Jonathan Jutsen

Energy productivity is fast replacing energy efficiency globally as a key input into a wider and deeper measure of economic growth. It’s not just about more output per unit of energy but about the wider impact energy can have. Jonathan Jutsen writes ahead of a briefing on the issue scheduled for Wednesday at Old Parliament House, Canberra.

The Commonwealth government recently released the Energy White Paper. The paper promotes energy productivity as one of three planks of the government’s energy strategy and calls for the development of a national energy productivity plan, including a target of up to 40 per cent improvement in EP by 2030.

The Paper followed 12 months of intensive work by the Australian Alliance to Save Energy to establish the concept of “energy productivity” and pursue an agenda of doubling Australia’s energy productivity (2xEP) by 2030 on a 2010 base. If Australia is able to double EP, we will gain major economic benefits by 2030 including:

  • Cut energy costs for end users by $30 billion a year in 2030, with a likely 2.5 multiplier from associated benefits. This will involve an investment of about $100 billion over 15 years
  • Real GDP per capita will be increased by $2000 a year
  • Emissions will be cut by 25 per cent, compared to business as usual projections for 2030
  • Oil imports will be reduced substantially, increasing Australia’s energy security

This is not a “nice to do” – it is an economic imperative. Energy is now a substantial and growing cost to end-users – accounting for over $111 billion of GDP, and much of it being wasted.

We can no longer afford for this to occur as the minerals boom, which masked poor performance in multi-factor productivity in the past decade, is now over. Sharp energy price increases over the past decade have combined with poor energy productivity – which is improving at about half the rate of key competitors – to damage our energy competitiveness.

A generation ago Australia used low energy costs to attract industry. Now we are discouraging businesses and jobs through a competitive disadvantage in energy prices. What is worse is that in trying to rectify this problem we are chasing a moving target, as other countries are accelerating away by setting and achieving even more ambitious improvements in energy end use performance.

The key benefit of using an economic productivity approach to energy in Australia is that it aligns with the national economic policy priority of improving (multi-factor) productivity that has been static or falling during the last decade.

So what is energy productivity? EP takes an economic approach to energy and aims to capture the total economic value created from each unit of energy applied, for example the dollar value of GDP as a proxy for total value at a national level, whereas energy efficiency is a much narrower concept focused on the relative work output from a unit of energy input.

The deficiencies of energy efficiency as a measure of value are clearly evident when we seek to evaluate non-energy benefits of energy efficiency programs. These benefits often substantially exceed the dollar value of energy savings.

EP is also an integrating concept and thus more powerful – it requires us to address the way end-use energy policy intersects with broader productivity programs in each sector, and with performance improvement opportunities in supply chains and from long term planning and infrastructure investments.

Energy productivity is an issue that should garner support across the political spectrum and so establish the certainty required to support long-term investment. A consistent approach over at least 15 years is essential to progress the 2xEP agenda. Sudden shifts in policy over the last decade have been most detrimental to business confidence for planning and investment in improved energy use.

In USA the Obama administration has adopted a target of doubling energy productivity by 2030, from a 2010 base year. I recently attended the first meeting of the Board of the Global Alliance to Save Energy. This new coalition aims to drive the doubling energy productivity agenda internationally.

At the recent European Council for and Energy Efficient Economy Summer Study, Philippe Benoit, an International Energy Agency vice president, observed that energy productivity resonated very well globally, especially in developing countries.

Doubling Australia’s energy productivity is achievable

In Australia the Energy White Paper implementation process will focus thinking on appropriate targets for improving national energy productivity to 2030. A2SE, through adopting a bottom-up research approach, has determined that doubling energy productivity by 2030 is achievable. ClimateWorks supports this finding through research recently reported as Australia’s Energy Productivity Potential. Furthermore, although a 2xEP target is challenging, it should be kept in mind that projected growth in GDP and structural shifts in the economy will deliver 60 per cent of the improvement target.

Our focus work in sub-sectors of the economy has led us to accept the need for differentiated targets by sector. For example, while the manufacturing sector should be able to achieve 2xEP, the mining sector has to deal with challenges including a decline in ore grades and increasing mining depths so it might be the case that maintaining current levels of EP is an appropriate target.

As work to develop a national EP plan continues we are looking forward to a productive exchange with governments on opportunities, hurdles, solutions and targets.

A2SE is a not for profit organisation dedicated to a more energy productive economy. We welcome inputs from the property sector to develop a roadmap, or EP plan, for the built environment sector which looks after the sectors interests and integrates with other carbon management policy initiatives of the industry. Contact info@a2se.org.au.

Jonathan Jutsen is chairman, Australian Alliance to Save Energy and founder Energetics Pty Ltd

The Canberra briefing will be with  Margaret Sewell, Department of Industry & Science, and a panel with Terry O’Brien, Simplot; Glen Corder, Sustainable Minerals Institute;  David Eyre, NSW Farmers;Peter Haenke, NRMA; Stuart Macfarlane, Schneider Electric; Jason Twill, Lend Lease, Bryan Clark, ACCI.