Why Conservatives are terrified of negawatts

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The global energy efficiency market was worth more than $400 billion in 2012, and the creation of ‘negawatts’ (electricity not consumed) has proven to be a lot cheaper than building new generation. In Australia, though, government decisions have brought the sector to a standstill.

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In 2012, according to global investment bank HSBC, the global market for energy efficiency was around $US375 billion. That’s as much as was invested in fossil fuel electricity generation in that year, and 1.5 times the amount invested in renewable energy.

HSBC negawattsPut another way, according to the International Energy Agency, energy efficiency measures have, since 1974, saved around two-thirds of the energy that might otherwise have been consumed. This “decoupling” of energy use and GDP growth, says HSBC, means that each billion of global GDP required almost 40 per cent less energy in 2012 than it did in 2002.

This reduced consumption is what is known in the industry as “negawatts”. In all the scenarios painted by the IEA and others on tackling climate change, cutting pollution, decarbonising electricity and saving money – creating “negawatts” rather than adding “megawatts” – is absolutely key in extending the so-called “carbon budget”.

HSBC says there are four reasons why governments would want to encourage energy efficiency: energy security, industrial competitiveness and decarbonisation and pollution goals. It says energy efficiency is widely recognised as the most powerful tool to meet the challenges of energy demand and security. It can also help meet decarbonisation targets along with enhancing economic competitiveness

Others point out the obvious benefits to consumers. The US, for instance, has a goal of doubling its energy efficiency by 2030; a move it says will create 1.3 million jobs and save households $US1000 a year.

China’12th Five Year Plan suggests that energy savings could be worth 6 per cent of GDP by 2015, and the EU Energy Efficiency Directive which entered into force in December 2012 and should yield 17 per cent energy savings by 2020. In Germany, HSBC notes, energy efficiency will play the key role in delivering the aspirations of the Energiewende in terms of reducing energy demand by 20 per cent by 2020.

HSBC EChina is implementing strict requirements on efficiency from cars, buses, and electricity generators. In the European Union, US, Japan, China, South Korea, Taiwan and Canada, fuel consumption standards are becoming stricter each year. The majority, close to 70 per cent, of all new vehicles sold globally are sold in these countries.

In Australia, though, energy efficiency is at a virtual standstill. Emission limits and efficiency standards are virtually non-existent. The National Energy Savings scheme, prepared several years ago, is gathering dust and state-based schemes that encouraged efficiency in buildings are gradually being unwound.

Indeed, it seems that in Australia, energy efficiency and “negawatts” have become dirty words. The incumbent utilities that have relied on growing demand for all their business assumptions, and are facing falling demand instead. As they face declining earnings, and are forced to put even relatively new generators on standby or in mothballs, they are placing huge pressure on governments to abandon schemes that could reduce that demand further.

In Australia, household consumption has fallen more than 10 per cent on average in the last few years. The installation of rooftop solar only accounts for part of this reduction. Households are using many more appliances than they used to, but fridges now consume less than TVs, lighting is consuming a fraction of what it used to, and people are paying more attention to how and what they consume.

As HSBC points out in a new report, Sizing Energy Efficiency Investment: Scaling up energy efficiency remains an obvious high-impact, low-cost choice to help reduce emissions, but energy efficiency dynamics change the outlook for utilities.

And here’s the problem in Australia. The new Coalition governments – at state and federal levels – seem disinterested in the issues of setting meaningful goals for decarbonisaion and pollution, and seem only too happy to indulge the complaints of the incumbent generators.

Energy security – because of abundant coal and gas supplies (not to mention renewables) – appears to be less of an issue than the protection of those incumbent interests; many of them owned by the state government, now with the added pressure of having to sell them to access more federal funds

This has led to some distorted thinking around the issue of household solar production and energy efficiency. Australians who install rooftop solar are accused by some generators and retailers of being “free-riders” on the grid. According to this logic, that accusation could be levelled at any household that seeks to reduce consumption by installing efficient lights or other appliances, or by just being more careful about the energy they use. Or even going on an extended holiday.

Some of this muddled thinking extends to the recent decision by the Victorian government to end its loan program for green buildings, apparently on the basis that it was not comfortable with loans. The decision threatens up to $2 billion in energy costs (just so it can save $21 million a year) and threatens hundreds of jobs.

