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A carbon tax is only likely to foster the much more efficient use of energy, and substantially reduce carbon emissions, if it provides a price shock.

Supply/demand economics says that the demand for a product is inversely proportional to price, the higher the price the lower the demand. In theory, as a carbon tax would increase energy prices, then people should search out ways to use less electricity.

However, demand for electricity is largely insensitive to price, unless of course the price increase is large and sudden.

For example, there is no doubt that over the last year or two household electricity prices have increased. Has this reduced demand? I don’t have any access to data, but anecdotally for the large majority of households I think not. And the reason for this, I would argue, is that whilst the increase may have been in the order of say 15%, the increase has not been enough for energy consumers to consciously focus on reducing their energy usage. Sure, the price increase is enough for many of us to complain. But not enough to take action to reduce our consumption.

Electricity prices in Australia are very low compared to wages. For most organisations the cost of energy is only around 1% of their total operating costs. If the price increases by 20% its not exactly damaging the bottom line.

AGLs chief economist has warned of power prices doubling by 2015. Contrary to popular opinion, electricity price rises to 2015 will be driven more by network and generation capacity constraints than by carbon pricing.

Surely a doubling in electricity prices over the next 5 years would reduce electricity consumption? Yes, I think it will, but not by much. But a doubling over a one or two year period would probably significantly reduce electricity consumption.

For example, lets take a business that has a 20% gross profit margin, and spends 1% of its income on energy. An increase over one year of energy prices of 20%, will reduce its gross profit by just 1%. This is unlikely to get much interest. On the other hand, if electricity prices doubled, the gross profit would by cut by 5%. This is more likely to get attention drawn to it and foster action to reduce electricity usage.

The science, as recently highlighted again by Professor Ross Garnaut,  is very clear that we must reduce carbon emissions. Therefore a carbon tax, if it significantly increases the price of power over a short time period, is likely to drive energy consumers to use less energy. Many energy consumers will seek to use energy more efficiently, whilst still getting the same outcome from their use of energy.

And, contrary to popular perception, cutting energy consumption by 50% or more is possible with today’s technology. But you have to genuinely want to reduce your energy use to do that. A number of our clients have halved or nearly halved energy consumption in their schools or offices, with a payback typically of 5 years or less.

If you really want to, you can probably cut your energy consumption by 15% to 20% AT NO COST. A company of lawyers we worked with cut electricity usage in their office by 19% without any investment in equipment, just by choosing to waste less power. Our low electricity prices relative to wages mean that Australians are very wasteful of energy.

From a scientific perspective we must reduce GHG emissions rapidly. Anything that therefore reduces the consumption of fossil fuels and drives the demand for renewable energy is to be welcomed.

To be confident of a stable future climate, the science says slash carbon emissions now. A carbon tax that produces a price shock will help achieve this. Energy efficiency will help us cope with the price shock. Electricity at $0.50/kWh in 2012 would be great to help slash emissions.

Today’s Financial Review front page news was about the desperate need for more power stations in Australia. The article stated that according to the Australian Energy Market Operator electricity consumption is increasing at 2.5% per year, and we need between 700 and 900 MWh of extra generating capacity per year. And that to cope with increased demand and a carbon price, Australian power generators will have to invest up to $120 billion in new electricity assets over the next 20 years.

These comments, and the failure of the article to mention energy efficiency, clearly show that by and large most people just don’t “get” energy efficiency. Because if as a society we really got energy efficiency, we wouldn’t need any new power stations.

So if you “get” energy efficiency, tell someone. Let me give you some examples of what energy efficiency means:

  • A local government client has cut electricity consumption in its office complex by 32% (2010 vs 2006). The office complex contains three major buildings, two of which are over one hundred years old and subject to heritage constraints.
  • Local government electricity consumption

    Local government electricity consumption

  • One of our earliest clients, Westernport Secondary college, used 31% less electricity in 2010 than it did in 2004. Roughly same number of students. Maximum peak demand at the college has also dropped, by39%.
  • WPSC electricity consumption

    WPSC electricity consumption

  • The all-electric CarbonetiX office uses 35 kWh/m2/year – that’s everything – light, power, heating, cooling. Most comparable offices would use over 100 kWh/m2/year. We are certainly using much less than the previous tenant.

