Planning a different energy approach

01 Oct 2008Archived News Energetics in the News

PUBLISHED: Powering Australia by Keith Orchison, Jon Jutsen, Executive Director; Business Development, Energetics Pty Ltd talks about issues large companies will have with meeting their emission targets.

 

Australia’s leading energy efficiency consultant says now is the time to advance a major change in supply and use of electricity.

A leading specialist consultant to hundreds of companies on energy and greenhouse gas management, Jon Jutsen believes that by taking advantage of the “enormous” energy efficiency opportunities available to it, Australia can reduce its power use significantly without compromising its economic growth.

Jon Jutsen’s passion is energy efficiency – and, in his thinking, it extends far beyond end-use management to mode changes, materials management and a step-change in the way in which Australia pursues electricity supply.

Jutsen, executive director and founder of Sydney-based Energetics, a leading specialist consultant to hundreds of companies on energy and greenhouse gas management, believes that Australia should set itself a goal of zero electricity growth within three to five years – as a start.

He sees this as being essential to meeting national greenhouse gas mitigation targets. “We cannot continue to grow energy use at two per cent annually,” he argues, “and seriously expect to cut emissions substantially and rapidly.”

Jutsen believes Australia should not invest in new baseload generation except to reduce emissions.

Energy efficiency opportunities, he claims, are “enormous”, and by taking advantage of them the country can cut power use very substantially without sacrificing economic growth.

“This has been achieved internationally. For example, California has halved electricity growth by implementing cost-effective savings through demand management programs. These programs were delivered at twice the cost effectiveness of alternative supply side options and without any consideration of carbon mitigation.

“The International Energy Agency has found that between 31 and 53 per cent of total carbon dioxide emissions reduction by 2050 will be through energy efficiency measures and much of this can be implemented as positive NPV,” he adds. “It follows that energy efficiency should be the centerpiece of Australia’s mitigation programs.”

Australia, he asserts, is fortunate that its energy system is “incredibly inefficient”, as is supply infrastructure in most other parts of the world.

“Our current energy systems are not focused on the end-service required by consumers, but on optimization of centralized supply chains – on mining fuel, converting it to electricity and distributing it to customers, where there is a further conversion process to deliver the service required.

“These services – cold beer, warm rooms, cooked meals, hot water – are often delivered at less than 10 per cent energy efficiency over the whole supply chain. There is no inherent demand for central power stations, but for the delivery of such services. Once this is recognised, there will be a move across to more cogeneration and trigeneration applications in housing development, commercial buildings and industry.”

Jutsen believes that the worldwide energy efficiency industry is on the cusp of massive expansion as more countries embrace the need to pursue carbon emissions constraint.

“Ultimately,” he says, “energy efficiency is going to be a multi-hundred billion dollar global industry. In Australia today it is a small fraction of the size it is going to be.”

He predicts that the emerging global services market will generate revenues of $10,000 billion to $20,000 billion over the next 40 years.

A core Australian problem in the past 25 years – he set up Energetics in 1984 – in Jutsen’s view has been the lack of understanding in Canberra that energy efficiency can be more than half the global warming solution, and, as the most cost effective approach, should be the major focus for achieving abatement targets.

Instead, the focus of policymakers, he says, has been too much on centralized generation technology and carbon capture – too little on energy efficiency. “There is no coherent national dialogue on energy efficiency and, because there is only a small industry focusing on the issue, the obvious and most cost-effective solutions for climate change have had the lowest level of attention of all solutions.”

With a new policy approach to greenhouse gas abatement now evident, he believes Australia has the opportunity for a “dramatic improvement” in energy efficiency, enabling improvement in the economy, increased jobs and a better quality of life.

One of the key challenges for the new federal government, he says, is to drive energy savings and demand management at the same time that it is introducing the emissions trading system. “A range of studies have shown that energy efficiency is the only approach that can reduce emissions substantially without any economic cost.

“This,” he argues, “is not reflected in the approach of the Australian Energy Regulator, which still sees demand management as an experimental art and does not even include carbon mitigation in its charter.”

He urges policymakers to produce an integrated national energy and carbon policy – and points out that energy efficiency is also essential in Australia because of declining oil self-sufficiency, escalating global natural gas prices and water shortages.

If the cost of carbon pricing adds inflationary pressures in the economy through driving up fuel and electricity bills, he says, then energy efficiency incentives offer an anti-inflationary opportunity as they reduce business and home operating costs.

Energetics gets many enquiries each week from companies large and small about addressing their carbon emissions, sometimes because it now sounds like a good marketing idea. “Green is now the new black for the business community,” Jutsen says.

Energetics advises them all they should consider “beyond compliance” as their corporate energy mandate. “Businesses need to get real about the issue, not only for the benefit of the community but also as a serious risk management approach for both commercial and governance purposes.”

Most corporate managements, he says, still lack proper appreciation of what is confronting them in the energy area. “Most still view the future as being pretty much an extension of the past with a carbon price imposed. By missing the signals of discontinuity with past experience, they are failing to plan for the different future now emerging.”

Jutsen says the most obvious risks for businesses relate to their direct costs as carbon charges are imposed and energy prices rise. “More serious risks and opportunities lie with market changes and supply chain requirements. These could markedly affect businesses.”

He adds that the business community also should be aware of the likelihood of rapid escalation in oil and gas prices as global supplies tighten and Australia’s oil imports increase beyond 50 per cent of domestic consumption needs by 2015.

In addition companies, especially larger energy users, now face direct costs of compliance with regulatory requirements, including the need to provide accurate reporting to government under new legislation and the need to invest to meet carbon abatement mandates.

Most top-200 companies, he comments, are not able to ensure that their carbon emissions data are accurate and auditable.

“There are also risks for business in the marketplace,” Jutsen says. “We can expect changing consumer buying attitudes and patterns based on their perceptions of the carbon content and climate friendliness of products.”

Above all, perhaps, he claims, companies are now confronted by reputation risk.

They cannot afford to pursue other than excellent and auditable provision of information about their energy use and their emissions.

They need to be able to verify their mitigation claims or risk pursuit by both regulators and environmental groups.

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