Fighting demand just as vital as chasing zero emission
THE real holy grail of clean energy supply is not only finding commercially viable zero emission technologies, but also driving down demand at the same time through end- use efficiency. The International Energy Agency estimates that every dollar spent on successful end- use electricity efficiency saves $ 2 on building generation plant. It also, of course, saves the customer expense on buying power — and, with the introduction of emissions trading in Australia, can take some of the sting out of higher electricity prices.
The IEA strongly supports governments pursuing energy efficiency. ‘‘ It is by far the most cost- effective way to deliver increased energy security, reduced energy costs and a cleaner environment,’’ it argues, urging a focus in particular on buildings.
The agency points out that buildings today are responsible for 40 per cent of global energy consumption and 24 per cent of CO emissions. ‘‘ An impressive amount of their energy use can be saved simply by applying efficient technologies and practices,’’ it says.
This perspective resonates in Australia, where the Insulation Council says the housing stock is among the least efficient in the developed world — and the Australian Glass & Glazing Association adds that windows here are the worst in the developed world for energy efficiency, with households and buildings using 60 per cent more energy for heating and cooling than is necessary.
Unfortunately, says the Clean Energy Council, energy efficiency initiatives in the past decade have been hamstrung by a combination of inter- governmental disputes and rivalries, a lack of interest at top policymaking levels, and ‘‘ active resistance from vested interests and sections of the bureaucracy.’’
In Australia, the underlying problem in energy supply management is that dependence on electricity is growing faster than overall energy demand. According to the Australian Strategic Policy Institute, power consumption grew 54 per cent between 1990 and 2004 compared with an overall increase in national energy demand ( which includes use of petroleum products) of 31 per cent, even though the use of mass transit transport has risen only marginally in the past decade.
This federal Government has high ambitions for achieving efficiency in Australia over the next 12 years: its target for 2020 is to cut growth in electricity demand — which suppliers at present predict will be about 60,000 gigawatt hours more than today and will require an extra 9,000MW of generation plant — by up to 35,000GWh a year.
Delivering the efficiency goal would chop about $ 5 billion off the cost of building new generation capacity to meet higher demand, as well as making a sizeable dent in the growth of greenhouse gas emissions from power stations.
Carbon dioxide emissions from coalburning and gas- burning power stations in Australia are predicted to peak at 207 million tonnes a year in 2009.
By forcing 20 per cent of power consumption to be sourced from renewable energy by 2020, the Rudd Government aims to limit further emissions growth, but the Department of Climate Change acknowledges that, even with this measure, fossil- fuelled stations will still be emitting 200 million tonnes a year of greenhouse gases in 12 years’ time.
A broad estimate of the impact of the government’s programs by its economic agencies suggests that all its climate change programs could deliver more than 80 million tonnes of abatement by 2020, with about 56 per cent coming from the higher renewable energy target.
This makes cutting customers’ thirst for power a critical extra element in the policy — but the multi- billion dollar question is, what level of carbon charge will it take to reduce demand growth?
Electricity demand is notoriously ‘‘ nonelastic’’ — in others words, the need for energy for household and business use will continue even if prices rise quite sharply.
The political problem is that higher energy prices are deeply unpopular with voters and maintaining the pain long enough to force real demand cuts requires a campaign much longer than the election cycle.
Opinion differs widely on what level of carbon charge — through the emissions trading scheme the government is now devising — will be needed to reduce the growth in power demand to meet the Rudd Government’s efficiency goal.
Some economists believe that it might need to be as high as $ 100 per tonne of CO — which would add $ 20 billion a year to the wholesale price of power.
Retail electricity bills are made up of wholesale costs ( about 50 per cent) and charges for transmission, distribution and retailing services ( the other 50 per cent). A 50 per cent increase in the wholesale price of power, for example, translates in to a 25 per cent increase in the retail price.
A further problem for the government is that a third of the power used in Australia is consumed by energy- intensive industries such as plastics and chemicals factories.
These companies argue that they are already in the forefront of pursuing energy efficiency and high local carbon charges will impact heavily on their competitiveness in international markets.
Many in the business lobby groups warn that a large Australian go- it- alone carbon charge potentially poses a threat to employment, an even more potent voter turn- off than high energy prices.
Consumption: Buildings are responsible for 40 per cent of global energy consumption