If anyone doubts there is a good case in energy efficiency, a quick look at the Victorian Government’s Greener Government Buildings will probably be enough for a Road-to- Damascus turnaround.
In this resource constrained world, where the tax coffers are in perennially short supply, the Victorian Treasury has managed to carve out a $1 billion in energy savings for taxpayers from future consumption.
The beauty of the scheme is that the cost of retrofit is retrofit is paid by the energy savings. As The Fifth Estate found in an article on the program last year, all the project needs to do is prove the business case that the work will be repaid within a given time-frame.
So the amount of funding is effectively unlimited, an open cheque book signed by Treasury.
- See our article, Victorian government in radical retrofit program
According to Gareth O’Reilly, vice president professional services and buildings, Pacific for Schneider Electric, whose company is on the list of tenderers for work on the GGB, it’s a message that other governments could do well to listen to. Our sources for last year’s article put it far less politely.
In the private sector, it’s another matter. They get it, he says.
Well, starting to get it.
According to O’Reilly the timing is good for serious commitment to energy efficiency, across a whole range of businesses. It’s not just wishful thinking on his part, he says. The time has come.
Costs of energy have been steadily rising. For many companies that’s enough to start taking the energy/carbon reduction challenge seriously.
“It’s no longer a secondary thing; it’s now becoming top of mind for corporates,” O’Reilly says.
“They’ve seen an increase in energy costs in the last three to four years. Energy and carbon reduction are the number one drivers.”
Then there’s the shifting finance environment. While the past 12 months have been capital constrained, severely so in some cases, O’Reilly says the finance options are opening up.
“There are private financial incentives through major financial institutions offering debt. There are EUA [environmental upgrade agreement finance mechanisms] and performance contracting under way, and there is help from the Low Carbon Australia.”
Among the strongest adopters are the retailers, in particular the supermarket chains, which are turning their attention from shaving margins on milk to shaving margins on energy.
O’Reilly can’t reveal who his company is working for (almost no-one working with retailers ever can) but he can confirm it’s with “thousands” of sites.
They’re clients with “enlightened views who want to improve their own corporate offices and retail stores and supply chains”.
“For one company, we monitor thousands of stores and install equipment in thousands of stores, whether it’s an energy strategy or getting energy data and lighting controls.”
There are strong drivers in retail to improve productivity but the biggest probably is the ultra tight margin constraints.
“Over the last five to six years, and particularly the last two, we’ve done an incredible amount of work physical and financial work to optimise energy procurement and sustainability around energy. There’s been a lot of innovation.”
Mirroring the Victorian Government example, much of the work is self-funded, O’Reilly says.
Specific programs include for lighting controls, lighting control system and items connected to the HVAC (heating, ventilation and airconditioning] plus mechanical plant upgrades.
Interestingly retail is similar to hospitality in that it’s “all about the client experience”, O’Reilly says.
This means it needs to look wonderful on the surface but the back end can be less than ideal. This leaves a lot of scope to smart operators to offer savings that with rising energy costs are starting to look worth the effort.
O’Reilly’s team has been capitalising on those shifting financial sands. “We get very good results on energy savings,” he says.
There’s a social element that slots in nicely as well, and that’s the feel good factor.
“In this environment the good news is that you can reduce energy and carbon and enhance environmental credibility.” And corporates see sustainability as a drawcard for high quality employees, he adds.
O’Reilly claims this extends to Schneider Electric as well: “People want to work for us because they like what we do.”
It’s a factor that can ring true with the chief financial officer when the human costs are considered. O’Reilly says real estate are typically 25 per cent of the cost of running a business, but the operations cost, centred on staff, is 75 per cent. So a positive view of the company’s sustainability profile can carry some clout.
Financial solutions are growing, some with no capital outlay
Schneider Electric’s professional services business was formed last year, precisely to capture the opportunities in these drivers, O’Reilly says.
The mission is to “deliver life cycle efficiency with pragmatic asset values and efficiencies,” as O’Reilly puts it.
But it also offers finance solutions, connecting clients to a range of options such as through major financial institutions offering debt, offers from Low Carbon Australia, EUA [environmental upgrade agreement finance mechanisms], leasing programs that require “no capital outlay” and performance contracts, which guarantee savings or the supplier of the retrofit picks up the shortfall in energy performance.
“Everyone is driven by efficiency and the need to reduce carbon. There are private financial incentives through major financial institutions offering debts. There are EUA [environmental upgrade agreement finance mechanisms] and performance contracting under way.”
The Treasury program in Victoria is a great model of what’s possible given the right financial/payback framework, O’Reilly says.
“It’s a very innovative program; they’ve drawn down on best practice from a number of areas and Australians are leading the way.”
What’s perplexing is why more state governments,in the federal government, aren’t getting involved, given how perennially strapped government coffers are for cash.
At the federal level, O’Reilly says there’s not much serious commitment beyond setting ideal targets.
“I’m aware of targets being set but no mobilisation”.
Changing the landscape is what technology can bring to the table and much of it is gaining timely information, that’s detailed and presented in a form that can translate to actions, O’Reilly says.
“What’s happening is the convergence of the need for energy efficiency and making that data available to ensure that customers are getting maximum information around consumption and getting the granularity of that,” O’Reilly says. “And turning that into actionable items that save energy.”
The company certainly has no excuse not to be fully across the latest technology. According to O’Reilly it has a global turnover of $20 billion a year, 4000 staff and 176 years of track record to call on.
The energy efficiency space is relatively new – 20 years since commencement.
Traditionally the company has focused on technology hardware but it’s now moved to “smart office-based structures and open web standards to move information, to ensure it is real time cloud enabled,” O’Reilly says.
“In the past data has tended to be backward looking. So it’s more predictive now. “We’re building confidence around modelling, to allow assets to be self healing.”
And yes, O’Reilly can see growth potential. The past 12 months have been
capital constrained, he says, but as far as he’s concerned it’s time to get set for growth.