 49
Table 27 Present value of gas savings to Victoria (2008 dollars) 50
Table 28 Present value of GHG emission reductions to Victoria (2008
dollars) 50
Table 29 Present value of water savings to Victoria (2008 dollars) 52
Table 30 Present value of aggregate benefits to Victoria (2008 dollars) 52
vii
Executive summary
ACIL Tasmanhasbeencommissionedbythe VictorianGovernments
DepartmentofSustainabilityandtheEnvironment(DSE)toundertakean
evaluationofthe Victorian5StarBuildingStandard.
Tomeetthe5StarStandard, whichcame intoeffectin July2005,anewhome

(Class1and2dwellings)mustachievea5Starenergyratingforthebuilding
fabric,adheretomaximumflowratesforshowerheadsandtaps,andhave a
maximum waterpressureof500kPa.Inaddition,newhouses(Class1
dwellings)mustinstalleitheratleasta2000litre capacityrainwatertankfor
toiletflushingorasolarhot watersystem,orbeconnectedtoareticulated
recycledwatersystem whereitisavailable.
Thisstudyinvolvedconsultation withbuildingcompaniesaboutbuilding
modificationsandcosts,as wellasundertakinga comprehensivereviewof
existingresearchreportsonthebenefitsofthe5StarStandardintermsof
energyandwatersavings andgreenhousegasemissionreductions.
Private costs and benefits of the 5 Star Standard

Thebenefitsofthe5StarBuildingStandardtoahomebuyerorhousehold
includesavingsinelectricity,gasandwaterexpendituresas wellasappliance
savings.Underarealdiscountrateof6.5percent,thepresent valueofthese
benefitstotal$5,210and$11,110overa10yearanda50yeartimehorizon
respectively.
Thetotalcostofthe5StarStandardtotheaverage homebuyerinrealpresent
valuetermsisestimatedat$3,600$5,300overa10yeartimehorizonand
$4,500$6,400overa50yearhorizon,undera6.5percentrealdiscountrate.
Thecostoverthe10yearhorizonissimplytheupfrontcostsincurredduring
theconstructionofthe5Starhome,butthecostoverthe50yearhorizon
includesbothupfrontcostsas wellasreplacement costsforsolarhot water
systemsor rainwaterpumps. Theprecisecostdependsonthesourceof
estimatesforthecosts of buildingfabricupgradesnecessitatedbythebuilding
standard,as wellassolarhot watersystemandrainwatertankcapitaland
installationcosts.
Fromahomebuyersorhouseholdsperspective,theoverallcosteffectiveness
ofthe5StarStandarddependsonthechoiceofasolarhot watersystemora
rainwatertank.In ACIL Tasmansanalysis,thecentralcaseassumesa50:50
splitbetweensolarhot watersystemsandrainwatertanks,basedonBuilding
Commissiondataonbuildingapprovals.Sensitivityanalysis wasconductedon
twoalternativescenarios wherethesplit was100:0 and0:100respectively.
Executive summary viii

Acomparisonofbenefitcostratiosacross thethreealternative assumptions

onthesolarhot watersystem/rainwatertanksplitisshowninFigureES1.
Overa10yeartimehorizon,undertheassumption ofa6.5percentdiscount
rate,thebenefitcostratio(BCR)ofthe5StarStandardisintherangeof1.2
1.8forahome withasolarhot watersystem(dependingonthesourceofcost
estimates) whiletheratioforahome witharainwatertankisintherangeof
0.81.2.
Figure ES 1 Comparison of benefitcost ratios across three scenarios, 6.5%

discount rate
3.5
10-year horizon 50-year horizon
3
Benefit-cost ratio
2.5
2
1.5
1
0.5
0
50% solar 100% solar 100% RWT 50% solar 100% solar 100% RWT
HWS, 50% HWS HWS, 50% HWS
RWT RWT
Builder cost estimates Independent cost estimates
Note: HWS = hot water system, RWT = rainwater tank

Data source: ACIL Tasman
Overa50yeartimehorizon,undertheassumption ofa6.5percentdiscount
rate,a5Starhome with a solarhot watersystemhasaBCRof2.12.9, witha
paybackperiodof57years.Bycomparison,a5Starhome witharainwater
tankhasaBCRof1.52.2 , withapaybackperiodof712years.
Theyieldfromarainwatertankdependsontheroofareacaptured,tanksize,
annualrainfall,thenumberofapplicationsitisusedfor,andthenumberof
occupantsinthehome. Thecosteffectivenessofarainwatertankisimpacted
bythecurrentminimumdesignconfigurationrequiredbythe5StarStandard,
andwouldincrease withgreatertankcapacity(i.e.largerthan2000litres),
greaterroofareacapturedandconnectionstomoreenduses.
Communitywide benefits of the 5 Star Standard

ACIL Tasmansevaluationofthe5StarBuildingStandardindicatesthat,in
additiontotheprivatehouseholdbenefits,itgeneratessubstantialpotential
benefitsto Victoriaintermsofsavingsfromdeferredconstructionofnew
Executive summary ix
electricity andgasgenerationcapacity,reductioningreenhousegasemissions
duetolowerenergyusage,anddeferredneedfornew watersources.
Thecostsandbenefitsof the5StarStandardto variousstakeholdersin

Victoriaareshownin TableES1. Thenetcommunitywidecostsandbenefits
arehighlightedingrey.
Manyoftheprivatecoststohouseholds(suchasincreasedinsulationand
windowcosts)resultinhigherrevenuesandprofitsfor Victorian
manufacturersofbuildingmaterialsandVictorianhomebuilders. Thatis,these
coststohouseholdsarebenefitstothebuildingindustry,andtheyoffseteach
other whencalculatingnetbenefitsacrossthesetwo stakeholdergroups.
Similarly,theprivatebenefitstohouseholdsinreducedenergyandwaterbills
throughlowerusageresultinlowerrevenuesfor Victorianutilities.However,
appliancecostsavingstohouseholdsareconsideredpartofthenet
communitywidebenefitsasappliances(particularly airconditioners)are
assumedtobeprimarilymanufacturedoverseas.
Table ES 1 Costs and benefits of the Victorian 5 Star Building Standard

Households/homebuyers Victorian building industry Victorian utilities Victorian Government and
other parts of the wider
Victorian community
Benefits Reduction in energy Increased revenues and Deferred cost of installing
(electricity and gas) bills profits for insulation additional electricity and gas
manufacturers and builders generation capacity
Reduction in water bills Increased revenues and Deferred cost of installing
profits for glass and window new water infrastructure
manufacturers and installers
Appliance cost savings Increased revenue and Reduction in greenhouse
(appliances assumed to be profits for solar hot water gas emissions
primarily manufactured system manufacturers and
abroad) installers (builders)
Increased revenue and
profits for rainwater tank
Costs Increased cost of building Reduction in revenues of Administrative costs
insulation electricity and gas utilities
Increased cost of glass and Reduction in revenues of
windows water utilities
Cost of solar hot water
system
Cost of rainwater tank
Note: Net community-wide benefits and costs are highlighted in grey; the other costs and benefits are transfers between different economic agents within
Victoria
Thepotentialcommunitywidebenefitsareprojectedtototalapproximately
$830millionover10yearsand$1.9billionover50yearsinrealpresent value
Executive summary x
termsundera6.5realpercentdiscountrate. Abreakdownonthesebenefitsby
thesourceofbenefitundera6.5percentdiscountrateisshownin TableES2.
Table ES 2 Some communitywide benefits of the 5 Star Standard to Victoria

Source of benefit Present value of benefits Present value of benefits
(10-year time horizon) (50-year time horizon)
Savings from deferred electricity $457 million $611 million
generation capacity
Savings from deferred gas $230 million $523 million
generation capacity
Savings from deferred water $30 million $95 million
infrastructure
Greenhouse gas emissions $118 million $667 million
Note: See Chapter 6 for details
Caveats and limitations

ThisevaluationdoesnotincludeanyquantitativedataonClass2buildings
(apartments).Howeverasmallnumberofbuildingdesignerscontactedhave
providedqualitativeinformationonhowtheymeet theminimumbuilding
standardforClass2buildings.
Theevaluationalsodoesnottakeintoaccount administrativecostsassociated
withtheStandard.Capturingthesecostscompletely andpreciselyisacomplex
task.Inaccurateestimates ofthesecostsarelikelytodistortanymetricthat
comparescommunitywidebenefitsagainstcommunitywidecosts. These
metrics(suchasthecommunitywidebenefitcostratio)arethereforenot
reportedinthestudy.
Asmanyoftheresultsinthisevaluationdependon assumptionsmade,alistof
keyassumptionsisprovidedattheendofthereportin AppendixF.
Executive summary xi
1 Introduction
ACIL Tasman wascommissionedbythe Victorian GovernmentsDepartment
ofSustainabilityandtheEnvironment(DSE)toundertakeanevaluationofthe
Victorian5StarBuilding Standard.
The Victorian5StarBuildingStandardcameintoeffectin July2005(aftera
12monthtransitionperiod)throughaState variationtotheBuildingCodeof
Australia, withtheaimof improvingthethermalefficiencyofresidential
buildingstoreducepeakloaddemand,energyconsumptionandgreenhouse
gasemissions.For thosehouses witharainwatertank,theStandardalsoaimed
toprovidepotable watersavings.
Tomeetthe5StarStandard,anewhomemustachievea5Starenergyrating
forthebuildingfabric,adheretomaximumflowratesforshowerheads,taps
andtoilets,andrestrict waterpressuretoamaximumof500kPa.Inaddition,
newhouses(Class1dwellings)musthaveeitherarainwatertankcapturinga
minimumof50m2ofroofcapacityanda capacityofatleast2000litresfor
toiletflushing,orasolarhot watersystem. Whereavailable,homesmaybe
connectedtoareticulatedrecycledwatersysteminsteadofinstallinga
rainwatertankorsolarhot watersystem.
Asthe5StarStandardisflexible,thedesiredenergy ratingforthebuildingcan
beachievedthroughdesignfeaturessuchashouseorientation,building
materials, windowsizing, orientationandshading,insulationandglazing.
ByOctober2008,morethan150,000newhomeshavebeenbuilttothe5Star
Standard.From1May2008,theStandardwasextendedtocoveralterations,
additionsandrelocationsofhomes.
1.1 Study objective

Theevaluationistodeterminethecosteffectivenessofthe5StarStandardas
apolicymeasuretodrivegreenhousegas(GHG)abatementandincrease water
useefficiency.
Thekeyquestionsaddressedinthisevaluationare:
Whatarethe costsandbenefitstohouseholdsin relationtothe5Star
Standard?
Whatarethe costsandbenefitstosocietyinrelationtotheStandard?
1.1.1 Private costs and benefits
Thecoststohouseholdscomprisethefollowing:
Introduction 1
Increasedpurchaseprice of5Starcomplianthomesrelativetothe
purchasepriceofahome thatisnotrequiredtomeetthe5StarStandard
Replacementcostsforthesolarhot watersystemortherainwatertank
duringthelifetimeofthehome,as wellassmallassociatedoperational
costs(suchasenergyfortherainwatertankpump)andmaintenance costs.
Theprivatebenefitsofthe5StarStandardinclude:
Reductionin energycostsduetolowerelectricityandgasusage(especially
forhomesfittedwithasolarhot watersystem)
Savingsinappliancecosts
Reductionin waterbills,particularlyforhomes witharainwatertank
Abilitytoirrigateoutdoorareasforhomes witharainwatertank,during
periodsof waterrestrictions.
Toevaluatetheprivatecosteffectivenessofthe5StarStandard, ACIL Tasman
hasundertakenarigorouscostbenefitanalysisoftheStandardfroma
homebuyersorhouseholdsperspective.
1.1.2 Communitywide costs and benefits
Thecommunitywidebenefitsofthe5StarStandardinclude:
Reductioningreenhouse gasemissionsduetolowerelectricityandgas
usage
Energysavingsbasedontheavoidedcostsofgasandelectricity, including
defermentintheinstallationofnewpowergenerationcapacity
Reductionin consumptionofpotable water.
Byreducingtheheating andcoolingloadsinhomes,andhencetheirenergy
consumption,the5StarStandardisalsoexpectedtomitigatetheimpacton
householdsofincreasedfutureenergycostsduetotheintroductionofan
emissionstradingscheme.
Thecostsandbenefitsof the5StarStandardto variousstakeholdersin

Victoriaareshownin Table1. Thecommunitywidecostsandbenefitsare
highlightedinpalegrey.
Introduction 2
Table 1 Costs and benefits of the Victorian 5 Star Building Standard

Households/homebuyers Victorian building industry Victorian utilities Victorian Government and
other parts of the wider
Victorian community
Benefits Reduction in energy Increased revenues and Deferred cost of installing
(electricity and gas) bills profits for insulation additional electricity and gas
manufacturers and installers generation capacity
(builders)
Reduction in water bills Increased revenues and Deferred cost of installing
profits for glass and window new water infrastructure
manufacturers and
installers, especially for high
performance products
Appliance cost savings Increased revenue and Reduction in greenhouse
(appliances assumed to be profits for solar hot water gas emissions, energy
primarily manufactured system manufacturers and resources and water
abroad) installers (builders) consumption
Increased jobs
Increased revenue and
profits for rainwater tank
(builders)
Increased jobs
Costs Increased cost of building Reduced revenue and Reduction in revenues of Administrative costs
insulation profits for manufacturers of electricity and gas utilities
less efficient building
products (eg single glazed
windows)
Increased cost of glass and Reduction in revenues of
windows water utilities
Cost of solar hot water
system (installation and
maintenance)
Cost of rainwater tank
(installation and
maintenance)
Note: Net community-wide benefits and costs are highlighted in grey; the other costs and benefits are transfers between different economic agents within
Victoria
Manyoftheprivatecoststohouseholds(suchasincreasedinsulationand
windowcosts)resultinhigherrevenuesandprofitsfor Victorian
manufacturersandsuppliersofbuildingmaterials. Thatis,thesecoststo
householdsarebenefitstothebuildingindustry,andtheyoffseteachother
whencalculatingnetbenefitsacross thesetwostakeholdergroups.
Similarly,theprivatebenefitstohouseholdsinreducedenergyandwaterbills
throughlowerusageresultinlowerrevenuesfor Victorianutilities.However,
appliancecostsavingstohouseholdsareconsideredpartofthenet Victorian
communitywidebenefitsasappliances(particularly airconditioners)are
assumedtobeprimarilymanufacturedoverseas.
ACIL Tasmanhasnotquantifiedtheadministrativecostsassociatedwiththe
Standard. Thesecostsincludethoseassociatedwith theplanning,design,
Introduction 3
implementation,enforcement,andevaluationofthe5StarStandard. They
includethesalary andoncostsofgovernmentstaff,thecostofexternal
consultingservices,andoverheadcostssuchasofficespace andequipment.
Dataisnotavailableonsomeofthesecosts,but wesuspectmany wouldbe

oneoff(incurredattheinceptionoftheStandard)andthatthey wouldlikely
belowrelativetothecostsofimprovedinsulation, solarhot watersystem
purchaseandinstallation etc. Administrativecostsincurredbybuildersarealso
expectedtoberelativelylow.
Capturingcomplete administrativecostspreciselyisacomplextask,and
inaccurate estimatesofthesecostsarelikelytodistortanymetricthat
comparescommunitywidebenefitsagainstcommunitywidecosts(suchasthe
communitywidebenefitcostratio). While wereportestimatesofthe
communitywidebenefits,suchconsiderationspreclude ACIL Tasmanfrom
undertakingafullcostbenefitanalysisofthe5StarStandardfroma
communitywideperspective.
1.2 Study approach

Thisstudyinvolvedconsultation withbuildingcompaniesaboutbuilding
modificationsandcoststoachievethe5StarStandard,as wellasundertaking a
reviewofexistingresearchreportsonthebenefits ofthe5StarStandardin
termsofenergyandwatersavingsas wellasgreenhousegasemission
reductions.
1.2.1 Building company consultations
Thebuilderconsultationprocess wasconductedintwostages. Theprocess

wasdesignedby ACIL Tasmaninconcert withDSEandTonyIsaacs
Consulting.
Stageone wasageneralsurveyof Victorianhomebuildingcompaniesof

varyingsizes(includingthefivelargest,intermsofthenumberofhomesbuilt
in Victoriain2007, as wellaslowvolumebuilders)toelicitqualitative
informationonmodificationstohouseplans,insulationlevels,glazing,and
otherfactorsrequiredto meetthe5StarStandard, as wellasgeneralestimates
ofthecostofthesemodifications.
Surveys weresent(viaemailorpost)to29buildersand17responses were

received.Followuptelephonediscussions wereundertaken withtheenergy
ratersfromamajorityofthe17buildersthatrespondedtothesurvey.
Stagetwoinvolvedfurtherconsultation withaselectgroupofthreehigh
volumebuilders whohavedemonstratedparticularcommitmenttobuilding
sustainablehomesin Victoriaoverthelastdecade. Fromeachofthese
Introduction 4
builders, ACIL TasmanobtainedtheFirstRate4energyratingfilesforsix

housetypes(that varyby builtuparea,numberofbedroomsandnumberof
storeys). Theseenergyratingfiles wereindependentlyassessed,analysedand
evaluatedby TrevorLeeofEnergyPartnerstoprovideanindependent
assessmentof thecompliancecostsassociatedwith 5StarStandard.1 The
assessmentof theenergyratingfilesalsofacilitatedabetterunderstandingof
thestrategiesemployedbybuildingcompaniestomeetthe5StarStandard.
1.2.2 Literature review
Energysavings
TocomputetheenergysavingsandCO2emissionreductionmadepossibleby
the5StarStandard, ACIL Tasmandrewupona2007DSEcommissioned
reportbyGeorge WilkenfeldandAssociates(GWA) Optionstoreduce greenhouse
gasemissions fromnewhomesinVictoriathroughthebuildingapproval process. ACIL
Tasman wasgivenaccesstothedataunderpinningthereportedresultsby
DSE.
Watersavings
ACIL TasmandrewuponanotherGWAreport WaterSavingRequirements for

NewResidentialBuildingsin Victoria:Options for flexiblecompliance(commissioned
byDSEin2006)tocalculatethe watersavingsenabledbythe5StarStandard.
Otherreports
Inaddition, ACIL Tasmanstudiedotherrelevantreports suchasthose

preparedby Allen ConsultingGroupforSustainableEnergy Authority Victoria
(SEAV)in2002 and2004 on exantebenefitcostanalysesofthe5Star
Standard,the AustralianBuildingCodesBoardsRegulatoryImpactStatement
regardingits Proposalto AmendtheBuildingCodeof Australiatoincreasethe Energy
EfficiencyRequirements forHouses,andinternal ACIL Tasmanreportson water
efficiency andtheimpactofanemissionstradingschemeonelectricityprices.
1.3 Report structure

Thisreportisorganisedasfollows.Chapter2describesthechangesinhome
designsandmaterialsusemadebybuilderstocomply withthe5StarBuilding
Standard.Increasesinbuildingcostsasaresultofthesechangesarediscussed
inChapter3.Chapter4analysestheprivatebenefitstohomebuyersand
occupantsof5Starhomes, whileChapter5presentstheresultsoftheprivate
1 Details of this procedure are provided in Section 3.1 of the report.
Introduction 5
costbenefitanalysisanddiscussesthesensitivityanalysisaroundtheseresults.
Chapter6analysesthebroadercommunitywidebenefitsofthe5StarStandard
to Victoria.Chapter7concludesthereport.
Introduction 6
2 Building companies responses to

the 5 Star Standard
Thischapterpresentsthe surveyresultsregardingmodificationstohouse
designandconstructionadoptedbybuildingcompaniestomeetthe5Star
BuildingStandard. Atotalof17builders(59percentofthe29contacted)
respondedtothesurvey, which wasdesignedby ACIL Tasman withguidance
andadvicefrom TonyIsaacsConsulting. Thebuildingcompanies who
respondedtothesurveyrepresentareasonablecrosssectionoftheindustryin
termsofthesizeofthecompanyandthenumberofhousesbuiltperannum
(see Table2).
Table 2 Size of building companies that responded to ACIL Tasmans

survey
Size of building company (total number of homes Number of builders responding to ACIL Tasmans
built in Victoria in 2007) survey
Between 1 and 100 6
Between 101 and 700 5
Above 700 6
In2007,thesurveyrespondentsbuiltatotalof7,340homesinMelbourneand
areasofregional Victoria, includingGeelong,Ballarat, Anglesea,Gisborne,
Ballan,MorningtonandTorquay. Thisrepresentsapproximately20percentof
the35,300building approvalsforresidentialhouses andunitsissuedin Victoria
in200607. Thelargestbuilderamongthesurveyrespondentsconstructed
morethan1,000homesin Victoriain2007;thesmallestbuilderconstructed
four.
Thebuildersurveyresults arepresentedintheirentiretyin Appendix A.
2.1 Modifications to the building fabric

Thebuildingcompaniessurveyedusedarangeoftechniquestoachievea5
Starenergyratingfornewhomes. Themostprevalentmethodwasincreasing
theamountofinsulationappliedtoceilingsandwalls.However,insomecases
this wascomplementedbymodificationsto windows.
Formoreinformationabouttheprinciplesandtypesofbuildinginsulation,
pleasereferto Appendix B.
Building companies responses to the 5 Star Standard 7

2.1.1 Ceiling
Ofthebuildingcompaniessurveyed,threequartersupgradedtheceiling
insulationmaterialfromR2.5pre5StartoR.3.54.0 inordertomeetthe5Star
Standard(see Table3).
Table 3 Choice of ceiling insulation

Insulation rating Number of builders (out of 17)
Up to R5.0 2
R4.0 11
R3.5 2
Indeterminate 2
Note: indeterminate refers to survey responses that were qualitative rather than quantitative
Data source: ACIL Tasman Builder Survey
2.1.2 Walls
Priortothe5StarStandard,thebuildingcompaniessurveyedtendedtouse
R1.0 wrapfoilinsulationinthe walls.Sincetheimplementationofthe5Star
minimumstandards,approximatelyhalfofthesebuildingcompanieshavebeen
consistentlyinstallingR2.0glasswoolbatts(someof whichincludereflective
foil wrap)andafurtherthreehavebeeninstallinguptoR2.5insulationfor
their6Starhouses(see Table4).
Table 4 Choice of wall insulation

Insulation rating Number of builders (out of 17)
R2.3-2.5 3
R2.0 8
R1.5 4
Indeterminate 2
2.1.3 Floors
Thethermalperformanceofconcreteslabfloorsandtimberfloors varies
significantly. Whilehouses withaconcreteslabon groundfloordonotrequire
anyfurthersubfloorinsulation,houses withtimberfloorsgenerallyrequire
additionalinsulationsuch assubfloor foilbatts(for example, concertinafoil
batts)inordertomeetthe5Starthermalefficiencyrating.
Furthermore,othermeasurestoimprovetheoverallthermalefficiencyof
houses withtimberfloors include:
Windowsizereduction,particularlysouthandwestfacing windows
Doubleglazing windows orothertreatments(eglowEglass)
Improvinginsulationinceilingsandwallsandensuringbetterdraftsealing.

