Time ripe to capitalise on energy-efficiency initiatives

pitt&sherry
Tuesday, 07 October, 2014


The repeal of the carbon tax has left many businesses pondering what impact its removal will have on energy markets in Australia. As Phil Harrington, Carbon & Energy Business Unit Manager at pitt&sherry explains, the potential effect of the tax’s removal should not be exaggerated and businesses should instead focus on energy-efficiency initiatives and fuel choices in their control.

Phil Harrington.

According to Harrington, the opportunity for Australian businesses to invest in energy-efficiency initiatives to save on costs has never been better.

As electricity prices level out after unprecedented rises, gas heads towards a well-documented price hike and energy-efficient alternatives become more valuable, Harrington believes energy management ‘rules of thumb’ which have guided businesses over the past decade should be re-evaluated.

With electricity prices in Australia more than doubling in recent years, Harrington says there has been a perception amongst the business community that the short-lived carbon tax was a major reason behind the increases following the levy’s introduction in July 2012.

“Something many businesses don’t understand is that the carbon price actually had a very trivial role to play in electricity’s price lift,” explains Harrington. “It was mostly driven by over-investment in electricity networks to meet demand that never materialised. So taking the carbon price away changes nothing fundamental.”

And the fundamentals are that the business case for investment in energy-efficiency initiatives has actually never looked better than it does today.

“This is primarily because the cost of electricity has risen to be so high that the value of saving electricity is also extremely high as a result ... and now gas is on a similar path.”

Emerging energy market

Analysis by pitt&sherry has found that electricity prices will likely remain stable, or even decline slightly, in the coming years. In contrast, gas prices are expected to rise significantly as the majority of Australia’s booming liquefied natural gas (LNG) production heads for the highly profitable export market.

According to Harrington, the changing market has created an energy environment where businesses would benefit from assessing a range of energy-efficiency technologies now available.

“How energy markets have worked over the past five to 10 years is now pretty much out the window. Some ideas you hear are that gas is cheap, renewables are expensive and energy efficiency has a long payback. That’s all been turned on its head in recent years. Businesses should rethink their energy strategies and redo their calculations based on a different pricing outlook and new policy environment. Business will need to make an informed and fresh decision about what’s optimal for them in the new energy environment,” says Harrington.

Businesses that have converted their major energy source to gas over the past decade have some particularly interesting decisions to make, adds Harrington.

“Do these companies stick with gas and risk seeing their advantage being taken away by rising prices?” he questions.

“These companies have the option to convert back to electricity or turn to another energy source, particularly renewables. There is also the option to improve the efficiency of their gas use to avoid another costly fuel change.”

Different strategies

For businesses investigating a conversion to a different energy source, Harrington says the costs of energy-efficient technologies, including renewables like solar, are continuing to fall.

The key is for businesses to have different strategies they can consider or implement for their main energy source, he adds. Pitt&sherry has been involved on a number of projects where different energy-efficiency strategies have been explored from an economic and environmental perspective.

According to Harrington, the key element of assessing each strategy is whether or not they will offset the impact of higher electricity and gas prices on their business.

“A prominent strategy currently being widely considered is solar energy, which has already been hugely popular in residential settings and is now increasing in use in the commercial and industrial sectors. A key driver for solar is that the cost of photovoltaic (PV) panels has fallen by about 90% since 2007,” says Harrington. “The focus now is on understanding how to size systems, relative to your load-shape and the structure of your pricing, to get the maximum value.”

Another energy strategy being explored as an alternative to electricity or gas is the use of biomass or biofuels - an option which is particularly useful in regional areas where feed stocks are readily available.

Harrington believes there is a good opportunity for manufacturers in particular to investigate biomass or biofuels as part of their energy strategy, from both an economic and environmental standpoint.

“Using these fuels will have very little impact on the operations of a manufacturer,” says Harrington. “At best, the manufacturer might need to tweak their boilers to make this change. In addition, these are renewable fuels and would contribute to a significant reduction in the carbon footprint of the operation. We are currently completing a study on the economics of this option, and of course it does depend on where you are, how much steam you need and local resources - but we expect very good return on investment as gas prices rise.

“Cogeneration and trigeneration are options that work in the right application, despite some narrowing of the ‘spark spread’ between gas and electricity. The key is good systems design - balancing electrical and heating/cooling loads, and understanding the opportunities to change your demand profile for energy services to reduce both consumption and cost.”

pitt&sherry investigates efficiency potential

pitt&sherry has worked with a variety of stakeholders and businesses from different industry sectors around Australia to assess their energy usage and help deliver the most efficient strategy moving forward.

The company has carved out a significant niche in the buildings energy-efficiency market over recent years, including a key project preparing the foundation report for the City of Sydney’s Energy Efficiency Master Plan.

By accessing Sydney’s 3D database on its building stock and its own, and partner Exergy Australia’s deep knowledge of building energy use, pitt&sherry created a rich model of energy use and greenhouse gas emissions associated with the city’s building stock.

According to Harrington, “Using this model we were able to demonstrate to the city, and key stakeholders, that absolute emissions savings of 40% or more could be cost effective, despite continued growth of the city’s footprint. These emission-saving investments have a negative abatement cost, saving businesses and the community hundreds of millions of dollars in energy costs, as well as making a substantial contribution to slashing emissions in Australia’s largest city.”

In the transport sector, pitt&sherry evaluated an in-service trial of double-decker buses in Sydney to assess the on-road performance of the vehicles in terms of fuel efficiency, emissions, passenger loading and costs compared with conventional bus configurations running on city-bound and suburban routes with three bus operators.

The double-decker trial is an extension to the projects pitt&sherry has coordinated for NSW Roads and Maritime Services (RMS) over several years through the Green Truck Partnership (GTP) program. The GTP trials function as an independent assessment of fuels and technologies that can reduce emissions and operating costs for truck operators.

One trial in 2012 assessed the performance of a hybrid electric vehicle compared with a conventional diesel vehicle. This trial demonstrated a 21% saving in fuel costs, and the same figure for greenhouse gas emissions.

“What these projects have revealed is clear evidence that the economics for investing in energy-efficiency initiatives are extremely attractive due to Australia’s evolving energy market,” concludes Harrington.

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