Poor energy efficiency proving pricey for Australian business

poorINADEQUATE investment in energy efficiency is costing Australia tens of billions of dollars in economic growth, according to new research commissioned by The Climate Institute and GE.
Based on an analysis of more than three decades of data from 28 Organisation for Economic Co-operation and Development countries, the research was undertaken by Vivid Economics and found that failure to match other countries’ rates of energy efficiency improvement would see Australia forego billions in revenue.
The Climate Institute chief executive John Connor stated that if Australia improved its energy efficiency by just 1 per cent each year, it would generate an additional $8 billion in gross domestic product (GDP) by the end of the decade, and $26 billion by 2030.
“This is an important contribution to improving Australia’s productivity, as well as cutting our energy bills and carbon pollution,” Mr Connor said.
The research was the first to quantify the impact of energy efficiency on economic output. It found that on average, a 1 per cent improvement in energy efficiency boosted GDP per person by 0.1 percentage points.
The Climate Institute – an independent research organisation focussed solely on the issue of climate change – reported there were simple ways that Australia could reduce its energy use across the economy, with the mining and oil and gas industries holding the potential to achieve significant savings.
According to a ClimateWorks Australia report released last December, the nation’s industrial sector could cut its energy use by 11 per cent based on 2010 to 2011 energy use without adversely affecting business activity — offering a potential saving of $3 billion a year and preventing the production of millions of tonnes of greenhouse gases.
The ClimateWorks report, commissioned by the Australian Government, revealed there were greater energy efficiency opportunities than previously identified.
However, on current trends, most savings in the resources sector wouldn’t be achieved due to barriers such as a limited availability of internal capital; short pay back thresholds for investment; risk of interrupting operations or key production lines; and long decision cycles.
The Climate Institute outlined a number of key policies to combat these obstacles, such as: ensuring that energy pricing more accurately reflected the true costs of energy use; expanding state-based energy savings schemes into a consistent and robust energy saving initiative covering the whole country; implementing “ambitious” rising energy efficiency standards for vehicles and equipment; and maintaining the carbon price mechanism to shorten the payback period for investments.
ClimateWorks Australia interim executive director Greg Garvin said opportunities to reduce energy had a payback for business of less than two years.
“By working with companies and government it will be possible to alleviate some of the barriers to action and therefore unlock significant reductions in energy use in the industrial sector,” Mr Garvin said.GE Australia and New Zealand director of ‘ecomagination’ Ben Waters said there was enormous potential to achieve productivity gains and eliminate costs from some of Australia’s major industries.
“This new research reaffirms that improvements in energy efficiency and economic growth are not mutually exclusive,” Mr Waters said.
“By making even small investments in our energy productivity, we have the opportunity to reach new levels of efficiency, drive economic growth and improve utilisation of our…resources while reducing carbon emissions.”
According to The Climate Institute, agencies such as the International Energy Agency (IEA) found Australia had a “very poor” record in energy efficiency investment: the country’s annual energy efficiency improvement of about 0.5 per cent is below the IEA average of one per cent, and well below many comparable economies such as the US (0.9 per cent) and Canada (1.4 per cent).
Mr Connor said the research put a figure on just how much Australia was missing out on, and that countries such as Japan, China, South Korea, the US and the UK were taking similar steps, as suggested by The Climate Institute, to save energy.
“The reality is that our current policies are inadequate to address the barriers preventing smarter energy use,” he said. “We need to get beyond the idea that energy efficiency means changing light bulbs.
In fact, just about every product and process can be streamlined to reduce energy waste.” The Australian Government’s legislative Energy Efficiency Opportunities (EEO) program, implemented in 2006, has more than 300 participating corporations responsible for consuming more than 60 per cent of the nation’s total energy use.
The program is mandatory for corporations that use more than 0.5 petajoules of energy per year – equivalent to 10,000 households – and they are also required to undertake rigorous energy efficiency assessments.
In 2011 to 2012, EEO program participants in the oil and gas sector used 243PJ of energy, representing 4 per cent of Australia’s total energy use.
A Department of Resources, Energy and Tourism spokesperson said companies participating in the EEO program had already implemented a range of energy efficiency measures amounting to more than $808 million per year in energy savings.
“In the oil and gas sector, companies are implementing savings representing 8 per cent of their assessed energy use, valued at $117 million per annum, with a range of opportunities still under investigation,” the spokesperson said.