AI-generated images are being used to fraudulently claim thousands of green certificates under Victoria’s flagship energy saving scheme, which has been wracked by rogue operators seeking to cash in on the taxpayer-funded program.
Nearly 20 businesses have been suspended or cancelled from the scheme over the past two years, some of which have collapsed into liquidation after being penalised by the regulator, leaving households owed millions in missing deposits and without warranties for hot water systems and airconditioners.
In an extreme example of how the scheme is being rorted, an employee at a sustainability company is being chased by his employer for allegedly transferring $5.9 million worth of carbon credits to his own business.
The Victorian Energy Upgrades (VEU) program encourages installers to more cheaply electrify or improve the energy efficiency of homes, with consumers offered discounts on products including hot water systems, refrigerators and televisions.
But an investigation by The Age – using company records, enforcement notices and interviews with consumers and installers – paints a picture of widespread misbehaviour in the $572 million program.
The integrity of VEU, which the government boasts has helped 2.4 million households and 180,000 businesses, will become increasingly important next year when the government will switch all solar rebates it provides on to the program.
Over the past six months, the rise of doctored images has become a particular issue for the Essential Services Commission, which oversees the scheme, as artificial intelligence has made it easy to create realistic fake images.
Dodgy installers are increasingly using AI to provide photographic evidence they have installed air conditioners, lights, heat pump or weather seals, which they then use to claim Victorian energy efficiency certificates valued at $83 each.
In September, the regulator ordered a business to surrender $230,000 worth of carbon credits after alleging they made false claims and submitted staged photos.
Another company was banned from the scheme in August after the commission alleged they provided false information, including doctored photos, and had to surrender 1228 certificates valued at more than $100,000.
In September last year, a company that claimed carbon credits for weather seals and shower heads was alleged to have manipulated photos and even “incentivised” a customer to back their false claims, according to the Essential Services Commission.
Commission chair Gerard Brody said the regulator had ramped up its efforts to stop bad behaviour over the past 18 months, particularly as the program had grown and expanded into more complex energy upgrades. In the last financial year, he said, 10 businesses had been kicked out of the scheme.
“In the early days of the program, lighting upgrades and weather sealing were the dominant activities, whereas in recent years there’s been significant growth in installation of energy efficient airconditioning units and hot water systems,” Brody said.
“We’ve conducted thousands of post-installation compliance checks, including inspections and consumer phone audits, and successfully used data and technology to identify non-compliance.”
Brody confirmed the presence of “bad actors” looking to cheat the system, including using artificial intelligence.
“But we have sophisticated technology, too, and have had success using it to identify breaches,” he said.
“We’ve also strengthened our accreditation processes to address applicants using AI to disguise their lack of knowledge or capability, including by requiring some applicants to attend in-person interviews.”
One of the biggest issues for Victorians purchasing affordable airconditioners and heat pumps has been the large companies who have gone bankrupt, taking deposits and warranties with them.
Liquidator reports obtained by The Age show Cyanergy, which stopped trading in March, owes $7 million to unsecured creditors – mostly households who have paid for energy-efficient products.
Before its liquidation, the company had been suspended by the regulator after installers working for the company allegedly installed heat pumps with wiring issues that represented a safety risk. In 2020, the company received a warning for allegedly submitting falsified invoices claiming products had been installed.
In its final report, liquidator Mackay Goodwin said a large part of the $5.2 million in cash owed was for customers over unpaid services such as installations and incomplete orders. Another $1.9 million was owed to the tax office and other unsecured creditors.
But because the company is in liquidation, it cannot process any refunds or fix any defective work.
Meeting minutes from a committee of inspection, chaired by the liquidator, alleged Cyanergy’s director ordered data be “wiped” from laptops recovered from the firm’s chief financial officer and human resources team.
The committee also identified more than $1 million worth of transactions sent to an overseas entity, which was subject to further investigations. Cyanergy owes another $9 million to creditors including Judo Bank.
A linked company, Smart Lifestyle Australia, also went into liquidation in March. It served as a manufacturer that provided Cyanergy with solar panels, inverters and batteries. It has liabilities of $8.8 million, Mackay Goodwin found, of which $8 million is owed to Judo Bank through loans and guarantees.
Another company, Glower, which sold battery, solar, heating and water systems, went into liquidation in February and is estimated to owe unsecured creditors $4.28 million.
Facebook pages for Glower and Cyanergy, seen by The Age before they were removed, show customers repeatedly asking the businesses to return their deposit or fix defective work.
One customer, Carol Edwards, said her hot water system from Glower started leaking the moment she bought it. But when she contacted the company for a repair it had gone under. “It’s just the biggest ripoff under the sun,” she said.
Brody said he sympathised with the Victorians who had been left out of pocket, particularly those that paid for work that was never started or completed.
“I also recognise the frustration and uncertainty customers can face when trying to get the work completed or recover their money,” he said.
Brody said Consumer Affairs Victoria could help customers. He suggested anyone who had paid for incomplete services by card could contact their bank to see if they could access a chargeback to refund their money.
He said some customers may also be able to claim warranties for defective products through the manufacturers, rather than the installers.
Under the program, households can receive discounts on new electric appliances if they are replacing gas or less energy-efficient models. These discounts are paid for because installers generate lucrative energy efficiency certificates which can be sold on to energy retailers.
But the money on offer can also lure dodgy operators. In 2023, dozens of display fridges were dumped outside businesses by installers looking to claim the green certificates without actually replacing ageing appliances.
Opposition energy spokesman David Davis said the scheme had been plagued with misconduct for years.
In a recent high-profile case, an employee at electrical wholesaler Lawrence and Hanson was taken to court as the company alleged he had funnelled $5.9 million worth of certificates to his own business. The company sought to freeze his assets as they chased the value of these credits.
In an emailed response, Lawrence and Hanson said the company was the victim of fraudulent conduct.
Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.