World Energy Outlook: The blueprint for an efficient world

18 Dec 2012Archived News Climate Change Matters

On 12 November 2012 the International Energy Agency (IEA) released the 2012 edition of their World Energy Outlook (WEO). For the first time the WEO has included an “Efficient World” scenario (EWS) considering the emissions savings, energy security and economic benefits associated with unlocking the global potential of energy efficient technologies and behavioural changes. Under the EWS growth in global energy demand is halved between 2010 and 2035 relative to the New Policies Scenario, energy intensity improves at 2.6 times the rate of the last 25 years, demand for fossil fuel resources is significantly decreased and economic output is boosted by $18 trillion by 2035.

Although energy efficiency has always been considered a vital component of an IEA portfolio approach to mitigating emissions, the 2012 WEO is the first edition to consider the benefits of a specific EWS. The EWS provides a point of comparison against the traditional “450 ppm”, “Current Policies” and “New Policies” scenarios.

The EWS promotes broad changes to policy and regulatory frameworks governing energy efficiency, as well as significant behavioural changes within industry to streamline the implementation of energy efficiency technologies and behaviours.
Unlocking the benefits of energy efficiency is dependent upon the 6 key policy initiatives outlined below:

What does this mean for industry?

In 2010, industry was responsible for 28% of global energy use and 32% of energy related carbon dioxide (CO2) emissions (including indirect emissions). Low efficiencies associated with a number of industrial processes, in combination with the large amounts of energy waste, mean that there is significant potential for efficiency gains within the industrial sector.

Under the EWS, industry gains will account for 23% of the reduction in primary energy demand. Energy demand growth in the industrial sector falls to 1.1% per year on average in the period 2010 to 2035 from 1.5% in the “New Policies” scenario. Despite an increase of 113% in industrial sector activity, energy use increases by only 31%.

How do we unlock the benefits of energy efficiency?

Industrial energy efficiency measures implemented in Australia are often linked with the legislative compliance requirements of the Energy Efficiency Opportunities Act (the EEO Act). The EEO Act requires large energy-using businesses to improve their energy efficiency by identifying, evaluating and publicly reporting on cost effective energy savings opportunities.

Whilst compliance with the Australian regulatory framework is important, it will not be the only driver for implementing energy efficiency measures.

Energetics extensive client engagements have reinforced the observation that upgrading or retrofitting existing operations with energy efficient technologies and making important behavioural changes can offer enormous cost saving potential for industry. Furthermore, the “Low Carbon Growth Plan” for Australia (prepared by ClimateWorks Australia and McKinsey & Company) looked at a range of opportunities that together can achieve a reduction in GHG emissions of 249MtCO2-e in Australia’s emissions footprint. Of the numerous cost-effective opportunities identified, all but two opportunities were energy efficiency measures.

In order to unlock the greatest energy efficiency cost savings, large scale changes are needed on both an operational and behavioural level.

Efficient equipment

The accelerated retirement of inefficient equipment and early adoption of equipment meeting best practice standards could contribute to radical energy cuts of almost a third of global industrial energy use.

Process controls

Optimisation of all systems, including implementation of robust energy management frameworks will achieve additional energy savings; the IEA predicts possible additional savings of 20%. System optimisation goes beyond the replacement of individual system components towards total integration of system design and operation.

Production systems

Production systems may require wholesale changes to ensure that resources and waste are managed over the whole industrial process and consumption chain. Some strategies for minimising energy use and waste within the entire production system include the increased use of recycled or waste materials and energy, sharing resources among industries and dematerialisation.

What are the barriers, and how do we overcome them?

There are significant barriers associated with the implementation of energy efficiency measures. These include:

  • Behavioural barriers: uncertainty about the ability to capture the benefits of energy efficient technologies and behaviours, lack of awareness about product efficiency and own consumption behaviour and unwillingness to change habits or custom.
  • Structural barriers: requirements by corporations and organisations for short payback periods, split incentives between parties and high initial transaction costs.
  • Availability barriers: inability to finance the initial outlay for more efficient technologies, improper installation or operation and lack of availability of options.

People passionate about change

A necessary first step in prioritising the implementation of energy efficiency technologies and behaviour is ensuring that the right leaders are driving change.

Individual organisations benefit from an energy leader at a facility or asset level. An energy leader (or “champion”) should be both knowledgeable and passionate about driving efficiency gains.

At an organisational level, priority should be given to capacity building and information sharing, to ensure that energy efficiency becomes, and remains, a priority.

Longer payback periods

A key aspect of the EWS is the IEA’s consideration of the appropriate maximum payback periods for buildings, industry, transport and power generation. Whilst the average payback periods considered for industry ranged from three years for
non-OECD countries, to five years for OECD countries, the maximum payback periods for the industrial sector can be longer.

At present, the EEO program in Australia demands the evaluation and public reporting of projects with a simple payback period of less than 4 years, although businesses are encouraged to report on projects with paybacks longer than 4 years. 

As a broader range of incentives for implementing energy efficient technologies or behavioural change emerge (including energy cost increases, available funding programs and further understanding of potential opportunities to improve), we see the growth of energy efficiency playing a pivotal role in any future energy scenario.

For more than 25 years Energetics has worked with large energy users to identify, assess and implement opportunities to improve energy efficiency. 

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