Whilefourofthebuildingcompaniessurveyeddonotoffertimberfloor
constructionintheirhouses,thosethatdoofferitindicatedthattheyhave
builtnoneor veryfewhomes withtimberfloors sincetheintroductionofthe5
StarStandard.
2.1.4 Windows
Sincetheintroductionofthe5Starrating,allthebuildingcompaniessurveyed
havemodifiedthe windowsusedinnewhouses. Themodificationsinclude:
Usingdoubleglazedwindows
Usinglowemissivity(lowe)glass
Reducing windowsizes,
Sealing aroundwindows withfoampriortoplastering
Usingimprovedaluminiumforframes(see Table5).
Table 5 Modifications to windows

Strategy Number of builders (out of 17)
Reduce window size 5
Use selective double glazing 17
Use of low-e glass 6
Seal around windows 3
Re-position windows 1
2.1.5 Shading
Thebuildingcompaniessurveyedindicatedthattheygenerallyhavenotused
shadingfromeavestoassist withachieving a5Starrating.Furthermore,eight
oftheseventeenrespondentsstatedthattheygenerallydonotprovideeaves;
threebuildingcompaniesincorporateeavesonlyiftheyarepartofthedesign
(i.e.foraestheticpurposes);andonestatedthatitamendsthedesigntoinclude
eavesfornorthfacing windows.
2.2 Changes to house plans

Inordertomeetthe5StarBuildingStandard,thebuildingcompaniessurveyed
indicatedthattheyprimarilyfocusedonchangestotheglazinganddesign.
Thesechangesinclude:
Glazing
Reductionintotal windowarea(numberof windowsandsizeof windows)
Maximisingnorthandeastfacing window areas,andminimisingsouthand
westfacing windows

Usingloweglass
Usingdoubleglazing.
Design
Locatinglivingroomstosuitmultipleorientations
Reductionin courtyardsandalfrescoareasastheyhindertheachievement
ofthe5Starrating
Improvingcrossflow ventilation.
2.3 Adaptations to orientations
2.3.1 Adapting house plans for different orientations
Theabilityforhouseplanstobeadaptedtodifferentlotorientationsisan
importantconsiderationforbuildingcompanies. Whilehousedesignsfor
volumebuilderstendtoperformbetterinoneortwoorientations,theyare
oftenabletobeadaptedtoalllotorientations.However,the5StarStandard
haslimitedtheadaptabilityofthesehousedesignsduetothepoorthermal
performanceinparticular orientations.
Thebuildingcompaniessurveyedoutlinedanumberofstrategiesforadapting
houseplanstosuitalllotorientations. Thesestrategiesinclude:
Glazing
Usingdoubleglazingtoimprovethermalperformanceinunfavourable
orientations
Usingloweglass
Altering windowplacementandsizetoimprovepassivedesign.
Design
Mirroringhousedesigns
Designinghousesthatincorporateroomlocationsofferingmultiplesitting
options
Reducingtheuseof verandahs
Maximisingnorthernexposureforlivingrooms
Minimisingrooms with westernexposure,suchasthroughreducing
windowsizesintheseand/orprovidingexternalshading.

2.3.2 Cost recovery for adapting house plans for different

orientations
Buildingcostsrelatingto5Starcompliancethat varybyorientationare
recoveredindifferent waysbythebuildingcompaniessurveyed. Theseinclude:
Varyingthehousepricetofullyorpartiallyreflectcostdifferences
Sharingtheincreasedcostsbetweenthecustomerandthebuilding
company
Pricingthehousebasedonthe worstorientation
Uniformlypricinghousesbasedonaveragecostacrossallorientations.
Itisinterestingtonotethatreducinghousesize wasnotanoptionconsidered
by volumebuilderstoreducecosts.
2.4 Lessons learnt

Thebuildingcompaniessurveyedindicatedtherearetwobroadresponsesto
meetthe5StarStandardsinceit wasintroducedin mid2005. Thefirstis to
addressthermalperformanceofthehousefromadesignperspective, whilethe
secondistoaddressthisthroughmaterialsselectionanduseoncethedesignis
essentiallyfinalised.Examplesoftheseinclude:
Design responses
Researchandanalysisregardingthebest wayofachievingthe5Star
Standard
Moreemphasisongoodorientationatthedesignstage.
Materials responses
Varymaterialsusedaccordingtothecostandavailabilityofupgradeitems
(suchasinsulation)
Changematerialscomposition(suchasadditionalinsulationanddouble
glazing)andpasscostsontopurchaser
Alterglazingthroughreducing windowsizeand/orlocation
Twoofthebuildingcompanieshavebeenoffering5Starratedhousessince
2001,andbothindicatedthatthetransitiontoregulationin2005 wassmooth:
As weintroduced5Star housesto Victoriain2001,andsubsequentlyimproved
designs over thenext couple ofyears, wehadalreadysortedout ourstrategies before
2005andhavecarriedtheseforward(BuildingCompany7).

2.5 Choice between solar hot water system and

rainwater tank
Whenaskedaboutthefactorsinfluencingthedecisiontoinstallasolarhot
watersysteminplaceofa rainwatertankor viceversa,buildersprovidedthe
followingresponses:
Costbaseddecisions
Solarhot waterservicesarecheaperforustosupply thanatank. Wedo notoffer the
customera choice.
The maindecisionisacommercial oneitisgenerally cheaper toinstallsolar hot
water thanrainwatertank,partly asinstallation(labour,time)iseasier andcheaper.
Also believe thatsolarhot waterprovidesgreater costsaving,environmentalbenefits
forclient.
Customerchoicebasedmainlyon cost.
Companypolicy.Cheaper at the momenttoinstallsolarhot watersystem.
Financialinitially.Now weusebothfor best environmentallysustainabledesignand
customerbenefit.
Easeofinstallation
Dependsonthepreferenceoftheclientandsitesize.Smallersitesaremorelikely
solaras therainwatertanks takeup alargeareaonthesiteandtheingroundtanks
can createangle ofreposeissuesontightersites.
Due to blocksizesandthetightspaces that canoccuriteasierto provideasolar hot
watersystem.
We offerourdesigns withsolarasitiseasier tolocateonthehouse than tanks cost
isroughly thesame.
Otherreasons
Solarhot watersystemisstandardandwater tanksareanoptionrecommendedtoall
clients.
Wesupplysolarhot wateras standard. Client can substituteifrequiredorpayfor
additionaltank.
Solarhot waterisstandardas itismore effective.
We haveasolarhot watersystemas astandardinclusiononourplans, alotofpeople
choose to put atankinas well,not manyswap.
Solarhot water: company decision/marketing. Displayhomesuse bothto
demonstrate to clients theuseofFlushmiser(toilet)andto maintaingarden.
We havea preferenceforsolarhot water,sogenerallyrecommend.Most clientsgofor
both.

Predominantlya customerchoice; however, wefindthat customersare more

consciousofthe needtosave water thereforerequest that water tanksareused.
Customersnowofteninsistonusingrainwaterstorage tankslargerthanthe2kL
requiredminimum (such as5 kL).
Rainwater tankispreferredduetothe extraadministration ofprocessinggovernment
rebates.
Insummary,13outofthe17buildingcompaniessurveyed(76percent)prefer
toinstallsolarhotsystemsinsteadofrainwatertanksprimarilyforcostreasons
andeaseofinstallation(especiallyonsmallerplots). Threebuildersinstallsolar
hot watersystemsasstandardbutofferrainwatertanksasanoption,andone
additionalbuilderstatedthatmostclientsinstallboth.
Ofthefourbuildersfavouringrainwatertanks,oneattributesthistothe
administrativeburdenofprocessinggovernmentrebatesforsolarhot water
systems.Itisnotablethatthefourbuilders whopreferredtoinstallrainwater
tanksbuiltbetweenfourand150homesin2007. Thatis,largerbuilding
companiessurveyedappeartofavoursolarhot watersystems whilesmall
buildersseemtopreferrainwatertanks.Pleasenote, however,thatBuilding
Commissionfiguresshowthatapproximately50percentofnewhomesinstall
solarhot watersystemsandapproximately50percentrainwatertanks.
2.6 Other compliance issues

Othercomplianceissuesrelatedtothe5StarStandardbroughtupbybuilders
inthesurveyincludedcostsrequiredinmaterialsandtime,achievingthe
Standardintimberflooredhomes,stafftraining,andimplementing variations
toplanstoachievetheStandard.
Appendix Aprovidesfurtherdetails.
ACIL Tasman wasunabletoanalysethecostsforClass2buildings

(apartments)achievingcompliance withthe5StarStandard,asfourmajor
apartmentbuilderscontactedindicatedthatno apartmentshadbeenbuiltby
themtotheStandardasofmid2008. This wasduetoexemptionsgrantedfor
apartmentsbuiltbetween 2005and2007(onthegroundsthatbuildingdesigns
werealreadyatan advancedstage whenthe 5StarStandardwasintroduced)
andadeclineinthe Victorianapartmentmarketin2006and2007.2
InsubsequentconsultationsundertakenbyDSE,onedesignerprovided
additionalqualitativeinformationonaClass2buildingproject. Thisindicated
2 It is possible that Class 2 buildings (apartments) have been constructed since the introduction
of 5 Star in July 2005, however none have been built by the building companies surveyed as
part of this report and therefore no quantitative data are available.

thathighlevelsofceiling andwallinsulation arenormallyincluded, while

windowsarechosentoensuretherequiredthermalperformanceratingis
achieved.
OnesmallbuildingfirmprovidedadditionalcommentstoDSEontheir
approachtoachievinga5 Starratingintimberflooredhomes. Thisfirm
advised:
Thereisaneedtoprovideadequate ceiling andwall insulation,orientation
andwindowshading asappropriate.
Forhomesover200m2 withpoororientation,itisdifficulttoachieve a5
Starrating withoutintroducingfloorinsulationordoubleglazedwindows.
Increasingthermalratingto6Stars(orhigher) willincreaseconstruction
costsduetointroducingdoubleglazingandfloorinsulationinsuchhomes.
Light weighthomes withtimberfloors willprobablystillbeaffordableon
flatsitescomparedwithslabhomes. Thenatureofthesitecanoften
influencethetypeoffloorconstruction.
ThisinformationonClass2dwellingsandtimberflooredhomesisnot
includedin Attachment A.

3 Builder costs for 5 Star compliance

Thischapterexaminesthecostsincurredbybuildersincomplying withthe
Victorian5StarBuilding StandardforClass1buildings. Thesecostscomprise:
thecostofimprovingthethermalperformanceofthebuildingfabric
(typicallybyinstallingthickerinsulationbattsintheceiling andwalls)
thecapital andinstallationcostsofthesolarhot watersystemandthe
rainwatertank(withallassociatedpipe work).
3.1 Costs of improving thermal efficiency

ACIL Tasmanestimatedthecoststobuildersofimprovingthethermal
performanceofthebuildingfabricintwodifferent ways:
usingdatacollectedinthebuildersurveyonadditionalinsulation,glassand
glazing costsincurredbybuilderstoattainthe5StarStandard
commissioningEnergyPartnersofCanberratoundertakeanindependent
costassessmentbyanalysingtheFirstRate4energy ratingfilesof14
currenthousedesignssuppliedbythreelarge Victorianhomebuilders
(usingunitcostsbasedonthosefromthe AustralianBuildingCodesBoard
(ABCB)s2006RegulationImpactStatement).
The ABCBobtainedunitcostsofconstructionfromthefollowingsources:
CordellHousing:BuildingCostGuidepublishedbyReedConstructionData
andprovidedforallstatesexcept Tasmaniaandthe Northern Territory
CordellLocationCostFactors providedcomparativecostindicesfor20
buildingelementsat40locationsacross Australia
RawlinsonsCostGuide forHousing,Small Commercial andIndustrialprovided
estimatesofallunitcosts forallcapitalcitiesotherthanCanberraand
Darwin
AustralianGlassandGlazing Association(AGGA)providedalternative
estimatesoftheincrementalinstalledcostofarangeofthermallyimproved
windows,relativetostandard3mmclearglazing
InsulationCouncilof AustraliaandNew Zealand(ICANZ)provided
alternativeestimatesoftheinstalledcostofinsulationforceilings, wallsand
floors.
Accordingto AustralianBureauofStatistics(ABS)dataonthepriceof
buildingmaterials,the weightedaveragecostofinsulationinsixcapital cities
Builder costs for 5 Star compliance 15

roseonlybyjustoverthreepercentbetweenlate2005andMarch2008.3No
adjustment wasthereforemadetothe ABCBsunitcosts. Theseunitcostsare
shownin Table6.
Therangeofpricesforglazingimprovementsreflectsadjustmentsmadefor
costdifferencesbetweenlocations. Thecostofceilingandwall insulation were
sufficientlysimilarbetweenlocationsthatthe ABCBprovidedonlyonesetof
unitcostsacross Australia. Volumebuilderdiscounts weretakeninto
considerationbythe ABCB.
Asareductionin window sizes wasrequiredinonly oneoutof14instancesin

theassessmentbyEnergyPartners,nocostadjustments weremade when
windowsizes werereduced.Itisassumedthatthereductioninthecostofa
windowisoffsetbytheincreasedcostsofbrick,plasterorotherbuilding
fabrics.
Table 6 Estimates for installed cost of typical thermal improvements

Description of measure Unit cost
Ceiling insulation
Increase by R0.5 $0.53/sqm
Wall insulation
Minimum insulation $3.00/m2
Increase by R0.5 $1.44/sqm
Improved glazing
Improved aluminium frames 3mm clear $2.00/m2
Improved aluminium frames 5mm Evergreen $25.39 to $49.21/m2
Improved aluminium frames 6.38mm ComfortPlus Neutral $39.80 to $77.14/m2
Improved aluminium frames clear double glazing $51.84 to $108.23/m2
Data source: ABCB RIS 2006-01, March 2006
Thedistributionofhomedesignsfor whichenergyratingfiles weresupplied

bythethreebuildersbybuiltarea(excludingporch andgarage)areshownin
Table7.Inallofthedesigns,concreteslabfloorsratherthantimbersubfloors
werespecified.(Asnotedpreviously,mostofthebuilderssurveyedby ACIL
Tasmanindicatedthattheybuiltnoneor veryfewhomes withtimbersub
floors sincetheintroductionofthe5StarStandard.)
3 ABS 6427.0 Producer Price Indexes, Australia, March 2008

Table 7 Energy rating files supplied by builders categorisation by

house size
House size Builder 1 Builder 2 Builder 3
Up to 160 m2 (single storey) 0 1 2
160 to 200 m2 (single storey) 2 0 1
2
200 to 300 m (single storey) 2 2 2
300 to 500 m2 (double storey) 1 1 0
Tocalculatethe costofincreasinginsulationlevelstoachievecompliance with

the5StarStandard,it wasnecessaryfirsttoreducetheinsulationinthe
buildinguntiltheoverall energyrating(ascomputedbytheFirstRate4energy
ratingsoftwareprogram) wasloweredfrom5starstoapproximately2.9stars,
theaverageratingofpre5Starhomesestimatedby TonyIsaacsConsulting.
This wasachievedby:
Step1:reducingthe wallinsulationtoR1.0intheenergyratingprogram
Step2:progressivelyreducingtheceilinginsulation untiltheoverallenergy
ratingofthehouseapproached2.9stars.
Thecostsofthermalperformanceupgradesinthe buildingfabricforClass1
buildings(houses)obtainedviathetwomethodsdescribedabove areshownin
Table8.4
Thenonlinearrelationshipbetweencostandhousesizeinthesecondtolast
columninthetableislikelyduetodifferencesinhousedesigns(inplanand
insulationspecification)andactualbuiltareasinthesamesizecategory within
andbetweenthethreebuilders.
4 Builders were requested to provide a low estimate and a high estimate for incremental costs
in ceiling, wall and floor insulation as well as window improvements to meet the 5 Star
Standard. The low estimate has been used here as it applies to the majority of houses built
while the high estimate corresponds to cases where houses are built on difficult sites and
orientations.

