Energy efficiency has long been recognised as the most cost-effective measure for dealing with the challenge of reducing greenhouse gas emissions, but this report dispels the myth that energy efficiency is static and just about harvesting ‘low hanging fruit’. In fact, the opportunities are constantly and rapidly evolving and investment is required to make the largest improvements.
It also points out the potential of, and need for, a major step change in energy efficiency. It is not generally understood that our economy is only about 10 per cent efficient – almost 90 per cent is effectively wasted in going from energy supply through to the final end use service delivered – so the potential savings are immense.
The report seems to have been written in the context of the (at the time) upcoming election and an assumption that there would not [be a] carbon price, so the comments I make take this into consideration.
The idea of having a national target for energy efficiency is sound.
The size of the target called for in the headlines may be a bit misleading on first reading, as it appears that the 30 per cent improvement in specific energy recommended actually equates to about a 1 per cent per annum improvement in energy efficiency, once you take out the effects of structural change. But this is a reasonable target, given the fact that we have to impact change across the economy. And if we do not start immediately, the target becomes increasingly challenging – although we are likely, ultimately, to be required to do a lot more than this to meet demands for more rapid carbon mitigation.
Perhaps we could consider whether it might be more effective to set a target for reducing total fossil energy consumption rather than an energy per output target. The problem with these ‘efficiency’ targets is that they are relatively hard to measure and are impacted by changes in the structure of the economy. A target to reduce total fossil energy consumption by, say, 5 or 10 per cent by 2020 would be simpler, easier to measure, and better aligned with the task at hand to reduce emissions significantly below 2000 levels by 2020, as well as being more in line with the European process.
The paper is also on track in advocating a national energy plan – it is fairly vague as to what that would entail, although the it does appear to favour a market-based approach. If the program is to utilise a market-based mechanism, then it has to have a fixed floor price to provide price certainty to project proponents, based on our experience with the NSW ESS scheme. And there are other important design criteria that must be met if the scheme is to be a success – such as simplicity in paperwork, and high speed for processing applications.
There are also other approaches that could be considered that do not use a market mechanism and may be simpler to implement – and are based on existing proven successful programs internationally.
Whatever the schemes implemented, we must have confidence that they will deliver outcomes and stimulate major investments in energy efficiency across all sectors.
The other breakthrough in the report is that it recognises that the largest source of rapid and large energy efficiency gains are to be found in large industrial/mining operations, and through the application of cogeneration. While these opportunities are covered reasonably well in the bulk of the paper, there is little in the executive summary proposing specific action on these critical topics.
And while the report makes it clear that there are huge opportunities to be had from energy efficiency, it doesn’t include many specific actions or timelines for action, so we need to push for outcomes.
The fact that we are talking about achieving a step change in energy efficiency between 2010 and 2020 indicates that we had better start making progress soon. The 30 per cent improvement in specific energy mentioned becomes a much bigger challenge if we don’t start implementing until 2012, and we have lost more than a decade through the lack of government leadership in this area.
The government now has to rapidly respond to the report and provide a firm program with specific timelines. Energy end-users, the energy efficiency industry and the public are waiting for immediate action.
Hopefully this will be seen as an opportunity for a genuine non-partisan approach to energy efficiency, as it appears to be one key element in the climate change debate where all parties agree.