A Strategy to Reduce Energy

01 Mar 2006Archived News Energetics in the News

PUBLISHED: Ethical Investor Magazine. By Jonathan Jutsen, Energetics Pty Ltd.

Energy efficiency can save money, create jobs and reduce carbon emissions.

As there is an increased acceptance of the urgency to limit carbon dioxide emissions as a risk mitigation strategy for humanity, there has been surprisingly little focus on improving energy efficiency. You would think that this would be the obvious measure in the short term, and continuing in the medium and through to the long-term future. Unfortunately, the focus of our government's mitigation strategies has been on technology solutions for energy supply, and is heavily influenced by strong lobbying by the coal industry on clean coal, and the environmental groups focused on renewables.

In the meantime, the most cost effective and practical solutions through energy efficiency of energy use have received very little attention and less R&D funding. In designing energy systems for the future, logic says that
you start by focusing on the efficiency of end use, then on the energy to supply remaining demand. Given the fact that only 35% or so of the primary energy to generate electricity reaches the end user, and then typically the efficiency of delivery of energy to the actual energy application is also well under 50%, there are clearly enormous efficiency opportunities from just focusing on that energy flow.

Energy management should thus be the primary focus on greenhouse policy in the short term - as new supply options should be designed to match refined end use requirements, not the waste.

Unlike most supply options, energy efficiency savings are available in the short term and cost effective measures provide an IMPROVED economic outcome. While theoretical economists claim that, if such large cost effective energy savings were available, users would capture them, there are well understood market barriers, which can be overcome through a combination of regulation, education, and financial incentives.

The sources of savings from energy efficiency are also not well understood. Many people think that such efficiencies are limited to reducing obvious waste in manufacturing facilities. However, large savings exist in all segments of the market, and require a systems approach to capture the
benefits, working the supply chain from before the actual end application back up the chain.

Sources of GHG Savings

First materials/supply chain management. I mentioned that to capture the full savings it is important to start 'before the application'. By this I mean that it is critical to review the materials used by the society for various end needs to determine whether there are less energy intensive options that can be used, or whether less material can be used for the
application. Material efficiency is also critical for energy efficiency - reducing losses and rework reduces energy use proportionally.

There is also a need for R&D investments to improved energy technology for buildings, processes, plant and equipment. The level of investment in these areas is grossly inadequate given the challenge ahead.

In existing facilities, efficiency can often be boosted by applying best practice building and process design where new plant is installed, and retrofitting energy efficient features/equipment to existing plant. This needs to be institutionalised into business and government so that it is
standard practice to purchase energy efficient plant.

Less than 15% of companies have such a policy in place.
There are also no/low capital cost savings in most commerce and industry from
improved operating procedures and controls, and improved maintenance procedures.

Once the end use process is designed to meet the real end need and efficiencies have been extracted at the pointy end of the energy flow, then it is time to turn attention to the rest of the flow. Energy distribution is the next measure - in many operations there are large savings opportunities through replacing central steam distribution by high energy efficiency
point of end use applications. Energy conversion processes such as boilers and air compressors within business operations are the next focus of efficiency measures.

Finally, we turn to the supply side of the equation including:

  • High efficiency generation using cogeneration, where waste heat is captured for use in process;
  • Use of lower carbon, waste fuels, renewable fuels at the end use location;

and finally,

  • Procurement of green electricity.

The extent to which savings opportunities have been captured to date can be defined through data generated by Energetics based on actual customer self-assessment results when using Energetics' 'One-2-Five' process. This is a comprehensive self-diagnostic to assess the level of progress of companies in managing energy in their operations. Management teams of organisations typically using over $0.5 M/year of energy participate in 2 hour self assessment using a software tool which stores the results and generates an immediate action plan to act on the 5 issues defined as being most critical for progress, based on the company's responses.