Table 8 Costs of attaining overall 5 Star rating building fabric (2008

dollars)
Cost estimates from ACIL Tasmans builder survey Independent Proportion of
costing by 5 Star houses
Energy (%)
Partners
House size Ceiling Wall Windows Total Total
2
Up to 160 m 250 269 163 701 593 18.9
160 to 200 m2 447 529 267 1,275 584 16.9
2
200 to 300 m 666 629 300 1,624 1,060 39.5
300 to 500 m2 634 1,164 319 2,182 1,058 24.8
Weighted average 1,529 892
Cost to average 5 Star homebuyer (based on a 25% 2,064 1,203
builder margin and 10% GST)
Note: House size excludes porch and garage. Total cost includes shading cost and other miscellaneous costs (such as
the cost of door seals) reported by some builders. It is therefore greater than the sum of the costs associated with
ceilings, walls and windows.
Data source: ACIL Tasman builder survey, Energy Partners, ABS data on building approvals
Therightmostcolumnin thetableshowstheproportionofhousesin foursize

categories,basedon AustralianBureauofStatistics(ABS)dataonbuilding
approvalsfor Victoriain200607that wasspeciallycompiledforDSE. Ascan
beseeninthelastrowofthetable,the weightedaveragecostincurredby
builderstoincreasethethermalefficiencyofhomestotherequisite5Star
Standardwas$1,529 accordingtotheresultsof thebuildersurveyand$892
accordingtotheindependentassessmentby Trevor Leeandhiscolleaguesat
EnergyPartners. Thesecostsexcludeanyadditional administrativecoststhat
maybeincurredbybuildersinmeetingtheStandard.
Whilethedifferencebetweenthetwosetsofcostestimatesmaybeattributable
tomanyreasons,partofthe variationmaybeexplainedbythefactthatnone
ofthe windowsinthe14 homedesignsassessedby EnergyPartnersrequired
upgrading(suchasdoubleglazing) whereasbuildersreportedspendinga
weightedaverageofapproximately$300on window upgrades.Itshouldbe
notedthatmostofthelargerbuildersin ACIL Tasmanssurveyreported
incurringnoadditionalcostsforglassorglazingfor theaveragehomebuiltand
thatthe$300figurelargelyreflectstheconsiderableadditionalglassandglazing
costsclaimedtohavebeenincurredbylowvolumebuilders.
Thebuildermarginonnewhomeshasbeenestimatedtorangefrom20
percentto30percent.5Usinganaverageof25percentandapplyingthe10
5 Personal communication with the Managing Director of one of Victorias largest home
builders and validated in conversations with representatives of two other home builders.
There is no current ABS data on builder margins. Data from 200203 (ABS 8772.0 Private
Sector Construction Industry) indicates that the operating profit margin of large residential
builders (with annual revenues of $100 million or more) was 13.2 percent. However, builder

percentGoodsandServices Tax(GST),theaveragecosttohomebuyersof
improvingthermalefficiencytomeetthe5StarStandardis$2,064(usingthe
estimatesfromthebuildersurvey)and$1,203(usingtheindependentcost
estimates).
3.2 Rainwater tank and solar hot water system

costs
Thecapitalandinstallationcostsofarainwatertank(andassociatedplumbing,
pumpetc)andasolarhot watersystemareshownin Table9. Thedatais
drawnfrom ACIL Tasmansbuildersurveyas well asfroma2006BIS
Shrapnelreportonthehouseholdappliancemarket in Australia.
The weightedaverage costsofarainwatertanksystemandasolarhot water

system(netofgovernmentrebatesapplicabletosolarhot watersystemsand
thecostofaconventionalhot watersystem),accordingtodatafromthe
builderssurvey,are$3,024and$2,078respectively. The weightsusedarethe
numberofhomesbuiltin Victoriabyeachbuilderin2007.
Usingabuildermarginof25percentandtakingintoaccountGST,theaverage
costsoftherainwatertankandsolarhot watersystemtohomebuyersbasedon
buildercostestimatesare$4,082and$2,805respectively. Thecurrent valueof
Renewable Energy Certificates(RECs)inthe AustralianGovernmentssolar
hot waterrebateprogram,estimatedtorangefrom$900to$1,600, was
providedbyDSE.
Theindependentcostestimateof$2,645fora2kLrainwatertank(including
tank,installation,pumpandinternalplumbingcosts)isdrawnfroma surveyof
morethan20rainwatertanksuppliersacross AustraliaundertakenbyMarsden
Jacob(NWC2007). The estimateoftheaverage costofasolarhot water
systembyBISShrapnelis$3,345.6
Theaverage costofaconventionalhot watersystem wasalsosourcedfromthe

sameBISShrapnelreport. Thiscost($1,123) wasaveragedacrossthreetypes
ofconventionalhot watersystems:instantaneousgasheaters,gasstorage
heatersandelectricstorageheaters.
Thenetcostsofarainwatertanksystemandasolarhot watersystem(beyond
thatofaconventionalhot watersystemandnetofgovernmentrebates)to
markups are likely to exceed operating profit margins due to increased transport costs and
other overheads such administrative costs associated with 5 Star compliance.
6 The $2,645 figure is the median rather than the mean ($2,788) to remove the influence of
outliers in the survey sample. The cost of a 2kL rainwater tank itself ranged from $641 to
$922, with a mean of $732 and median of $721.

homebuyers,basedonbuildercostestimatesandindependentcostestimates
,areshowninthelasttworowsof Table9.
Table 9 Cost of rainwater tank and solar hot water system (2008 dollars)
Rainwater tank Solar hot water system
Estimate from ACIL Tasmans builder survey
Total cost to builder (including 3,024 2,078
installation and all necessary (after RECs, incremental cost
pipe work) taking into account over conventional hot water
rebates for solar hot water system)
systems
Total cost to homebuyer 4,082 2,805
(including 10% GST and (after RECs, incremental cost
assuming a builder margin of over conventional hot water
25%) system)
Independent (non-builder) cost estimate
Total cost to homebuyer 2,645 3,345 (after RECs)
(including installation and all
necessary pipe work) taking
into account rebates for solar
hot water systems
Total cost to homebuyer for a n.a. 1,123
conventional hot water system
Incremental cost over n.a. 2,222
conventional hot water system
Net cost
Net cost to homebuyer (based 4,082 2,805
on builder cost estimates)
Net cost to homebuyer (based 2,645 2,222
on independent cost estimates)
Note: Assume the average rebate for solar hot water systems is $1250, the mid-point of the $900-$1,600 range
provided by DSE
Data source: ACIL Tasman builder survey, NWC 2007 for cost estimate of rainwater tank, BIS Shrapnel (2006) for
cost of conventional hot water system and independent cost estimate for solar hot water system, DSE for estimate of
current value of RECs
3.3 Comparison with previous cost estimates

Accordingtocostestimatesfromthebuildersurvey,thetotalcostofthe5Star
Standardtothehomebuyeraverages$5,508perhome(assuminga50:50split
betweensolarhot watersystemsandrainwatertanks).Iftheindependentcost
estimatesforbuildingfabricimprovementsareused,theaveragecompliance
costis$3,637.
Assuminganaveragebuildingcostof$225,000(excludinglandcostsbut
includingsitepreparation costs),anestimatederivedfrom200708Housing
Industry Association(HIA)dataonthelargesthomebuildersin Victoria,the5
StarStandardincreasesthecostofanewhousebyabout1.6to2.5percent.
Previousestimatesofthe costsofthe5StarBuildingStandardtobuildershave
variedconsiderably. These werederived(before,orsoonafter,theStandard
cameintoeffectinmid2005)under varyingassumptionsandmethodologies.

In2002,the Allen ConsultingGroupsexantecostbenefitanalysisofthe5

StarStandardfoundthatit wouldaddaround0.7to1.9percenttothecost
ofanewhouse. The5StarStandardanalyseddidnotincluderainwater
tanksorsolarhot watersystems.
IntheHousingIndustry Association(HIA)ssubmissiontothe
ProductivityCommissionsinquiryintofirsthomeownership,itestimated
thecontributionof Victorias5Starenergyefficiencyrequirementstobe
$3,300foraprojecthome valuedat$150,000, anincreaseof2.2percent.
InFebruary2005aBuildingCommissioncommissionedsurveyof601
buildersfoundtheestimatedmediancostincreasetobeintherangeof3.0
to5.0percent(ChantLink& Associates). Aboutonethirdofrespondents
estimatedtheadditional costsat35percent,onefifthat610percent,anda
further13percentofrespondentsputthecostsat10percentormore.
AsubsequentBuildingCommission surveyofnine volumebuildersin
September2005foundcostincreasesof2.1to3.0percent(Jetteree).In
contrasttothe AllenConsultingGroupsstudy,this study includedsolar
hot watersystemsandrainwatertanks.
InasubmissiontotheProductivityCommission,theMasterBuildersof
Australia(MBA)reportedbuilderestimatesofthecostsincurredtomeet
Victorias5Starrequirementsat$13,000$18,000forarangeofthree
bedroombrick veneerhomes,dependingondesignandlocation.
VCECinits2005reportonhousingregulationreportedthat5Staradded
between$6,000and$18,000(or2.5to6.0percentofthecostofanew
house),basedonasurveyoffivebuilders.
The ABCBnationalRIS(2006)referredtosubmissionsfromanumberof
sourcesthatidentifiedtheestimatedcostofcompliance withthe
amendmentstothenationalbuildingcodeasrangingfrom2.2to13.2
percent.
Inasubmissiontothe ABCB,theMBAprovidedthefollowingexamples
ofadditionalcostsincurredonrecentlyconstructedhomes. Thefirstthree
werebuiltintheGeelong regionandthelastinMildura. Theestimatesfor
thefirstthreeincludethe costofarainwatertank.
$5,000(2.6percent)addedtothecostofathreebedroomhome valued
at$190,000
$6,000(2.7percent)addedtothecostofafourbedroomhome valued
at$220,000;
$12,000(3.8percent)addedtothecostofafourbedroomhome witha
largeareaofglassandvaluedat$320,000,andstill onlyachieving4.5
stars;
$50,000(13.2percent)addedtothecostofafourbedroomhome with
alargeareaofglass,includingFrenchdoorsandvaluedat$380,000.
AnationalMBAsurveyof497buildersconductedinresponsetothe
ABCBsdraftRISfoundthat, whilethe costsimpactsarehighly variable

andnegligibleinsomecases,themajorityoftheresponses wereforcost
increasesintherangeof35percentand6+percent.
Theresultsfromthesepreviouscoststudies(undertakeninorpriorto2005)
aresummarisedin Table10.
Table 10 Summary of results from cost studies

Year Organisation Victoria / Survey sample Increase in cost
national
2008 ACIL Tasman Victoria 17 builders 1.6 2.5%
2002 Allen Consulting Group Victoria 0.7 1.9%
(building fabric
only)
2003 (Oct) Housing Industry Victoria 2.2%
Association (HIA)
2005 (Feb) Building Commission Victoria 601 builders 3.0 5.0%
2005 (Sep) Building Commission Victoria 9 volume builders 2.1 3.0%
2005 Master Builders of Victoria $13,000 - $18,000
Australia (MBA)
submission to the
Productivity Commission
2005 (July) VCEC Victoria 5 builders 2.5 6.0%
2005 Various submissions to National 2.2% and above
the Australian Building
Codes Board (ABCB) RIS
2005 MBA submission to the Victoria 4 recently built 2.6%, 2.7%, 3.8%
ABCB homes and 13.2%
2005 MBA response to ABCB National 497 builders Highly variable,
draft RIS mostly above 3%
Data source: ABCB 2006, PC 2005, VCEC 2005
Thecostestimatesfrom ACIL Tasmansbuildersurveyandfromthe

independentcostingby EnergyPartnersare withinthelowerendoftherange
offiguresshowninthetable. Thismayreflectefficiencygainsbybuildersdue
toincreasedfamiliarity withthe5StarStandardthreeyearsafteritbecame
mandatoryin Victoria.

4 Benefits of 5 Star homes to

households
Thischapteranalysestheprivatebenefitsofthe5StarBuildingStandardto
households. Thebenefits are:
reductioninexpenditure onenergy(electricityandgas)usage
reductioninexpenditure on waterconsumption.
ACIL Tasmansanalysisofthesebenefitsisdiscussedbelow.
4.1 Reduction in energy usage

ACIL Tasmanscalculationsoftheenergysavingsmadepossiblebythe5Star
StandardarebasedonmodellingundertakenbyGeorge Wilkenfeldand
Associates(GWA)in2007. Thismodellingofenergyusagein5Starhomes
assumesthat50percentof5Starhomeshavearainwatertank while50
percentarefittedwithasolarhot watersystem.
TheGWAmodelassumes2.67occupantsperhome,andconsidersthe
followingtypesofheatingandcoolingequipment:electricresistance,electric
roomairconditioner,electriccentralairconditioner,gasroomheater,gas
centralheater,LPGroom heater, woodroomheater,andevaporativecooler.
Thefollowingtypesof waterheatingareconsideredinthemodel:electric
resistancestorage(peak), electricresistance(offpeak),solar withelectric
resistancebackup,electricheatpump,naturalgas(instantaneous),naturalgas
(storage),andsolar withnaturalgasbackup.
Table11reproducesthedataonmodelledenergyusageof5Starhomesin
threeclimatezonesbypurpose(heating,cooling and watercooling)andaccess
tonaturalgassupplyfromtheGWAstudy.
Forexample,a5Starhouse with2.67occupantsinthecoastalclimatezone
(whichincludesMelbourne) withaccesstonaturalgasconsumes3.5GJof
energyfromelectricity eachyearforspaceheating andcoolingas well as water
heating,of which1.9GJisforheating,0.3GJisforcoolingand1.4GJisfor
waterheating.GWA assumesthatasmallproportionof5Starhousesinthis
climatezonearefittedwith varioustypesofelectric spaceandwaterheaters
despitetheiraccesstonaturalgas.
The5Starhouseinthecoastalclimatezone withaccesstonaturalgasalso
consumes41.2GJofenergyfromgaseachyear,of which26.9GJisfor
Benefits of 5 Star homes to households 23

heatingand14.3GJisfor waterheating. Almost24,000outofatotalof38,000

homes(or63percent) wereassumedtobeofthistypeintheGWAstudy.
Table 11 Modelled energy usage of 5 Star homes in various climate zones (GJ per household per
annum)
Home type Climate Heating Cooling Water heating Total No. of
Electricity Gas LPG Electricity Electricity Gas Electricity Gas LPG dwellings
Class 1: Houses
NG Coastal 1.9 26.9 0.0 0.3 1.4 14.3 3.5 41.2 0.0 23,911
Warmer 1.7 11.0 0.0 1.4 1.5 10.7 4.6 21.7 0.0 1,450
Colder 2.1 41.7 0.0 0.5 1.9 16.2 4.5 57.9 0.0 4,572
No Gas Coastal 11.8 0.0 3.5 0.5 14.1 0.0 26.4 0.0 3.5 466
Warmer 5.5 0.0 1.6 1.3 10.6 0.0 17.4 0.0 1.6 891
Colder 10.5 0.0 17.6 0.4 13.4 0.0 24.4 0.0 17.6 1,695
Class 2: Apartments
NG, LR Coastal 2.3 9.4 0.0 0.3 1.8 9.4 4.3 18.7 0.0 1,170
Warmer 1.2 3.2 0.0 1.0 3.3 6.5 5.4 9.7 0.0 37
Colder 2.7 18.3 0.0 0.1 1.8 8.9 4.6 27.2 0.0 25
No Gas, LR Coastal 6.9 0.0 0.0 0.3 10.6 0.0 17.8 0.0 0.0 130
Warmer 2.0 0.0 0.5 1.5 10.1 0.0 13.6 0.0 0.5 0
Colder 7.0 0.0 6.4 0.1 10.6 0.0 17.7 0.0 6.4 7
HR Coastal 6.5 5.4 0.0 0.1 3.7 9.2 10.3 14.7 0.0 3,648
Note: NG indicates that natural gas is available, LR stands for low rise and HR for high rise
Data source: GWA 2007
Thehouseholdheating,coolingandwaterheatingenergysavingsenabledby
the5StarStandardareshownin Table12. Thetotalenergyusagebythe
average5Starhome(whichisa weightedamalgamationofthehometypes
shownin Table11,encompassingbothhousesandapartments)byenergy
source(electricity,natural gasandLPG)showninthesecondrowofthetable
arethe weightedaverages ofthedatashowninthelastfourcolumnsof Table
11.7 The weightsarethenumberofdwellingscorrespondingtoeachdwelling
type.
Thegreenhouseemissionsbyenergysourceshowninthethirdrowofthe
tablearecalculatedbymultiplyingenergyusageby energysource(rowone)by
thefactorsfromthe AustralianGreenhouseOffice(AGO)showninthe
secondrow.
BasedonGWAmodelling whichshowsthatacomparablenon5Starhome
produces8,336kgofCO2peryear(andassumingthatemissionsbyenergy
sourceareinthesameproportionsasthoseintheaverage5Starhome), ACIL
Tasmancalculatesthattheenergysavingsinelectricityandgasenabledbythe 5
StarStandardare4.48GJ (or1.24MWh)perhouseholdperyearand26.83GJ
perhouseholdperyearrespectively.
7 The relative weights on houses and apartments are 87 percent and 13 percent respectively.

Table 12 Household heating, cooling and water heating energy savings

due to 5 Star Standard
Electricity Natural gas LPG Total
Heating, cooling and water heating 5.96 35.73 0.87
energy usage by the average 5 Star
home (GJ/HH/yr)
Australian Greenhouse Office 407.4 63.6 67.2
(AGO) emission factors (kg/GJ)
Greenhouse gas emissions (kg/yr of 2,430 2,272 58 4,760
CO2-e)
Proportion of emissions by energy 50.8% 47.5% 1.2%
source
GHG emissions without 5 Star 4,255 3,979 102 8,336
Standard (kg/yr of CO2-e)
GHG savings due to 5 Star 1.825 1.707 0.044
Standard (tonne/HH/yr)
Energy savings due to 5 Star 4.480 26.834 0.653
Standard (GJ/HH/yr)
Electricity savings due to 5 Star 1.24 n.a. n.a.
Standard (MWh/HH/yr)
Note: HH stands for household; the latest (January 2008) update of the AGO emission factors are not used as ACIL
Tasmans calculations are based on GWA modelling undertaken in 2007
Data source: ACIL Tasman calculations based on GWA 2007 data
Thereductioninenergyconsumptionandgreenhousegasemissionsduetothe
5StarBuildingStandardobviouslydependsontheaveragesizeofthe5Star
homeconstructedandrangeofapplianceandequipmentinstalled.In
estimatingthereductioninenergycostsofa5Starhome, ACIL Tasman
assumesthattheaveragesizeofa5Starhome willnotchangeoverthelifespan
oftheregulation. Thisassumptionisbasedon ABS buildingapprovalsdata
whichindicatesthat, whiletheaveragesizeofhomesbuiltin Victoriaincreased
steadilyupto200405,it hasdeclinedslightlysince (seeFigure1).

Figure 1 Average size of houses in Victoria, 199192 to 200607 (m2)
300.0
250.0
200.0
150.0
100.0
50.0
0.0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04 2005-06
Data source: ABS Building Approvals data
4.2 Reduction in energy costs

Thereductioninenergycostsforhouseholdsliving in5Starhomesis
calculatedbymultiplyingtheenergysavingsoverthelifespanofthehome
(assumedheretobe50years) withtheprojectedpriceofelectricityandgas
overthistimeperiod.
4.2.1 Electricity
ACIL Tasmanhasforecasttheretailpriceofelectricityin Victoriato2020,

incorporatingthe AustralianGovernments20percenttargetforrenewable
energyandtwo alternativescenariosregardingtheintroductionofan Australia
wideemissionstradingscheme(CarbonPollution ReductionScheme CPRS)in
2011.(TheneartermtargetsfortheCPRShadnotbeenannouncedbythe
governmentatthetimeof writingthisreportin2008.) Thesescenariosare:
Scenario1:a10percentreductiononyear2000 greenhousegas(GHG)
emissionsby2020
Scenario2:a20percentreductiononyear2000GHGemissionsby2020.
Theforecasts weregeneratedby ACIL Tasmans PowerMarkelectricitymodel
usedinconjunction withthe GasMarkgasmodelandthe TasmanGlobal
computablegeneralequilibriummodelofthe Australianeconomy.
PowerMark wasusedtoestimatetheprice/tonneof CO2equivalentneededto
achievetheemissionstargets. PowerMarkincludestheemissionscoefficientsfor
eachpowerstation which allowsthecostofemissionstobeaddedtothe
marginalcostsofgeneration. Thisprocessincreasescostsinproportionto

emissionsandreducesgenerationfromsomepowerstationsandeventually,
whentheemissionspriceishighenough,makescontinuedgeneration
uneconomicinsomecases. Thisprocesseffectivelybacksouthighemitters
andreplacesthem withthelowestcost(includingemissionscost)alternative.
Thepricingofemissionsinthis wayalsobringsaboutchangesinrelatedfuel
marketsas wellasthemarketforelectricity. GasMark wasusedtoestimatethe
effectofincreaseddemandforelectricitygenerationongaspricesandsupply.
TasmanGlobal wasusedtoestimatetheeffectofincreasedelectricitypriceson
demandinthefuture.
Moredetailsabouttheassumptionsunderlyingtheelectricitymarketmodeling
usedtoproduceelectricitypriceforecastsareprovidedin AppendixD.
Thepathsofcarbonpricesbetween2011 and2020 predictedbythemodelling

areshowninFigure2. Asthepriceofcarbonincreases,browncoalgeneration
plantsin Victoriamaybe progressivelyreplacedby gasfiredcombinedcycle
gasturbines(CCGTs)as wellas windturbines.
Figure 2 Projected price of carbon with an Australian Carbon Pollution

Reduction Scheme, 2011 to 2020
$60.00
$55.00
$50.00
2008$/tonne CO2
$45.00
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
20% case 10% case
Figure3showstheindicativepassthroughoftheincreasesinelectricitycosts
throughtheCPRSanda20percentby2020RenewableEnergy Target(RET)
toretailtariffsinthetwoscenarios(comparedwiththebusinessasusualor
BAUcase withouttheCRPSorRET).Ineachcase, energycostsincludepool
andcontractingcosts,andnetworkcostsincludean allowanceforboth
transmissionanddistribution.