The Victorian Energy Efficiency Target is also under threat, with a recent government leak to a Murdoch newspaper highlighting a $12 cost to consumers from the scheme, but ignoring the $2.2 billion aggregate benefits over its lifetime.

And it also extends to the federal arena, where the Abbott government is determined to dismantle the Clean Energy Finance Corporation, which makes loans and profits for the government and has invested a significant proportion of its money in energy efficiency.

Abott wants to replace this with Direct Action, where instead of providing a loan where the government would most likely get its money back, it is now just going to fork out taxpayers money in the form of a non-refundable grant.

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  1. Ursula Theinert 5 years ago

    Just love the term Negawatts! So true!
    Our 7.5kW installation has in fact produced a total of 16 Negawatt hours of power in 18 months – 16,000kWatt hours someone else didn’t have to generate for us!

  2. Bob_Wallace 5 years ago

    ” save households $US1000 a month.” ?

    • Giles 5 years ago

      Egads, a year. fixed.

  3. Chris Fraser 5 years ago

    … and so the money that consumers save from efficiency gains, can simply be forked back to the incumbents through the consumers’ taxation. Climate success from efficiency turns out to be revenue neutral to the incumbent dirty generators. It’s kind of anti-climate but brilliant in concept, and permits conservative voters – who would wish their government to do ‘something’ about the environment – something to hang on to. Efficiency and also new technology may well appear to incumbents as a loss of access to ‘their’ market, even though the market is deploying more gadgets and building more comfortable lifestyles. I’m sure it must be very annoying for them.

  4. Alan Baird 5 years ago

    It’s all sort of like the US state that decided to tax hybrid cars higher to “level the playing field” with gas guzzlers. Presumably if you drive a Abrams tank you get the fuel free of charge. Let’s all regress together!

  5. Chris Baker 5 years ago

    “The US, for instance, has a goal of doubling its energy efficiency by 2030; a move it says will create 1.3 million jobs…” How can this be so? I get that the funds saved could now be spent on other things, thus creating some jobs in those areas. But surely the funds not spent on energy would lead to an equivalent loss of jobs in that area? The money is just being moved from one place to another. It is not new money generated out of thin air.

    • Ronald Brakels 5 years ago

      I can only guess that buy now every single American must each be holding down thousands of separate jobs as apparently every single thing an American politician or CEO does creates them. I’d suggest putting a bounty on these surplus jobs to tidy the place up but that would just create bounty hunting jobs and make the situation worse.

    • wideEyedPupil 5 years ago

      It takes relatively few people to run a 150MW coal power station compared to the number if people running a solarCST plant or installing that capacity in solarPV or running EE audits and retrofitting efficiency measures and installations of existing buildings to curtail that same 150MW of energy. The coal plant fast fuel costs and potentially a price on its GHG pollution and other health impacts.

      • Chris Baker 5 years ago

        I see your point, and yet is that how the money is moved here? Instead of being spent on electricity, household money is now available to be spent on some other thing. I suppose someone might put that money towards a more modern airconditioner for example. Does spending $1000 a year on some consumer item create more jobs than is lost by not spending it on electricity? Chances are that a consumer item will come from China, whereas the money spent on electricity is mostly spent on distribution, not generation, and that must surely mean local jobs. I remain sceptical about the number of jobs created out of thin air.

        • wideEyedPupil 5 years ago

          If the AC unit is made in China/Japan it still needs to be installed by a local tradie. And sold by a local retailer and sent from a distribution centre by a local transport company. If you want to break down any particular comparison then you need t get their data or at least their assumptions. Often the mining industry project X will create n jobs and then use very dodgy assumptions about downstream economic activity and claim credit for it. Australia Institue has done work deconstructing that kind hype. In this case you might want to ask are these million jobs full time permanent or part full time temporary during an intense ‘transition’ to energy efficient housing phase that might take ten years or something. 1miliion jobs in USA is feasible but highly speculative I imagine.

          • Subhadip Chakraborty 5 years ago

            But what is the cost of climate change ?
            Millions will die due to climate change. Millions will lose jobs in agriculture, Infra etc due to extreme weather. What about that ?
            How you will compensate it ?
            Even today lots of death/ diseases happening due to pollution. For better health common man is spending Billions of dollar. (Yeah sure its creating Job in medical sector 🙂 )Do we really need this when we have options ???

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