Upgrading an air conditioner can be a major expense, especially when you are replacing an older system or installing HVAC equipment for a larger property. In NSW, the Energy Savings Scheme (ESS) and Peak Demand Reduction Scheme (PDRS) may help reduce the cost of eligible energy-efficient air conditioning upgrades. However, not every system or installation qualifies. The equipment, property, installation process, and certificate requirements all matter. Understanding these rules before you sign a quote can help you avoid surprises later.
This guide explains how ESS and PDRS work for residential and commercial HVAC upgrades and what to check before installation.
ESS and PDRS Explained
The Energy Savings Scheme (ESS) and Peak Demand Reduction Scheme (PDRS) are part of the NSW Energy Security Safeguard.
They have different purposes. The ESS focuses on reducing energy use. It supports eligible upgrades that can reduce electricity consumption over time. Eligible activities can create Energy Savings Certificates (ESCs).
The PDRS focuses on reducing electricity demand during periods of high demand on the NSW electricity system. Eligible activities can create Peak Reduction Certificates (PRCs).
Air conditioning is covered by activities under both schemes. For residential and small business air conditioners, the relevant activities are D16 under ESS and HVAC1 under PDRS. Commercial air conditioning uses F4 under ESS and HVAC2 under PDRS.
This distinction matters because a home air conditioner and a large commercial HVAC system do not necessarily follow the same eligibility pathway.
Energy Savings Scheme
The ESS is designed around energy efficiency. For an eligible air conditioner activity, the equipment must meet the requirements set by the applicable activity definition. These requirements can include the product’s performance, cooling capacity, heating capacity and registration in the relevant equipment registry.
The current ESS rules took effect on 7 September 2026, following changes gazetted earlier in 2026. The latest changes include updates relating to multi-split systems, large air conditioners, commercial HVAC eligibility and air conditioner customer co-payments.
The important point for property owners is simple: do not assume that every new high efficiency air conditioner qualifies for an ESS discount or certificate. The actual model and installation need to be checked against the current rules.
Peak Demand Reduction Scheme
The PDRS has a different focus. Instead of looking only at energy saved over time, it looks at the value of reducing electricity demand during peak periods.
For eligible air conditioning activities, the PDRS uses specific requirements for equipment and demand reduction calculations. The current scheme also includes rules covering air conditioners and other technologies that can reduce electricity demand.
For HVAC upgrades, this means an efficient system may have value under both energy saving and peak demand reduction rules, provided the installation meets the requirements of each scheme.
Residential Upgrades
Homeowners and small businesses in NSW may be able to access an upfront discount when installing or replacing an eligible energy efficient air conditioner through the ESS.
The NSW Government states that the air conditioner incentive is available for eligible households and small businesses, although eligibility depends on the equipment, installation and other scheme conditions.
For residential and small business air conditioning, the activity is linked to D16 under ESS and HVAC1 under PDRS. A typical upgrade may involve replacing an older air conditioner with a newer, more efficient model.
Before choosing the unit, check:
- The brand and exact model
- Cooling capacity
- Heating capacity, where relevant
- Energy efficiency information
- GEMS Registry information
- Whether the installation meets the activity requirements
- Whether an eligible certificate provider is involved
- Whether required paperwork is completed before installation
The exact model matters. The NSW Government’s certificate estimator can use equipment information from the Greenhouse & Energy Minimum Standards (GEMS) Registry. Where possible, specifications are updated from the registry based on the brand and model.
This is useful when comparing different systems, but the estimator should not be treated as final approval. The NSW Government specifically states that estimator results are a guide only and do not guarantee eligibility.
What about replacing an old air conditioner?
Replacing an existing system can qualify under the relevant activity where the current rules are met. For an eligible replacement, the existing equipment may need to be removed and the new equipment installed as required by the activity rules.
This is one reason it is worth discussing the upgrade with your installer before any work begins. Do not remove the old system or start installation based only on an online estimate. The certificate process has requirements that need to be handled at the correct stage.
Commercial Upgrades
Commercial HVAC upgrades can be more complex because the system may serve a larger building, multiple zones, or different areas with different cooling needs. Commercial air conditioning is covered under F4 of the ESS and HVAC2 of the PDRS.
