Energy Efficiency in the Electricity Sector in Australia

Transcription

1 Energy Efficiency in the Electricity Sector in Australia Dr David Crossley Managing Director Energy Futures Australia Pty Ltd Asia Pacific Energy Research Centre Mid-Year Workshop Tokyo, November

2 Presentation Topics Thirty years of energy efficiency Potential of energy efficiency to mitigate GHG emissions Energy efficiency policies and measures in Australia Role of electricity businesses in energy efficiency Conclusions Information resources 2

3 Thirty Years of Energy Efficiency 3

4 Mid-1970s to early 1980s Focus on energy conservation, initially in response to concerns about energy security following the 1973 first oil price shock, then resource depletion Policy concerns: depletable resources (especially oil) should be extended as long as possible investments in energy conservation may be more cost-effective than increasing supply low level, but growing, concern about environmental impacts of energy production and use 4

5 Mid-1980s to early 1990s Increased energy consumption, coupled with growing interest in energy efficiency, rather than conservation Policy concerns: doing more with less energy efficiency is possible without reducing production or altering lifestyles energy efficiency makes economic sense and improves competitiveness valid role for governments and regulators to implement policies and programs to overcome barriers to energy efficiency environmental issues in the background 5

6 Mid-1990s to early 2000s Microeconomic reform dominates the agenda energy efficiency takes a back seat Policy concerns: establishing competitive markets will resolve any inefficiencies in the use of resources if market failures and barriers to the efficient use of energy exist, they can be overcome through market mechanisms increasing recognition of climate change issues and initial development of market-based responses 6

7 Today Mid to Late 2000s Growing concern about climate change, development of the carbon economy and commercial opportunities in GHG emission reduction Policy concerns: international cooperation on climate change mitigation development of market mechanisms to reduce greenhouse gas emissions role of energy markets in encouraging or inhibiting the use of demand-side options (including energy efficiency) to reduce GHG emissions 7

8 Potential of Energy Efficiency to Mitigate GHG Emissions 8

9 Current GHG Emissions in Australia (1) Source: AGO (2007), Australian National Greenhouse Gas Inventory

10 Current GHG Emissions in Australia (2) Source of Emissions Economic Activity Greenhouse Gas Source: AGO (2007), Australian National Greenhouse Gas Inventory 2005 by Economic Sector 10

11 Projections of GHG Emissions Change in Emissions by Sector: 1990 to (after policy measures) Source: Australian Greenhouse Office (2006), Tracking to the Kyoto Target

12 Role of Energy Efficiency Energy efficiency is currently the most cost effective approach to abatement and delivers real economic benefits Australian Greenhouse Office (2006) Tracking to the Kyoto Target

13 Potential Impact of Energy Efficiency (1) Reduction in CO2 Emissions Below the IEA Baseline Scenario in 2050 World Source: IEA (2006), Energy Technology Perspectives: Scenarios and Strategies to

14 Potential Impact of Energy Efficiency (2) Abatement in the Enhanced Technology Scenario Relative to the ABARE Reference Case at 2050 World Source: ABARE (2007) Technology: Toward a Low Emission Future 14

15 Potential Impact of Energy Efficiency (3) Abatement in the Enhanced Technology Scenario Relative to the ABARE Reference Case at 2050 Australia Source: ABARE (2007) Technology: Toward a Low Emission Future 15

16 Potential Impact of Energy Efficiency (4) Illustrative Example of Australia s Potential Future Generation Mix Source: Courtesy of the Department of Industry Tourism and Resources 16

17 Economic Benefits of Energy Efficiency Modelling carried out in Australia for the National Framework for Energy Efficiency estimated the economic benefits in year 12 from the modelled take up of energy efficiency technologies: GDP would be around $975 million (0.09%) higher employment would be increased by about 2,600 people (0.02%) 17

18 Conclusions on Energy Efficiency Potential Energy use is currently a large contributor to Australia s GHG emissions; in 2005 stationary energy use contributed 50% of national emissions and electricity generation and use contributed 35% Stationary energy use will also make the largest contribution to the increase in national emissions between 1990 and 2008/12; this increase is estimated as 110 Mt Increased energy efficiency can contribute significantly to reducing Australia s GHG emissions; technology modelling forecast that energy efficiency could reduce GHG emissions by 55% compared with the reference case Energy efficiency also provides other benefits, including increased GDP and employment 18

19 Energy Efficiency Policies and Measures in Australia 19

20 Consequences of a Federal System Australia is a federation, and under the Australian Constitution, energy is the responsibility of State governments rather than the Commonwealth (federal) Government Consequently, all State governments and the Commonwealth have their own policies and measures in relation to climate change, including energy efficiency While this allows diversity and experimentation, it is also confusing (and costly), particularly for large commercial and industrial energy users In recent federal election, both major parties promised to rationalise the plethora of different climate change policies and measures 20

