energy efficiency council platform

8/9/2019 Energy Efficiency Council Platform

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EnErgyEfficiEncyAustralias Low Carbon Opportunity

Boost Profts

Cut EmissionsCreate Jobs


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Key sectors or action

Industry

The top 200 companies in Australia use almost twice asmuch energy as all households put together. Requiring thesecompanies to improve their eciency by just one per cent eachyear and giving them targeted nancial support to help them

meet and exceed this target would save over $2 billion a yearwhile slashing carbon emissions.

Cogeneration

A eed-in tari and changes to the electricity market could create3000 Megawatts o low-emission cogeneration thats doublethe output o Victorias aging Hazelwood power station andaround 75 per cent less greenhouse emissions per Megawatt.

Commercial Buildings

Millions o Australians work in aging, inecient and uncomortableoces. Combining a new National Eciency Scheme with asophisticated loan scheme or commercial buildings would drivea new wave o productivity improvement in our workplaces.

Government Operations

I governments set up specic policies or investing in energyeciency they could cut their emissions by 30 per cent and save$450 million every year.

More detail on these policy proposals is provided on

pages 6 11.

Three big policies to transormAustralia

An energy efciency target or Australia

We could meet all the growth in our energy needs over the nextdecade simply by using the energy we waste now. Australiashould ollow Europe, China and the US and set a seriousenergy eciency target. The Council recommends that Australiacut energy demand by 20 per cent below business-as-usual by2020.

Targeted investment in efciency by electricitydistributors

Electricity bills are going to increase by as much as 42 per centover the next three years simply because were investing toomuch in new and expanded electricity networks. I the networkcompanies invest just 10 per cent o this planned spendingin energy eciency they could reduce the need or newinrastructure, reducing energy consumers bills.

A National Efciency Scheme (NES)

A National Eciency Scheme (NES) would drive energyeciency across all sectors o the economy. The scheme wouldalso reduce red tape by replacing three existing state schemesin New South Wales, Victoria and South Australia.

The Energy Eciency Council is the peak body orcompanies that provide energy eciency servicesand products to business and government. Together,Australias top eciency experts have developed aset o policies that would transorm Australia into acompetitive, low-carbon economy.

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How to make Australia

energy efcient


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page 4

550

Policy

Scenario

450

Policy

Scenario

Nuclear

CCS

Renewables

Energy Efciency

45

40

35

30

25

20

9%

14%

23%

54%

do-nothing

G

igatonnesofCO2

50ppm 450ppm

2005 2010 2015 2020 2025 2030

Energy Efciency - a wise investment

Eciency is not only the cheapest way to cut emissions itactually saves us money. This means that even in the absenceo climate change we should take action on energy eciencyto strengthen our economy. ClimateWorks Australia ound thatenergy eciency could save the economy $5 billion a year.

This means that Australia will have to pay more to tackle climatechange i we ail to take up the obvious potential o energyeciency. For example, energy eciency in the building sectorcould save $38 billion every year by 2050, partly by avoidingmore expensive ways to cut emissions6.

However, energy eciency is not ree. Like any wise investmentit requires an outlay upront to deliver good returns. Once thesereturns have paid back their original investments the savings gostraight to the bottom line.

Figure 1: The proportion o global abatement rom dierent sources, rom IEA World Energy Outlook 2008

Energy Efciency - hal the greenhouse solution

Its a act. Energy eciency is the biggest, cheapest and astestway to cut greenhouse emissions. Energy eciency could deliverhal o Australias abatement between 2000 and 2020. However,Australia is improving its energy eciency slowly. I we increasedthat rate o improvement, by 2020 we could cut emissions by anextra 50 Megatonnes a year. Thats more greenhouse savingsthan wed get rom taking every Australian car o the road!