All these examples show what energy efficiency can do to reduce the demand for energy – and cut carbon emissions -whether a building be old or new, owned or leased. And the energy efficiency measures implemented at the local government office,  Westernport Secondary College and the CarbonetiX office haven’t been particularly complex or used leading edge technology. In fact some of the savings come not from technology, but from choice. Choosing to switch off, to only switch on when necessary, choosing to change the air conditioner temperature settings, choosing to be conscious of energy usage.

WPSC electricity demand

WPSC electricity demand - by time of day.

WPSC - maximum electrical demand by month

WPSC - maximum electrical demand by month

The example of Westernport Secondary College is particularly interesting. If every household and organisation that uses electricity could do what Westernport Secondary College has done we would need about 39% fewer power stations, not more.

I’m not the only one who “gets” it. New Scientist has recently reported on a study by Cambridge University which found that energy efficiency could cut world energy usage by over 70%.

Energy efficiency has multiple benefits:

  • It reduces carbon emissions
  • It saves money for the energy consumer
  • It reduces peak demand
  • It reduces upward pressure on electricity prices

So, if you “get” energy efficiency tell someone!

Last week  I attended the All Energy conference in Melbourne. Running over 2 days, with over 30 conference sessions, just one was dedicated to energy efficiency.  Rob Murray Leach, head of the Energy Efficiency Council who chaired the session, kicked it off by saying that this was the most important session of the conference, as 65% of the world’s carbon reduction by 2020 to come from energy efficiency according to the International Energy Agency.

But is energy efficiency getting 65% of the press coverage, is it 65% of the conversation around 2020 carbon abatement targets? Clearly it isn’t.

There is a massive vacuum when it comes to awareness and understanding of the most cost effective way by far of reducing carbon emissions – energy efficiency. Have a conversation about reducing your carbon footprint, and the first thing to come up will be solar panels, not building controls.

Yet from an economic perspective energy efficiency is extraordinarily interesting in comparison with solar. At commercial electricity tariffs, without subsidies, even the cheapest solar PV system has a payback of over 25 years.

Cover the entire roof of a typical two or three storey office building with solar panels and you’ll reduce electricity usage at the site by around 15%, whilst spending about four times your annual electricity costs to buy the solar system. Yet energy efficiency could probably deliver that same 15% saving with a 2 to 3 year return on investment.

So why isn’t energy efficiency getting the attention it deserves?

As an industry we haven’t been effective in promoting energy efficiency. The recently formed Energy Efficiency Council, of which CarbonetiX is a member, is now taking up this challenge, but there is a long way to go.
Energy efficiency is not visible. The results of changes to the lights and the way the air conditioning is controlled are only visible to the person paying the much lower energy bills, and the person who championed the changes. Solar panels are visible to everyone.

The invisibility of energy efficiency is compounded by the fact that the good news stories aren’t told. They may not even be told to people in the building where the savings have been achieved, let alone to the wider public.
And energy efficiency, whilst it gets good savings, is not that easy to do, but there is a perception that it is easy. So organisations may undertake a DIY approach, with no training and no experience, and not achieve any noticeable savings. A classic DIY approach would be to spend $2,000 to get occupancy sensors fitted to control the lights in the toilets – I’m sorry but the savings from this simply won’t show up in your energy bills.

The problem arising from failed DIY efforts is that this then creates the perception that energy efficiency doesn’t work. And nothing could be further from the truth. Yes, energy efficiency does work, but you need to know what you are doing. Businesses don’t get the receptionist to do their tax return. A qualified, experienced accountant who  is normally contracted to do so. But when it comes to saving energy, all too often its assumed that an environmental officer or a facility maintenance officer can effectively do energy efficiency.