21 Overview of Policies and Measures The following generic types of policies and measures (in order of increasing compulsion) are being used to promote increased levels of energy efficiency in Australia: voluntary agreements on energy efficiency financial support for energy efficiency energy performance labelling and standards for appliances and equipment energy performance disclosure and standards for buildings electricity generator efficiency standards mandatory energy efficiency planning and reporting clean energy targets and obligations GHG emissions trading 21

22 Voluntary Agreements on Energy Efficiency The Commonwealth Government Greenhouse Challenge program was initially established in 1995 to enable Australian companies to form working partnerships with the Government to improve energy efficiency and reduce greenhouse gas emissions Under the program, companies enter into voluntary agreements with the Government to: measure and monitor their greenhouse gas emissions deliver maximum practical greenhouse gas abatement continuously improve management of greenhouse gas emissions and sinks work towards any specific milestones set out under individual agreements In return, member companies are provided with information and advice about how to reduce their emissions, particularly by implementing energy efficiency measures 22

23 Financial Support for Energy Efficiency Many State Governments have funding programs that provide rebates for the purchase of low GHG emission appliances, including some energy efficient appliances The Commonwealth Government s Low Emissions Technology Demonstration Fund is focussed on large scale reductions in GHG emissions and energy efficiency projects are eligible The Commonwealth Government s Solar Cities project provides funding for large scale demonstrations of GHG emission reductions in particular urban communities, including energy efficiency measures The NSW Government s Climate Change Fund includes a component that can be used to implement energy efficiency measures identified through the mandatory energy savings planning process imposed by the Government on large energy users 23

24 Appliance and Equipment Energy Efficiency (1) NSW and Victoria introduced energy performance labelling for refrigerators and freezers in the 1980s Over time, energy labelling for specified household appliances and office equipment was adopted nationally and Minimum Energy Performance Standards (MEPS) were also introduced The current policy for MEPs in Australia is that they should be set equivalent to world best practice From 2009, MEPs will be used to phase out incandescent light bulbs nationally in Australia and electric water heaters in Queensland National standards will shortly be established for the maximum energy consumption in standby mode by specified appliances and equipment Energy labelling and MEPs have made the largest contribution to reducing energy consumption in Australia 24

25 Appliance and Equipment Energy Efficiency (2) Elec (water savings) 26 Gas (water savings) Gas space heaters 24 Gas water heaters 23 Pool equipment PAC heat mode AC heat mode 06 Mt CO2-e reduction below BAU CCAC Chillers Water dispensers TV On mode Greenlights 15 Standby Misc WH Large WH Motors Motors Small WH 05 9 Com Ref + Ice 04 8 Trans 04 7 Fluoros Ballast 03 5 PAC 07 4 PAC 01 3 AC 06 Enhance 2 RF 05 1 All Apps to 99 Previous Projection 25

26 Building Energy Efficiency In the early 2000s, the Australian Capital Territory mandated disclosure of the energy performance of a house at the time it is sold The Building Code of Australia was amended in 2004 and 2006 to include minimum energy efficiency standards for the building shell of new residential and commercial buildings, and for major renovations and refurbishments Some States have established higher energy efficiency standards for new and renovated residential buildings including, in some States, standards for fixed appliances Voluntary energy performance labelling of commercial buildings using rating tools is increasing; a high level of energy performance is becoming a decision factor for purchasers and tenants of commercial buildings 26

27 Generator Efficiency Standards This Commonwealth Government initiative is the only supply-side energy efficiency measure in Australia The GES measure aims to move towards best practice in the efficiency of fossil-fuelled electricity generation, and to deliver reductions in the greenhouse gas intensity of energy supply The measure applies to all fossil-fuelled power generating plants of 30 MWe electrical capacity or above Under legal contracts with the Government, generators agree to assess their operations and compare these with best practice for their technology classes and fuel types Generators also agree to achieve specified increases in generator efficiency 27

28 Mandatory Planning and Reporting Two States and the Commonwealth have placed obligations on large energy users to carry out energy audits and develop energy efficiency plans and to provide reports on these activities The reporting and implementation obligations vary between jurisdictions: NSW requires the development of energy saving plans and reporting on them to the NSW government energy agency the Commonwealth requires public reporting (via company Boards) about identified energy efficiency measures Victoria requires public reporting and the actual implementation of cost effective energy efficiency measures Currently, there is significant overlap between these schemes From July 2008, a single national system for reporting GHG emissions, abatement actions, and energy consumption and production will be in place 28

29 Clean Energy Targets and Obligations In 2003, the NSW Government imposed obligations on electricity retailers to reduce to pre-set target levels the GHG emissions from the electricity they sell; this was accompanied by a trading scheme under which emission reductions from projects, including energy efficiency projects, could be traded From 2009, the Victorian Government will impose an obligation on energy retailers to achieve pre-set targets for energy savings; retailers will be able to meet their targets through energy efficiency activities, such as providing householders with energy saving products and services at little or no cost; energy savings will be tradeable Several other State Governments have established targets which required set proportions of electricity generated in the State to come from specified low GHG emission sources In September 2007, the (former) Prime Minister proposed a national Clean Energy Target which would cover a range of clean energy technologies and rationalise all the State-based targets 29

