Deep energy retrofits, part 1: what national policy says about existing commercial buildings

Why it matters

National policy on existing commercial buildings is still mostly direction, not law. It shows where requirements are heading: HVAC maintenance, wider disclosure, clearer renovation rules, finance conditions and, possibly, minimum standards. Teams that see that direction can scope an upgrade once, at the right moment.

• Developers and builders (cost, programme, risk). All six policy options the report costed were cost-effective, with benefit-cost ratios of 1.7 to 4.7 (p. 8). The 2025 Update proposes mandatory disclosure for most major commercial buildings by 2035 (Action 45). Upgrade works cost less when they ride on plant replacement, lease or renovation events (p. 57).
• Architects and engineers (design and specification). How the NCC applies to existing buildings is often unclear and differs by state (pp. 64 to 65), so confirm a refurbishment's regulatory scope with the building surveyor before design starts. HVAC is about 43% of commercial building energy use (Figure 7, p. 25).

Part 1 of our Deep Energy Retrofits series.

The big picture: what is "Achieving Low Energy Existing Commercial Buildings in Australia"?

It is a final report by EY for the then federal Department of the Environment and Energy, dated 28 October 2019. It identified and costed policy options to cut energy use and emissions in existing commercial buildings. Its findings informed the COAG Energy Council's plan for zero energy and carbon ready buildings.

The report (PDF, DCCEEW):

• was prepared by EY with contributions from Strategy.Policy.Research and ClimateWorks Australia (p. 9);
• built on an earlier Phase 1 report on barriers and policy options, which is included as Appendix B (p. 9);
• excludes the Commercial Building Disclosure program from its modelled scope (p. 9);
• states that it does not commit the COAG Energy Council to the specific costs or implementation strategies it discusses (p. 9).

Why focus on existing commercial buildings?

Around half of the buildings Australia will use in 2050 already exist. The report says new construction adds only about 1% a year, so improving existing buildings is critical, not just new ones (p. 25).

• Emissions: commercial buildings, including offices, shops, hotels, warehouses, schools and hospitals, account for about 10% of Australia's greenhouse gas emissions (p. 10).
• Where the energy goes: HVAC is about 43% of commercial building energy use, lighting 20%, equipment 13%, pool heating 9%, water heating 5% and other uses 10% (Figure 7, p. 25, citing ASBEC and ClimateWorks Australia).
• Potential: the report shows a potential efficiency improvement of about 34% in commercial buildings between 2015 and 2030 (Figure 8, p. 25, adapted from ASBEC 2016).
• Lock-in: buildings last for decades, so delays "can lock in higher emissions for decades into the future" (p. 25).

The 2019 Trajectory Addendum makes the same point: by 2050, about a third of commercial buildings will not have been subject to improved NCC energy measures (Addendum, PDF p. 5, printed p. 3).

What did the report find?

The report found that existing commercial buildings face real barriers despite cost-effective solutions. It said a blend of information, incentives and regulation is needed, and it costed six policy options. Together, they would save 26.6 Mt CO₂-e by FY2030 and deliver a net present value of $8.4 billion.

Headline findings (Executive summary, p. 8):

• Existing commercial buildings contribute around 10% of Australia's greenhouse gas emissions.
• They face barriers to efficiency and on-site renewables, even though cost-effective solutions exist.
• A complementary policy approach is needed, blending information and capacity building, financial incentives and regulation.
• Six priority policy options each have a benefit-cost ratio of between 1.7 and 4.7.
• Together, the six options are estimated to deliver:
• 26.6 Mt CO₂-e in cumulative savings over FY2021 to FY2030, and 87.5 Mt over FY2021 to FY2050;
• $13.9 billion in energy savings against $5.5 billion in costs (present value at a 7% real discount rate), for a net present value of $8.4 billion and an average benefit-cost ratio of 2.5.
• An illustrative "high ambition" scenario sees sector emissions fall by more than 34% by 2030 and by more than 97% by 2050.

Every state benefits. The modelled net present value is positive in every state and territory. NSW, Victoria and Queensland have the largest totals, and South Australia has the highest benefit-cost ratio at 3.5 (Table 3, p. 14).

Recommendations (p. 10):

• Endorse an objective for energy and emissions reduction in existing commercial buildings, in line with the Paris Agreement as a minimum.
• Adopt the six options as a coordinated package.
• Consider three-yearly reviews of the implementation programs.
• Carry out detailed program design.
• Research emerging technologies.

What stops building owners upgrading?

The report names five barriers: the diversity of building types and markets, tenure issues such as split incentives between landlords and tenants, a lack of motivation, capital and capacity constraints, and a lack of triggers for upgrades outside premium offices and retail, where natural refurbishment cycles are relatively frequent.

From Table 1 (p. 11):

Barrier	What it looks like
Diversity	Many building types and markets make many buildings "hard to reach"
Tenure	Split incentives between landlords and tenants; owner-occupiers lack motivation and triggers too
Motivation	Other priorities come before energy and emissions savings, outside premium offices and retail
Capital and capacity	Limited access to finance, skills, staff and time
Triggers	Few natural upgrade points outside premium offices and retail

The report adds that long-term policy certainty is needed to drive investment (pp. 11, 25). It also notes that healthcare, education, retail and offices account for most commercial energy use, while hotels and data centres have high energy intensities (p. 11).

