Comment, Efficiency, Policy

It’s time for a 10% energy savings target

Fresh federal leadership with a commitment to a national target would be a tidy primary lever to reduce energy bills, peak demand and greenhouse gas emissions, writes Rod Woolley.

Without a national energy savings measure, energy upgrades won’t happen in jurisdictions without schemes. While some people in the sector may feel a national target ambition is impossible, it makes logical sense. Australia has a successful Renewable Energy Target (RET) and with the right leadership we can deliver a successful National Energy Savings Scheme (NESS) target.

National energy efficiency policy in this country has been slammed with a plethora of sliding-doors- shut moments while its renewables cousin has had more success and is now enjoying emerging climate change “darling” status. (Which is great: Australian energy markets would have a much less attractive profile without a 30-year RET commitment from 2001 to 2030, thanks to bi-partisan vision in 2000 which hasn’t been demonstrated since.)

Back in 2013, the Commonwealth Government was working on implementing a national energy savings scheme and found that a 5% energy savings target would deliver $5.3 billion from 2015 to 2050. (There was a change in government later that year and the project was shelved.) In 2015, the Victorian Government found that its 2016 to 2020 energy savings scheme targets would deliver a net present value benefit of between $1.3 billion and $3.3 billion. While the parameters of these analyses were different, both demonstrated the attractive public policy case for such schemes, and Victoria has gone on to deliver.

Fast forward to 2016 when the Climate Change Authority (CAA) first recommended to the Commonwealth Government that it support schemes in every jurisdiction, then revised its advice in 2017 to introduce a national scheme. Let’s not forget that just seven days after the 2017 CCA recommendation the Finkel Review of the National Electricity Market (NEM) recommended that governments accelerate the roll-out of energy efficiency measures.

Given the short life of the Finkel report’s recommended Clean Energy Target and the ensuing suffocation of the substitute National Energy Guarantee, it could be a blessing that a NESS was not harnessed in the same stable. The door to its introduction remains open.

Bigger states push savings

Fortunately the big energy consumption states, Victoria and NSW, had the foresight and means to establish local energy savings schemes from 2009. Now in their tenth year those initiatives and the industry they have stimulated have good reason to celebrate their maturity and robustness.

Both schemes are currently in the middle of five-yearly reviews to 2025 and, fingers crossed, with already clear commitment to strengthening the programs with introduction of more eligible energy saving activities and less red tape, we hope to see them commit to larger targets. NSW legislation has been passed to hold its 8.5% electricity sales through to 2025, so that parliament will have to agree to legislate a greater ambition. Victorian targets from 2021 to 2025 will be set in 2020, and that target would need changes in regulations to almost double from just over 6% in 2020.

South Australia and the ACT are considering extending their 2020 targets to 2023, but nothing is committed. South Australia is the least ambitious scheme on a per capita energy consumption basis (see first chart). A Queensland scheme consultation is under way, with target ambition likely to be determined late in 2019.

Energy Savings Schemes: Targets committed to 2025 (ESIA March 2019)

10% savings has Liddell covered

Recent analysis by the Energy Savings Industry Association (ESIA) demonstrates a scenario where a National Energy Savings Scheme could save 10% of electricity and gas consumption by 2030.

To grasp the size and timeliness of a national energy-savings target ambition, we can consider filling the gap of coal-fired power station closures: the next in line is Liddell in NSW, scheduled to close in 2022. A NESS target saving 10% of electricity and gas consumption by 2030 would be equivalent in electricity terms to 4.5 times the annual output of Liddell.

This is based on Liddell’s average output of 8,680GWh over the past two years and various target assumptions based upon: electricity and gas consumption in the NEM and Western Australia’s South West Interconnected System, which is expected to be the equivalent of 379,119GWh in 2019 and growing to 394,154GWh in 2030 (these figures incorporate business and residential energy use (including losses) and exclude gas used for power generation and LNG), and; delivering annual energy savings of 10% by 2030 needing an initial national target of 19,799GWh in 2020 and increasing 35,980GWh in 2030 (see second chart).

Proposed NESS target and annual energy savings 2019-2030 (ESIA March 2019)

The second chart illustrates a national target ambition from 2020 to 2030, in comparison to currently committed scheme targets. Existing targets including Victoria, NSW, South Australia and ACT have an equivalent target of 11,319GWh in 2019 increasing to 11,475GWh in 2020.

In this analysis, for the national target energy savings targets have been determined upfront in GWh and would be committed in NESS legislation on an annual basis to 2030. The actual energy savings delivered each year have been based on an assumed deeming period of eight years. (Deeming refers to how the energy savings for an upgrade are determined over a period such as eight years and are based on a number of hours of use, for example, for off-the-shelf product installations such as lights.)

The chart shows a linear trajectory to achieve the 10% by 2030 target that would require a target increase at 2020 of 8,324GWh which could be mobilised under a NESS. Notably, existing scheme targets from 2021 will be determined through reviews during 2019 and 2020. A significant target increase from 2020 will provide a strong signal to the market to deliver upgrades sooner.

Commonwealth cracks

Those who will hurt more without a national energy savings target are the less populated, more isolated jurisdictions. The challenges of immense geographical distances, remote communities, a high percentage of low-income households and limited local bureaucrat resourcing provide significant program design and rollout challenges. However, there are many lessons to be learned from Australia’s 10-year-old industry and other schemes around the world serving remote communities demonstrating that leadership and community engagement deliver results.

On par with rooftop solar

A recent review of the NEM in 2018 by Green Energy Markets indicated that energy-saving activities installed under existing schemes in 2017-18 in Victoria, NSW, SA and ACT could reasonably account for 1,043GWh of demand reduction. In comparison, rooftop solar PV in NEM states installed under the RET in 2018 equates to 1,355GWh of demand reduction. Analysis since 2013 shows this situation has held for the past five years.

With a growing appetite for rooftop solar uptake, energy efficiency could well slip behind in its demand-reduction contribution. On the contrary, a national energy-savings target supported by more ambitious state-level targets could provide a far more comparable demand reduction lever.

Inaction will cost jobs

Every year without a measurable national energy savings target is another year of wasted opportunity. What an energy-saving salve lacks in headline appeal it delivers in spades in practical terms: addressing rising cost-of-living pressures, stagnant wage growth and climate inaction screaming well after the polls have closed.

We now have research that shows the lost job opportunities if we don’t mobilise stronger energy efficiency targets and complementary policies. The report commissioned by the ESIA and the Energy Efficiency Council highlights for the first time that energy efficiency is a larger employer than any other sector in energy.

With thanks to ESIA members.

Rod Woolley is president of the Energy Savings Industry Association, a director of Yellow Door Consulting and before that helped establish the Victorian Energy Efficiency Target scheme which commenced in 2009.


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