So, to raise the profile of energy efficiency, celebrate and promote the savings you achieve. Put up a plaque above reception showing how much you have saved, or a graph of how your energy use has gone down. Get a high NABERS rating and put the certificate in reception as well. Talk about what was done to use the savings. Get a case study done and circulate it amongst your staff. Then send the case study off to your local paper and get them to do a profile on what you have achieved.

And to get those savings, to make energy efficiency really work for you, get expert advice and guidance.

The Australian Conservation Foundation (ACF) has released its scorecard for the forthcoming federal election, and will update it weekly. With only 3 weeks to go, the three major political parties have clearly put entirely different emphases on the importance of the world in which we live. Which best suits you?

As the ACF states: “Unfortunately, the scorecard shows that to date the ALP and the Coalition are failing on cutting pollution and protecting the environment. Check out how the environmental policies of each of the parties rate, and what work needs to be done…”

These have all been calculated from the publicly stated policies of the political parties. Some of the criterion for the results above included:

Question 1 – Pollution and a Clean Economy:

  • Deliver science based greenhouse gas pollution reduction targets with the urgency required?
  • Reduce fossil fuel subsidies and re-invest the proceeds into the clean energy economy?
  • Embed environmental sustainability into decision making processes of government?

Question 2 – Clean Energy:

  • Boost renewable energy at the scale needed by 2020?
  • Put Australia on track to be a leader in energy efficiency in the developed world by 2020?

Question 3 – Sustainable Cities:

  • Result in world leading, better planned, resource efficient and sustainable cities by 2020?
  • Boost federal transport spending to achieve world class public and active transport systems for Australian cities and regional centers?

Question 4 – Healthy Environment:

  • Build resilience of ecosystems to climate change, protect carbon stores and significantly reduce land use emissions?
  • Bans the importation of illegally logged timber products and helps achieve effective forest protection in the Asia pacific?
  • Protect the cultural and natural values of the Kimberley with Traditional Owner consent?

For more detail on how the four scores were assessed, go to http://www.acfonline.org.au/default.asp?section_id=374 .

As you decide what you’re going to use your vote for, consider the consequences of voting for each of these parties. Some cultures plan for sustainability many generations ahead – the Iroquoi up to seven generations. Can enough Australians see beyond the next election?

I’m starting this blog posting at 277 km/hr on a very fast train with 16 carriages and 100 seats per carriage. The train is full. Where am I? Not in Japan or France. I’m somewhere between Wuxi and Shuzhou in China, where public transport operates at a speed and efficiency that is a quantum leap above the XPT train from Melbourne to City that I’ve caught a few times. And these trains don’t just go short distances. In a couple of weeks I’ll be travelling 1200 kms in less than four hours from Wuhan to Guangzhou.


Where land is at a premium the solution has been simple – build an elevated railway over the top of the existing tracks. 20th century trains below. 21st century very fast trains above.

The fast train service is operated like an airline. Passengers go through a security check at the station. There is a large waiting hall, and train access through a boarding gate. Passengers are only let onto the platform 5 to 10 minutes before their train is due. To speed up access to the train, the platform is marked with numbers, each number corresponding to a carriage. The train pulls up so that the carriage doors line up exactly with numbers. Unlike in a plane, the leg room is sensational. A woman across from me is straining to reach the keys of her laptop perched on the tray table. My laptop is on my lap, the screen pushed back, and its still ten cm away from the seat in front. Try that in a plane!

This is the sort of public transport that can take planes out of the sky. The emissions per km are much lower. They are more convenient, operating from city centres, not on the outskirts of town. Taking into account the trip to and from the airport, my 1200 km trip in a couple of weeks will probably take no more time than if I was flying.

Signing off at 335 km/hr.