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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.

Across Australia power bills are going up and the climate is clearly changing. So you would think that our mainstream media would be  bringing us good news stories about how we can cut our power bills and reduce carbon emissions, with a fast payback on investment.

But no. The focus is doom and gloom.The reporting I see is about how reducing carbon emissions is expensive, about how programs to reduce carbon emissions push up prices.

Have you ever picked up The Australian, The Age, The Sydney Morning Herald, The Courier Mail, the Australian Financial Review or any of our major papers and seen a good news story about how much money someone has saved from energy efficiency? I haven’t.

Have you ever seen a TV program that shows how different businesses are saving money and reducing carbon emissions through energy efficiency? I haven’t (but I admit I hardly ever watch TV).

Want a bit of cheer from your mainstream media. Sorry, you have to go to other side of the world.  Such as to the NY Times.

Why aren’t we seeing a lot of article like this in Australia? Believe me, there are lots of good news stories from energy efficiency if you want to look. Check out the good news interviews on our website for some of them.

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!

Reports recently published in newspapers indicate that the government’s mandatory energy star rating schemes of homes is rather inaccurate. The scheme has been heavily-criticised by the building industry (HIA and MBA) and they are calling on scientists and the Department of Climate Change and Energy Efficiency to review the way the star rating is calculated for new houses.

Applying the same software to the whole continent is not the right approach either. Most importantly there is another fundamental issue that relates to the way a home is used –which has more to do with the occupants than the actual construction of the house itself.

The main problem cited by the building industry involves the three government-approved tools used to award the star six star rating. Basically it means that there are unacceptable differences between the star ratings produced by the various software tools when assessing the same house. The flaws in the star rating system were discovered after industry representatives, private companies and scientists commissioned independent studies to test the software tools on identical houses. For example the independent testing showed that the same Brisbane house had a variation of 3.2 stars when different software tools were used to audit it. In addition the software tools are easy to manipulate to get the desired results. A side issue is the under-qualified assessors who don’t operate under any quality programs.

The second issue relates to the fact the same software tools are used Australia-wide. Since the software tools mainly deal with heating and cooling to deliver a star rating they don’t take into consideration the varying climates found in Australia. In each part of Australia there will be different contributions of heating and cooling and we have little real data to help us in our understanding of by how much, or whether at all, star ratings will help reduce consumption. A respected scientist explained that the star rating doesn’t actually measure the electricity demand in a given house. So basically there is no correlation between the stars and GHG emissions.

It has been suggested that end-use metering study should be commissioned to determine overall home energy use, energy use by home appliances and the assessment of the thermal performance of the building shell for different housing types. Also, the overall performance of the recently-built six star homes should be assessed to create a valid database to establish if the star rating scheme has in fact helped reduce energy consumption.

The third observation was expressed by a university professor who explained that in reality the behaviour of the occupants of a house dictate the energy consumption. It doesn’t matter how many stars a home has if the occupants don’t use it responsibly. It could be stacked with electrical appliances like LCD screens, fridges or with inefficient halogen lighting. The software tools merely calculate the potential savings based on the fabric of the house, insulation, wall materials and of course the likely heating and cooling. Therefore, it is really up to the individual to act responsibly and to have an interest in reducing greenhouse emissions and of course their electricity bills.

For more detailed information and pdf file go to this site: https://carbonetix.com.au/why_your_5_star_energy_efficient_home_isnt.php

(Ref: http://www.theaustralian.com.au/news/features/eco-threat-to-house-prices/story-e6frg6z6-1225904124270 and
http://www.theaustralian.com.au/news/investigations/energy-star-ratings-in-disarray/story-fn6tcs23-1225899270215 )

Last week I caught up with Raj Maniher of Baw Baw shire council in their Smith Street Community Development office that council is renting in Warragul. Raj has implemented a number of measures to cut energy use in the office, and has achieved a 30% electricity saving.

Some of the measures implemented include:

Insulating the ceiling

Double glazing using “magnetite” on some of the windows.

Retrofit Double glazing

Retrofit Double glazing

Getting internal reflective blinds made up by a local blind maker. Very ingeneous!

Internal reflective blinds

Internal reflective blinds

Voltage reduction on the lights

Voltage reduction units on lighting circuits

Voltage reduction units on lighting circuits

Blanking off light fittings with a clear Perspex sheet to prevent air leakage into the ceiling cavity.

Glass panel under light fitting to keep conditioned air out of the ceiling cavity.

glass panel under light fitting to keep conditioned air out of the ceiling cavity.

Disconnecting inefficient lights and replacing with fluorescent

Upgrading to a 5 star fridge

5 star fridge

5 star fridge

Only switching on when needed – for example the airconditioner, and kitchen equipment is turned off at the wall when not in use.

switch off at wall

switch off at wall


How would you save energy in your rented office?