Bruce Rowse

This post looks at a range of other policies not covered earlier to wrap up the discussion on policies that have lowered Australia’s electricity consumption

Summary – parts 1 and 2

In parts 1 and 2 of Policies that have lowered Australia’s electricity consumption I have looked at a range of policies, including the Renewable Energy Target, the Victorian Energy Efficiency Target (VEET) Scheme, appliance standards and building standards. With a focus on the state of Victoria, I have attempted to quantify how much each of these policies have contributed to the lowering of Victoria’s electricity consumption that has occurred over the period 2008 to 2012/13.

Victoria’s electricity consumption has dropped by around 4,000,000 MWh since 2008, and in 2013 was around 8,000,000 MWh lower than had the increasing trend of 2004 to 2008 remained. As the Australian Energy Market Data referred to in Part 1 is for electricity generation for Victoria, I have assumed that consumption  matches generation, i.e. over the course of each year electricity inflows and outflows out of Victoria to other states are roughly equal.

In part 1 I identified that the RET, aided by the state feed in tariff, and the VEET scheme had contributed to a reduction of around 2,000,000 MWh annually. However there is a considerable uncertainty around the actual savings achieved by the VEET scheme.

In part 2 I identified that appliance energy efficiency standards saved roughly an additional 2,500,000 MWh annually, assuming that estimates of savings commissioned by the Equipment Energy Efficiency program are accurate. Building standards made a smaller contribution, possibly in the range of around 300,000 MWh.

Together these four policies examined (plus including the impact of the state solar feed in tariff) account for a reduction in electricity consumption of very roughly 5,000,000 MWh. Compared with the 8,000,000 total reduction (had electricity use continued to rise at the same rate it had from 2004 to 2008) this leaves roughly 3,000,000 MWh of reduction unaccounted for.

So where would the other 3,000,000 MWh of savings come from? Policies of significance could be:

• The carbon price from 1 July 2012.
• NABERS and Commercial Building Disclosure
• The national Energy Efficiency Opportunities (EEO) program, complimented by the state government’s EREP program.
• The Victorian government’s Greener Government Building’s Program

Additionally rising electricity prices, caused by rising network charges and environmental charges (including the renewable energy target, VEET and carbon pricing) could have resulted in some voluntary reduction in energy use.

Finally the ongoing decline of Australia’s manufacturing sector could have also made a contribution.

In this post I attempt to quantify these impacts.

The carbon price from 1 July 2012

The carbon price has resulted in an increase in the cost of electricity, as electricity generators have passed on their costs of compliance. This has also made renewable generators more competitive in the national electricity market, with greater renewable generation, particularly hydro, reducing emissions from electricity generation.

In Victoria the drop in electricity generation from 2012 to 2013 of 1,400,000 MWh was roughly 750,000 MWh more than the average annual drop 2008 to 2012.

So very roughly it would be fair to assume that roughly 750,000 MWh of savings could be attributed to the carbon pricing, without being specific as to how the reduction arose, with likely reasons being:

•  Liable entities, particularly EEO participants, making additional investments to reduce their electricity consumption and thus reducing the quantity and total cost of carbon permits.
• The carbon price was used to fund the Clean Technology Investment Program (CTIP), which awarded grants on a matched basis for energy efficiency/renewable projects in industry. EEO participants would have tapped into this funding, with projects implemented in 2013. Additionally in also funded the Community Energy Efficiency Program (CEEP) which local governments used to fund predominantly energy efficiency investments.
• Further additional voluntary residential energy savings in response to further electricity price rises.

NABERS and Commercial Building Disclosure (CBD)

NABERS, the National Australian Built Environment Rating System, provides building sustainability ratings covering energy, water, and indoor environment quality, based on the actual performance of the building. NABERS is primarily used to rate the energy performance of large office buildings,

The Commercial Building Disclosure (CBD) Act 2010 requires that office spaces of more than 2000 m2 obtain a Building Energy Efficiency Certificate comprised of a NABERS rating and tenancy lighting assessment at the time of sale or lease.

Whilst the CBD Act does not require energy efficiency works to be implemented, in a market place where building owners compete for tenants, the CBD Act has been effective in driving efficiency improvements. The savings in 2012 in Victoria have been estimated at 0.1PJ, or roughly 60,000 MWh based on a study undertaken by Pitt&Sherry for the Department of Climate Change.

