It is almost the perfect energy source. It can provide half of all our energy needs by 2030 with zero carbon emissions. It can do this at a fraction of our current energy costs, without impacting on the landscape, while boosting innovation, the economy and creating thousands of jobs. In fact, the only reason it is not the perfect energy source, is that it is not an energy source. Yes, I am talking about energy efficiency, or to be more precise lifting our energy productivity. And it is about to become big news.
A historic disruption of the energy sector is now well in train. Rooftop solar, large scale renewables, energy battery storage and electric vehicles are already massive and are expected to grow more or less exponentially. But as will be highlighted at next week’s Summer Study on Energy Productivity in Sydney, the impact of lifting energy productivity via smarter energy management, energy efficiency and load management may have an even bigger impact over coming years.
Unconvinced? Consider this: Since the last recession ended in 1992, Australia’s economy has grown by 108% while our overall primary consumption grew by less than 47%. Coal consumption, including for power stations, has contributed a measly 5% of the additional energy needs of this economic growth. Oil, which since 2010 has overtaken coal as Australia’s biggest single energy source, contributed 18% and natural gas, 17%. Even our burgeoning renewable energy sector contributed less than 3% of our growing energy needs.
By far the largest share of the new energy driving more than two decades of economic growth has come from our most neglected resource- improved energy productivity. In short, we have improved the energy productivity of the economy, squeezing out more economic value per unit of energy consumed. In an age when lifting productivity is critical to our future prosperity, energy productivity has delivered in spades, increasing by 42% since 1992. At current energy prices, this is equivalent to cutting our national energy bill by almost $50 billion, per year. The improvement in energy productivity is so pronounced that Australia’s total energy consumption has actually declined over recent years, even as the economy continues to grow.
The decline of our energy intensive manufacturing sector has played a modest role in this but it is not the main game. A recent federal government study showed that the impact of efficiency improvements outweighed the structural effect by a ratio of more than 3 to 1.
What is so striking about this quiet revolution in Australia’s energy sector is that it has happened with so little conscious attention from consumers, businesses, government or the media. However, while energy productivity may have delivered so much with little fanfare, there are four compelling reasons why we should start making some noise about lifting energy productivity.
Firstly, while the above improvements might sound impressive, we have more work to do to stay competitive. According to the World Bank, Australia ranked 27th out of 34 OECD countries for Energy Productivity in 2012. Meanwhile, China increased its energy productivity at twice the rate of Australia between 1992 and 2012.
Secondly, improving energy productivity through improved energy efficiency is not just our biggest energy resource, it is also the cheapest. The American Council for an Energy Efficient Economy has recently estimated that the cost of energy efficiency at between 2 and 5 US cents per kWh, about half the cost of electricity from wind, natural gas, coal or solar and less than a quarter of what you are probably now paying for electricity in Australia.
Thirdly, improving energy productivity is our best option for meeting the global carbon emission targets emerging from the December Paris Climate Summit. In its recent Special Report, the International Energy Agency indicated that to meet more ambitious carbon targets at an affordable cost, most energy sector emission reductions should come from energy productivity improvements.
Fourthly, Google. And Apple. And Samsumg. And perhaps even Telstra. A slew of hungry tech giants and start-ups are salivating at the prospect of turning our billions of dollars wasted energy into their next growth opportunity. A key part of value proposition for Google’s Nest, Apple’s Homekit and Samsung’s SmartThings is not just home automation, but saving consumers money through energy efficiency. The technology is not quite there yet, but it will be soon. Link this to batteries, rooftop solar, EVs and building management systems, and it does not take much imagination to see what that means for the traditional energy industry. And every other industry…
So what about meeting half our energy needs by 2030? Well that is exactly what President Obama aims to do in the US by adopting a target of doubling energy productivity between 2010 and 2030.
Fortunately, Australia’s state, territory and federal governments have also decided that it is finally time to recognise the key role of energy productivity. In December, led by Federal Minister for Energy Josh Frydenberg, the Council of Australia Government Energy Council adopted Australia’s first National Energy Productivity Plan (NEPP). The NEPP sets out 34 existing and new measures, and crucially Australia’s first national energy productivity target: to increase energy productivity by 40 percent between 2015 and 2030. Given the NEPP’s later base year of 2015, it would not take much more ambition for this target to approach Obama’s. (The businesses involved in the Australian Alliance to Save Energy’s 2xEP program are advocating that we should do just this.)
The NEPP aims to boost our energy productivity in five broad areas: incentives, information, market reform, innovation support and tougher energy standards for appliances, equipment and vehicles. We can optimistic about energy efficiency standards being delivered, as Australia and the Prime Minister have a strong record in this area. As Minister for Environment in the Howard Government, Malcom Turnbull led the world in setting efficiency standards to eliminate woefully inefficient incandescent light bulbs that produced about nine units of heat for every unit of light. But for the other policy areas, success will depend on whether the modest level of government funding required is forthcoming.
For many Australians, the overriding energy priority is to cut carbon emissions as quickly as possible. For others who see gathering economic clouds, the priority is securing affordable energy. By lifting energy productivity we can do both, stop arguing and save our energy.
Chris Dunstan is co-Chair of the forthcoming 2016 Australian Summer Study on Energy Productivity and a Research Director at the Institute for Sustainable Futures, University of Technology Sydney.