Figure 3 Projected retail price of electricity, 2008 to 2020
19
18
17
real 2008 cents per kWh
16
15
14
13
12
11
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10% 20% BAU
Networkcostsareassumedtorisefromthecurrentlevelofapproximately5.5
centsperkWhto6.0centsby2020(incurrent2008dollars). Therealretail
marginisassumedtobeconstantat1.5centsperkWh, whiletheRETis
expectedtoimposeareal costof1.0centperkWh by2020. Theretailpriceof
electricityisassumedtoremainconstantafter2020inrealterms.
Inourcostbenefitanalysis, weuseaprojectedpathofelectricityretailprices
thatistheaverageofthoseforthetwoscenariosdescribedabove.
Whilethe5StarStandardmakeshouseholdsmoreresilienttoincreased
energycostsbyreducing heating/cooling loads,theincreaseinthepriceof
electricityisstillexpectedtogenerateademandresponsebyresidential
consumersofelectricity.Forexample,accordingto ACIL Tasmansmodelling,
residentialdemandforelectricityisexpectedtobe3.9percentlowerthanthat
inthebusinessasusual(BAU)casein2013and10.1percentlowerthanBAU
in2020. Withtheseexpecteddemandresponses,theprojectedelectricity
savingsperhouseholdattributabletothe5StarStandarddeclinesfrom1,240
kWhin2008to1,115kWhin2020.
Thepresent value(PV)ofexpectedsavingsinelectricitycostsforoccupiersof
5Starhomes,basedonGWAmodellingofenergy usageandACIL Tasman
modellingoffutureelectricitypricesanddemandresponses,forthree
alternativediscountrates andtwotimehorizonsisshownin Table13.

Table 13 Present value of household electricity savings (2008 dollars)

Discount rate PV (10-year time horizon) PV (50-year time horizon)
3.5 percent 1,505 4,620
6.5 percent 1,330 2,930
9.5 percent 1,190 2,090
Adiscussionontheappropriatechoiceofdiscountrateforthiscostbenefit
analysisispresentedin AppendixC.
4.2.2 Gas
ACIL Tasmansforecastofnaturalgaspricesto2020,takingintoaccountthe
impactoftheCPRS,isshowninFigure4.(Realgaspricesareassumedto
remainatthesamelevelthereafter.)Inadditiontoemissions trading,gasprices
areexpectedtoriseinthecomingdecadeastheestablishmentofLiquefied
NaturalGas(LNG)exportterminalsontheeastcoastmeansthatthepriceof
gasin Australia willbegin toreflect worldpricesfor thefirsttime.(Ifnatural
gaspricesin Australiadonotrisetothelevelof worldprices,it wouldbemore
profitabletoexportallofthenaturalgasratherthantosellsomeofitto
Australianconsumers.)
Asinthecaseofelectricity, ACIL Tasmansmodellingindicatesthattherisein

gaspricesisexpectedtoinduceanegativedemandresponsethatreduces
demandby1.9percentrelativetotheBAUcasein2013andby4.9percentin
2020.
Figure 4 Forecast of Victorian gas price, 20082020 ($/GJ, 2008$)
18
16
14
12
10
8
6
4
2
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

ThePVofexpectedsavingsinnaturalgascostsfor occupiersof5Starhomes,
basedonGWAmodellingofenergyusageandACIL Tasmanmodellingof
futuregaspricesanddemandresponses,for threealternativediscountrates
andtwotimehorizonsisshownin Table14.
Table 14 Present value of household gas savings (2008 dollars)

3.5 percent 2,920 9,270
6.5 percent 2,590 5,830
9.5 percent 2,320 4,140
4.3 Reduction in water consumption and costs

ACIL Tasmanhasforecastedvariable watertariffs(residentialBlock2:441
880Lperday)andvariablesewerchargesbetween2008and2012.8Fixed
chargesfor waterusageandseweragedisposalhave beenexcludedinthese
forecastsastheydonotaffectthesavingsin waterandseweragedisposalcosts
tohouseholdsenabledby the5StarStandard. Themethodologyunderpinning
theseforecastsisexplainedin AppendixE. AccordingtoGWA(2006),the
mains waterconsumptionoftheaverage2.67personhouseholdoccupyinga 5
StarhomeinMelbourne(wheremost5Starhomesin Victoriaarelocated)is
166.7kLayearor456L/day.
Intheabsenceofcrediblelongerrangeforecasts,itisassumedthatthereal
priceof waterremainsconstantfrom2013onwards. Thepriceforecastis
showninFigure5.
8 Residential water tariffs in Victoria are structured into three usage charge blocks with usage
charge block 1 (0440 litres/day) priced at the lowest rate. The rate is highest for usage
charge block 3 (>880 litres/day), which is approximately double that of block 1.

Figure 5 Projected variable component of price of water and sewerage

disposal for households, 20082014 ($/kL, 2008$)
3.00
2.50
2.00
1.50
1.00
0.50
0.00
2008 2009 2010 2011 2012 2013 2014
AccordingtoGWA(2006),the5StarStandardresultsin watersavingsof35.8
kLayearfortheaverage5StarhomeinMelbourne,assumingthat50percent
of5Starhomesareequippedwitha2kLrainwater tankconnectedto50m2of
theroof. Thebulkofthesesavingsareduetotherestrictionsonflowrates for
showerheadsandtapsandon waterpressureimposedbythe5StarStandard
andplumbingregulations.
GWA(2006)estimatesthata2kLrainwatertankusedtoprovide waterfor
toiletflushingreduces waterconsumptionby18.4kL/yearforhomesin
Melbournethatareequippedwithsuchtanks. Asitisassumedthathalfof5
Starhomesarefittedwithsuchtanks,thesavingsfromrainwatertanksforthe
average5Starhomeis9.2kL/year. Thissmallsavingisduetothetankbeing
optionaland, when chosen,capturingonlyasmall areaofroofandbeing
connectedtotoiletsonly.
ThePVofexpectedsavingsinthecostsof waterforoccupiersof5Star
homes,basedonGWAmodellingof watersavingsandtheforecastof water
pricespreparedby ACIL Tasman,isshownin Table15.
Table 15 Present value of household water savings (2008 dollars)

3.5 percent 970 2,990
6.5 percent 850 1,890
9.5 percent 750 1,340
Undera6.5percentdiscountrate,thepresent valueof watersavingsfromthe

restrictionsonflowrates fortapsandshowerheadsandon waterpressureis
approximately$590overa10yearhorizonand$1,310overa50yearhorizon.

Thecorrespondingpresent valueof watersavingsfromarainwatertank are

approximately$520and$1,160respectively.
Thepresent valueofcombinedsavingsfortheaverage5Starhome(fromflow
rateandwaterpressurerestrictionsandhalfarainwatertank)is$850overa10
yearhorizonand$1,890overa50yearhorizon(ascanbeseeninthemiddle
rowof Table15).
4.4 Total private benefits

Thetotalprivatebenefitsofthe5StarStandard,intermsofenergyandwater
savings,areshownin Table16. Thesetotalbenefitsincludeoneoff
electricity andgasappliancesavings,conservatively estimatedby ACIL Tasman
tobeabout$225and$200pernew5Starhomerespectively. Theseare
achievedaslowercapacityheatingandcoolingappliancesarerequiredinmore
efficienthomes.
TheseappliancesavingsarediscussedingreaterdetailinSection6.2.1and
Section6.2.2.
Table 16 Present value of total private benefits of the 5 Star Standard

(2008 dollars)
3.5 percent 5,840 17,370
6.5 percent 5,210 11,110
9.5 percent 4,700 8,020
Theyearonyearbenefits totheoccupantsofa5Stardwellingbythesource
ofbenefitisshowninFigure6. Ascanbeseeninthefigure,gassavings
enabledbythe5StarStandardarethelargestcontributoroftotalprivate
benefits.

Figure 6 Annual private benefit by source, year 1 to 50 (2008 dollars)
800
700
600
500
400 Water
300 Gas
200 Electricity
100
0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49
Year
4.5 Sensitivity of estimated benefits to assumptions

Thetotalestimatedprivatebenefitsofthe5StarStandarddependonaseries
ofassumptionspertainingto:
average annualsavingsingas,electricityandwater
forecastedpriceofgas,electricityandwater
appliancesavings.
ACIL TasmanhasperformedMonteCarlosimulations(with10,000iterations)
toanalysethesensitivityoftotalestimatedprivatebenefitstothese
assumptions.9Intheabsenceofspecificdataonthe statisticaldistributionsof
keyparameters, weassumethateachoftheseparametersisnormally
distributedwiththestandarddeviationequaltoatenthofthemean, whichis
thedefaultsettinginthe @Risksoftwareusedfortheanalysis.
Figure7showsthe90percentconfidenceintervalforthepresent valueoftotal
estimatedprivatebenefitstotheaverage 5Starhouseholdovera10yeartime
horizonundera6.5percentdiscountrate. Thisconfidenceintervallies
between$4,670and$5,730.Recallthatthe centralestimateis$5,210.
9 A simulation refers to any analytical method meant to imitate a reallife system, especially
when other analyses are too mathematically complex or too difficult to reproduce. Without
the aid of simulation, a spreadsheet model will only reveal a single outcome, generally the
most likely or average scenario. Spreadsheet risk analysis uses both a spreadsheet model and
simulation to automatically analyse the effect of varying inputs on outputs of the modeled
system. One type of spreadsheet simulation is Monte Carlo simulation, which randomly
generates values for uncertain variables over and over to simulate a model.

Figure 7 90% confidence interval for total estimated private benefits
4.671 5.730
0.0014
5.0% 90.0% 5.0%
0.0012
0.001
0.0008
0.0006
0.0004
0.0002
0
3.9 4.2 4.5 4.8 5.1 5.4 5.7 6.1 6.4
Value in thousands ($)

The Tornadodiagram(Figure8)indicatesthatthetotalprivatebenefitsofthe
5StarStandardaremostsensitivetoassumptionsonthequantityofgas
savingsenabledbythestandard(withaonestandarddeviationincreaseingas
savingsraisingtotalprivatebenefitsbyjustover$250),followedby
assumptionsaboutthequantityofelectricitysavingsandthequantityof water
savings. Theresultsoftheanalysisarerelativelylesssensitivetotheforecasted
futurepricesofgas,electricityandwater.Insummary,theresultshingeonthe
precisionandreliabilityoftheGWAmodellingof energysavings.
Figure 8 Tornado diagram impact of key assumptions on total private

benefits
Quantity of gas saved (MJ/yr)

Quantity of electricity saved (kWh/yr)
Quantity of water saved (kL/yr)
Price per unit of water ($/kL) / yr 6
Price per unit of gas with ETS ($/MJ) / yr 1
Electricity appliance savings
Gas appliance savings
0 50 100 150 200 250 300

Impact of 1 std dev increase in parameter on total private benefits ($)

4.6 Other difficulttoquantify benefits
4.6.1 Increase in market value
Aprivatebenefitofthe5 StarBuildingStandardthatisdifficulttoquantifyis
theincreaseinthemarket valueofamoreenergyandwaterefficienthome.
Thedatafor Australiahasbeenscantuptonow.
The AustralianBureauofStatistics(ABS) wascommissionedtoestablishthe
relationshipbetweenenergyperformancedisclosureandpriceusinghedonic
analysisofauniquedataset. Thepricesofdetachedhousessoldinthe ACT in
2005and2006 weremodelledasafunctionofland, distance,neighbourhood,
socioeconomicandenergyefficiencyrating(EER) data.
Ahedonicregressionregressespriceagainstahostofexplanatory variables,
whereinthiscaseitdecomposesthehousepriceintoitsconstituent
characteristics,andobtainsestimatesofthe valueofeachcharacteristic.
Thehedonicregressiondemonstratedstrongmarketrecognitionofthe value
ofenergyefficiency. The modelestablishedafinancialbenefitassociatedwith
eachstarimprovementin buildingenergyperformance.
EER wasfoundtobepositivelyassociatedwithhousepriceandhadastrongly
significantrelationship. Theassociationonaverage for2005 was1.23percent
foreach0.5EERstar,and1.91percentin2006,holdingallother variables
constant.
Thisstudyconcludesthatiftheenergyperformanceofahouse isimprovedby
onestarlevel,onaverageitsmarket value willincreasebyabout3percent
(range2.53.8).Forexample:foradetachedhousesoldinCanberrain2005
withaprice valueof$365,000,increasingthe EERratingbyonestar wouldbe
associatedwith,onaverage,anadditionalpriceincreaseinexcessof$8500.
Theauthorsofthestudyarguethatthiscreatesmultipleincentivestoinvestin
energyefficiency.First,therearebenefitsofreducedoperationalenergycosts.
Second,thehighercapital valueofthepropertydue totheimprovementin
energyefficiencyislikelytobegreaterthanthecost involvedinachievingthe
improvement. Third,therearedirectandindirectconsumerbenefitsofenergy
efficiencyincludingthermalcomfort,physicalhealth,andmentalsatisfaction
associatedwithlowerenvironmentalimpacts.
Astheresultsof thestudyarepreliminaryandpertainonlytothe ACT(which

hasdifferentclimacticconditionsto Victoriaandhencedifferentbenefitsfrom
buildingenergy efficiency improvements), ACIL Tasmanhasnotincludedthe
impactofthe5StarStandardonhomepricesinthecostbenefitanalysis.Itis

expectedthat, when available, Victoriandata wouldstrengthentheeconomic

caseforthe5StarStandard.
Anotherbenefitofthe5StarStandardisthatrainwatertankscanalsoprovide
anindependent watersupplyforoccupantsof5Starhomesandbeasourceof
waterforirrigation where andwhenpotable waterrestrictionsapply.
4.6.2 Environmental and community benefits of rainwater tanks
Rainwatertanksinstalledaspartofthe5StarStandardcanalsoprovidea
numberofindirectbenefits.
Theadditionofarainwatertankina5Starhomereducesthe volumeof
stormwaterrunoffleavingtheproperty. This volumeisequaltothe volume
thatisannuallycapturedinarainwatertank andreusedthat wouldotherwise
haveleftthesiteasstormwater.
Reductionsinthe volume ofstormwaterenteringthedrainagesystemresultsin

reducedpressuretoaugmentdrainage capacityasurbanredevelopmentoccurs
andthusrepresentsasavingtosocietyfromtheinstallationofrainwatertanks,
ifoffsiteupgradesininfrastructurearereducedand/oravoided(URS2007).
Reducedrunofftostormwaterdrainsalsoresultsinreducednitrogenandother
nutrientsentering waterways.Dissolvednitrogeniscapturedbyrainwatertanks
andsubsequentlydivertedfromthestormwaterdrainagesystemtothe
seweragesystem whereitistreatedandremoved.
However,therainwatertankoptionunderthe5StarStandardwasnot
designedforstormwater management andthereforefallssignificantlyshortof
meetingthe Victorianstormwatermanagementstandardsforurban
development(ELM&EE2008).Greater watercapture(largertanksize,larger
roofarea)andmoreendusesof water(forexamplelaundry,shower) would
contributetomoreeffectivestormwatermanagementandthemeetingof
environmentalobjectives.

5 Private costbenefit analysis

ACIL Tasmanhasundertakena costbenefitanalysisofthe5StarBuilding
Standardpurelyfromahomebuyersorhouseholds perspective. Theanalysis
bringstogetherthecosts discussedinChapter3 withtheprivatebenefits
discussedinChapter4.
5.1 Cost of 5 Star Standard to households

Incomputingthecostofthe5StarStandardtoahomebuyerorhousehold
overthelifespanofthedwelling, ACIL Tasmanmakesthefollowing
assumptions:
a50yearlifespanforthe 5Starhome
alifespanforasolarhot watersystemof17years
alifespanforarainwatertankof50years
alifespanforarainwater pumpof10years
a50:50splitbetweenhomes withasolarhot watersystemandthose witha
rainwatertank.
Theassumptiononthelifespanofthesolarhot watersystemisbasedonthat
in ACG(2004) whiletheassumptionsonthelifespanoftherainwatertankand
pumparebasedonthoseinNWC(2007).
5.1.1 Present value of costs
Undertheseassumptions,thePVofthecostsofthe5StarStandardoverthe
lifespanofthehomeandover10years,basedonbuildercostestimatesand
independentcostestimatesforthethreealternative discountratesused
previously,areshownin Table17.Recallthatthecostestimates were
presentedpreviouslyin Table8andTable9,anddiscussedinSections3.1and
3.2.
Private costbenefit analysis 37

Table 17 Present value of costs of 5 Star Standard to homebuyers (2008

dollars)
Based on builder cost estimates
3.5 percent $5,300 $7,200
6.5 percent $5,300 $6,400
9.5 percent $5,300 $5,900
Based on independent cost estimates
3.5 percent $3,600 $5,300
6.5 percent $3,600 $4,500
9.5 percent $3,600 $4,200
5.1.2 Yearbyyear costs
Theannualcostsofthe5StarStandardtohouseholdsoverthelifespanofthe
homebasedonbuildercostestimates,brokendownbyeach costitem,is
showninFigure9.

builder cost estimates, year 1 to 50 (2008 dollars)
$6,000
$5,000
$4,000 Solar HWS replacement
$3,000 Rainwater pump

replacement
$2,000
Rainwater tank/solar HWS
$1,000
Thermal upgrades
$0
1 5 9 13 17 21 25 29 33 37 41 45 49
Year
Theannualcostsofthe5StarStandardtohouseholdsoverthelifespanofthe
homebasedonindependentcostestimates,broken downbyeachcostitem,is
showninFigure10.


independent cost estimates, year 1 to 50 (2008 dollars)
$6,000
$5,000
$4,000 Solar HWS replacement
$3,000 Rainwater pump

replacement
$2,000
Rainwater tank/solar HWS
$1,000
Thermal upgrades
$0
1 5 9 13 17 21 25 29 33 37 41 45 49
Year
TheexpectedintroductionofanETSfrom2011onwardsmayhavesome
impactonbuildingcostsinthelastfewyearsofthe10yearscenarioforthe5
StarStandard.Forexample,theglassindustryisenergyintensive, withenergy
costsrepresentingsevento20percentoftotalproductioncost.Mostofthe
energyusedisfromfossilfuels whosecombustionleadstoCO2emissions.
Processemissionsrepresentaround20percentoftotalCO2emissionsinglass
productionduetothedecompositionofcarbonaceousrawmaterials.
AnETSisexpectedtoimpactinsulationproductioncostsas well.However,
thereisinsufficientdatatoincorporatethesepotentialimpactsintothecost
benefitanalysis.
5.2 Costbenefit analysis results

Thecostbenefitanalysisbringstogetherthecosts ofthe5StarStandardto
householdsdiscussedabove withtheprivatebenefitsdescribedinChapter4.
5.2.1 10year time horizon
Thekeyresultsofthecostbenefitanalysisovera10yeartimehorizonare
summarisedin Table18.

Table 18 Key results of costbenefit analysis, 10year time horizon

Discount rate: 3.5% Discount rate: 6.5% Discount rate: 9.5%
Benefit-cost ratio (BCR) 1.10 0.97 0.88
Payback period 9 years
Thebenefitcostratio(BCR),obtainedfromdividingthePVofbenefitsbythe
PVofcosts,rangesfrom 0.97to1.43underthecentralassumptionofa6.5
percentdiscountrate,dependingonthesourceofthecostestimates. TheBCR
is1.101.60undera3.5 percentdiscountrateand0.881.29undera9.5
percentdiscountrate. ABCRgreaterthanoneindicatesthatthestreamof
currentandfuturebenefitsoutweighthestreamofcurrentandfuturecosts
whentherelativepreferenceforconsumptiontoday versusfuture
consumptionistakenintoaccount(viathediscountrate).
Thepaybackperiod,thelengthoftimerequiredtorecoverthecostofan
investment,is9years whencostsarebasedonbuilderestimatesand7years
whenthey arebasedonindependentestimates.10
5.2.2 50year time horizon
Thekeyresultsofthecostbenefitanalysisovera50yeartimehorizonare
summarisedin Table19.
Table 19 Key results of costbenefit analysis, 50year time horizon

TheBCRrangesfrom1.74to2.44undera6.5percentdiscountrate,
dependingonthesource ofthecostestimates. The correspondingrangesfor a
10 The limitation of using the payback period as a tool of analysis is that it does not properly
account for the time value of money or the opportunity cost of an investment.