Which policy levers did the report cost?

The report costed six options: clarify and enforce NCC provisions, mandatory HVAC inspection and certification, universal low-cost disclosure, minimum standards for government buildings, financial incentives linked to performance, and expanded MEPS for equipment. Expanded MEPS had the highest benefit-cost ratio (4.7) and the most abatement.

From Table 2 (pp. 13–14). Avoided emissions are cumulative over FY2021 to FY2030.

#	Policy option	Benefit-cost ratio	Avoided emissions
1	Clarify and enforce NCC provisions	2.1	1.4 Mt CO₂-e
2	Mandatory HVAC inspection and certification	2.1	3.1 Mt CO₂-e
3	Universal, low-cost mandatory disclosure	1.7	4.7 Mt CO₂-e
4	Mandatory minimum standards for government owned or leased buildings	2.1	2.0 Mt CO₂-e
5	Financial incentives linked to minimum performance	3.0	3.9 Mt CO₂-e
6	Expand MEPS for building technologies and equipment	4.7	11.4 Mt CO₂-e
	Package (average BCR, total abatement)	2.5	26.6 Mt CO₂-e

Caveat from the report: the benefit-cost analysis does not consider the combined net reduction of all six options or how much each adds beyond the others, and further modelling was commissioned to address this (p. 14). The report's summary table is adjusted for interactions between the options (pp. 13, 107).

Note: the six rows, as rounded, sum to 26.5 Mt. The report's total of 26.6 Mt is correct: its unrounded annual figures (Table 24, pp. 107–108) sum to 26.6 Mt.

The options fall into three complementary approaches: empower with information and capacity building, incentivise with market mechanisms, and mandate and enforce through regulation (p. 12). The financial incentives option lists mechanisms such as Environmental Upgrade Agreements, grants, rebates, tax depreciation, green bonds and Energy Performance Contracts (p. 14).

Note: HVAC is the common thread. HVAC is the largest end use (Figure 7, p. 25). It has its own policy option (option 2), option 6 names chillers and packaged air conditioners for expanded MEPS, and option 5's finance examples include HVAC upgrades. Any serious retrofit plan starts with the plant room.

Zoom out: how does the report tie to the Trajectory for Low Energy Buildings?

The report was written to inform the national Trajectory for Low Energy Buildings, which energy ministers agreed in February 2019. Its figures fed the November 2019 Addendum on existing buildings. The 2025 Update carries the same ideas forward as actions on HVAC, disclosure, finance, renovations and minimum standards.

• The 2019 Trajectory. The Trajectory aimed for zero energy and carbon ready buildings and covered existing buildings through other National Energy Productivity Plan measures (DCCEEW; 2019 Trajectory, p. 8).
• The Addendum (November 2019). The Addendum on existing buildings found that commercial policies could deliver a net present value of more than $8.4 billion, with 26.6 Mt saved by 2030 and 87.5 Mt by 2050 (PDF p. 6, printed p. 4). It grouped measures into enabling mechanisms, targeted building policies and supporting measures (PDF p. 8). It listed commercial actions including:
• an HVAC "health check";
• work on the feasibility of HVAC regulation;
• stronger renovation requirements through the states and territories;
• MEPS research covering HVAC plant, chillers and glazing (PDF pp. 11–12).
• The 2025 Update. The Energy and Climate Change Ministerial Council agreed the 2025 Update on 15 August 2025. Its existing commercial building actions (Actions 41–62, pp. 28–33) include:
• industry partnerships for low-cost, high-benefit interventions such as building maintenance and optimisation, HVAC upgrades and thermal shell improvements (Action 41);
• bank-ready implementation plans for finance (Action 44);
• considering expanding mandatory disclosure to most major commercial buildings by 2035 (Action 45);
• continuing to investigate minimum energy performance standards for existing buildings and developing an initial policy framework (Action 47);
• standard electrification guidance (Action 48);
• HVAC maintenance and refrigerant leakage (Action 49);
• building manuals and passports (Action 50);
• clearer, more consistent NCC requirements for major renovations through state and territory regulators (Action 51);
• digital building management system retrofits (Action 52).
• Implementation. The ECMC agreed an Implementation Plan 2026–27 on 16 December 2025.

Note: Expectation, not commitment. The 2025 Update uses "should" and "consideration should be given" for most existing-building actions. Minimum standards for existing buildings are still being investigated, not legislated.

What does the report mean for a retrofit project?

Expect pressure on existing buildings to grow through HVAC maintenance, disclosure, renovation rules, finance conditions and, possibly, minimum standards. Owners who plan upgrades around natural triggers, such as plant replacement, refurbishment and lease events, will spend less than those who wait for rules to force their hand.

