Why Conservatives are terrified of negawatts

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.

Put 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.

China 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.