3.5percentdiscountrateanda9.5percentdiscount rateare2.403.29and
1.341.92respectively.
5.3 Sensitivity of costbenefit analysis results to key

assumptions
Thebenefitcostratiosdiscussedaboveareaffectedbythemyriadassumptions
underpinningthecostbenefitanalysis.(Alistofallthekeyassumptionsusedin
thisstudyisprovidedattheendofreportin AppendixF.)
Figure11showsthatthesensitivityofresultsusing buildercostestimates(over
a10yearhorizonandundera6.5percentdiscountrate)tothefollowing
assumptions(indecreasingorderofsensitivity):
quantityofgassavingsperyear(anincreaseinonestandarddeviation
equalsa0.047increasein theBCR)
average weightedbuilder costestimateofbuildingfabricimprovements(1
stddev=0.036inBCR)
averagebuildercostestimateofarainwatertank(1 stddev=0.035in
BCR)
Figure 11 Tornado diagram sensitivity of benefitcost ratio to key

assumptions
Quantity of gas saved (MJ/yr) 0.047

Cost of insulation and glazing improvements -0.036
Average total cost of rainwater tank -0.035
Average net cost of solar hot water system -0.024
Quantity of electricity saved (kWh/yr) 0.024
Builder margin plus GST -0.018
Quantity of water saved (kL/yr) 0.015
Price per unit of water ($/kL) / yr 6 0.008
Price per unit of gas with ETS ($/MJ) / yr 1 0.006
-0.06 -0.03 0 0.03 0.06

Impact on BCR of 1 std dev increase in parameter
averagebuildercostestimateofasolarhot watersystem(1stddev=
0.024inBCR)
quantityofelectricitysavingsperyear(1stddev= 0.024inBCR)
buildermarginplusGST(1stddev=0.018inBCR)
quantityof watersavings peryear(1stddev=0.015inBCR)

pricepathsof water,gasandelectricity.
The90percentconfidenceintervalforthebenefitcostratiointhis scenariois
showninFigure12. Theintervalliesbetween0.82and1.09.Recallthatthe
centralestimateis0.97.
Figure 12 90% confidence interval for benefitcost ratio builder cost

estimates, 10year horizon
0.816 90.0% 1.090

5 5.0% 5.0%
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
0.7 0.8 0.9 1.0 1.1 1.2 1.3
BCR
5.4 Solar hot water system versus rainwater tank

Theresultsof thecostbenefitdependcruciallyonthesplitbetweensolarhot
watersystemsandrainwatertanksfittedto5Starhomes.Itisnotedthesetwo
optionsachieveindependentenvironmentalbenefits. Whilebuildingapprovals
datacollectedbytheBuildingCommissionshowsa50:50split(ifanything,a
slightbiastowardsrainwatertanks), ACIL Tasman calculationsbasedonthe
buildersurveyresults(see Section2.5)suggesta75:25splittowardssolarhot
watersystems.11 Asnotedpreviously,a50:50split wasusedasthecentralcase
inthisreport.
11 However, in a report for Sustainability Victoria, Moreland Energy Foundation, Strahan

Research, Sunstruck Energy and Ikonomidis Reid surveyed occupants of recently completed
5 Star homes on fittings and appliances in these homes. The survey found that 31.8 percent
of homes had a solar hot water system, 58.8% had a rainwater tank, and 9.4 percent had
both (SV 2007).

5.4.1 Alternative scenario 1: 100 percent solar hot water system
Inthisscenario,itisassumedthatall5Starhomes arefittedwithasolarhot
watersystem(inadditiontothebuildingfabricandwaterefficiency
improvements)andnone witharainwatertankcapturing50m2ofroofarea
andconnectedtotoilets. Thisresultsinincreasedenergysavingsbutreduced
watersavings.
Theresultsof thecostbenefitanalysisunderthisscenarioaresummarisedin
Table20andTable21. Ascanbeseenfromthesetables,theresultsofthe
costbenefitanalysisareconsiderablymorefavourablethanthoseunderthe
50:50solarHWS/rainwatertankassumption.Pleasenotethatthesefigures
reflectthebenefitsandcostsofbothbuildingfabricimprovementsandthe
installationofasolarhot watersystem.
Table 20 Results of costbenefit analysis 100% solar HWS, 10year time

horizon
Table 21 Results of costbenefit analysis 100% solar HWS, 50year horizon

5.4.2 Alternative scenario 2: 100 percent rainwater tank
Inthisscenario,itisassumedthatall5Starhomes arefittedwitha2kL
rainwatertank(inadditiontothebuildingfabricimprovements)andnone with
asolarhot watersystem. Thisresultsinreducedenergysavingsbutincreased
watersavings.
Theresultsof thecostbenefitanalysisunderthisscenarioaresummarisedin
Table22andTable23.Pleasenotethatthesefiguresreflectthebenefitsand

costsofbothbuildingfabricimprovementsandtheinstallationofarainwater
tank.

horizon

horizon
Ascanbeseenfromthesetables,theresultsofthecostbenefitanalysisare
somewhatlessfavourablethanthoseunderthe50:50solarHWS/rainwater
tankassumptionandconsiderablylessfavourablethanthoseunderthe100
percentsolarHWSassumption.
However,theseresults wouldbebetterif waterprices weresubstantiallyraised

(beyondtheincreasesalreadyenvisaged)toreflect morecloselyitsscarcityin
Australia.Greateryields wouldalsobepossibleifadifferentdesign
configuration wasutilisedfortherainwatertank(forexample, greaterroofarea
captured,greaterstorage volumeandconnectiontomoreenduses).

6 Communitywide benefits of the 5

Star Standard
Besidesprovidingprivatebenefitstohomebuyersandhouseholds,the5Star
BuildingStandardalsoconfersbenefitstothe wider Victoriancommunity. The
netcommunitywidebenefitsofthe5StarStandardinclude:
savingsfromdeferredconstructionofnewelectricitygenerationcapacity
savingsfromreductionsingasinfrastructure,gasusageandgasappliance
costs
reductioningreenhousegasemissionsduetolower energyusage
watersavingsanddeferredneedfornew watersources.
Itshouldbenotedthatthe valuationofthesebenefitsisdistinctfromthe
estimatesoftheprivatebenefitspresentedinChapter4,andthusdonotresult
inthedoublecountingof benefits. Theassessmentofthesecommunitywide
benefitsisincludedinthisstudytoprovideanotherperspectiveontheimpact
ofthe5StarStandardin Victoria.
Asnotedintheintroductorychapter,theabsenceofdetailedinformationon
administrativecostshasprecludedtheundertaking ofacostbenefitanalysis
fromthecommunitywideperspective.
6.1 Stock of 5 Star homes in Victoria

Tocomputetheaggregatebenefitsto Victoria, ACIL Tasmanhasadoptedthe
assumptionmadeinGWA(2007)that38,0005Starhomes(bothClass1and
Class2)areconstructedannuallyoverthe10yearexpectedlifespanofthe
buildingstandard. Ascan beseeninFigure13,the actualnumberofresidential
buildingapprovalsfluctuatesconsiderablyfromyeartoyear.
Usingthisassumptionofthenumberofnewhomesconstructedeachyearand
ascenarioofa10yearlifespanofthe5StarStandard,thestockof Victorian5
Starhomesover whichthe Victoriawidecommunitybenefitsarecalculatedis
showninFigure14.
Whilethe5StarStandardwasextendedtocoveralterationsandrelocationsof
homesfrom1May2008,thesehavenotbeenincludedinthemodelling as
thereisinsufficientdataavailableontherateandamountofadditionsand
alterationstoexistinghomes.
Communitywide benefits of the 5 Star Standard 45

Figure 13 Total residential building approvals, 199192 to 200607
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1991-92 1993-94 1995-96 1997-98 1999-2000 2001-02 2003-04 2005-06
Data source: ABS building approvals data
Figure 14 Stock of 5 Star homes in Victoria, 2006 to 2055
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2006 2011 2016 2021 2026 2031 2036 2041 2046 2051
6.2 Reduction in energy costs to Victoria

ACIL Tasmanhasmodelledthebenefitsofthe5StarStandardto Victoriain
termsofloweredexpendituresonelectricityandgasappliancesanddeferred
constructionofnewelectricityandgasgenerationcapacity.
Duetothecomplexityof suchmodellingandthenumberofassumptionsthat
mustbemade,thereportedbenefitsshouldonlybetakenasindicative
estimates.

6.2.1 Electricity
The5StarStandardwouldcontributetoreducedcapitalinvestmentin
electricity generation anddistributioninfrastructure,reducedappliancesize and
thegasinputsavingsassociatedwithreducedpeakloadelectricitygeneration
usinggasturbines.
Itshouldbenotedthatthesesavingsfroma Victorian,communitywide
perspectivearedifferentfromthoseaccruingtoindividualhomebuyersor
households. Asexplainedinthepreviouschapter,householdelectricitysavings
duetothe5StarStandardarecalculatedbymultiplyingtheamountof
electricitysavedbyeachhouseholdbytheretailpriceofelectricityfacedbythe
household.
Fromthe Victorianperspective,the communitywidebenefitsofthe5Star

Standardinregardtoelectricityarecomputedby analysingthecostsofnew
generationcapacitythatcanbedeferredduetothe 5StarStandardandthe
inputcostsassociatedwiththeamountofelectricitythatnolongerhastobe
produced. Asthe5StarStandardhasthegreatestimpactonpeakloads(such
asreducedairconditioningusageon veryhotsummerdays),theinput would
primarilybenaturalgasthatpowersopencyclegasfiredturbines.
In Victoria,peaksystemresidentialloadsaredriven byairconditioning
installations. Whilethedemandforspaceheatingis largein Victoria,itis
mostlymetbynaturalgas.Hencecoolingloadsaresubstantiallyhigherthan
residentialheatingloadsandarethedriverofpeakcapacityratings. An
inspectionof2007netsystemloadprofilesforthefivedistributionsystemsin
Victoriaindicatesthatupto40percentofthepeak summerloadisair
conditioningload.
Henceanyinitiativetoreduceairconditioningloadshouldleadtoareduction
inthepeaksysteminstalledcapacityrequirementin termsofgenerationand
distributioncosts.
Detailedassumptionsusedinthemodelingandsavingsaresetoutin Table24.
Capacitysavingsoccurbecausetheinstalledcapacityofairconditionersisable
tobereducedin5Starhomes. Airconditioningpenetrationin Victoriaisin
excessof60percentofhouseholdsbutitismuchmorelikelytobeinstalledin
newhomes. Asurveyofoccupantsofrecentlycompleted5Starhomeshas
indicatedthatabout75percentofthesehomesarefittedwithairconditioners
(SV2007).

Table 24 Electricity generation capacity and input savings assumptions

and estimates
Item Value
Appliance size reduction 30%
Load factor (peak) 50%
Load diversity 75%
Cooling load living area only (kW) 10
Proportion of households installed 75%
Installed appliance capacity saved (kW) 2.25
Install system capacity saved (kW) 0.84375
Value of input (gas) savings per MWh $40.00

Generation installed capacity savings per kW $800.00
Distribution installed capacity savings per kW $500.00
Appliance savings per kW $100.00
Electricity saved from GWA modelling (MWh) 1.24
Total deferred electricity generation capacity savings (one-off) $1,321.88

Total input cost savings (annual) $49.60
Next wehaveassumed,alsoonaconservativebasis,thattheairconditioner
sizecanbereducedby30 percentfora5Starhome, whichis3kW. Averaged
acrossallhomes,thisreducesto2.25kW. Wehaveassumeda veryconservative
appliancesavingof$100/kW whichprovidesaone off$225appliance
installationsavingperhousehold. Thisisasavingandabenefitto Victoriaas
mostcoolingappliancesaremanufacturedoverseas. Thatis,itisnot simplya
transferfromoneeconomicagentin Victoriatoanother withinthestate.
Notallappliancesoperateatalltimeseven atthepeak. Wehave assumeda

conservative50percentloadfactoronairconditioners. Thereisalsoload
diversityasnotallcustomersarethesameandnotallregionsexperiencethe
sameconditionsatthesametime. Wehave assumedaconservative75percent
loaddiversityfactor.
Hencethepowersystemcapacitysavedisassessedtobe0.84375kWper5Star
home. Thesesavingsareattributabletodistributionandinstalledgeneration
capacity.Itshouldbenotedthat wehaveexcludedtransmissionand
distributionlosses which wouldincreasethissavingslightly.
Generationavoided/deferredwouldbepeakinggeneration. Wehaveused
opencyclegasturbinesasaproxy which wehaveassumedtocost$800/kWto
install. Thisfigureisbasedonrecentprojectsundertakenin Australia.
Distributioncapacityavoidedhasbeenassessedat$500/kW. Thereisnot
muchpublicinformationaroundthecostsofdistributionsystemsintermsof

avoidedcapacity. Weconstructedthisestimateconservativelybyreviewing
existingdistributiontariffsin Victoria.
Electricity energysavingsatpeaktimesareassumedtobeenergygenerated
throughopencycle gasturbinesusinggas. Wehave conservativelyestimated
gastobepricedat$3.50/GJasaninputtothepowerstationandthatthegasis
convertedtoelectricityat aheatrateof12GJ/MWh(anadjustmenthasbeen
madeforreducedheatrateefficienciesatthepeakbecausethey coincide with
veryhotdays).
Thepresent valueofelectricityrelatedsavingsto Victoriaasaresultofthe5

StarStandardisshownin Table25.
Table 25 Present value of electricity generation capacity and input

savings to Victoria (2008 dollars)
3.5 percent $517.0 million $826.2 million
6.2.2 Gas
Withregardtogas,thebenefitofthe5StarStandardto Victoria wouldbe a

combinationofreducedcapitalinvestmentingasinfrastructure,inputcost
savingsandreducedappliancesize.
Theassumptionsunderpinning ACIL Tasmansmodellingofthegassavings

andthemodellingresultsareshownin Table26.
Table 26 Gas savings assumptions and estimates

Item Value
Value of gas savings per GJ $3.50
Connection capacity savings per connection $123.80
Distribution system capacity savings Unknown
Appliance savings per installation $200.00
Gas saved from GWA modelling (GJ) 26.834
Total deferred gas generation capacity savings (one-off) $323.80

Total gas input savings (annual) $93.90
ACIL Tasmanhasassumedaconservative$200savinginapplianceinstallation
asaconsequenceofreducedheatingrequirement.
Theaveragedistributionconnectioncost(acrossallthreedistributors)for
residentialcustomersin Victoriain2008is$1238.20.Someofthesecostsare

fixed(suchasmetering). ACIL Tasmanhasassumeda10percentsavingsin

thesecostsasaconsequenceoftheneedforlessconnectioncapacity.
ACIL Tasmanhasmadenootherassumptionsaboutdistribution savingsas

theabilitytoaccessrelevantdataislimited.
Gasinputsavingsarebasedonaconservativeprice of$3.50/GJandenergy
savingsof26.834GJ(fromtheGWAmodelingdiscussedpreviously). The
mainbenefitfromgassavings wouldbetofreeupgasreservesforusein
electricity generationunderanETS wheremuchgreateramountsofgas willbe
requiredthanbefore.
Thepresent valueofgasrelatedsavingsto Victoria asaresultofthe5Star

Standardisshownin Table25.
Table 27 Present value of gas savings to Victoria (2008 dollars)

6.3 Reduction in greenhouse gas emissions

UsingtheaverageofthetwocarbonpricepathsshowninFigure2,thepresent
valueofgreenhousegas(GHG)emissionsavingsfromthe5StarStandardto
Victoriaisshownin Table28.12
Table 28 Present value of GHG emission reductions to Victoria (2008

dollars)
3.5 percent $145.7 million $1,252.4 million
TheseGHGsavingsaredistinctfrom,andadditionalto,thesavingsdueto
deferredelectricity andgasgeneratingcapacitydiscussedpreviously.
Thecarbonpriceisapartial valuationthroughapplicationoftheCPRSofthe
harmfuleffectsofGHGemissions thatarenottakenintoaccountinmarket
12 The value of GHG emission reductions estimated here is reflected in the projected energy
prices used to calculate the private benefits of the 5 Star Standard. Recall that the carbon
price arising from an ETS is fed through to the retail price of electricity faced by
households.

transactions.Forexample, whendeciding whetherornottoengageinan

activitythatgeneratesGHGemissions,mostindividualsorfirmsdonot
consideritsspatialandintertemporal(time)impacts:GHGemissionscause
global warming, whichharmspeoplelivinginotherpartsofthe world(suchas
fromrising sealevels)andleavetheplanet worseoffforfuturegenerations.
Deferredenergycapacity savings,ontheotherhand,aremoneysavedby
Victoriafrompostponing theconstructionandinstallationofnewelectricity
andgasproductioncapacity.
6.4 Water savings and supply infrastructure

Whilethereductionin waterdemandfromeach5Starhome(restrictionson
flowratesforshowerheadsandtapsandmaximum waterpressuresand
additional watersavings wherearainwatertankisinstalled)mayhavea
negligible impacton Victorias waterinfrastructure,thecombinedimpactof
thestockof5Star Victorianhomesonpotable waterdemandandtheneedto
developnew watersources willbeconsiderable.
A2KLtankcurrentlysavesabout18kL/year. Watersavingscanbe
significantlyincreasedby capturingalargerproportionoftheroofareaand
connectiontootherinternal waterusesinadditiontothetoilet(BEC2007).
However,thegrowingdemandfor waterfromnaturalpopulationgrowth
meansthattheconstructionofnewsourcesisonlydelayedratherthan
eliminatedaltogether.
AsnotedinNWC(2007), thetotalsystemimpactmaybecalculatedasthe
differencebetweenthepresent valuecostof watersources withbusinessas
usual(BAU)demandandthepresent valuecostofthedelayedwatersources.
ThiscalculationiscommonlyreferredtoastheLongRunMarginal Cost
(LRMC)ofnew watersources.LRMCinclude changesinbothcapitaland
operatingcostfora waterutility.
TheLRMC will vary considerablybetweenregions, dependingonthenext
plannedaugmentation.Ithasbeenestimatedbyregulatorsacross Australia
with varyingdegreesofconfidenceandprecision.Someoftheseregulators
havenotmadethedetails oftheirLRMCcalculationspubliclyavailable.Itis
thusunclear whatassumptionshavebeenadoptedandwhethertheyare
consistentacrossallStates.
TheLRMCofnew water sourcesfor Victoriahasbeenestimatedby Yarra

Valley Waterat$0.60/kL andSouthEast Waterat$0.58/kL. Wehaveusedthe
$0.58/kLfigureinourcomputationofthe valueofthe watersavingsenabled
bythe5StarStandardto VictoriaasitistheonepreferredbytheEssential
ServicesCommission(ESC)(seeESC2005).Itshouldbenotedthatthisfigure

isseveralyearsold,andmayresultinanunderestimationofthe watersaving
benefits.
Theestimatedvaluesofthesesavingsareshownin Table29.
Table 29 Present value of water savings to Victoria (2008 dollars)

6.5 Aggregate communitywide benefits to

Victoria
Theaggregate communitywidebenefitsto Victoria fromdeferredconstruction
ofnewelectricityandgasgenerationcapacity,reductioningreenhousegas
emissionsduetolowerenergyusage, watersavings anddeferredneedfornew
watersourcesareshownin Table30.
Table 30 Present value of aggregate benefits to Victoria (2008 dollars)

Theannualcommunitywidebenefitsofthe5StarStandard,brokendownby
thesourceofbenefit,isshowninFigure15.Inthefirstdecadefollowingthe
introductionofthebuildingstandard,mostofthecommunitywidebenefits
arederivedfromtheavoidanceofnew electricityandgasgenerationcapacity
(whichareassumedtobe aonetimebenefitforeachnew5Starhomebuilt).
Thereafter,thelargestsourceofbenefitto Victoriaisthereductionin
greenhousegasemissions duetolowerenergyusagemadepossiblebythe5
StarStandard.
Asthelargestsourcesof benefitsto Victoriaaretheavoidanceofnew

electricity andgasgenerationcapacityandgreenhousegasemissionreductions,
theaggregatecommunitywidebenefitsofthe5StarStandardaremost
sensitivetoassumptionsunderlyingthecalculationofavoidedelectricityand
gasgenerationcapacityandthequantityofCO2emissionreduction.
Conversely,theaggregate benefitsarelikelytobemuchlesssensitiveto
assumptionsabouttheLRMCofnew watersources.

