More incentives will help reduce energy usage

27 Aug 2009Archived News Energetics in the News

PUBLISHED: Australian Financial Review by Stephen Shore, Jonathan Jutsen, Executive Director and Founder, Energetics Pty Ltd is quoted from Energetics Energy Efficiency Report produced earlier this year.

Businesses require a few more sticks and carrots to encourage them to reduce their energy costs, writes Stephen Shore.

Australian businesses have had little incentive to save on energy as there are plenty of relatively cheap energy sources available.

But with concerns over emissions increasing, businesses are being pushed to reduce their energy consumption – and they may benefit from this new discipline.

According to Energetics, a climate-change consultancy, many Australian businesses could cut their energy costs by about 20 per cent through additional investment.

But the business sector needs a few more sticks and carrots to encourage it to go in the right direction. One stick is the Energy Efficiency Opportunities legislation introduced by the Department of Resources, Energy and Tourism in 2007.

This regulatory system requires 220 of the nation’s largest emitters to disclose the energy performance of their assets and identify and report on opportunities to improve energy efficiency. The companies are typically in the resources sector or large manufacturers and collectively account for 65 per cent of emissions from industry.

Together these companies use about $35 billion worth of energy a year. Energetics says they could save about $5 billion per year if they identified and implemented all possible energy saving opportunities.

So far, the energy savings identified through the EEO program could save business an estimated $650 million or more per year. To take advantage of those opportunities, business would have to invest about $1.1 billion, but the payback period on that amount through energy savings is just 20 months.

Consultants with Energetics, an independent organization that examines each company’s report to gauge its progress in saving energy, say the progress has been good, but there is scope for more.

Part of the problem, they say, is that the scheme requires only the reporting of projects that return a profit in less than four years, and there is no incentive for companies to report all possible opportunities.

“There is a regulation and some are doing what is required,” says Energetics executive director Jonathan Jutsen.

“Some are doing significantly more but there is no incentive. We think there are a lot more savings out there than have been reported.

“We’ve only picking up a fraction of the potential. That’s partly a limit of the specific nature of the scheme.”

Jutsen says potential savings range from small changes to mining equipment/ operation and maintenance procedures, through to major capital investment and everything in between.

“We’re argued very strongly in our report that if you want to drive energy savings out of business you need to do more than put a regulation in place that requires reporting, you really need to put substantial incentives in place as well,” he says.

“If those incentives were linked with the identification of projects within the scheme, then the scheme would identify lots of possibilities that are not in place already.”

In the latest federal budget, the government announced a couple of programs that may provide incentives.

There is a $200 million program that will apply to some of the larger companies, but no details have been confirmed. Jutsen says the incentives should be more in the order of $1.5 billion per year, through tax incentives and grants.

“That is what is needed to really accelerate the transition of these companies to a low-carbon economy,” he says.

“If companies had to report projects under this scheme to be able to get financial assistance, then clearly they would find a lot more ways to save energy than they are when reporting to regulation.”

Despite the lack of incentive, Energetics says companies such as Woolworths and the Sydney Water Corporation have made good progress and gone beyond what is required by regulation.

Woolworths is aiming for a 40 per cent reduction in carbon emissions on projected growth levels by 2015, bringing its emissions back to 2006 levels. Some of its initiatives include reducing water usage by at least 200 million litres a year by 2010, and replacing single-use waxed boxes with reusable crates.

Sydney Water is implementing a renewable energy generation program as part of its pledge to be carbon neutral by 2020.

The program aims to reduce greenhouse gas emissions by about 54,000 tonnes per year – equivalent to 12.5 per cent of Sydney Water’s total emissions.

Jutsen says companies leading the way deserve more public recognition, and more attention to the issue could motivate others in the same direction.

But he is not in business of “naming and shaming”, those that have not made as much progress.

“We’re more interested in working with companies to help them find ways to become more efficient rather them shaming them into action he says.

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