The equipment requirements are different from the residential and small business pathway. Commercial projects may involve systems such as:
- Split systems
- Multi split systems
- VRF or VRV systems
- Ducted systems
- Packaged air conditioners
- Air handling equipment
- Larger HVAC installations
The right approach is to look at the project as a whole rather than choosing equipment based only on the advertised efficiency rating. For a commercial property, the installer may need to consider the size and use of the space, existing equipment, operating conditions, zoning and the proposed replacement system.
The model also needs to meet the relevant scheme requirements. Current NSW scheme information confirms that commercial HVAC eligibility and large air conditioner requirements have been updated as part of the 2026 rule changes.
This is particularly important for businesses planning a major HVAC replacement. A system selected under older advice may not follow the same requirements under the current rules.
Installer and Compliance Requirements
This is one of the most important parts of the process. Getting a calculator result does not mean that your project has automatically been approved. The NSW Government states that the eligibility estimator is only a guide. An Accredited Certificate Provider (ACP) must be engaged before installation work begins.
That timing matters. If you are considering an HVAC upgrade and want to access an ESS or PDRS certificate benefit, raise the issue before the installation starts. Your installer or certificate provider can help check the equipment and project against the applicable requirements.
For eligible air conditioner activities, the rules also contain requirements around installation and removal of existing equipment. The work must be completed or supervised by an appropriately licensed person and comply with relevant standards and legislation.
A good pre-installation check should cover:
1. Property
Confirm whether the installation falls under the residential, small business or commercial pathway.
2. Equipment
Check the exact brand and model rather than relying only on the product range or series name.
3. Performance
Check the relevant efficiency information and activity requirements.
4. Capacity
Confirm the cooling and heating capacity recorded for the equipment.
5. Installation
Make sure the proposed installation meets the applicable scheme and licensing requirements.
6. Paperwork
Complete the required documents before the installation starts where the scheme requires this.
This preparation can prevent a common problem: discovering after the work is finished that the installation cannot be claimed under the scheme.
How to Claim
The certificate process is generally handled through an Accredited Certificate Provider, rather than the customer creating certificates independently.
The first step is to discuss the proposed HVAC upgrade before work begins. The ACP can check the project and determine whether the proposed activity can qualify under the relevant scheme rules.
The NSW Government also provides an online eligibility and certificate estimation process. You may need information such as the installation postcode and the brand and model number of the equipment.
However, the estimator is not a guarantee. The actual certificate outcome can depend on the project meeting all relevant requirements.
For residential air conditioner upgrades, the NSW Government states that customers may receive an upfront discount through an eligible installer. The quote should show the work, discount and total cost, and required nomination paperwork needs to be completed before installation begins. This is why the best time to ask about the scheme is before you approve the installation.
Can one HVAC installation earn both ESCs and PRCs?
Potentially, yes. The ESS and PDRS address different benefits. The ESS recognises energy savings, while the PDRS recognises reductions in peak electricity demand.
NSW Government material explains that the same implementation can potentially create both ESCs and PRCs where all requirements are met. That does not mean every HVAC installation automatically receives both.
The project must satisfy the requirements of the applicable ESS and PDRS activities. Your ACP should assess the installation and handle the certificate process under the relevant rules.
FAQs
Yes, one eligible HVAC upgrade may qualify for both ESS and PDRS certificates. However, the installation must meet the separate requirements of each scheme before certificates can be created.
The model must meet the requirements of the relevant scheme activity. Check the exact model, capacity and performance details against the GEMS Registry before choosing your air conditioner.
An oversized system may cost more and may not suit the space or how it is used. Your HVAC installer should assess the room size, heat load and cooling needs first.
A business may qualify for both ESS and PDRS certificates if the installation meets both sets of requirements. Have the project checked by an Accredited Certificate Provider before installation.
Plan Your Upgrade
An HVAC upgrade starts with choosing the right system, capacity and installation approach. If you are considering ESS or PDRS benefits, check eligibility before work begins. The current NSW rules also cover changes to multi split systems, large air conditioners and commercial HVAC.
Planning an upgrade in Tamworth or surrounding NSW areas? Contact AirFreeze to discuss your HVAC needs, check potential scheme eligibility and find the right system for your property.
