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Energy Efficiency Conference: Australia risks missing out on extraordinary economic benefits

Victorian energy, environment and climate change minister Lily D'Ambrosio
Victorian energy, environment and climate change minister Lily D'Ambrosio

Australia needs to catch up on its energy efficiency efforts, or risk missing out on the economic benefits being experienced by leaders like California, delegates at the 2017 National Energy Efficiency Conference have been told.

The conference brought together experts in the energy space from both government and private sector organisations in both Australia and overseas, including California Energy Commissioner Andrew McAllister.

In the lead-up to the conference, McAllister observed that the discussion on our nation’s energy transition had focused primarily on the supply side of the market.

While decarbonising the energy system is important, he argued that focusing on the demand side was equally crucial.

In California, demand-side measures such as energy efficiency have created three times as many jobs as the solar PV industry in the state – even though it has pushed hard on getting solar installed en masse, he told conference delegates.

Horizon Power’s Frank Tudor said California was set to create half a million more jobs in the next 13 years just in the areas of micro-girds, energy storage and electric vehicles.

The theme of the conference was the “energy trilemma” of security, affordability and productivity.

Energy Efficiency Council president Tony Arnel said in his introductory remarks that energy policy had now replaced taxation policy as the top priority for Australian businesses.

“We are now wearing the full consequences of a decade of confusion on energy policy and an ideological focus on energy supply,” Mr Arnel said.

“We’ve countless opportunities for jobs, economic growth and carbon reduction have passed us by over those 10 years – and we are paying the price – literally.”

He said that while the current focus is on the National Energy Guarantee (NEG), on its own the NEG won’t be enough to deliver secure, affordable energy.

“Even if all the [COAG energy] ministers achieve consensus – something that we are yet to see in a decade of fierce policy debate – the cost reductions flowing from policy certainty will take years to flow through to businesses and consumers.”

This is why policy and programs that address demand are essential.

The International Energy Agency has found that energy efficiency is critical to energy affordability. In some countries, improvements have seen household bills slashed by up to one third.

Globally, efficiency has delivered 75 per cent of total emissions reductions in the past two years, IEA presenter Louise Vickery told the gathering.

The role of states

Victorian energy minister Lily D’Ambrosio used the conference as a platform for announcing the full package of programs the state government will be implementing as part of its Energy Efficiency and Productivity Strategy.

Director of Common Capital Henry Adams said the role the states could play in shifting the energy picture was of the interesting themes at the conference.

This was particularly seen in both the sessions on state-based programs such as the NSW Energy Savings Scheme (ESS) and Victoria’s new energy-efficiency initiatives, and also in the presentation by California energy commissioner Andrew McAllister.

His presentation on the steps California has taken over the past 30 years of tackling energy efficiency highlighted that it can be easier to get small things achieved at the state level, Mr Adams said.

When a state like California makes progress, it can nudge the federal level along, as change does “not appear to be as challenging”.

“NSW and Victoria are doing a lot of really innovative and well thought through things in this space,” Mr Adams said, noting proposals consulted on as part of the NSW Plan to Save Energy and Money earlier this year and the Victorian Energy Efficiency and Productivity Strategy.

Energy efficiency boosts lighting market

His own presentation focused on recent research undertaken for the NSW Office of Environment and Heritage that analysed the impact of the ESS scheme on the lighting market.

The Common Capital and Beletich Associates study found that over 2011 and 2016 the scheme had delivered $1.6 billion in savings for energy customers.

It also generated $600 million in new investment in the state, $670 million in net economic benefit to NSW and 1830 indirect jobs created by improved productivity.

“Beyond that, the process has transformed the lighting market, delivering really positive and lasting benefits,” he said.

The businesses that have emerged under the ESS have developed innovative energy-user centric business models that are changing the way lighting is designed and breaking down split incentives.

But lighting is only a fraction of the opportunity out there, and other energy services markets have similar challenges and opportunities when it comes to energy efficiency, many of these firms are looking to where they can innovate next.

Opportunities for Queensland post-election

Mr Adams said there was an opportunity for Queensland, following the state election, to follow through on the government’s investigation into its own energy efficiency scheme.

He said NSW Independent Pricing and Regulatory Tribunal had been given the authority to issue ESS certificates for other jurisdictions. This gives Queensland the option of hitting the ground running on energy savings targets. Queensland can save the 2-3 years it takes to develop and ramp up a market-based program like this by leveraging the ESS accreditation and compliance infrastructure, as the ACT is proposing for commercial activities.

This arrangement would be similar to that of long-running successful programs like NABERS and Green Power, delivered nationally through collaboration between states.

The important thing any energy efficiency policy should do, Mr Adams said, was to work in sync with industry, jobs and economic policy, and look at how it can drive innovation and microeconomic reform.

A broader view of the energy market is also needed, he said, that includes not only end users but also the entire supply chain for designing through to installing energy using equipment, like lighting, HVAC, motors and refrigeration.

There also needs to be patient and long-term policy settings that give certainty for investment.

“Industry needs to know where the goal posts are, and that they will be there for the time it takes to develop and refine the innovative new business models and products we need to overcome the market failures in this space,” Mr Adams said.

While there were a lot of conversations around the National Energy Guarantee – and Mr Adams said there was a lot of goodwill on the part of industry to engage with the government in good faith – there was also a level of fatigue with the rate of policy change.

Policy and regulatory certainty needed

President of the Energy Efficiency Certificate Creators Association and managing director of Wattly Hamish McGovern also commented on the degree to which commercial lighting schemes driven by the states had been the source of the majority of meaningful action.

A theme emerging from the conference was the need for other opportunities, such as energy efficiency in HVAC, he said.

Another theme he observed was the need for a “clear runway” in terms of policy and regulatory certainty.

He said a recent report by EECCA on the state of the market, launched at the conference, showed that energy efficiency schemes to date have over-delivered in terms of energy savings and economic rates of return.

If schemes were extended nationally, they could easy see emissions reductions sufficient to meet around 50 per cent of the electricity sector’s fair contribution to meeting Australia’s Paris Agreement target.

In addition, they can assist with the phase out of some of our dirtiest power stations.

Switch to LEDs equals a Hazelwood, potentially a Liddell

“If all warehouses and factories switched to LED lighting, that would equal energy savings equivalent to the generation capacity of Hazelwood,” Mr McGovern said.

If the rest of the commercial property sector followed suit nationwide, we would save the equivalent of the output of Liddell.

Mr McGovern said a challenge was that the “winners” were consumers and energy efficiency businesses, not heavyweight companies like the incumbent generators and retailers.

Because the beneficiaries are not big business, there is a need to get consumer lobby groups involved.

Visible star ratings for homes

Another topic that arose at the conference was the way consumers now use star ratings on appliances such as fridges as a mark of quality. This is a concept that could be applied to homes, he said, where there was a need to think about mechanisms to actively promote homes with ratings that indicate more liveable, higher quality homes.

“That would be a much easier message for people to absorb,” he said.

A high “quality rating” would implicitly mean a home has better lighting, insulation, thermal comfort and energy efficiency.

“Victoria is coming out with the Residential Rating Scorecard, and it would be great to have national schemes.”

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