The International Energy Agency estimates that energy eciencywill deliver 65 per cent o worldwide carbon cuts in the energysector by 2020, and 54 per cent by 2030. This means that in2020 energy eciency could have almost twice the impact o

renewable energy, nuclear power and clean coal combined. Itsa similar story in Australia. The Australian Bureau o Agriculturaland Research Economics estimate that energy eciency willaccount or 55 per cent o Australias cuts in greenhouse gassesover the next 40 years5.

The Big

Picture

5 Gurney, A., Ford, M., Low, K., Tulloh, C., Jakeman, G. and Gunasekera, D. 2007,Technology: Toward a Low Emissions Future, ABARE Research Report 07.16

6 Centre or International Economics 2007, Capitalising on the building sectors potentialto lessen the costs o a broad based GHG emissions cut. Centre or InternationalEconomics, Sydney.

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Australias National Electricity Market does not encourageinvestment in energy eciency. The National Electricity Market is

highly regulated, and the grid is managed by regional monopolies.The regulations arent perect and the current system actuallyprevents sensible investment in energy eciency and smallgeneration systems.

Even in the absence o climate change these faws should betackled as they distort the energy market, increasing energysupply costs or households and businesses. To reduceAustralias emissions by ve to 25 per cent by 2020, we haveto make some vital changes to the National Electricity Market. Australias energy market is dierent to Caliornias, whichmeans that we need to combine a National Eciency Schemewith requirements or distributors to invest in energy eciency.

Energy Efciency acting now to prepare or acarbon price

Even i Australia introduced a price on carbon tomorrow, wewould still need strong energy eciency policies. The EuropeanUnion has had an emissions trading scheme since 2005 and alsohas more ambitious energy eciency policies than Australia. Asthere are many barriers to energy eciency, we need severalkey energy eciency policies. These policies are separate roma carbon price and are compatible with either Labors delayedCarbon Pollution Reduction Scheme or the Coalitions proposedabatement purchasing scheme.

The major delay to a carbon price means that energy eciencyis now critical. Global carbon emissions must peak soon andstart coming down to limit global warming to 2 degrees Celsius.The Australian Government has a number o policies to ensurethat 20 per cent o energy will come rom renewable sourcesby 2020. However, even with more renewable energy, emissionsrom ossil uels will still increase i energy demand continuesto increase at its current rate. Energy eciency policies wouldreduce the growth in energy demand, putting Australia on trackto meet its international greenhouse targets.

Energy Efciency - making power cheaper oreveryone

Energy prices will rise by up to 42 per cent over the next threeyears, because the monopolies that manage the electricitygrid are planning to spend more than $40 billion over 5 yearsto expand the grid. This is the largest single investment in the

electricity grid, ever, and these costs will be passed straightthrough to consumers.

Energy eciency and cogeneration could save the distributorsbillions o dollars and lower the price o electricity or all users.There are two ways to deal with demand and supply orelectricity. One is to spend millions on more generators andexpanding the electricity grid to meet increasing demand. Theother is to lower demand by investing in energy eciency andlocal generation. Energy eciency and distributed generationcan oten solve the problems o increasing power demand muchmore cheaply than the options that boost centralised generationand inrastructure.

page 57 Caliornia Public Utilities Commission and Caliornia Energy Commission 2006Energy Eciency Caliornias Highest Priority Resource

Smart Example: Caliornia

The State o Caliornia requires energy utilities to invest in energyeciency when it is cheaper than expanding supply. Caliorniasutility energy eciency programs aim to halve the growth indemand or electricity and natural gas between 2004 and 2013,reduce household energy bills and deliver net savings o $10billion.7


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The Energy Eiciency Council recommends that Australiashould aim to drive all energy eciency that saves the economymoney. Experts estimate that the cost-eective potential orenergy eciency in Australia would be equivalent to reducingstationary energy demand by 20 per cent below business asusual by 2020, similar to the European target.