• Confirm the regulatory scope first. State and territory building laws treat refurbishment differently, and the report notes this is often unclear (p. 65), echoing long-standing industry feedback that the NCC's application to existing buildings is poorly understood (p. 64). Ask the building surveyor, early and in writing, whether and how the energy efficiency provisions apply to the proposed work.
• Start with HVAC and controls. HVAC is the largest end use, and HVAC maintenance and inspection appear in the EY options, the Addendum and the 2025 Update.
• Use natural triggers. Plan the upgrade path before end-of-life plant replacement or a major refurbishment. Action 51 targets renovations while trades are on site.
• Get finance-ready. Action 44 points to bank-ready plans for envelope, heating and cooling upgrades. The report's finance option lists mechanisms such as Environmental Upgrade Agreements, grants, rebates, tax depreciation, green bonds and Energy Performance Contracts (p. 14).
• Plan electrification as a sequence. Action 48 recognises that electrifying a building is complex. A staged plan avoids stranded gas plant.
• Check the envelope for moisture as well as heat. Upgrading walls and windows can shift condensation risk. Test a proposed build-up for condensation risk before you commit to it.
• Keep good records. Building manuals and passports (Action 50) make later upgrades cheaper.

What should you ask before you scope a retrofit?

These questions help a project lead find the constraints that shape the scope. Most of the answers already exist somewhere in the owner's or the facility manager's records.

Ask the owner or asset manager:

• When do the major leases expire, and when is the next refurbishment planned?
• Is the building, or part of it, already subject to mandatory disclosure, and does it hold a current NABERS Energy rating?
• What records exist: as-built drawings, operation and maintenance manuals, commissioning records and energy data (Action 50)?
• Which finance routes are under consideration (Action 44)?

Ask the services engineer or facility manager:

• What is the remaining life of the main HVAC plant, and when is it due for replacement (Action 41)?
• Which refrigerants are in use, and what is the leakage and maintenance history (Action 49)?
• Can the building management system support metering, trend logging and analytics, or does it need upgrading (Action 52)?
• What would electrification need: electrical supply capacity, switchboard space and plant space?

Ask the building surveyor:

• Does the proposed work trigger the NCC energy efficiency provisions, and for which parts of the building?
• Which state or territory rules on alterations and change of use apply?

Printable retrofit scoping checklist by role

Use this checklist when an upgrade is first discussed and again before the scope is fixed. Items are grouped by who usually owns them. Print it, tick it off and keep it on the project file.

Developer, owner or asset manager

• ☐ List the natural triggers over the asset plan: plant end of life, lease expiries and planned refurbishments.
• ☐ Check current and possible future disclosure obligations (Action 45).
• ☐ Gather records: as-built drawings, O&M manuals, commissioning records and recent energy data.
• ☐ Identify finance options, such as Environmental Upgrade Agreements, grants, tax depreciation, green bonds or Energy Performance Contracts.
• ☐ Decide whether the plan targets electrification, and over what sequence (Action 48).

Architect

• ☐ Confirm with the building surveyor, in writing, whether and how the NCC energy efficiency provisions apply to the work.
• ☐ Assess the envelope: glazing, roof and wall insulation, and air leakage.
• ☐ Check any envelope upgrade for condensation risk before it is specified.
• ☐ Coordinate envelope works with tenancy and refurbishment programmes, so trades are on site once (Action 51).

Services engineers

• ☐ Survey the HVAC plant: age, condition, efficiency, refrigerant type and leakage history (Actions 41 and 49).
• ☐ Review controls and the building management system for metering, trend logging and analytics (Action 52).
• ☐ Check electrical supply capacity, switchboard space and plant space for electric replacements.
• ☐ Set up metering so that savings can be measured after the works.

Builder

• ☐ Stage works around occupied areas, lease events and plant shutdown windows.
• ☐ Record what was installed, with commissioning results, for the building manual (Action 50).

FAQ

Who wrote "Achieving Low Energy Existing Commercial Buildings in Australia"?

EY prepared the report for the then Department of the Environment and Energy, with contributions from Strategy.Policy.Research and ClimateWorks Australia. The final report is dated 28 October 2019 and is published by DCCEEW.

How much of Australia's emissions come from existing commercial buildings?

The report says existing commercial buildings contribute around 10% of Australia's greenhouse gas emissions.

What policy options did the report recommend?

Six options: clarify and enforce NCC provisions; mandatory HVAC inspection and certification; universal, low-cost mandatory disclosure; minimum standards for government buildings; financial incentives linked to performance; and expanded minimum energy performance standards for equipment.

Does the NCC apply when you refurbish an existing commercial building?

It depends on the state or territory, because their building laws treat refurbishment differently, and on the building surveyor's assessment of the work. The EY report notes long-standing property industry feedback that the circumstances in which the NCC is intended to apply to existing buildings are poorly understood, inconsistent across jurisdictions and rarely enforced. The 2025 Update aims for clearer, more nationally consistent application of NCC requirements for major renovations (Action 51).

Are minimum energy performance standards for existing buildings law?

No. The 2025 Update to the Trajectory for Low Energy Buildings says the options, benefits and costs of minimum standards for existing buildings should continue to be investigated and an initial policy framework developed.

Cover image: Engraving by George Measom, from Berlyn & Fowler, The Crystal Palace (1851). Public domain, via Wikimedia Commons.