McKinsey says energy efficiency could reduce energy use by $1.2 trillion – but reinforces the dangerous viewpoint “think climate – think government”

A new report has identified that the USA could reduce its energy consumption by 23% by 2020 through energy efficiency.

The report has been prepared by McKinsey and Company, who are well known for their studies on the economics of cutting greenhouse gas emissions.

McKinsey however says that this sort of saving is not easily achieved. Three types of barriers to the uptake of energy efficiency are identified in their report – structural, behavioural and availability. They say that these barriers need to be overcome to realise the full potential of energy efficiency across the economy.

Structural barriers are those that prevent an end user of energy from saving energy. For example a tenant typically has no control over the type of heating and cooling system in the building.

Behavioural barriers are those where ignorance or unwillingness to act mean energy efficient solutions aren’t implemented. An example that we see quite often in commercial buildings is ignorance about the time the air conditioning starts in the morning. Often it will be starting two hours or more before the building is occupied in the morning – which is wasteful if it only takes half an hour to get the building to a comfortable temperature.

Availability barriers are those where the user wants to reduce energy, but can’t access the solution or technology, often for cash-flow or cost reasons. For example, a business with tight cash flow that knows its HVAC system is a clunker, but doesn’t have the cash for an upgrade.

The report proposes various solutions to these barriers, mostly showing what government could do. The prescriptions appear valid for any government, not just the US. If you are in government, or have some influence in government circles, this report is worthwhile looking at.

Click here for the report.

Whilst these sorts of reports can be useful, they come with the implicit message “Think climate change – think government.” Don’t fall into the trap of thinking that just because another report is recommending the government do more, that it’s the sole responsibility of government to cut greenhouse gas emissions. There is a lot you can do yourself, and with focus and creativity these barriers can be overcome. Your organisation could probably cost effectively achieve a 23% saving from energy efficiency within a couple of years if you make this a priority. And the greater the number of individuals and organisations who make this a priority, the greater the impact.

Go to the department of climate change’s website and you’ll see the slogan “think climate, think change”.

Here in Melbourne the department of climate change’s slogan could be rephrased as “Think climate - watch change”.

In the 1980s vehicle number plates here in Melbourne proudly bore the slogan “Victoria – the garden state”. Fast forward twenty years to 2009 and Melbourne is now the driest capital city in Australia. Six months ago we had our worst ever bush fires. The newspapers this week have been saying that fire danger is going to be even worse next summer. 

This is precisely what most governments have been doing for a long time now – thinking climate – watching change - and not doing enough. The Australian Government ratified the United Nations Framework Convention on Climate Change, along with most of the rest of the world, back in 1992 (yes, SEVENTEEN years ago!).  Back in 1992 this is what Australia and many other countries agreed to:

“Where there are threats of serious or irreversible damage,lack of full scientific certainty should not be used as a reason for postponing such measures [to anticipate, prevent or minimise the causes of climate change]”, UNFCCC, 1992

“Think climate, think change” is a start – yes we need to think about this issue – but we need to go beyond thinking to action – all of us, not just the government. I much prefer the message developed by Darebin City Council – “think climate, make change”. Now.

You can reduce your own carbon footprint significantly if you want to. You can encourage those you know to do the same. And if you are an entrepreneur – think up solutions that cut carbon emissions then make them a reality, like Shai Agassi at Better Place. “I’m an imagineer. I imagine the future and engineer towards it.”

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The five essentials to effectively “do” energy efficiency

Reflecting on my interviews with various leaders in the energy efficiency space there are five things you must have to successfully reduce energy use and carbon emissions.

First you need leadership commitment.

Second you need a measurement and monitoring system. Whether you are a school (listen to Hannah Lewis, Westernport Secondary College, which has halved its energy use in the last four years) or a major corporation such as Wesfarmers, you must be able to track your progress.

Third you need more than one person active and driving the program. Witness Linfox, where a few programmers voluntarily took on the extra project of building a carbon tracking tool.

