Understanding Tradeoffs for a Successful Energy Policy

Existing technologies and approaches can deliver significant gains in EE. However, to date, there has only been limited success in terms of adopting these technologies and approaches by industries and domestic markets. This is because, there is a general belief that inefficient practices are primarily caused by social, economic, informational and institutional actions working against a shift to more energy efficient practices. For example, there is a general acknowledgement of the fact that there are potential gains in areas other than those that directly benefit from improved energy management, but there is a limited understanding of the nature and extent of these 'flow-on' benefits. In formulating energy policy, government agencies need to understand how to use these flow-on benefits to promote a wider adoption of energy efficient practices (Box 1.1). This requires identifying and quantifying the barriers and drivers in terms of factors such as economic growth, environment, employment and regional development.

39 WEC 2003.

Box 1.1 Flow- on Benefits to Promote Energy Efficient Practices

How do you take a 29-year old office building from a 1-star to a 4-star rating under the Australian Building Greenhouse Rating (ABGR) scheme? It has been achieved by 'looking for better ways of doing things'. The results have been startling, with the Council's overall electricity bill slashed from USD 1 million in 1995 to around USD 550,000 per year. This equates to greenhouse gas savings of approximately 1,303 tons, equivalent to taking 289 cars permanently off the road. The Council's administration building alone has reduced energy costs from USD 168,000 in 1995 to USD 65,000 in 2003. If the Council had not implemented energy savings, the 2003 energy bill would have been USD 1.2 million.

Installing a USD 68 movement detector in the administration building toilets has achieved a 98 per cent saving in lighting energy use. Investing USD 72,000 in power factor correction in the administration centre, art gallery and city hall has achieved savings of USD 36,000 a year by improving the building's power factor and reducing peak demand energy load. This eliminates the electricity supplier's penalty for poor power factor. A USD 52,000 office lighting retrofit, which replaced the inefficient control gear in 1,200 twin 4018-watt fluorescent fittings with Gold Energy low loss ballasts and single triphosphor lamps, has achieved a 47 per cent reduction in office lighting energy use and a more uniform lighting output. An added benefit of installing triphosphor lamps has been the reduced loads on the air conditioning system due to reduced lighting heat. Plus, the lamps are now changed every five years instead of every two, reducing maintenance costs.

The Council also controls the 2.4kW auto boiling units and chilled water drinking fountains so that they only operate when someone turns on the lights in a particular area. This reduces the operating time by 70 per cent and greenhouse pollution by 63 tons per annum. In the underground car park, the 29.5 kW exhaust fans operated for 18 hours a day, five days a week. By installing a Variable Speed Drive (VSD) and carbon monoxide sensors at a cost of USD 35,000, the energy usage and resultant greenhouse gas emissions dropped by 89 per cent. The project had a simple payback period of 3.2 years and cut emissions by 115 tons per annum. The windows in the administration building were replaced with double-glazed smart reflector glass, which reduced the internal surface temperature of the glass by 10 degrees Celsius in summer.

Many of the changes have flow-on benefits such as reduced maintenance and a better working environment. The air conditioning system was modified to include an ecocycle, which now allows the building to automatically draw on 100 per cent outside air for almost half of the year, and has resulted in a more comfortable environment. The new Building Management System

(Box 1.1 Continued)

(Box 1.1 Continued)

determines when to introduce outside air. The consumption has been reduced from 2000 to 250 kWhr a day when 100 per cent fresh air is utilized. With the savings, it was possible to replace the air filtration system, which is now four times as efficient and a much better level of air quality is being enjoyed. The installation ofVSDs on the main air handling fans has resulted in a significant reduction in noise levels, again adding to a better work environment.

Source: Australian Building Green Rating Scheme 2001 (www.abgr.com.au)

A broader development-oriented approach is possible only if various stakeholders, namely, politicians, planners, equipment manufacturers, financial institutions and researchers begin, without delay, to channel the available human, technical and financial resources into the mass production and marketing of energy-efficient and environment-friendly technologies. This path bears the potential of providing employment opportunities, as these technologies are labour intensive. The implementation of such a system requires the reorientation of energy planning and the priorities of governments and utilities, a multiplying of research efforts for clean, renewable energy systems, and changing the mindset of consumers. Efficiency measures are, on an average, less capital-intensive per kilowatt than supply side options. Although many are aware of this truism, the knowledge about who can and should do what is lacking.

Research is needed to underpin the development of national and regional strategies that will lead to greater adoption of both existing and new technologies and approaches for increasing EE. Such research will need to go further than simply identifying and describing the barriers. It will need to develop a fundamental understanding of the characteristics of these barriers so that government policy and planning agencies can design effective strategies for the implementation of solutions. It may involve the development and assessment of policies, which have the potential to promote new markets for energy-efficient practices, products or services. Further research should aim at identifying business models for commercialization of efficient technologies.

The commercialization of EETs is of direct and immediate relevance to the development of government policies to promote EE government actions have the potential to facilitate a positive response by firms and businesses. Science and technology support will need to demonstrate how their proposed research will make a strategic contribution to the development of a policy that promotes uptake of energy-efficient practice by industry and the markets. Linkages and alignment to existing policy research, and even support from the private sector may need to be developed as part of formulating a proposal. Such linkages would need to be identified clearly. It should also become clear how the research project will build on previous or current research efforts, or how it will fill gaps in national and international research findings. Project proposals should provide evidence of strategic partnerships that ensure the implementation of energy efficiency projects.

The key to a successful energy policy is to achieve:

• Greater efficiency in energy use by consumers, due to better management of existing equipment and buildings, switching to low carbon fuels such as natural gas;

• New investment in plants for low carbon generation in the future; public investment geared at stimulating private investments in new technologies and infrastructure which can transform the underlying demand for services, such as transport, power, shelter, and comfort, into less intensive demands for energy. The cost of reducing emission trends varies where there are many alternatives. Many demand policies have long lead times as consumers are needed to take a new investment. Also, habits as well as institutions have high inertia.

In the light of competing claims on scarce public funds, governments and multilateral institutions are unlikely to make up for the bulk part of this gap (between need and availability of funds) through massive investments. A significant proportion of capital must come from the private sector. Even if sufficient public capital is available, it could be argued that government investment is less effective as far as the stimulation of EE is concerned than measures that create the framework conditions, which favour private sector activities in EE. In other words, governments may be more effective if they shift their emphasis from direct financing of EE to:

(a) overcoming the barriers that prevent the commercialization process and

(b) stimulating the drivers that promote the commercialization process. These barriers and drivers vary with each actor in the system. If each actor, such as the public, the private, the local, national and multilateral is motivated, then the whole process starts.

In recent years, a number of trends have accelerated the commercialization of EETs. These trends can be referred to as drivers and include factors such as high prices for fossil fuels, technological innovation, increasing economies of scale, rising environmental awareness, growing recognition of EE as a source of profit rather than cost, increasing investments of firms in this sector, and the prospect of stronger measures being introduced in the coming years at the national, regional and international levels in order to mitigate global warming. Any action to reinforce these drivers is likely to boost the commercialization trend.

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