21 March 2012 – Leading energy expert Alan Pears says that long term factors are driving down electricity use in commercial and residential buildings and in manufacturing, which is switching to less energy intensive industries.

In response to debate that blames a decline in electricity consumption on Australia’s failing manufacturing sector, Professor Pears of RMIT in Melbourne, says there are bigger longer term trends at play.

Significant reduction in consumption in recent times can be explained by three key factors, he says.

Commercial property sector:

  • Two rounds of building energy regulations in 2006 and 2010 (after having none at all) plus MEPS [minimum energy performance standards] for a range of commercial equipment
  • Strong voluntary adoption of Green Star and NABERS
  • Energy disclosure at time of resale or lease
  • “virtualisation”, or smarter controls and equipment

“Most of these measures are just beginning to become visible,” Professor Pears says.

Residential:

  • Building codes in 2003, 2006 and 2010 requiring much better building performance, lighting and hot water efficiency.
  • From 1990s to 2010 inefficient airconditioners installed in thermally poor homes; and more efficient airconditioners in thermally better homes are replacing the previous trend.
  • Appliance energy growth from 2003 to 2010 was dominated by inefficient large TVs and halogen lights and take-up of desktop computers, but this has shifted dramatically in the past few years
  • Insulation and Green Loans programs (despite the criticisms) and a lot of local action has upgraded existing buildings
  • Strong growth in solar hot water (HW) and photo voltaics and shift to gas HW away from off-peak electric HW
  • Behaviour change driven by price increases and broader questioning of waste

(See our related article Stockland claims reveal a stunning turnaround in energy costs for housing)

Industry

  • Much of the manufacturing energy growth in the 1980s and 90s was electricity intensive industry. Energy market reform means the subsidies that drove these industries are harder to get in Australia
  • Some industries are becoming much more efficient: for example alumina refining is now a major exporter of low emission electricity to the grid instead of being a consumer, and some pulp and paper mills are much more efficient.
  • Shorter operating hours and shutdowns at many sites driven by the global financial crisis, but also leading to fundamental change
  • Energy Efficiency Opportunities and other industry programs are saving a lot of energy, some of which is electricity
  • Ongoing closures of Australian plants that are too small and old to compete internationally

Many of these trends mean that new buildings, equipment and retrofits are leading to much more efficient new facilities, and upgrading of performance of many existing ones. So it is quite feasible that there is an emerging downward trend in grid-sourced electricity consumption.

Professor Pears was in part responding to debate about the reasons for falling electricity consumption.

This response was also today posted on Climate Spectator, and is a  response to another article in the publication by Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, which discusses a study by consultants Ernst & Young for the Australian Energy Market Commission, which has found that

The “biggest mover in consumption over 35 years has been the manufacturing sector, with demand rising from 24,300 GWh to 66,900 GWh, outstripping the household sector, for which the rise has been from 19,080 GWh to 60,100 GWh, ” Mr Orchison said in discussing the report.

The commercial and public services sector showed consumption starting at only 9400 GWh and reaching 57,200 GWh.

The survey showed that manufacturing demand growth had averaged “2.8 per cent annually versus three per cent for households – while commercial and public services has averaged five per cent and has shot up 38 per cent since the start of the new century.”

“The politically sticky side to this for Gillard and Swan is that their ‘clean energy future’ scenario predicts a long-term slowing down in electricity demand growth that relies on a decline in manufacturing.

“Tucked away in the Treasury papers used to support the policy is an acknowledgement that manufacturing areas like metals processing, petroleum products, automotive, plastics and chemicals and clothing ‘will all experience annual growth lower than the national average’ over time.”

But while Mr Orchison says this is a political problem for the Labor Government as it reveals a fall in manufacturing, Professor Pears says a bigger reason for falling consumption is higher efficiencies in manufacturing processes.

consultants Ernst & Young released a study for the Australian Energy Market Commission which gives a breakdown of demand between 1973-74 and 2009-10.

The study says the biggest mover in consumption over 35 years has been the manufacturing sector, with demand rising from 24,300 gigawatts hour to 66,900 GWh, outstripping the household sector, for which the rise has been from 19,080 GWh to 60,100 GWh.

Was this a blip or a trend, the article asks?

“The energy regulator was already signalling that it wants to use the current situation to drive down the bids by network businesses for billions of dollars in capital outlays and related operating expenditure, a reaction to the wall of sound generated by householders and energy-intensive industries as their power bills keep climbing,” the article says.

See full article

Professor Pears says this is not a new experience for the networks and asks if the recent past is the blip or the previous decade.

He said:  “From the start of the east coast market in the late 1990s until the middle of the past decade, the regulatory system – although not the Australian Energy Regulator per se as it wasn’t around then – “sat on capex [capital expenditure] and opex [operational expenditure] to keep prices down.”

“Not surprisingly, this had the effect of also suppressing necessary investment in replacing ageing equipment. And, when the catch-up time could no longer be avoided (ie now), it coincided with pressure to service growth, especially in peak demand, and to meet political demands for greater supply reliability, delivering today’s price shocks.

“It is good to ask if the recent decline in electricity consumption is a blip or a change. But we also have to ask whether the trend of the 2000s was a blip or a trend. And because our end-use data are appallingly bad, none of us really knows the answer.

“It’s easy to look at historical trends in a simplistic manner using statistical analysis, but the fundamental demand for energy is not driven by past history, it is a derived one: we use electricity to run appliances and equipment that deliver services we want or need. In this context, there have been some major discontinuities added recently that potentially explain significant reduction in consumption.

“Many of these trends [outlined above] mean that new buildings, equipment and retrofits are leading to much more efficient new facilities, and upgrading of performance of many existing ones. So it is quite feasible that there is an emerging downward trend in grid-sourced electricity consumption.”

– With Tina Perinotto