Fourth you need a well informed plan as to what you need to do. An energy audit by experienced energy efficiency engineers will provide this.

Fifth, you need investment. Money is needed to get the savings. The money could be spent on people (eg the driver training undertaken by LinfoX) or technology (eg lighting upgrades at Darebin City Council and Newcastle City Council, or the new paint plant at Toyota). 

Do this and with time you’ll have a self-funding system that will continue to reduce your energy use and carbon footprint.

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Why 5 and 6 star homes won’t get us to the low carbon future we need

If you’ve bought a new home in Victoria in the last few years the builder would have impressed you by saying its an “energy efficient” 5 star home (or maybe even 6 stars).

Unfortunately even if all existing homes were converted to 5 star homes this won’t get us to the low carbon future we need. And in fact many new 5 star homes use more energy than forty year old 2 star homes. The 5 star standard is misleading, and needs to change if we are to have truly low energy homes.

The major flaw with the 5 star standard is that its focus is solely on the theoretical heating and cooling performance of the home. A 5 star home should use less energy to heat or cool per square meter than a homes with a lower rating. However the largest contributor to greenhouse gas emissions in most Victorian homes now is not heating and cooling – its appliances! Additionally most new homes feature halogen downlights – one of the most inefficient forms of lighting on the market. Finally, there is no validation that the specified insulation and sealing of the building – key to minimising heat loss and gain – is done properly.

Homes now have more appliances in them than ever before. And I’m not talking electric can openers. In particular large screen plasma and LCD TV’s use several times more power than the modestly sized CRT screens they replaced. A large plasma TV will draw 400 watts. To put that in context, if the TV runs 12 hours a day, it will produce more than half the greenhouse gas a car produces in a year. But the Victorian home energy standard doesn’t take appliances into consideration.

Walk into any display home, and it will be filled with bright halogen downlights. For some reason these are still often linked with low power consumption because they are “low voltage”.  To the contrary, to produce a given amount of light halogen downlights use five times as much power as an energy efficient fluorescent light. I’ve heard of new homes that have over 50 halogen downlights in them. If all these lights were on you would require a $40,000 solar PV system to keep them illuminated . But the Victorian home energy standard doesn’t take lighting into consideration.

The Victorian home energy standard does take heating and cooling into consideration. But only on a theoretical basis. Two fundamentals of high performance passive solar design are high levels of insulation and good sealing. The home energy rating specifies the level of insulation and sealing that a building must install in a given home. But unfortunately there is no inspection in place to verify that this level of insulation and sealing is actually installed. I recently undertook a major home extension, which required that the entire house, including the original part of the home and the extension, was a 5 star standard. I spent a lot of effort and time getting the insulation and sealing right. However, had I been lazy and not bothered to spend dozens of hours with a caulking gun and gap sealant, my house would still be classified as 5 stars because the design was certified as a 5 star design. The problem is that there is no mandated inspection to verify the quality of sealing and insulation. There are inspections for the footings and the framing, but not for the insulation and sealing. My building inspector didn’t even notice the effort I had gone to properly seal the sisalation around the windows. The home is certified as 5 star as designed but not as built. In effect its up to the builder as to whether they do the job properly or not. And considering that making sure that batts are not compressed and there are no gaps, and that all penetrations to outside must be well sealed is time consuming and costs money, why would a builder bother if there is no inspection to validate the quality of the work?

On the other hand the Australian Building Greenhouse Rating Scheme (ABGR) for commercial buildings is actually effective in reducing building energy use. The reason for this is that it is based on the actual performance of the building, based on one year’s worth of billing data. It cuts straight to the bottom line – the actual amount of greenhouse gas produced when operating the building. So the type of appliance (eg computers), the lighting, and the actual heating and cooling performance are all important to achieve a 5 star whole of building ABGR rating. These building genuinely use less energy, and produce less greenhouse gas emissions, than lower star buildings.