Figure 15 Benefits to Victoria by source, 20062065 ($ millions, 2008$)
200
180
160
140
120
100
80
60
40
20
0
2006 2011 2016 2021 2026 2031 2036 2041 2046 2051 2056 2061
Electricity Gas Water GHG emissions
6.6 Sensitivity of aggregate Victorian benefits to

key assumptions
Asinthecaseofthetotal privatebenefitsofthe5StarStandard, ACIL
TasmanhasusedMonte Carlosimulationstoanalysethesensitivityof
aggregate Victorianbenefitstokeyassumptions.
A90percentconfidenceintervalforthepresent valueofaggregate Victorian
benefitsovera10yeartimehorizonundera6.5percentdiscountrateisshown
inFigure16. Theconfidenceintervalliesbetween $0.76billionand$0.93
billion, withacentralestimateequalto$0.83billion.
Figure 16 90% confident interval for aggregate benefits to Victoria

0.8446 0.7598 0.9280
9E-09
5.0% 90.0% 5.0%
8E-09
7E-09
6E-09
5E-09
4E-09
3E-09
2E-09
1E-09
0
0.66 0.71 0.76 0.81 0.86 0.91 0.96 1.01 1.07
$billion

The TornadodiagraminFigure17showsthattheestimatedaggregatebenefits
ofthe5StarStandardto Victoriaismostsensitivetothefollowing
assumptions(indescendingorderofsensitivity):
theestimatedvalueofoneoffelectricitycapacitysavings
reductioninannual CO2emissions
annualgasenergysavings
oneoffgascapacitysavings
annualelectricityinputsavings
LRMCofnew watersources
watersavingsperhome
carbonpricepath.
Thediagramshowstheimpactofaonestandarddeviationchangeineach
assumptiononthe valueoftotalbenefitsto Victoria.Forexample,aone
standarddeviationincreaseinannual CO2emissionreductionper5Starhome
increasesthetotalannual benefitto Victoriaby$27.5million, while aone
standarddeviationincreaseintheLRMCofnew watersourcesraisesthetotal
annualbenefitby $3.0million.
Figure 17 Tornado diagram sensitivity of aggregate Victorian benefits to

key assumptions
Electricity capacity savings per home ($) 38.45

Reduction in CO2 emissions (tonnes) 27.46
Gas input savings per home per year ($) 13.62
Gas capacity savings per home ($) 9.44
Electricity input savings per home per year 7.22
Carbon price ($/tonne of CO2) / 2015 3.27
Water infrastructure savings per home 3.01
LRMC of new water sources ($/kL) 3.00
0 10 20 30 40
Impact of 1 std dev increase in parameter on total benefits to Victoria ($m)
6.7 Impact of the 5 Star Standard on the Victorian

insulation and glass/glazing industries
Byrequiringbuilderstouseimprovedinsulationandwindows withhigher
thermalefficiencies,the5 StarBuildingStandardhashadconsiderableimpacts

onthe Victorianinsulationindustryandthe Victorianglassandglazing

industrysincetheStandardcameintoforceinmid2005.
However,theseimpactscannotbecountedasnetbenefitsto Victoriaasthey
essentiallyinvolvetransferpaymentsfromhomebuyerstobuildersandthetwo
industries withinthestate.Nevertheless,itisusefultodiscusssomeofthekey
impactsthebuildingstandardhashadontheseindustries.
6.7.1 Impact on the Victorian insulation industry
AccordingtomembersoftheInsulationCouncilof AustraliaandNew
Zealand(ICANZ), which supply55to65percentofresidentialinsulation
requirementsin Victoria,the Victorian5StarStandardhasresultedina
revenueincreaseofabout$20millionperannum.Ofthisfigure,approximately
halfcouldbeattributable toinsulationmanufacturedin Victoria. Accordingto
ICANZ,annualsalesR3.54.0ceilinginsulationbattshaveincreasedby100
percent while annualsalesR1.52.0 wallinsulationbattshaverisenby65
percentsincetheintroductionofthe5StarStandard.
Glasswoolandrockwoolinsulationplantsarecapitalintensive,centralisedand
tendtoserviceallof Australiaandmanufactureproductsforallmarket
segments(includingcommercialandindustrialbuildings).Itisthereforenot
possibletoisolatepreciselytheinvestmentsmadetoservicetheincreased
residentialdemandarisingfromthe5StarStandard.
AccordingtoICANZ, investmentstotallingabout$100millionhavebeen
madeacross Australiasincemid2005toaccommodategrowthresultingfrom
regulationinallstatesforbothresidentialandcommercialinsulationproducts.
Accompanyingthisinvestmentisanincreaseinindustryemploymentofmore
than80personsacrossthecountry.
In Victoria,FletcherInsulationhasinvestedinupgradesofitsglasswool
manufacturingplantinDandenong whileCSRBradfordInsulationhas
investedinupgradesofitsrockwoolmanufacturing plantinClayton.
6.7.2 Impact on the Victorian glass and glazing industry
The5StarBuildingStandardhasincreasedtheadoptionofenergyefficient
glazing(EEG),suchasdoubleglazing,in Victoria. AroundAustralia,theshare
ofEEGisbelievedtobe below5percent.In Victoria,sincetheintroduction
ofthe5StarStandard,thefigurehasrisentonearly15percent.
Inaddition,thepriceofanIGU(adoubleglazedpanelofglasstobeinstalled
intoa window)hasdecreasedfromapproximately$55/m2toabout$35
40/m2.

Sincetheintroductionofthe5StarStandard,DMSGlass(sincepurchasedby
CSR)haveinstalledadoubleglazingplantofsignificantsize(costingabout$6
million) whileMoenGlasshaveupgradedtheirplantatacostofaround$2
million.CSR ispoisedtospendapproximately $7millionininstallingan
additionalplantandnearly$40mininstallinga loweplant.(Lowemissivityor
loweglassconsiderablyenhancestheperformance ofanIGUandcanbeused
inbothsingleanddoubleglazedpanels).Dreamhaven,StegbarandA&L
(Victoriasbiggest windowsupplier)haveallinstallednewIGUlines,andtwo
otherfirmshaveorderedequipmentforlinesoftheirown.
The5StarStandardhasthereforegeneratedsignificantinvestmentand
additionalemploymentin theglassandwindowindustry.

7 Conclusions
ACIL Tasmansevaluationofthe5StarBuildingStandardindicatesthatit
potentiallygeneratessubstantialbenefitsto Victoria intermsofsavingsfrom
deferredconstructionofnewelectricityandgasgenerationcapacity,reduction
ingreenhousegasemissionsduetolowerenergyusage, watersavingsand
deferredneedfornew watersources.
Thesepotentialbenefitsareprojectedtototalapproximately$840millionover
10yearsand$1.9billionover50yearsundera6.5percentdiscountrate,and
$970millionover10yearsand$3.1billionover50yearsundera3.5percent
discountrate.
Fromahomebuyersorhouseholdsperspective,thecosteffectivenessofthe5
StarStandarddependsonthechoiceofasolarhot watersystemorarainwater
tank.
Overa10yeartimehorizon,thebenefitcostratio(BCR)ofthe5Star
Standardisintherangeof1.21.8forahome withasolarhot watersystem
(dependingonthesource ofcostestimates) whiletheratioforahome witha
rainwatertankisonly0.81.2,but wouldbebetterif waterpricesmoreclosely
reflectscarcityorifthere wasgreaterroofcaptureandconnectiontomoreend
uses.
Asnotedin VCEC(2005),thechoicebetweenasolarhot watersystemanda
rainwatertankofferedby the Victorian5StarStandardinvolvesatradeoff
betweentwodifferentobjectives,astheformeraddressestheissueofenergy
efficiency whilethelatter addressestheissueof waterefficiency.
Inaddition,anumberofindirectbenefitsofrainwatertankshavealsobeen
identified,including environmentalandcommunity benefitsthatareinfluenced
bythedesignconfigurationoftherainwatertank.
Conclusions 57
8 References
ABCB(2006), RegulationImpactStatement:Proposalto AmendtheBuildingCodeof
AustraliatoIncreasethe Energy EfficiencyRequirements forHouses, AustralianBuilding
CodesBoard,March.
ACG(2002), CostBenefitAnalysisof NewHousing EnergyRegulations, Allen

ConsultingGroupreport fortheSustainableEnergy Authorityof Victoria.
ACG(2004), Enhancing5StarHome EnergyStandardsinVictoria: ABenefitCost

AnalysisofProspectiveWater Efficiency,RainwaterTankandSolarHotWaterHeating
Regulations, AllenConsultingGroupreportfortheSustainableEnergy
Authorityof Victoria.
AG(2008), ModellingtheRelationshipof Energy Efficiency AttributestoHousePrice:

TheCaseofDetachedHousesSoldinthe AustralianCapitalTerritoryin2005and2006,
AustralianGovernment,Canberra.
BEC(2007), Formulationandassessmentofallotmentscale flowobjective for protecting

receivingwaterways, BenchmarkEnvironmentalConsulting,Melbourne.
ELM&EE(2008), Building forBetterStormwater Quality:Howwatersensitiveurban

designcanimprovewaterqualityandenablereuse,EnvironmentandLand
Management&EcologicalEngineering,Melbourne.
ESC(2005), MetropolitanandRegionalBusinessesWaterPlans200506to200708:
FinalDecision,EssentialServicesCommission,Melbourne, June.
GWA(2007), OptionstoReduceGreenhouseEmissions fromNewHomesinVictoria

throughtheBuildingApprovalProcess,George WilkenfeldandAssociates,Sydney.
GWA(2006), WaterSavingRequirements for NewResidentialBuildingsinVictoria:

Options forFlexibleCompliance,George WilkenfeldandAssociates,Sydney.
NWC(2007), TheCostEffectivenessofRainwaterTanksinUrban Australia,Marsden

Jacob AssociatesfortheNational WaterCommission,March.
PC(2005), ThePrivateCostEffectivenessofImproving Energy Efficiency,Productivity

CommissionInquiryReportNo.36,Canberra, August.
SV(2007), 5StarHousesFittingsand AppliancesSurvey,reportforSustainability

VictoriabyMorelandEnergyFoundationLtd,StrahanResearch,Sunstruck
EnergyPtyLtdandIkonomidisReidPtyLtd,Melbourne, August.
References 58
URS(2007), BenefitCostAnalysisofChangestotheRegulationof5StarStandards for

Stormwater Management,preparedbyURSforMelbourne Water,Melbourne,
November.
VCEC(2005), HousingRegulationinVictoria:Building BetterOutcomes, Victorian

Competition&EfficiencyCommission,Melbourne.
References 59
A Builder survey results

Modifications to building fabric to achieve 5 Star
rating
Ceiling
Q1. Whatmodificationstoceilinginsulationarerequired toattain the5

Starrating?
Builder Response
Builder 1 Increase the R value to R4 from R2.5
Around 50% of our homes require an upgrade from R2.5 to
Builder 2 up to R4.0. The other 50% achieve 5 Star with R2.5 alone.
Builder 3 Depends, we allow R 3.5 batts as standard
Upgrades of ceiling insulation to R4.0 (typical),
R5.0(occasional) & R6.0(in rare cases) in lieu of R3.0. We
Builder 4 now use R4.0 as a minimum requirement for ceilings.
Builder 5 Job specific - mostly upgrade to R4.0
Builder 6 Additional insulation
This is dependant on design and orientation, but we basically
Builder 7 increase insulation up to R4.0
Builder 8 An additional R0.5 batts
Builder 9 Ranges from R2.5 to R5
Builder 10 R4.0 batts
Builder 11a R4.0 - for 6 star
(houses)
An increase in R value and possible space requirements to
Builder 11b accommodate added insulation. No values available at this
(apartments) time.
Our standard ceiling insulation is R4.0, it is too costly to raise
the value any more. We don't offer a two bedroom product so
Builder 12 all totals for this are n/a.
Builder 13 3.5 to 4.0 in lieu of our standard 2.5
Builder 14 R 3.8 batts
Builder 15 Standard: R3.5 Upgrade: R4.0 to R.7.0
Builder 16 R4.0 insulation
Builder 17 up to R5.0 batts
Wall
Q2. Whatmodificationsto wallinsulationare requiredtoattainthe5

Starrating?
Builder Response
Builder 1 No modifications have been made over our previous practice
References 60
All homes have R1.5 insulation batts with reflective foil wrap
as a standard inclusion. Around 40% of our homes require an
Builder 2 upgrade to R2.0 wall batts.
Builder 3 We now allow R 2.0 wall batts as standard
We use R2.0 in lieu of R1.5. We use R2.0 as a minimum for
Builder 4 walls.
Builder 5 Job specific - mostly upgrade from R1.3 foil to R2.5
Builder 6 Additional insulation
Builder 7 increase insulation up to R2.3
Builder 8 R1.5 batts
Builder 9 None, as our standard requirements meet 5 Star Rating
Builder 10 R2.0 with sisalation (taped)
Builder 11a R2.5 - for 6 Star
accommodate added insulation. No values available at this
Builder 11b time.
Our standard wall insulation is R2.0, if required we can raise it
Builder 12 to R2.5
We don't generally up the wall insulation but have increased
Builder 13 to R2.5 In lieu of R1.5 for 6 star estates
Builder 14 R 2.0 batts
Builder 15 Standard: R2.0
Builder 16 R1.5 sisalation and R2.0 bulk insulation
Builder 17 R2.0 batts plus wrap
Floor
Q3. Whatmodificationstofloorinsulationare requiredtoattainthe5

Starrating?
Builder Response
Builder 1 No modifications have been made over our previous practice
None. Almost all homes are built on a concrete slab on
Builder 2 ground.
Depends, on a slab nil. On a strip footing, floor insulation is
often required, stip footings are heavily penalised by the
energy rating system making blocks afflicted by slope even
Builder 3 more expensive to build on.
We typically use concrete slab on ground construction. This
does not require modifications to insulation to achieve 5 star.
With timber framed suspended floor we typically add
Builder 4 insulation (ie concertina foil batts) to achieve 5 star.
Nil to concrete slab - no timber floors rated since new
Builder 5 regulations adopted
Builder 6 Mostly concrete slab but if required insultion to timber floors
We only build with concrete slab on ground. Waffle pod slabs
has not shown us any benefit in the software outcomes to
Builder 7 offset its additional cost.
Builder 8 Nil
Timber floor has R1.5 under floor. Concrete slab no
Builder 9 difference.
References 61
Builder 10 Waffle pod slab

Builder 11a None. Concrete slab construction.
accommodate added insulation. No values available at this
Builder 11b time.
On strip footing jobs, we can put a foil wrap and insulation in
the floor boards. But have not done so as of yet, costings
Builder 12 would be done if and when we do have to do one.
Builder 13 We haven't as we don't do timber sub-floors
Builder 14 We mostly do slab floors
Builder 15 NIL
Builder 16 None, mostly built on concrete slab
Nil for waffle slab. Sub-floor foil batts for suspended timber
Builder 17 floors
Windows
Q4. Whatmodificationsto windowsarerequiredtoattain the5Star

rating?
Builder Response
Some windows are required to be double glazed - done on a
Builder 1 house by house basis
In a small number of cases low-e glass is required. Our range
of 'Future' homes includes double glazing throughout as
Builder 2 standard.
Depends on the orientation, more often than not some double
Builder 3 glazing is required.
Double glazing is used sometimes with low-e glass to achieve
5 star. Extent of double glazing varies. In occassional cases
all windows have been double glazed due to poor oreintation
of house. Occasionally clients ask for all windows to be
Builder 4 double glazed.
Builder 5 Increase substantial areas of glass to double glazing
Builder 6 Window orentation/size and double glazing
Builder 7 double glaze where required.
Seal around windows with foam prior to plaster. Some double
Builder 8 glazing depending on orientation.
Builder 9 Re-position of some windows and some double glazing
Builder 10 Moderated sizes and some double glazing, seals
Builder 11a Aluminium Double Glazed
Generally an increase from single to double glazing, and the
Builder 11b use of high performance Low-E glazing.
We reduce windows, add Low E glazing and or Double Glaze
Builder 12 windows.
We have to double glaze as required, our windows are
Builder 13 aluminium improved as a standard
Builder 14 Low E glass
Double Glazing + Awning (Aluminium), Low-E , reduce
Builder 15 window height(if applicable)
Builder 16 some double glazing, changing window sizes
References 62
Seal gaps b/n frame & window frame. Some windows require
Builder 17 double glazing or low-e glass or equivalent.
Shading
Q5. Whatmodificationstoshadingarerequiredtoattainthe5Star
rating?
Builder Response
Shading devices are sometimes included - done on a house
Builder 1 by house basis
Builder 2 None
Again depends on the site etc. Being in Zone 4, keeping heat
Builder 3 in is a must so eaves not as crucial as reducing windows.
A balance is aimed at to obtain maximum energy rating. 300
600mm eaves is found to be best. Covered verandahs (ie
very large eaves) to north facing windows is avoided.
Verandahs (large eaves) are used to west facing orientations
Builder 4 for shading.
Builder 5 Not adopted due to cost
Builder 6 Eaves have been added to get additional points
Builder 7 None
Builder 8 Nil
The design determines eaves or not, we modify other ways
Builder 9 for 5 Star
Builder 10 Generally eaveless is better
Builder 11a -
Builder 11b Generally no changes are being applied.
Builder 12 We would do this only if a client requests this change.
We don't generally provide eaves and shading devices, we
Builder 13 try to keep our designs as standard as possible.
Builder 14 None
Builder 15 Eaves- dependant on design
Builder 16 generally none
Designs without eaves usually require addition of eaves to
north-facing windows. Shade battens/pergola are sometimes
required to patio areas that have sliding door or bifold door
Builder 17 access.
Plans and orientations
Changes to house plans
Q6.Howhavehouse plansbeenchangedtomeetthe5StarStandard?
Builder Response
Builder 1 Reduction in glazed area

Location of living rooms to suit multiple siting options
They are assessed at the design stage for a new product and
Builder 2 it is generally the area of glazing which needs attention for the
home to achieve 5 Stars.
References 63
Far less windows in general, especially south & west facing

Builder 3 glazed areas reduced severely. Homes on strip footings
becoming a lot more difficult to build.
Houses are designed and oriented to maximise northern
Builder 4 exposure to largest windows with a balance of east windows
while minimising south and west facing exposures/windows.
Builder 5 Some reduction in window areas
Builder 6 Glazing has reduced in all designs and court yard designs are
no longer practical.
We are designing homes with simpler outlines and smaller
Builder 7 windows which has helped. However many clients request
roofed alfrescos which are detrimental to the 5 star outcomes
and result in added expense to achieve 5 star
Builder 8 We have reduced our window sizes.
Builder 9 Orientation has become important, designs are still clients'
decisions regardless of the costs.
Builder 10 More innovative use of glazing and zoning off living areas
Builder 11a Not changed. Good design princples were already being
used.
Builder 11b Generally they haven't been changed.
Builder 12 We have flipped a house on occasion, but it is hard in built up
areas as it can be costly to put in a new crossover.
When new designs are being thought up we look at the ratio
Builder 13 of glass to floor space and orientation of houses to the blocks
they are put on.
Builder 14 Yes - we had our designs rated to all oreintations with low E
glass changes
Builder 15 40% (change to standard spec.)
Builder 16 change orientation, improve cross flow venitliation
Builder 17 North facing living areas more important. Smaller windows to
the other orientations.
Adaptations to orientations
Q7.Howarehouse plansadaptedtosuitdifferentorientations?
Builder Response
The design of the houses incorporates room locations which
Builder 1 offer multiple siting options.
Double glazing is our key method for increasing performance
of poor performing houses.
Builder 2 All new home designs are assessed so that all orientations
are able to achieve 5 Stars.
Window placements & sizes for better passive design are
Builder 3 altered. Reduced use of verandas etc, difficult given
everyone wants significant glazed areas on to under roof al
fresco areas these days.
Living areas which generally have largest windows are
located to maximise northern exposure. Utility rooms are
Builder 4 located to south. Western exposures are minimised. Standard
house designs are re-oriented (mirrored) to make best use of
available orientation.
Builder 5 With great difficulty & expense - particularly in regard to
windows.
References 64
Builder 6 window locations alter to suit site