The electricity network operators are planning to spend morethan $40 billion over the next ve years on the grid. TheGovernment needs to support and mandate that they spendjust 10 per cent o this amount on demand-side measures. Those

network operators that ail to deliver this level o investment indemand-side measures in 2010-2012 should have a levy placedon their regions, which an independent body would invest inenergy eciency to oset network expansion and reduce theircustomers bills.

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Overarching Policies

and Energy Market Reorm

Targeted investment in efciency byelectricity distributors

Where there is a need or new capacity in the electricity grid,distributors can either invest in augmenting the grid or in energyeciency and distributed generation. Currently, the rules o theNational Electricity Market strongly avour investing in moreexpensive networks and centralised supply. However, investing

in energy eciency and distributed generation would otenprovide the same results at much lower costs.

The cost o augmenting the grid is passed straight on toelectricity consumers which means that amilies andbusinesses are bearing the cost o an outdated approachto energy. We need to urgently reorm this system. Energyeciency and distributed generation could signicantly lowerthe cost o energy supply.

Energy eciency is critical to Australias uture but, like anythingworthwhile, it not simple. It requires investment and well-designedpolicies.

An Energy Efciency Target orAustraliaThe Prime Minister has committed to place Australia at theoreront o energy eciency improvement in the OECD. Thisaim should be quantied as a clear energy eciency target.Other major economies have already set ambitious energyeciency goals:

EUThe European Union set a target to reduceprimary energy use by 20 per cent belowbusiness-as-usual by 2020.

USAThe US has announced its intention toreduce energy demand by 15 per centbelow business-as-usual by 2020.

China

China reduced the energy intensity o itseconomy by 14 per cent between 2006and 2009 and has set a new goal to reducethe greenhouse intensity o the economy

by 40 to 45 per cent by 2020.


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A National Efciency Scheme

There are a number o options or the NES, including a certicate-based scheme and a grant scheme. Whichever option is chosen,the NES must:

Provide incentives based on the amount o energy a project1.actually saves, including electricity, gas, coke and diesel.

Apply to all parts o the economy, but ocus on industry and2.commercial buildings, as these sectors have the greatestpotential or energy savings.

Be run by an independent body that includes impartial3.energy eciency experts. This will ensure a airer systemand give people condence about the long-term stability othe scheme.

Balance simplicity and compliance by providing part o4.the incentive up ront and part ater measurement andverication.

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Encourage major energy eciency retrots, rather than5.small, incremental projects. Typically, incremental projectsonly add up to minor savings, but whole site upgrades cancut energy use by 30 per cent or more.

Focus on genuinely new projects, rather than projects that6.companies were going to do anyway. In industry this meansocusing on projects with a payback period longer thantwo years. In commercial buildings, this means projectsthat deliver a signicant improvement in NABERS Energy

Ratings.

Encourage applicants by simple, clear rules that help7.businesses, including:

Simple application processes with minimal red tape

Clear rules about how companies secure the incentive

Quick assessments o business applications that includea rapid assessment o eligibility and a detailed second-stage assessment

Multiple unding rounds each year

Establish support services to assist companies to apply

or unding.

Schemes like the NES have been operational or many yearsin the US and Europe. Australia already has three state-basedeciency schemes: the New South Wales Energy SavingScheme (ESS), Victorian Energy Eciency Target (VEET) andSouth Australian Residential Energy Eciency Scheme (REES).Other states are considering their own schemes, too. Introducinga single, national scheme would be ar more ecient and wouldcut compliance costs or retailers and other businesses.

A National Efciency Scheme (NES) should be establishedto invest in energy eciency in households, industry andcommercial buildings when it is cheaper than spending on newgeneration.


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Mandatory minimum goals to improve energyefciency

Every large company has opportunities to improve their energyeciency. Requiring the 200 largest energy users to improve theirenergy eciency by just one per cent per annum would ensurethat everyone plays a part in reducing Australias emissions. Incountries like the Netherlands, eciency goals improved theeciency o industry by over 20 per cent in just ten years.