The bottom line when it comes to averting dangerous climate change is reducing greenhouse gas emissions. The residential 5 star standard isn’t achieving this, because it doesn’t focus on the bottom line – the actual energy use and greenhouse gas emissions of the home when occupied and in use.

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Canberra to be Better Place’s first city for electric vehicle recharge network

Yesterday Better Place announced that Canberra would be the first site in the national rollout of its electric vehicle recharge network.

Construction of the network will begin in 2011, with services available to electric vehicle owners from 2012.

ActewAGL – the electricity distribution business and retailer in the ACT – responsible for sourcing and distributing the renewable energy that Better Place will use to power electric vehicles within the ACT. “A significant influence on our decision to choose Canberra was the enthusiasm and support we have received from Michael Costello and his team at ActewAGL” said Evan Thornley, Chief Executive Officer of Better Place Australia.

The deployment of the network will include:

  • Recyclable lithium-ion batteries that will power the electric vehicles and be provided as part of the service to drivers, reducing the up-front costs of purchasing an electric vehicle;
  • Charge spots in homes, offices, shopping centres and other car parks where drivers can plug in to keep their battery fully charged; and
  • “Battery Swap Stations” where motorists can drive in and have a depleted battery automatically exchanged for a fresh, fully charged one.

The vision of Shai Agassi, Better Place founder, is for electric vehicles to be cheaper and more convenient than fossil fuel powered cars. Australia is one of three countries where the technology is being rolled out globally. Its great to see this vision now being translated into concrete plans.

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Linfox cuts energy use by 9%, on track for 15%

Linfox is well known for the “You are passing another Fox” sign on the back of its vehicles. But the company has also cut its greenhouse gas emissions by 9% in the last eighteen months, and is on track to cut its emissions by 15% by December 2010.

David McInnes, Linfox

David McInnes, Linfox

I had the privilege of interviewing David McInnes, Group Manager Environment and Climate Change yesterday and being inspired about Linfox’s approach to the climate change challenge. It was refreshing not to hear the Carbon Pollution Reduction Scheme mentioned once in the interview. Linfox is reducing its carbon emissions because it wants to, not because its being forced to, and is quietly getting on with it.

So how does a organisation with 15,000 staff, whose carbon emissions mostly come from diesel consumed in trucks, reduce its per km emission by 9% in eighteen months? You can find the interview on our “Good News Interviews” page.

For me a couple of the standouts from the interview were:

  • Their staff engagement program. Almost all of their savings have come about by making better use of what they already have, rather than investing in new technology. This has been achieved by getting their staff involved in changing the way things are done and in how trucks and buildings are operated, and making hundreds of small changes.
  • Their carbon accounting system – developed in-house. Linfox programmers set up their SAP system such that now monthly carbon reports can be generated, down to the level of individual trucks if necessary. A consistent theme of all organisations cutting their carbon footprints is their focus on accurately and frequently tracking their emissions
  • David’s recommendation to any organisation wishing to cut their carbon footprint to undertake an energy audit, which provides the business case for action. Thanks for the plug for my profession David!

After the interview we discussed Linfox’s Greenfox program, and I wish I had left the voice recorder on. This is a fantastic program. Staff can become a Greenfox by passing five training modules. Everyone who completes the training gets a framed certificate, and drivers who complete the training get a Greenfox badge on the shoulder of their uniform. David mentioned that Greenfox’s often become ambassadors, with truck drivers going to their kid’s schools and talking about climate change.

Also not covered in the interview was the great help David got from Linfox’s IT department in modifying SAP. Normally there is a long queue in the organisation for projects requiring SAP changes. The carbon accounting adjustments though were undertaken by the SAP programmers on top of their normal requirements, such was their commitmen to the company reducing its carbon footprint.

Finally David also spoke off the record about the need to focus less on the science and more on the community and the emotional response that when sparked can result in great change.

As one of Australia’s larger businesses Linfox is taking a leadership role by getting on with reducing its corporate carbon footprint. David McInnes is providing inspirational leadership. Take half an hour to listen to David McInnes and I guarantee you’ll come away motivated and hopeful about what is possible if we focus on cutting carbon emission.