Builder 7 does not change the house plans as such, but we
Builder 7 do things such as increasing insulation levels and adding
double glazing etc as required.
Builder 8 Mirror reversed or re-designed.
Builder 9 Very difficult to change clients' decisions to meet 5 Star
Standard
Builder 10 Good design (left- and right-handed options)
Builder 11a Integrated housing model
Generally they haven't been changed. Site geometry and
Builder 11b maximising site usage. Optimising views combined with
design considerations is a priority.
We work with the Consultant when we design new plans and
Builder 12 only release plans when there are a few orientations that will
work with that house type.
Builder 13 We look at relocating windows and Outdoor Living spaces to
suit.
Builder 14 Low E glass required for some windows
Builder 15 Some plans allow for for living areas to be mirrored from a
pivot point
Builder 16 orientated correctly from the beginning
Builder 17 Window locations & sizes are modified, if possible - including
vertical location with respect to eaves.
Adaptations to orientations
Q8.Howarecoststhat varybyorientationrecovered(e.g.by varying

house pricesaccording toorientation)?
Builder Response
Builder 1 Combination of increased customer price and profit erosion.
Builder 2 The house is priced based on the worst orientation, so all lot
orientations for that home design are covered.
Builder 3 Custom homes so charged on a case by case scenario as
necessary.
Clients are made aware at the early design stages that
display home energy rating may vary due to orientation.
Builder 4 Depending on client budget costs are typically recovered by
reduction in cost of fixtures, fittings and finishes ie lower cost
appliances, plumbing fixtures, bricks etc.
Builder 5 Site-specific costing & charge to owners.
Builder 6 Clients are charged directly
Builder 7 does not charge extra regardless of orientation. We
Builder 7 do however charge the client for energy upgrades that are
required when the client changes erode the rating.
Builder 8 Variation to house price.
Builder 9 The price of 5 Star Rating is treated as an extra charge to
client.
Builder 10 Averaging
Builder 11a They are not.
Builder 11b See above notes.
References 65
Builder 12 Any changes to meet the five star requirement are charged to
the client by variation.
Builder 13 We allow for a 5 star rating in our base cost and anything
additional is passed onto the client.
Builder 14 Up to $6000
Builder 15 price is based on 'worst case scenario/orientation'
Builder 16 Generally not a problem
Sale price of home is fixed for all orientations - which includes
Builder 17 the cost for the least efficient orientation.i.e. the cost of the
worst case orientation is already built into the standard house
price.
Other information
Timber flooring
Q9. Whatstrategiesareusedtoattainthe5Star rating whenbuildinga

home withtimber flooring?
Builder Response
Builder 1 We do not use timber flooring in our homes.
Use FirstRate 5 which is friendlier to timber sub-floors through
Builder 2 offering a greater number of options e.g. enclosing the sub-
floor. This is rare for our company as very few homes are built
on timber sub-floors.
You can only add insulation so far, other than that windows
must be double glazed, reduced or deleted. In some
Builder 3 instances it can be almost impossible to achieve without
severly compromising the home. Much to consumer
dissatisfaction. A serious issue!
Use of added floor insulation (ie concertina foil batts), improve
Builder 4 insulation to ceilings and walls, reduction in window sizes to
south and west orientations. In some cases modify the
standard floor plan to improve the energy rating.
Builder 5 No experience to date
Builder 6 sisalation and insulation to floors and additional insulation
required to walls and ceilings
Builder 7 We do not do timber flooring
Builder 8 Additional double glazing. Sisalation/insulation to sub floor.
Builder 9 This is very difficult as the energy rating system for timber
floors is not working properly.
Builder 10 added floor insulation
Builder11 Timber framed floor construction not used.
We find that if we play with the window sizes and glass types
Builder 12 and wall insulation we can normally achieve five stars, but on
occasion we have had to use floor insulation.
Builder 13 We don't do timber floors.
Builder 14 We haven't done one since 4 Star upgrade was required
timber floor homes built are minimal - most are waffle pod
Builder 15 slab construction. If any, windows/ceiling insulation would be
upgraded at the cost of ther client
Builder 16 double glazing to all windows
References 66
Window orientation, location & size are optimised. Draft

Builder 17 sealing & insulation to walls & ceiling are optimised. Finl
option is to insulate the subfloor.
Data source:
Learning effects
Q10.Howhavethemodificationsandstrategiestomeetthe5Star
Standardchangedbetween2005and2008?
Builder Response
Builder 1 We have completed substantial analysis on how best to

achieve the required standard.
Strategies change based on the cost of upgrade items. For
Builder 2 example, Builder 2 recently decided to offer wall batts as
standard because we were able to negotiate an agreement
with the supplier to provide batts at a cheaper price.
Builder 3 No significant change for us.
There is a more conscious effort in the early design stages to
Builder 4 design dwellings that are better orientated. Dwellings on
allotments with poor orientations will be rated at early stages
to check and amend design if necessary.
Builder 5 By increasing costs passed onto owners.
Builder 6 House design has changed to less windows and more
insulation.
As Builder 7 introduced 5 Star houses to Victoria in 2001, and
Builder 7 subsequently improved designs etc of the next couple of
years, we had already sorted out our strategies before 2005
and have carried these forward.
Builder 8 Unknown.
Builder 9 The general public require a home to suit their needs and
reluctantly acept that there is a large price to pay.
Builder 10 Commenced in 2001
Builder 11 More focus on best insulation and best double glazing.
Builder 12 Not really sure, I haven't really noticed a change, since I don't
do the reports.
Builder 13 We have learnt to site houses to best suit the blocks and
design our standard products with energy effeciency in mind
Builder 14 New products have helped slightly
Reducing window sizes (where applicable), adding air space
Builder 15 between cladding & timber wall frame, 'Pivot ' floor plans,
zoning, cross-flow ventilation
Builder 16 The strategies are integrated into the design from the
beginning so it's a lot easier now.
We have learnt to optimise/minimise windows, since this is
Builder 17 the cheapest option. New floor plans are designed with living
areas to one side that can be mirror-reversed to
accommodate most east-west oriented lots.
Solar hot water system and rainwater tank
Q11. Whatfactorsinfluencethedecisiontoinstallasolarhot water

systeminsteadofarainwatertankor viceversa (e.g.customerchoice)?
References 67
Builder Response
Builder 1 Solar hot water services are cheaper for us to supply than a
tank. We do not offer the customer a choice.
Main decision a commercial one - generally cheaper to install
Builder 2 solar hot water than rainwater tank, partly as installation (ie.
labour, time) is easier and cheaper. Also believe solar hot
water provides greater cost saving, env benefits for client.
Preference of client & site size. Smaller sites more likely
Builder 3 solar as the rainwater tanks take up a large area on the site &
the in ground tanks can creat angle of repose issues on
tighter sites.
Predominantly a customer choice however we find that
customers are more conscious of the need to save water
Builder 4 therefore request that water tanks are used. Customers now
often insist on using rainwater storage tanks larger than the
2000ltr required minimum (ie 5000ltr)
Builder 5 Customer choice based mainly on cost
Builder 6 Company policy. Cheaper at the moment to install solar HWS
Builder 7 Solar hot water system is standard and water tanks are an
option recommended to all clients
Builder 8 Solar hot water we supply as standard. Client can substitute if
required or pay for additional tank.
Builder 9 Solar system is more difficult to install on an existing home so
I prefer this method - price is similar.
Builder 10 Solar hot water is standard as it is more effective.
Builder 11 Financial initially. Now we use both for best ESD and
customer benefit.
We have a solar hot water system as a standard inclusion on
Builder 12 our plans, a lot of people choose to put a tank in as well, not
many swap.
Builder 13 Due to block sizes and the tight spaces that can occur it
easier to provide a solar hot water system.
Builder 14 We offer our designs with solar as it is easier to locate on the
house than tanks - cost is roughly the same
Solar Hot Water: Company Decision/Marketing. Display
Builder 15 Homes use both to demonstrate to client use of
Flushmiser(toilet) and maintain garden
Builder 16 We have a preference for solar hot water, so generally
recommend. Most clients go for both.
Builder 17 Rain water tank is preferred due to the extra administration of
processing gov't rebates.
Other Compliance Issues
Q12. Arethereanyothersignificantissuesincomplying with the5Star

Standard?
Builder Response
Additional cost in both materials and added time to assess
Builder 1 and schedule changes.
Increased complexity in describing what is in the home i.e.
some windows may be double glazed.
References 68
Double storey homes suffer under the current standard (due

Builder 2 to the area adjustment built into the software), so these
homes generally require more expensive upgrades.
Homes on a timber floor strip footing are problematic if the
Builder 3 site is not blessed with good solar orientation. Serious issue,
have had sites where the home almost cannot be built.
The most difficult issue is with timber framed sub-floors,
dwellings on lots with poor orientations, large dwellings
Builder 4 60+squares. We also now provide as a standard weather
seals to external and utility doors, self-closing dampers to
exhaust fans and seal all joins, penetrations etc
Builder 5 Timber floor will be difficult to rate at 5 Stars cost-effectively, I
imagine.
Builder 6 Training of staff for energy rating. Cost of registration for
accedited raters. Cost of additional insurance for raters.
Builder 7 None
Builder 8 Draft strips to external and some internal doors.
The major concerns I have are that designs have to
Builder 9 compromised and we could see large boxes with small
windows as the norm.
Builder 10 Roof ventilation / door seals / draft stoppers.
Builder 11 Anticipate a potential shortage of accredited suitably qualified
and experienced HER assessors from 1 May 2009.
Builder 12 n/a
Builder 13
Variations to standard plans affecting 5 Star. Trying to quote
Builder 14 the cost without the 5 Star effects known until plans are done
and rating is complete.
Builder 15 Large Houses mainly 2-Storey require additonal upgrades to
comply
Builder 16 Not really, it's all pretty standard now.
Whilst we have internal rating, we also need external
consultants due to the volume of work. Accordingly there is
Builder 17 extra compliance cost & time in producing 5-star reports. i.e.
we need both extra internal & external resources to comply
with 5-star.
Cost Estimates: Thermal

Thefollowing weightsarebasedonthenumberofhomesbuilt in
Victoriabyeachbuilderin2007:
Weight
Builder A 0.169
Builder B 0.004
Builder C 0.007
Builder D 0.220
Builder E 0.028
Builder F 0.294
Builder G 0.029
References 69
Builder H 0.064
Builder I 0.158
Builder J 0.028
Ceiling
Small Medium Large
2 bedroom 3 bedroom 3 bedroom 4 bedroom Single Double

storey storey
<120 150 175 275 250 350
Builder A From $270 $330 $385 $605 $550 $770

To $350 $410 $465 $685 $630 $850
Builder B From $150 $200 $250 $300 $450 $500

To $400 $500 $750 $1,500 $1,200 $2,000
Builder C From na na na na $700 $900

To na na na na $1,000 $1,200
Builder D From $0 $0 $0 $202 $0 $167

To $0 $125 $150 $462 $174 $515
Builder E From $240 $300 $350 $550 na na
To $240 $300 $350 $550 na na
Builder F From N/A $920 $1,007 $1,415 $1,522 $1,390

To N/A $920 $1,007 $1,415 $1,522 $1,390
Builder G From $200 $250 $250 $400 na na
To $200 $250 $250 $400 na na
Builder H From $367 $372 $474 $573 $661 $137

To $367 $372 $474 $573 $661 $137
Builder I From na $45 $60 $90 $105 $85
To na $160 $215 $315 $380 $305
Builder J From $700 $900 $1,050 $1,600 $1,500 $1,050

To $1,000 $1,200 $1,400 $2,200 $2,000 $1,400
Data source:
Wall
Small Medium Large

storey storey
<120 150 175 275 250 350
Builder A From $0 $0 $0 $0 $0 $0
To $270 $290 $315 $395 $375 $445
Builder B From $100 $120 $150 $300 $200 $300
To $200 $300 $450 $600 $500 $900
Builder C From na na na na $1,600 $2,000
To na na na na $1,800 $2,400
Builder D From $0 $817 $957 $1,111 $856 $2,041
To $0 $817 $1,120 $1,199 $856 $2,041
References 70

To $600 $650 $700 $800 na na
Builder F From N/A $730 $690 $870 $980 $1,661

To N/A $730 $690 $870 $980 $1,661

To $300 $300 $350 $450 na na
Builder H From $93 $59 $127 $66 $104 $227

To $93 $59 $127 $66 $104 $227
Builder I From na $375 $400 $550 $650 $1,100

To na $375 $400 $550 $650 $1,100
Builder J From $366 $430 $500 $600 $600 $850

To $400 $1,050 $1,200 $1,500 $1,500 $1,900
Window
Small Medium Large

storey storey
<120 150 175 275 250 350
Builder A From $0 $0 $0 $0 $0 $0
To $1,177 $1,328 $1,512 $1,966 $1,966 $3,200
Builder B From $1,200 $1,400 $1,500 $2,500 $2,100 $3,000
To $3,000 $4,000 $5,000 $9,000 $7,500 $15,000
To na na na na $3,500 $6,000
Builder D From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $217 $0 $0
To $200 $250 $300 $400 na na
Builder F From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
Builder G From $0 $0 $2,500 $5,000 na na
To $5,000 $5,000 $7,500 $10,000 na na
Builder H From $140 $280 $224 $364 $448 $868
To $287 $574 $494 $560 $988 $1,849
Builder I From na $0 $0 $0 $0 $0
To na $1,650 $1,600 $1,600 $1,600 $2,200
Builder J From $4,500 $5,500 $6,000 $6,500 $7,000 $9,000
To $1,000 $6,000 $7,000 $7,200 $8,000 $10,500
Shading
Small Medium Large

storey storey
<120 150 175 275 250 350
References 71
Builder A From $0 $0 $0 $0 $0 $0
To $440 $660 $880 $1,700 $1,700 $1,700
Builder B From $0 $450 $900 $1,200 $1,000 $1,500

To $1,200 $1,500 $2,000 $2,500 $2,000 $3,000
To na na na na $0 $0
Builder D From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 na na
Builder F From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 na na
Builder H From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
To na $0 $0 $0 $0 $0
Builder J From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
Data source:
Other
Small Medium Large

storey storey
<120 150 175 275 250 350
Builder A From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
Builder B From $450 $450 $450 $600 $450 $600
To $600 $600 $600 $1,000 $900 $1,200
To na na na na $0 $0
Builder D From $0 $0 $0 $0 $0 $135
To $0 $89 $88 $133 $0 $179

To $50 $50 $75 $100 na na
Builder F From N/A $64 $64 $64 $64 $96
To N/A $64 $64 $64 $64 $96

To $200 $200 $200 $200 na na
Builder H From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
To na $0 $0 $0 $0 $0
References 72
Builder J From $0 $0 $0 $0 $0 $0
To $0 $0 $0 $0 $0 $0
Data source:
Total
Small Medium Large

storey storey
<120 150 175 275 250 350
Builder A From $270 $330 $385 $605 $550 $770

To $2,237 $2,688 $3,172 $4,746 $4,671 $6,195
Builder B From $1,900 $2,620 $3,250 $4,900 $4,200 $5,900

To $5,400 $6,900 $8,800 $14,600 $12,100 $22,100
Builder C From na na na na $2,300 $3,400
To na na na na $6,300 $9,600
Builder D From $0 $817 $957 $1,313 $856 $2,343
To $0 $1,031 $1,358 $2,011 $1,030 $2,735
Builder E From $1,090 $1,250 $1,425 $1,850 na na
To $1,090 $1,250 $1,425 $1,850 na na
Builder F From N/A $1,714 $1,761 $2,349 $2,566 $3,147
To N/A $1,714 $1,761 $2,349 $2,566 $3,147
Builder G From $700 $750 $3,300 $6,050 na na
To $5,700 $5,750 $8,300 $11,050 na na
Builder H From $600 $711 $825 $1,003 $1,213 $1,232
To $747 $1,005 $1,095 $1,199 $1,753 $2,213
Builder I From na $420 $460 $640 $755 $1,185
To na $2,185 $2,215 $2,465 $2,630 $3,605
Builder J From $5,566 $6,830 $7,550 $8,700 $9,100 $10,900

To $6,400 $8,250 $9,600 $10,900 $11,500 $13,800
Cost Estimates: Rainwater tank/Solar hot water system
Rainwater tank
Capital Installation Total
Builder 1 approx $3,000.00 to

$8,000.00 depending
on size and whether
above or below ground
Builder 2 $1,856 $890 $2,746

Builder 3
Builder 4 $3,200 $700 $3,900
Builder 5 $3,000 $1,500 $4,500
References 73
Builder 6
Builder 7 $2,094 $459 $2,553
Builder 8 $1,500 $1,700 $3,200

Builder 9 $2,100 $1,200 $3,300
Builder 10 $2,477
Builder 11 $2,300 $600 $2,900

Builder 12 $5,070
Builder 13 $3,064 $611 $3,675
Builder 14
Builder 15
Builder 16 $2,000 $500

Builder 17
Solar hot water system
Capital Installation Total (incl RECs)
Builder 1 $1,500
Builder 2 $1,000 $1,200 $2,200

Builder 3
Builder 4 $4,700 (excl RECs) $1,300 $4,750

Builder 6
Builder 7 $664 $743 $1,407

Builder 8 $2,000 (excl RECs) $700 $1,450
Builder 10 $1,740
Builder 11 $2,500 $1,500 $4,000
Builder 12 $3,950
Builder 14
Builder 15 $2,300
Builder 17
Note: The adjustment for RECs is assumed to be $1,250 for builders whose capital cost estimates
exclude RECs.
References 74
B A primer on insulation
ThisintroductiontobuildinginsulationisdrawnfromChapter7ofthe Energy
SmartHousing ManualpublishedbySustainableEnergy Authority Victoriain
2002.
How insulation works

Anuninsulatedhomeissubjecttoconsiderable winterheatlossesandsummer
heatgains. Allmaterialsallowsomeheattopassthroughthem(viaradiation,
convectionandconduction). Theterminsulationreferstomaterialsthat
providesubstantialresistancetoheatflow. Whenthesematerialsareinstalled
intheceiling, wallsandfloorsofabuilding,heatflowintoandoutofthe
buildingisreduced,thusminimisingtheneedforheatingandcooling.
Principles of insulation
Resistancetoheatflowis achievedbytheuseofeitherbulkinsulationor
reflectiveinsulation.Bulk insulationtrapsmillionsoftinypocketsofstillairor
othergases withinitsstructure. Theseairpocketsprovidetheresistancetoheat
flow.Bulkinsulationreducesradiant,convective andconductedheatflow
Bulkinsulationisavailableasbatts,blanketsandboards,orasloosefill which
ispumped,blownorplacedbyhandintoan area.Battsandblanketscanbe
madefromthefollowingmaterials:
Glasswool(fibreglass)madefrommeltedglassspunintoaflexiblematof
finefibres
Rockwoolmadefrom volcanicrockmeltedathightemperaturesand
spunintoamatoffinefibres
Natural woolmadefromsheeps woolformedintobattsorblankets
Polyestermadefrompolyesterfibres(includingrecycledPETbottles)
spunintoaflexiblematt
Rockwoolisdenserthan glasswool,soR valueper unitthicknessishigherand
providesbettersoundabsorptionqualities.However,itisalsomoreexpensive.
Reflectiveinsulation worksbyreducingtheradiant heattransferacrossan

enclosedspace, e.g.betweenbricksandplasterboardinaninsulatedbrick
veneer wall.Reflectivefoilin wallsorundertheroofreflectsradiantheataway
fromtheinteriorinsummer.Fourtypesofreflectiveinsulationproductsare
currentlyavailable:
References 75
Reflectivefoillaminatefoillaminatedtopaper withglassfibre
reinforcement
Multicellreflectivefoilproductstwotofourlayersoflaminatedfoil
separatedbypartitioningtoprovideaone,two,orthreelayeredcell
structure
Expandableconcertinastylefoildoublesidedreflectivefoilformedinto
anexpandableconcertina
Foilbondedtobulkinsulationreflectivefoilbondedtobatts,blanketsor
polystyreneboards
Bulkinsulationandheatflow Reflectiveinsulationandheatflow
How insulation performance is measured