30 GHG Emissions Trading (1) The introduction of an emissions trading scheme has been debated in Australia for several years, even though Australia has signed, but not yet ratified, the Kyoto Protocol Both the State governments and the Commonwealth Government have produced separate reports on emissions trading In the recent federal election, both major parties promised to introduce a national emissions trading scheme Given the election result, Australia will immediately ratify the Kyoto Protocol and a national emissions trading scheme is likely to be implemented by 2010, probably covering all sectors except agriculture and land use The trading scheme will be supported by the national reporting system for GHG emissions, abatement actions, and energy consumption and production to be introduced in

31 GHG Emissions Trading (2) The Australian national emissions trading scheme will be based on a cap and trade design Under this type of scheme, providing offsets for energy efficiency undertaken in the same sector as the obligated parties involves double counting of abatement The current NSW emissions trading scheme, which is based on a baseline and credit design, allows trading of emissions reductions from energy efficiency projects It is unlikely that a national trading scheme will include a similar mechanism because of the double counting problem This issue has been recognised in the various reports on the design of the national scheme and it is likely that the implementation of some policies and measures promoting energy efficiency will continue 31

32 Conclusions on EE Policies and Measures The federal system in Australia has enabled diversity and experimentation but has also generated a plethora of overlapping policies and measures to promote energy efficiency Following the recent election, it is likely that some rationalisation will occur, particularly through the introduction of a national GHG emissions trading scheme Energy performance labelling and MEPS have made the largest contribution to reducing energy consumption in Australia The contribution by other policies and measures is potentially significant, but most have not been in place long enough to assess their effectiveness 32

33 Role of Electricity Businesses in Energy Efficiency 33

34 Demand Side Management in Australia (1) From the early 1980s to the mid-1990s, electricity utilities in the United States were heavily involved in implementing demand side management (DSM) programs, largely driven by regulatory requirements DSM was introduced to Australia in 1990 by the former vertically integrated electricity utility, the State Electricity Commission of Victoria Between 1990 and 1995, with the assistance of US consultants, the SECV designed and implemented the largest DSM program which has yet been seen in Australia, including significant energy efficiency programs In the first half of the 1990s, both generation and distribution/retail utilities in Australia experimented with DSM, though none carried out any large-scale programs to rival those of the SECV 34

35 Demand Side Management in Australia (2) In 1992, the National Grid Protocol, the initial design of the competitive National Electricity Market, stated: Demand management and renewable energy options are intended to have equal opportunity alongside conventional supply-side options to satisfy future requirements. Indeed, such options have advantages in meeting short lead-time requirements However, similarly to the situation in the United States, DSM program activity in Australia started to decline from 1995 as the focus shifted to the development of the National Electricity Market 35

36 Demand Side Management in Australia (3) The unbundling of vertically integrated utilities into separate generation, transmission, distribution and retail businesses removed many of the incentives for electricity businesses to implement DSM Recently, there has been a renewed interest in DSM in Australia, particularly among distribution businesses which are implementing DSM programs that reduce peak loads on the grid, therefore deferring the need to build more poles and wires Also, State Governments have imposed specific obligations on electricity retailers to reduce the GHG intensity of the electricity they sell (NSW) and to achieve set targets for energy savings (Victoria) 36

37 Incentives for DSM Electricity industry regulators in three States have introduced incentives to encourage electricity distributors to implement DSM programs In NSW, the regulatory formula was altered to enable each of the three distributors to recover both the actual cost of implementing prudent DSM programs and the resulting lost revenue In South Australia, the regulator provided the sole distributor with AUD 20 million to trial DSM programs In Victoria, the regulator provided each of the four distributors with AUD 0.6 million to implement DSM These incentives may not survive the imminent transition to a national electricity industry regulator 37

38 Conclusions on Role of Electricity Businesses To date, involvement in DSM by Australian electricity businesses has been modest Consequently, there is currently little expertise in implementing DSM within the businesses Recent actions by regulators have obligated electricity distributors to carry out DSM, and Governments have imposed obligations on electricity retailers to reduce GHG emissions and meet energy efficiency targets Therefore, involvement by electricity businesses in DSM and energy efficiency is likely to increase in the future and they may well have to build up their in-house expertise in these areas 38

39 Information Sources David Crossley: Reviews of documents on DSM and energy efficiency in Australia are available at my company s website: The International Energy Agency DSM Programme carries out multi-national research projects on DSM. Website for information about the IEA DSM Programme: The IEA DSM Programme is currently undertaking a research project on network-driven DSM. Website for information about this project: ViewTask.aspx?ID=16&Task=15&Sort=0 39