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Imagineering a better place

Today I had the fortune to see Shai Agassi, founder of Better Place, talk about his vision for the electric car future. Shai calls himself an imaginer – “I imagine the future and engineer towards it”. His vision of an electric car future is elegant, simple, and achievable. Australia is a key part of his strategy to get the world to a tipping point which results in all cars becoming electric.

For electric cars to replace petrol cars they must be cheaper and more convenient. Yet the electric cars available now are more expensive and less convenient because of their short range and limited recharging options.

One of the keys to Shai’s vision is treating the battery – the single most expensive component in an electric vehicle – like gasoline. The battery becomes a consumable, not owned by the car owner. By taking out the battery its possible to make vehicles that are price competitive with gasoline vehicles.

A second key is the electricity grid, which is everywhere, and which he called “the longest extension lead in the world”. By extending the grid to having recharging points where cars are parked, vehicles can be charged whenever they are not in use. Better Place will be buying only wind or solar generated electricity for use in its vehicles.

A third key, for longer trips, is batteries that can be swapped over in a minute. The first prototype has just been built in Japan. So on a long trip (over 200kms) you pull into a battery station, change your battery, then keep going. It will take less time to change your battery than to fill your car for petrol. For a typical suburban vehicle typically there would be around 12 to 15 battery changes per year.

Paying per km you travel – for the electricity and battery amortisation – is still cheaper than the equivalent cost of petrol per km.

The result is:

  • Cars that cost less to buy than fossil fuel powered vehicles; and
  • Cars that cost less to run than fossil fuel powered vehicles.

Of course a large investment is needed to build the infrastructure – the recharging points and battery change stations. But if cars are cheaper, if they cost less to run, if petrol is only going to keep increasing in price, and if there is going to be continued regulation and incentive to reduce carbon emissions this is not a insurmountable hurdle.

Shai believes that the “tipping point” will be reached once three countries have proven the concept. Then the rest of the world is likely to follow – and follow quickly. The first country is Israel, which first supported the idea. Renault are investing one billion dollars in producing a electric vehicle, which will first be sold in Israel; they are aiming to sell 150,000 vehicles in the next few years. The second country is Denmark. And the third country is Australia, with Looksmart founder and former Victorian parliamentarian Evan Thornley heading up Better Place in Australia.  Australia was chosen for a couple of reasons. First its big, unlike Israel and Denmark, and thus provides a demonstration that the technology is suited to big and small countries. Secondly we have large sprawling cities, involving a long suburb to city commute, not dissimilar to many North American cities. A third reason would be that we have a relatively small population of cars, so the net capital cost is relatively low. Shai also said that Australia has lots of Lithium, iron and phosphate, the components used in electric vehicle batteries.

With a country full of electric cars, each with large storage capacity, the intermittent nature of electricity generation from wind and solar can be overcome. When the wind blows and the sun shines batteries in parked cars everywhere will be charged. When its calm and cloudy cars can then feedback into the network. And we move towards the smart grid or distributed network.

The choice of Evan Thornley as Australian CEO is interesting. Clearly Better Place will need tremendous IT and communication infrastructure to communicate with vehicles and the smart grid and monitor battery condition and charge levels. Its hard to go past one of the people who was involved in driving widescale uptake of the internet as a leader.

This future is not that far away. Various governments around the world are now offering subsidies to those who purchase electric vehicles. And in Beijing gasoline cars will be progressively banned from the streets. By 2014 no fossil fuel powered vehicles will be allowed in Beijing.

Shai believes that within 10 years we could have three to four million drivers using electric vehicles in Australia.

Shai Agassi spoke at the inaugural 2009 Alfred Deakin eco-innovation lecture. These lectures will feature optimistic innovation driving a more sustainable world. Shai’s positive vision is a great inspiration and a fantastic way of kicking off the lectures.

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