From aggregate results for the 250 or so organisations that have participated in the diagnostic process in Australia and the 1500 globally (mainly USA, Australia, NZ and UK), the critical issues in Australia in priority order are:

  • Senior management commitment
  • Understanding of savings opportunities
  • Energy reporting
  • Energy metering and monitoring
  • Energy performance indicators and targets for savings
  • Awareness and training
  • Energy planning
  • Accountabilities

As you can see, the issues facing most companies in energy management are the most basic and preliminary management steps, like demonstrating management commitment to making savings, and understanding opportunities for savings at management level.

While it is distressing that so little progress has been made in this area in the past decade, there have been major strides in just the last 6 months, prompted by the NSW DEUS Energy Savings Act requiring that mandatory
electricity savings plans be reported for all sites using over 10GWh/year, and through the forthcoming CommonwealthEnergy Efficiency Opportunities Program.

These programs will force major energy users to report on energy savings, and have caused a large upswing in activity in this area. While this has not generally resulted in senior management commitment, the number of companies registering low understanding of savings opportunities should fall dramatically over the next 2 years.

Scale of GHG Savings

Australia has barely scratched the surface in terms of achieving short-term or long-term savings in energy efficiency from all sections of the economy.
Most operations have substantial energy savings opportunities with over 25% internal rate of return, low risk and using existing commercial technology.

Typical short-term savings include: commercial and government: 20+%; mining and mineral processing: 15+%; and manufacturing: 10+%.

There are additional, short-term, greenhouse gas (GHG) savings from supply side measures at manufacturing/mining, commercial facilities. These savings could more than double from application of best practices and best available energy technology used for all new buildings and plant. On top of all of this there are the further savings available through supply chain measures.

While, in the past, energy efficiency has not been a business priority - as our businesses have been highly focused on output and energy efficiency has not been integrated into continuous improvement programs - we are optimistic that this is about to change as a result of increased public focus and government reporting regulation.

I believe that Australia should set long-term, as well as annual, greenhouse mitigation targets and we should annually track performance toward that target. I am also strongly of the opinion that there is room for effective government regulation in this industry to ensure energy savings can be achieved rapidly and costeffectively. I have only been focusing on stationary
applications in this article, though there is also an urgent need to act to improve the efficiency of the transport sector, both for GHG savings and also to save our balance of payments.

With the rapid depletion of domestic oil reserves, Australia's oil imports have gone from less than 1% of total imports to 9% over the last 7 years and will rapidly increase going forwards. Measures I would recommend for improving the energy efficiency of stationary applications include:

  • Continue and extend mandatory public energy/GHG;
  • Reporting by businesses and government agencies;
  • Implement significant tax/other incentives, and financing support for business to encourage accelerated;
  • Implementation of energy efficient technology; tighten, broaden and accelerate introduction of minimum energy efficiency standards for industrial, commercial; and residential equipment/appliances;
  • Implement uniform and stringent national commercial building energy

efficiency standards and mandatory greenhouse efficiency reporting for all large buildings;

  • Support training/information/accreditation of energy competency in businesses;
  • Extend BASIX across Australia as a uniform national code for residential buildings and make it more stringent over time; and,
  • Invest much greater funding on energy efficiency research, development, and

demonstration programs.
This focus should extend to international programs like AP6. Increased attention on energy efficiency both reduces the risk to the program of generating practical and measurable results, and at the same time supports
opportunity for Australian energy efficiency businesses to export their skills into China and India with Australian government backing.

It is time for energy efficiency to fulfil its role as the key short-medium term strategy for greenhouse mitigation. The good news is that government and business priorities are now changing. This is driving many high energy consuming companies to act now. If these initiatives are combined with realistic government incentives, many more businesses will be encouraged to
implement opportunities.

Easy as One-2-Five

Companies initiate the One-2-Five process with a management diagnostic, in the process of gaining senior management buy-in during an approximately 2-hour session.

The session is run by a trained facilitator addressing senior management from cross-functional business divisions. By addressing 20 management issues across 10 topic areas, the tool provides the company with a best practice energy efficiency rating from 1 to 5 stars.

The system also draws attention to the 5 most critical areas for improvement based on identified areas where least progress has been made, combined with the priority weighting applied by the company.

The tool was also used in Sydney Water's high profile Every Drop Counts Business Program.

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