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Energy Savings Scheme NSW: what it is and who benefits

4 July 2026 · 7 min read

The NSW Energy Savings Scheme (ESS) is a market. Retailers in New South Wales must hold a quantity of Energy Savings Certificates each year. Someone has to create those certificates, and the people who do are businesses and households that make eligible energy-saving upgrades, plus the accredited firms that sell the resulting certificates. The money retailers pay for certificates ends up as discounts and incentives on lighting, refrigeration, motors, hot water and a long list of commercial upgrades.

If you are an installer, that means a second certificate stream beside STCs. If you are a business owner, it means some of the cost of an upgrade can be recovered. This article explains how the scheme works, who runs it, and how it fits with the Peak Demand Reduction Scheme.

The mechanism in plain terms

Start with the obligation. The government sets a target as a share of electricity sales, and the target rises over time. Electricity retailers, called scheme participants, must surrender enough ESCs to meet their share. If they fall short, they pay a penalty, which creates a ceiling on how high certificate prices can sensibly go.

Each ESC stands for one megawatt-hour (MWh) of savings. Savings are not measured by a meter on every job. They are calculated under an approved method, which sets out a baseline (what would have happened without the upgrade) and a formula to credit the difference. Some methods are deemed for common upgrades, so the number of certificates for a given product is known in advance. Others are measured and verified, which suits larger or custom projects.

The scheme is administered by the NSW Government, with IPART acting as Scheme Administrator. It sits inside what the state calls the Energy Security Safeguard, together with the Peak Demand Reduction Scheme.

Who can create certificates

Only an Accredited Certificate Provider (ACP) can create ESCs. Accreditation is by application to the scheme administrator, and each ACP is accredited for specific activities. Many installers do not hold accreditation themselves. Instead, the customer or the installer assigns the right to create certificates to an ACP, who handles the paperwork and pays for them.

That is the part installers should understand. If you use an accredited provider, you can offer a discount on the job and have the provider recover it through certificates. If you apply to become an ACP, you take on record keeping, audits and compliance. Our answers on becoming an ACP in NSW and what an ACP is go through the steps.

A worked example

Take a business replacing an old commercial refrigeration unit with a high-efficiency model under a deemed method. Suppose the method credits 25 MWh of savings over the allowed period.

  • 25 ESCs are created
  • At a market price of $25 each (an illustrative figure, not a quote), that is $625
  • At $35 each, it is $875

The price of ESCs moves with supply and the target, so always check the current market. We do not publish ESC prices on this site. The answer on ESC prices in NSW explains how to find a reliable number, and how to sell ESCs explains the sale itself.

ESS versus PDRS

The two schemes get confused because they live under the same roof. Here is the difference.

ESS PDRS
Certificate ESC (per MWh saved) PRC (peak demand reduction)
What it rewards Total energy saved Lower demand at peak times
Typical activities Efficient lighting, refrigeration, motors, hot water Efficient appliances, batteries, demand response
Official page NSW Energy Savings Scheme NSW Peak Demand Reduction Scheme

The NSW battery incentive moved into the federal Cheaper Home Batteries Program in 2025, and a PDRS incentive for VPP connection continues. If batteries are your trade, read how the federal and state incentives stack rather than assuming the old NSW rules still apply.

Where STC installers meet ESCs

Solar installers touch the ESS in a few ways:

  • Heat pumps. Heat pump hot water systems can attract STCs federally and may also be eligible for NSW incentives under the state schemes. You cannot claim the same benefit twice, so check the rules for each activity. Our heat pump STC guide covers the federal side.
  • Commercial customers. A business buying solar often asks about lighting, HVAC and refrigeration upgrades in the same conversation. If you can refer those to an ACP, you keep the customer.
  • Referral value. An installer with a trusted ACP partner can capture the relationship even without the accreditation.

From the desk: Before you promise a customer an ESS discount, confirm the activity and the product are currently eligible, and that the ACP has agreed to take the certificates. Methods change. A discount shown on a quote that the ACP later declines comes out of your margin.

Compliance basics

ESS audits focus on whether the activity happened, whether the product matched the claim, and whether the customer consented. Keep:

  • Tax invoices and product specifications
  • Dated photos where the method requires them
  • Customer consent and any assignment forms
  • Installer licence details where relevant

The principle is the same as with STC claims: evidence that matches the claim, held for as long as the scheme requires. Details vary by method, so read the relevant method guide. For the federal comparison, see our STC audit explainer.

Why the scheme keeps moving

Targets, methods and eligible activities are reviewed regularly. The government consults on rule changes, and methods can be added, amended or closed. For anyone building a business line on ESCs, that means two habits. First, read the scheme administrator’s updates before each quarter, not just when something breaks. Second, never base a quote on a method that is under review without a margin to absorb a change.

The same applies to the Peak Demand Reduction Scheme, where the target for a given year has been revised when the market was short of certificates. A shortfall in supply tends to lift prices; a surplus does the opposite. Neither is guaranteed to last, which is why the sensible stance for an installer is to treat certificate income as variable and keep your core margin independent of it.

Households versus businesses

Households mostly meet the scheme through a discount at the point of sale, on products such as efficient appliances and hot water systems, delivered by an installer who works with an ACP. Businesses meet it through bigger projects: refrigeration, lighting, motors, compressed air and building upgrades, where the certificate value can be a meaningful share of project cost. The paperwork is heavier for businesses, but so is the reward, which is why many ACPs specialise.

What to do next

  • Decide whether ESCs are a stream you want to touch directly, or one you will pass to an ACP.
  • Read the method guide for any activity you already install, such as heat pumps or commercial lighting.
  • Keep your STC book in order: see the STC trading page and the resources hub for checklists.
  • For the NSW trading side specifically, read ESC trading next.

Questions

Quick answers

What is the Energy Savings Scheme in NSW?
A market-based NSW scheme that rewards energy savings with tradeable Energy Savings Certificates. Electricity retailers and other liable parties must buy and surrender ESCs each year, which funds incentives for efficiency upgrades.
What is an ESC?
An Energy Savings Certificate represents one megawatt-hour of electricity (or equivalent) saved by an eligible activity, as calculated under an approved method.
Is the ESS the same as the Peak Demand Reduction Scheme?
No. They sit under the same Energy Security Safeguard but reward different outcomes. The ESS rewards energy saved over time, while the PDRS rewards reduced demand at peak times, through Peak Reduction Certificates.

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