Comments on the Report of the Prime Minister’s Task Group on Energy Efficiency

30 Mar 2011Archived News Publications

WIth more than 25 years in energy and carbon management, Energetics provides insight into the value of promoting greater energy efficiency as a critical component in achieving Australia's emissions reduction target.

 

A national energy efficiency target

Energetics generally supports a national target for energy efficiency as a means of driving improvement and focusing the attention of stakeholders. We have concerns related to the criteria used to set the target of improving Australia’s primary energy intensity by 30% from 2010 to 2020. It was described as being ambitious but achievable, and meeting this target would represent a 14 percentage point improvement on the 2020 outcome expected under existing policies. The report gives no economic justification for setting the 30% target. Arguably, any target could be achieved through suitably aggressive policy interventions; however, in the absence of a suitable external driver (such as a desire to reduce greenhouse gas emissions) these policy interventions would result in an economically sub-optimal outcome.

The report does highlight the range of barriers to improvements to energy efficiency in Australia. These barriers lead to a gap between actual energy performance and ideal energy performance, and tracking how that gap is being addressed could be more valuable than a simple energy efficiency target.

We also have reservation about an energy intensity target. Identifying how intensity can be measured equitably across different parts of the economy is a non-trivial exercise.

A national energy savings initiative

Energetics is supportive of a national energy savings initiative (NESI) as the most effective mechanism to drive implementation of energy efficiency projects. Before outlining some desirable features of a NESI, we would like to make two observations.

First, Energetics does not believe that in a perfect market, a NESI is complementary to any market mechanism that puts a price on greenhouse gas emissions if the objective of the NESI is solely to reduce greenhouse emissions. However, Australia does not have a perfect market for energy efficiency, and despite energy efficiency being widely seen as the most effective method to reduce greenhouse gas emissions, Energetics is concerned that the various barriers to energy efficiency in Australia will act as a deterrent to energy efficiency playing an optimal role in any market based emissions reduction scheme. For this reason, we support the introduction of a NESI. The challenge lies in designing the scheme and setting the targets for the NESI so that it has the effect of addressing the barriers to energy efficiency without impeding the market mechanism(s) driving greenhouse gas reductions.

Second, numerous reports have shown that peak energy demand in Australia is growing at substantially faster rate than total energy demand. Energetics firmly believes that Australia needs a national energy savings initiative that is focused on reducing the peak demand and that this scheme is needed now, before a range of planned investments in the power industry are made.

Energetics notes the extensive stakeholder consultation that preceded the introduction of the NSW Energy Savings Scheme (EES). We recommend that the NSW ESS be the starting point for any national scheme. Notwithstanding our previous comment, Energetics believes that the national energy savings initiative should account for the following:

  • The scheme must have a floor price which is guaranteed. The impact of unforseen swings in the REC price is but one example of the disadvantages associated with market based mechanisms that seek to achieve an environmental outcome. In that case, the policy feature that promoted a particular set of renewable technologies (residential solar) has led to a collapse of investment in the renewable technologies that are needed in the long term, namely utility scale renewable energy particularly wind power. A guaranteed floor price will give suppliers and service providers some confidence of the on-going viability of investments.
  • Any national scheme must simplify the paperwork and speed up the project approval process.
  • The scheme must have the ability to handle complex process changes and other similar projects. This is a key issue. As a general rule, core process changes result in much greater improvements in energy performance than do the more straightforward changes to associated energy services. Unfortunately, the impact of process changes on energy use can be more difficult to determine. The NESI must be framed in a manner that encourages businesses to pursue changes in the core process that go beyond business as usual. This will make the NESI more attractive to the process industries than is the case with the current ESS program.
  • The NESI must be supported by a robust method the measure and verify savings. Energetics recommends the adoption of IPMVP, the international protocol for M&V.
  • The NESI needs to address all forms of energy, The NSW ESS focuses on electricity. Further, moving from one form of energy to another (as long as total energy is reduced) should not needlessly complicate application processes.

An improved governance structure

Energetics supports any move to simplify the governance on energy efficiency in Australia.

Improved innovation, data and analysis

While offering in principle support for the EE-MAP and we certainly support the development of a ‘one stop shop’ for energy data, Energetics does have some concerns about the value of significant investment in the EE-MAP. In particular:

  • There is a range of policy measures or programs that are either already in existence or could be modelled from other countries that offer major improvements in energy efficiency, and there is no requirement for the EE MAP to inform policy makers of the value of these measures. Examples include:
    • low energy lighting;
    • building insulation;
    • distributed energy;
    • outcomes from the EEO program and other state based programs;
    • fleet fuel performance standards and targets; and
    • MEPS.
  • Energetics would prefer to see national resources allocated so that these programs are pursued rather than building a data platform.
  • We note that the EE-MAP will seek to extract data from existing programs and data sources. However, there is no guarantee that these sources will complete the EE-MAP, and there is always a temptation of government to impose an additional reporting burden on business to close a data gap. Energetics does not believe that it is appropriate to impose such an additional burden on business.

A long-term strategy to build a culture of energy efficiency

Energetics has long believed that behaviour change is critical to improving energy efficiency in the long term. We believe that measures to improve feedback to consumers or which provide benchmarks are highly desirable. Our enthusiasm for the other actions is tempered by two factors:

  • Changing behaviour through awareness campaigns and role models has a mixed record. . The “Flex Your Power” initiative which following from the California Energy Crisis was hugely successful and had lasting effect. However, the ‘Life be in it’ campaign was not so successful.
  • The most effective means to change behaviour is through the use of price signals, and so long as energy in Australia is cheap, achieving world class energy efficiency performance will be difficult.

Large energy users

Energetics believes that the recommendation to expand the Energy Efficiency Opportunities program to require assessment at the design stage has great potential to improve national energy performance. We recommend that the basic approach adopted for the assessment of hazards during design be adopted. This includes reviews prior to the detailed process design starting.

Role of energy services companies

Energetics sees energy service companies (ESCOs) as central to the implementation of cost effective energy saving measures in existing facilities in Australia, and generally supports the suggested measures. In particular, a revolving building fund for Commonwealth government portfolios to bid for retrofit upgrades offers a cost effective means for the Commonwealth to lead by example.

Many studies have highlighted the constraints introduced by a shortage of suitably trained and accredited energy professions. Energetics therefore strongly supports the recommendation that governments should work with relevant industry associations, education and training service providers and other stakeholders to develop and promote an accreditation and training regime for energy service companies.

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