Fair fnancial support

Supporting companies to go beyond minimum targets will deliver

major benets to the economy. The government shouldnt undeciency projects with short payback periods because theyalready deliver such large benets to corporations. However,the government should use the National Eciency Schemeto support industrial projects that involve R&D or have longerpayback periods. This support should be scaled back overtime.

Creating internal energy efciency unds

A system should be set up to encourage companies to invest inenergy eciency. The Council recommends a ve per cent taxlevied on companies energy bills, with companies who spend a

certain amount on eciency projects exempted.

Standards or new or expanded operations

There are currently no requirements or new mines and plantsto be energy ecient. Companies that are planning new orexpanded operations beyond a certain size should be requiredto assess all the opportunities or energy eciency that have apayback o less than our years. These opportunities should bedisclosed to their board and shareholders.

Industry uses a huge amount o energy. Just 220 companies,mainly in manuacturing, mining, and construction, use morethan 40 per cent o the energy consumed in Australia. Thismeans there are enormous opportunities to save energy inindustry. One company recently ound that they could save 5.4Petajoules o energy at a single site. Thats enough energy topower 100,000 homes.

When a large company tackles energy waste, they cut greenhousegasses, save money and become more globally competitive.Since 1994, Dow Chemicals has cut its global greenhouse gasemissions by 25 per cent and saved US$9.2 billion throughenergy eciency.

Its easy to assume that big companies dont need support tobecome energy ecient because it is an obvious economicbenet. However, many companies lack the expertise, cultureand systems to reap these savings. Recent research by 200corporations ound opportunities to cut their energy use by over60 Petajoules, saving $736 million and cutting Australias totalemissions by over one per cent a staggering result.

This is just the tip o the iceberg. ClimateWorks have estimatedthat energy eciency and cogeneration in industry could saveover $2 billion a year in Australia while cutting greenhousegasses by 22 Megatonnes.

Strengthening

Industry


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page 109 ClimateWorks Australia 2010, A Low Carbon Growth Plan or Australia10 Davis Langdon 2009, Retrogreening Oces in Australia, Davis Langdon Research

Report, Davis Langdon

National Efciency Scheme

The National Eciency Scheme should provide incentives orcompanies that improve the energy eciency o their buildings.The incentive should encourage whole-o-building upgradesand provide greater incentives or more ambitious upgrades.

Perormance Disclosure

The Australian Government is currently introducing vitallegislation that will require commercial property owners to

disclose the energy eciency o their buildings at the point olease and sale. We can strengthen this by requiring governmentsand private sector tenants to display eciency ratings or theirtenancies in their oyers.

Support or Innovation

While we can make major improvements in energy eciencyusing current technologies and practices, developing low andzero-carbon buildings requires innovation. Governments shouldinnovate in their own buildings and provide R&D unding or theprivate sector.

Capacity BuildingRetrotting Australias buildings will create a huge number o jobs, but this means up-skilling existing workers and trainingnew workers.

A major retrot o Australias existing commercial buildings overthe next decade could save $1.4 billion a year9, cut buildingemissions by 30 per cent, and create 27,000 jobs10. While weshould make all new buildings ecient, ocusing on retrottingexisting buildings will have a much bigger impact, as these willaccount or two thirds or more o the building stock in 2030.

Retrot programs need to ocus on integrated buildingupgrades. Combining a bundle o measures together, like chillerreplacements and lighting rets, is nancially attractive anddelivers deep cuts in emissions. I property owners have to dothese upgrades separately it is harder to nance them.

Investing in building energy eciency delivers excellent rates oreturn. Investa recently improved one o its Sydney propertiesto 4.5 NABERS stars, cutting energy use by 51 per cent atalmost 50 per cent rate o return. However, there are barriersthat impede many companies rom retrotting. Currently, thebenets are split between landlords, tenants and other partiesin the National Electricity Market, and there are skill gaps andproblems with nancing upgrades.