EEO, aided by EREP

The EEO program is widely recognised as making a significant contribution to emissions reduction by Australia’s largest energy users. This program has required large energy users to identify energy saving opportunities with a payback of four years or less. As with the CBD program, there is no obligation for identified opportunities to be implemented.

The Victorian state government Environment and Resource Efficiency Plans (EREP) program, which ran from 2008 to 2012, similarly required large energy users to identify energy saving opportunities and develop an action plan. It was closed because of overlap with the EEO program.

The five year program review found that over the first 5 years of the EEO program from 2006 to 2011 the EEO program is estimated to have saved 35 PJ of energy savings. There is no state by state break down of savings or identification of the separate electricity and fuels (principally natural gas) savings, however Climate works who participated in the program review found that most of the savings attributed to EEO came from the manufacturing sector (22 PJ).

Victoria is Australia’s largest manufacturer. If we assume that 30% of the 35PJ of savings were made in Victoria, that savings were approximately 1/3rd electricity 2/3rds gas (based on energy audits I have undertaken of manufacturing facilities), this would give roughly 3.5 PJ of electricity savings in Victoria over the period 2006 to 2011. As:

• the EEO program is on-going;
• It is unlikely that many saving measures were implemented during the initial years of the program (2006 to 2008)
• Year on year savings could be expected to be increasing as more measures are implemented.
• The five year evaluation went only to 2011, and savings would have increased in 2012 and further again in 2013
• It would seem reasonable to assume that very roughly of the total savings measured to 2011 of 35 PJ, by 2013 savings may have risen to perhaps doubled, or say around 70PJ (not including the stimulatory effect of the carbon price and CTIP).
• On this basis annual savings in 2013 could be estimated at very roughly say 15 to 20 PJ

Then in very rough terms the Victorian electricity savings in 2013 vs 2008 would have been roughly 1.5 to 2.0 PJ, or perhaps up to around 600,000 MWh.

The Greener Government Buildings Program (GGB)

The GGB program is a program that requires Victorian state government departments and agencies to enter into an energy performance contract for buildings that represent 90% of their energy use. The N.S.W. government has now adopted a similar program.

This is a program I personally am very familiar with, as up until the end of 2013 I was the owner of CarbonetiX, one of the energy services contractors implementing energy performance contracts under the GGB program.

By mid 2012 projects delivering around 50,000 tonnes of GHG savings annually had been funded. My estimate is that nearly all of these savings would be in electricity savings, and with additional GGB projects underway since mid 2012 my estimate is that in 2013 approximately to 40,000 MWh of annual electricity savings arose from the program.

Rising electricity prices

A combination of rising network charges and environmental charges have increased electricity prices. Its believed that domestic users decrease electricity consumption in response to rising prices, whilst commercial and industrial users are relatively insensitive to price increases.

Whilst a price elasticity of electricity price for residential consumers has commonly assumed to be -0.25 (ie a 25% reduction for a doubling in electricity prices) I don’t believe this is the case. Residential electricity prices have nearly doubled since 2008, yet its highly unlikely that consumption has reduced by 25%. I believe a residential price elasticity of only -0.05 is more likely, on this basis the doubling of electricity prices would have seen a drop in residential consumption of about 5% since 2008. With residential consumption accounting for roughly 30% of total electricity consumption, this would result in an annual drop in consumption of about 800,000 MWh in Victoria. For arguments sake lets assume its a bit higher at 1,000,000 MWh.

This full amount, cannot however, be directly attributed to carbon policy, with less than half of the electricity price rises due to environmental charges.

The decline of Australian manufacturing

This has no doubt contributed to decreased electricity consumption, although its likely that future declines will be greater, as Victorian car manufacturers shut down over the next few years and the Point Henry aluminium smelter closes down later this year.

I have no figures to substantiate any estimate, but on balance with other figures put the decline at around 500,000 MWh annually in 2013 vs 2008.

Summary

This analysis has shown that a range of policies have contributed to reduced electricity consumption in Victoria since 2008. My estimates of the electricity savings attributed to each policy are tabled below.

As I have indicated through the discussion, the numbers above should largely be considered as approximations only.

So what has been the economic efficiency of achieving these outcomes? Which policies are more cost-effective than others? This will be examined in another posting.