Allinsulationmaterialsareratedfortheirperformanceinrestrictingheat
transfer. ThisisexpressedastheR value,alsoknownasthermalresistanceor
resistivity. TheR valueis aguidetoitsperformanceasaninsulatorthehigher
theR value,thegreatertheinsulatingeffect.
R valuesare expressedusingthemetricunitsm2/K/W, where:

m2referstoonemetresquaredofthematerialofa specifiedthickness;
Kreferstoaonedegreetemperaturedifference(KelvinorCelsius)across
thematerial;and
Wreferstotheamountofheatflowacrossthematerialin watts.
TheoverallR valueisthe totalresistanceofabuildingelement.Ittakesinto
accountresistanceprovidedbyconstructionmaterialsusedina wallorceiling,
internalairspaces,thermalbridging,insulationmaterialsandairfilmsadjacent
tosolidmaterials.Eachofthesecomponentshasits owninherentR value,the
sumof whichprovidestheoverallR value.
References 76
C Appropriate choice of discount rate
Energyefficiencyinvestmentsofteninvolveanupfrontcapitalcost, whilethe
benefitsarerealisedinincrementsinthefuture.Evenintheabsenceof
inflation,adollarreceivednowis worthmorethanadollarreceivedatsome
timeinthefuture, whilea dollar'scostincurrednowismoreonerousthanone
accruingatsomefuturetime.
Inorderfor benefitsandcoststobecompared,bothforagiveninvestment
andacrossdifferentinvestments,theyshouldbeconvertedtoacommonunit
ofmeasurementthatremovestheeffectsoftimingdifferences. This
conversionisdonebyusingadiscountrate.
Theappropriatediscountratetouseinaninvestmentevaluationdependson
whoseperspectiveisbeingconsidered.Ifaninvestmentisassessedfroma
publicperspective(taking accountofallbenefitsandcoststosociety),the
discountrateshouldreflecttheperspectiveofsocietyasa whole. Thus,the
guidelinesforpublicsectorinvestmentsandregulationimpactstatementsin
Australiarecommendusingthesocialopportunitycostofcapital(OCC)asa
discountrate.
Regulationimpactassessmentstypicallyassessprivatecosteffectivenessonthe
assumptionthatindividualsusetheestimatedsocialopportunitycostofcapital
astheirdiscountrate. AstheProductivityCommission(PC)hasnoted,the
averageprivatediscountrateislikelytobehigherthantheestimatedsocial
discountrateusedinmanyregulationimpactassessments,andsothebenefits
toindividualscouldbelessthanthosepredicted.Inanycase, asthePCargues,
ifprivatecosteffectivenessisbeingassessed,thentheprivateopportunitycost
ofcapitalfortherelevant individualshouldbeused. The(nominal)bank
lendingrateforhomeloansfacedbymosthomebuyersatthetimeofthis
reports writingisapproximately9.5percent.
The VictorianGovernmenthassetthreebenchmarkdiscountratesfor
infrastructureprojects(Partnerships Victoria2005), whichremaincurrentasof
thisreports writing. Theyhavebeenspecifiedinordertoallowfordifferences
inriskacrossthefollowingsectorsandarebasedonariskfreerateof3.5
percent:
accommodationandrelatedservices(socialOCCof5.5percentinreal
terms)
water,transportandenergy(6.5percent)
telecommunications,mediaandtechnology(9percent).
References 77
TheNSW Treasurydirectstheuseofacentralreal discountrateof7percent

withsensitivitytestsontheuseof4percentand10 percent. The Australian
GovernmentOfficeofBestPracticeRegulationalsosuggestsusinganannual
realmarket weightedaveragediscountrateof7percent,butsuggests
performingsensitivityanalysisat3percentand11percent.
The Victorian(VCEC)recommendsthat,unlessacompellingcase canbe
presentedforadifferentfigure,thediscountrateusedshouldbetherealrisk
freeopportunitycostofcapitalestimatedbytheDepartmentof Treasuryand
FinanceforuseinthePartnerships Victoriaprocess, whichiscurrently3.5
percent.
Toevaluatethe costsandbenefitsofthe5StarBuildingStandardfromthe
homebuyersorhouseholdsperspective, ACIL Tasmanhaschosentousea
centraldiscountrateof6.5percent withsensitivity analysisundertakenat
alternativeratesof3.5percentand9.5percent.
Datasources:ProductivityCommission2005, NSWTreasury2007,Partnerships
Victoria2005,VictorianGuidetoRegulation2007
References 78
D Electricity market modelling

assumptions
ACIL Tasmans PowerMarkisapowerfulmodelthatsimulatestheformulation
ofpricesintheelectricity market. Themodelhasbeenusedinallfive
privatisationsof Victoriangenerators,toanalysethebehaviourofNSW
generatorsandtoassessthecompetitiveprospectsofseveraldifferent
generationinvestmentsinQueensland. ACIL Tasmanhasalsoadaptedthe
modeltoanalysetheSingaporeelectricitymarket.
Thedatainputsfor PowerMarkareintensive, withdemand,outages,supply,

interconnectorcapacityandfuelcostsrequiredforeachregionandeachhour
ofthe12year(2008to2020)projection.
Thisappendixpresentsthebroadapproachtakeninthisaspectofenergy
marketmodelling,includingthedevelopmentofbothsupplyanddemand
inputs.
Modelling assumptions
Theassumptionscoveredinthisappendixareconsideredunderfourheadings:
Electricityconsumption,includingenergyandmaximumdemand
projections whichtakeintoaccountexistingenergy conservationmeasures,
distributedrenewablegenerationandtheeffectsofthedemandside
responsetothehigherpricesresultingfromanETS.
Newentrantcosts,thisconcernstheassumptions madeaboutthe
generationtechnologiesavailableby2020 andthelongrunmarginalcost
(LRMC)theyneedtocoverinordertoenterthemarket.
Marketsupply, whichcoversthepowerstationsavailabletogeneratein
themarketandincludesassumptionsaboutretirementsandnewentryas
wellasplannedandunplannedoutages.
Contractcover,setsout ACIL Tasmansassumptionsconcerningthe
proportionofenergygeneratedinanyperiodthatis coveredbyswap
contracts. Thisisanimportantinputtothemodellingastheproportionof
generationthatisuncontractedaffectsthe wayin which PowerMarkmodels
priceoutcomes.
Electricity consumption
Growthinannualenergy andpeakloadareimportantinputstotheelectricity
marketsimulationprocess.Peakloadistheaverage maximuminstantaneous
References 79
demandforelectricityplacedonthesystemovera givenperiodoftime,
measuredinMW.Energy istheamountofelectricityusedbythesystem
duringagivenperiodoftime,measuredinGWh(orMWh). Thesetwoinputs,
describedonaregionbyregionbasis,broadlydescribetheenergy
consumptionoftheNationalElectricityMarket(NEM).
Forthebusinessasusual scenario wehaveusedtheofficialforecastofregional
summerandwinterpeak demandsandannual energyto2017publishedby
NationalElectricityMarketManagement Company (NEMMCO)inits2007
StatementofOpportunities(SOO).Projectingforwardto2020 wehaveused
theannualaverage growthratesforenergyconsumptionoverthisperiodto
projectbothenergyandmaximumdemandto2020.
TheenergyandmaximumdemandprojectionsadoptedfromtheSOOarethe
mediumenergyand50%probabilityofexceedencemaximumdemand.
TheenergyforecastisrelatedtoasetofunderlyingGDPgrowthassumptions
putsimply,theenergyforecastusedinthescenariosassumesthemostlikely
economicgrowthconditionsineachregionofthe NEMwhichare
developedbytheNationalInstituteofEconomicandIndustryResearch
(NIEIR). Themaximumdemandforecasttakesintoaccounttypicalambient
temperatureconditionsandisdevelopedbyeachof theregionaltransmission
authorities.
New entrant costs

Indevelopingthescenarios ACIL Tasmanassumesthatthenewentrycost
providesalongtermceilingonpoolprices(onaloadweightedbasis). The
logicofthisapproachderivesfromthe viewthatifpoolpricesexceednew
entrycostsforanyperiodoftime,newinvestors willbeattractedintothe
marketuntilpricesaredrivenbackbelowthelongtermceiling. Thesenew
investorsmayincludeelectricityretailersinducedto buildplantoftheirownif
existinggenerators weretodemandcontractstrikepricesabovenew entry
costs.
Newentrycostsarenotuseddirectly within PowerMarkmodelling.However,

theyareusedby ACIL Tasmananalystsasaguideasto whenandwhereto
bringnewentrantsintothesimulations(ascapacity additionsassumptions).
Thenewentrycostsareestimatedwithinafinancialmodelthatencompasses
assumptionsconcerningthermalefficiency,thecostofgas,the weighted
average costofcapitalandthecapital costsofbringingaplantintocommercial
operation.
Intheprojection,newplantisintroducedwheneverthedispatch weighted
poolpriceofthenewentrantintherelevantregion achievesoris verycloseto
References 80
achievingitsnewentrycost. This requiresthatconstructionbebegunsome

twoyearsforCCGTs,andthreeyearsforcoalfiredplant,beforenewentry
levelsarereached.
Thisprocessbringsinnewcapacityundercommercialincentivesandwecheck
thisrateofincreasetoseeifitisaffectingreservemarginsandtheprobability
ofachangeinunservedenergylevels.Infactthecapacityofnew entryplantin
thisprojectbringsaboutaslightreductioninthereserveplantmarginupto
2020.
Toestimatethenewentrylifecyclecost ACIL Tasmanusesadiscountedcash

flowfinancialmodelthat requiresanumberofkeyassumptionsto bemade.
Wehaveassumedthatsomeofthelowandzeroemissiontechnologiesnow
underdevelopmentare available asnewentrantsby thenandsomearestillin
theirdemonstrationstages. Wehaveassumedthatgeothermalenergyisa
technicallyandcommercially viablenewentrantin 2020 withthemain
constraintonitsgrowthbeingthetimetakentodrillanddevelopnew
generationandbuildthe interconnectionneededtobringthisenergyto
market.
Weassumedthatcarboncaptureandstorageforcoalfiredplantsisatthe
demonstrationratherthancommercialstage, asareintegratedgasifying and
combinedcycle(IGCC) CCSplants.
Weassumenuclearisnotanoptionin Australiain2020. Thecurrent
AustralianGovernmenthasruleditoutof Australiasgenerationmixand,
giventhetimerequiredtoputinplacea licensingregimeandforanuclear
planttoplanned,approvedandbuilt,itis veryunlikelythatone wouldbe
contributingto Australiasgenerationby2020.
Market supply
Whentakentogether withtheelectricityconsumptionforecast,the
assumptions regardingplantadditionsandretirementsdeterminesthesupply
demandbalanceandarecriticaltothemodellingresults.
Contract cover
Contractcovermeasurestheextentto which generatorshavetheirpoolprice
exposurecoveredbyfinancialswapcontracts(twowayhedges)13.Inmodelling
poolmarkets,thelevelof swapcontractcoverisadrivingfactorinpriceand
13 Caps impact on generator offering behaviour only to the extent that they relate to plant
capacity that would normally be offline.
References 81
dispatchoutcomes.Basedsolelyonshortrunanalysis,agenerator willusually
offercontractedcapacity atmarginalcost(saveforbelowmarginal costbidsin
respectofMinGenandrampupneeds14),andwillbidtomaximisenet
revenuesfromtheremaininguncontractedcapacity.
Theextentofswapcontractcoveracrossthe whole market, whetherexpressed

asaproportionofavailablecapacityorofmarketdemand,canonlybe
estimatedasitisnotapublishedstatistic.Individualportfolios,ofcourse,are
keenly awareofthepositioninrespectoftheirownbusinessbutthis
informationisnotreportedordivulged.
Whileswap contractlevelsarenotpubliclyknown, portfoliobidstacksdo

allowthelevelofcapacity bidatmarginalcosttobe inferred.
WithinPowerMark,specificationofswapcontractlevelsmeansspecification
oftheamountofcapacity tobeofferedatorbelowmarginalcost.Itis
estimatedbyreferenceto recentmarketexperience andadjustedovertimeon
thebasisofananalysisofcontractingincentives.
ACIL Tasmansanalysistodateindicatesthatthelowestoftheoffpeakhours
areheavilycontractedasaproportionofload, whereascapsandothermore
exoticoptionsareaddedtoswapsinthepeakperiodstoprovidecosteffective
riskmanagement.
ACIL Tasmanestablishes proxy valuesofswapcontractcoverforrecent

historicalperiodsbyreverseengineeringtheswap contractcoverandswap
contracttargetassumptionssuchthattheyreplicateactualpowerstation
dispatchandpoolprices whenactualdemanddata andoutagedataare
substitutedforprojecteddemandandoutages. Theestimatesderivedinthat
wayareplausiblenumbersintheopinionofmarketparticipantsfamiliar with
them.
14 MinGen (for minimum generation) is the estimated minimum level at which a plant can be
technically and economically operated (for flame control and damage limitation).
Generators usually offer this level of capacity at near zero or substantially negative prices in
order to avoid being offloaded by the central dispatcher. It is rare but does occur for
the pool price to settle at a negative offload price. Generators also tend to offer capacity
at below marginal cost for periods when they are intent on rampingup in order to have
the ability to offer greater amounts of capacity in a subsequent period, when pool prices are
expected to be higher.
References 82
E Water and sewerage disposal price

forecasting methodology
Thefollowingmethodwasusedinforecastingthepriceof waterandsewerage
disposalforresidentialcustomersin2008:
1. ObtainthemostrecentpricingdeterminationsforCity West Water,South
East WaterandYarra Valley WaterfromtheEssentialServices
Commission(ESC) website.
2. Extracttheusage chargeforBlock2(440880L/day)andsewagedisposal
charge(perkL)foreachretailer.
3. Extracttheseasonalindicesusedforcalculationof volumeofsewageby
eachretailerandderive anaverageofseasonalindicestobeappliedacross
theyear.
4. Foreachretailer,derive a sewagefactorasfollows:(1/averageofseasonal
indices)*dischargefactorof0.9.
5. Foreachretailer,multiply thesewagedisposalchargebytheappropriate
sewagefactor.
6. Foreachretailer,addthe usagechargetothe value obtainedfromstep5.
7. Averagethe valuesobtainedinstep6tocreateasingle,combined
volumetricchargesfor water&sewagedisposal@ Block2for2008.
IntheabsenceofESCpricedeterminationsformetroretailersbeyond2008/9,
weappliedthe14.8percentannualpriceincreaseto2012announcedbythe
Victorianpremierin August2007andreiteratedbytheMinisterfor Waterin
January2008.15
15
http://www.dpc.vic.gov.au/domino/Web_Notes/newmedia.nsf/b0222c68d27626e2ca256c
8c001a3d2d/7c8e19492e25b999ca257337007fc3ab!OpenDocument and
http://www.dpc.vic.gov.au/domino/Web_Notes/newmedia.nsf/798c8b072d117a01ca256c
8c0019bb01/39d04f2fea3a84b8ca2573d600735d5a!OpenDocument
References 83
F Key assumptions
Alistofkeyassumptions underpinningtheanalysescontainedinthisstudyis
showninthetablebelow.
List of key assumptions and their sources

Assumption Relevant report section Source
Installed costs of thermal improvements 3.1 ABCB 2006
Cost of rainwater tank and solar hot water 3.2 ACIL Tasman builder
system survey, NWC 2007
Builder margin 3.1, 3.2 CEO of major building
company, verified by 3 other
building companies
Reduction in electricity and gas usage in a 5 4.1 GWA 2007
Star home
Projected electricity prices under an ETS 4.2.1 ACIL Tasman
Projected gas price in Victoria 4.2.2 ACIL Tasman
Reduction in household water consumption 4.3 GWA 2006
due to the 5 Star Standard
Lifespan of solar hot water system, 5.1 ACG 2004, NWC 2007
rainwater tank and pump
Annual number of 5 Star homes constructed 6.1 GWA 2007
Savings from deferred electricity generation 6.2.1 ACIL Tasman
capacity
Savings from deferred gas generation 6.2.2 ACIL Tasman
capacity
Reduction in greenhouse gas emissions in a 6.3 GWA 2007
5 Star home
Long run marginal cost of new water 6.4 ESC 2005
sources
Discount rate Various ACIL Tasman
Source: ACIL Tasman
References 84

ACIL5 Star

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Evaluation of the Victorian

5 Star Building Standard

Prepared for the Department of Sustainability and

ACIL Tasman Pty Ltd

Melbourne (Head Office) Brisbane Canberra

For information on this report

2.1 Modifications tothe buildingfabric 7

2.3 Adaptations toorientations 10

2.3.1 Adaptinghouseplans fordifferentorientations 10

2.3.2 Costrecovery foradaptinghouseplansfordifferent

2.5 Choicebetweensolarhot watersystemandrainwatertank 12

3.1 Costs ofimprovingthermal efficiency 15

3.2 Rainwatertankandsolarhot watersystemcosts 19

3.3 Comparison with previouscostestimates 20

4.3 Reductionin waterconsumptionandcosts 30

4.5 Sensitivityofestimatedbenefits toassumptions 33

4.6 Otherdifficulttoquantify benefits 35

4.6.1 Increasein market value 35

5.1.1 Present valueofcosts 37

5.4 Solarhot watersystem versusrainwater tank 42

5.4.1 Alternativescenario1:100percentsolarhot watersystem 43

6.1 Stockof5Starhomesin Victoria 45

6.2 Reductioninenergycosts to Victoria 46

6.5 Aggregatecommunitywide benefits to Victoria 52

6.6 Sensitivityofaggregate Victorianbenefitstokeyassumptions 53

6.7 Impactofthe5StarStandardonthe Victorianinsulationand

6.7.1 Impactonthe Victorianinsulationindustry 55

6.7.2 Impactonthe Victorianglassandglazingindustry 55

Modifications tobuildingfabrictoachieve5Star rating 60

Boxes, charts, figures and tables

Figure 3 Projected retail price of electricity, 2008 to 2020 28

Table 1 Costs and benefits of the Victorian 5 Star Building Standard 3

Table 21 Results of costbenefit analysis 100% solar HWS, 50year horizon 43

Table 22 Results of costbenefit analysis 100% 2kL RWT, 10year time

Table 23 Results of costbenefit analysis 100% 2kL RWT, 50year time

Table 24 Electricity generation capacity and input savings assumptions

Table 25 Present value of electricity generation capacity and input savings

to Victoria (2008 dollars) 49

Table 26 Gas savings assumptions and estimates 49

Table 27 Present value of gas savings to Victoria (2008 dollars) 50

Table 28 Present value of GHG emission reductions to Victoria (2008

Table 29 Present value of water savings to Victoria (2008 dollars) 52

Table 30 Present value of aggregate benefits to Victoria (2008 dollars) 52

Tomeetthe5StarStandard, whichcame intoeffectin July2005,anewhome

Private costs and benefits of the 5 Star Standard

Executive summary viii

Acomparisonofbenefitcostratiosacross thethreealternative assumptions

Figure ES 1 Comparison of benefitcost ratios across three scenarios, 6.5%

Builder cost estimates Independent cost estimates

Note: HWS = hot water system, RWT = rainwater tank

Communitywide benefits of the 5 Star Standard

Thecostsandbenefitsof the5StarStandardto variousstakeholdersin

Table ES 1 Costs and benefits of the Victorian 5 Star Building Standard

Table ES 2 Some communitywide benefits of the 5 Star Standard to Victoria

Caveats and limitations

1.1 Study objective

1.1.1 Private costs and benefits

1.1.2 Communitywide costs and benefits

Thecostsandbenefitsof the5StarStandardto variousstakeholdersin

Table 1 Costs and benefits of the Victorian 5 Star Building Standard

Dataisnotavailableonsomeofthesecosts,but wesuspectmany wouldbe

1.2 Study approach

1.2.1 Building company consultations