Key recommendations or commercialbuildings

Access to capitalEnergy eciency is like any wise investment - it delivers excellentreturns but its not ree. This means that companies need to ndsuitable nance to invest in energy eciency. The governmentshould trial a number o schemes that provide building ownerswith simple access to nance, including revolving unds andProperty-Assessed Clean Energy loans.

Transorming

Commercial Buildings


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Making governments

energy efcient

Recommendations or governmentoperations

Commit to a clear unding path or energyefciency

Agencies need access to capital to invest in energy eciencythrough revolving unds, third party inance or similar.Governments should generally provide access to capitalequivalent to 25 per cent o their annual gas and electricity billeach year, and the Federal Government should provide accessto $75 million in nance per annum over the next 5 years. Igovernments can make clear investment plans over 5 to 10 yeartimerames it will allow industry to meet government and privatesector demand.

Mandate agencies to upgrade their efciency

All government agencies should improve their top energy-usingsites by 2012, accounting or 30 per cent o their energy use,and by 2020 cover o on their remaining major sites, to cover80 per cent o agency energy use. Department heads should beaccountable or achieving these targets.

Appoint one agency to lead on energy efciency

Energy eciency needs to be coordinated across the wholeGovernment, and resources allocated to assist agencies toimplement energy eciency. Ideally the lead agency would bebased in nance or building management departments.

Public Reporting

All agencies must publicly report their progress on an annualbasis, and publicly disclose NABERS energy ratings or allowned or leased oces over 1000m2.

I Australias governments become energy ecient this wouldbe a win-win or taxpayers and the environment. Governmentsin Australia collectively waste $450 million in energy every year11.I the public sector invested in energy eciency they could cuttheir emissions by 30 per cent while saving taxpayers money.

The Auditor General ound that the Australian Government alonecould save $75 million each year i it just met its own modestenergy eciency targets12. However, the Governments nancialprocedures or borrowing private capital, seeking unds rom thebudget and retaining savings can make it dicult or agencies toobtain unds or sensible energy eciency investments.

Governments in the US and Europe that are successullyimproving their energy eiciency either invest in energyeciency using their own unds or the private sector invests ontheir behal. This upront investment is then paid back throughenergy savings, so that budgets remain positive. In just onedecade the US public sector invested US$21 billion to improvethe eciency o schools, hospitals and other buildings.

The State governments in Queensland and Victoria have startedto invest in energy eciency and are reaping the benets. Forexample, Logan Hospital in Queensland cut its electricity useby 19 per cent, with a return on investment o 18.6 per cent. Weneed to expand these programs and we need other governmentsto urgently ollow their example.

1 ClimateWorks Australia 2010, A Low Carbon Growth Plan or Australia2 Australian National Audit Oce 2009


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Suite 2, 490 Spencer Street, West Melbourne, Victoria 3003Phone: (03) 8327 8422

Email: [email protected] Web: www.eec.org.au

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7 StepS to make auStralia energy efficient

The Energy Eciency Council recommends action in seven key policy areas. These measures would save the economy billions odollars every year, reduce electricity price rises and are essential i Australia is going to meet its international commitments to reducegreenhouse emissions by 2020.

Target Cut energy use by 20 per cent below business as usual by 2020

Scheme Introduce a National Efciency Scheme (NES)

The Grid Targeted investment in efciency by electricity distributors to reduce expenditure on the grid

StrengthenIndustry

NES support or projects with longer payback periods

Mandatory efciency targets or the top 200 energy users

Unleash

Cogeneration

A eed-in tari

Changes to electricity markets

TransormCommercial

Buildings

NES support or whole-o-building retrofts

Innovative fnance or energy efciency retrofts

Mandatory display o energy ratings

ImproveGovernmentOperations

A clear unding path or energy efciency

Mandatory requirements or agencies to improve their efciency

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