Efficiency Insight - March 2020
Efficiency Insight is the Energy Efficiency Council's monthly energy management update for members, partners and stakeholders.
Four weeks ago in my introduction to the first edition of Efficiency Insight for 2020, I reflected on the aftermath of the bushfire catastrophe, and how it had thrown our political landscape into flux.Just a month later and Australia, along with the rest of the world, is gripped by another escalating crisis which poses an even greater threat to lives and wellbeing.
COVID-19 is affecting us all. Like may other businesses, all Energy Efficiency Council staff are working from home. And working hard: we have rolled up our sleeves, rapidly reshaping our operations so we can play the most constructive role possible in the broader community response to this new emergency.
Yesterday we sent members the first in a series of rolling updates on government assistance for businesses doing it tough as a part of the economic downturn. Our policy focus will shift to ensure the energy management and energy efficiency sector has the support it needs to weather this crisis. Our National Energy Efficiency Conference has been deferred to late 2020, so we are looking at how we can use digital platforms to keep our network connected over coming months. And we’re reviewing all our training with a view to taking it online so we can continue to support the professional development of everyone working in our sector.
We’re a very small part of a much broader effort. But if you have ideas for how the EEC can a constructive role over the coming months, please don’t hesitate to get in touch.
Chief Executive Officer
Energy Efficiency Council
To subscribe to receive future editions of Efficiency Insight direct to your inbox, click here.
Australia’s political landscape is in flux due to the impact of the novel coronavirus (COVID-19). There has been a rapid increase in the number of confirmed cases in Australia since 11 March and the political, corporate and community responses to COVID-19 are changing rapidly.
The World Health Organisation have made it clear that slowing the rate of transmission is vital to minimise the number of people who have COVID-19 at any one time. Reducing the number of coincident infections is important to ensure that our health system can support everyone that needs assistance. This approach is known as ‘flattening the curve’.
Accordingly, the Australian Government has imposed a 14 day quarantine period on anyone arrive from overseas and has banned non-essential gatherings of over 100 people. Many organisations, including the EEC, have gone further and chosen to reduce non-essential face-to-face meetings. Many COVID-19 policies, including the EEC’s, are partly aimed reducing the risk of staff contracting the disease, and partly about reducing the speed of transmission in the community.
However, the EEC and other businesses will continue to operate. Governments have started to roll out policies that aim to both encourage ‘social distancing’ (i.e. keeping people a reasonable distance apart) and keep the economy running. However certain sectors will be particularly impacted, and over the last week the Council has begun analysing how COVID-19 might affect carbon emissions and the energy and energy management sectors.Global air travel dropped by 4.3 per cent in February. Qantas announced that it would cut its international flights by 90 per cent and domestic flights by 60 per cent. Some of this reduction will be temporary, but it’s entirely possible that COVID-19 could lead to some permanent changes in work practices. Some of these changes are overdue - in 2011 I participated in a high-quality telepresence event run by The Economist magazine, and I expect we’ll see further investment in video conferencing systems over the coming months.
The significant reduction in air traffic has delivered reductions in greenhouse gas emissions. However, it’s not the only factor driving down emissions, and some energy-intensive factories in China have significantly reduced their output. Carbon Brief estimates that COVID-19 has reduced China’s emissions over four weeks by around a quarter, although the scale of this reduction is likely to be temporary.
COVID-19 has also impacted on energy markets. International oil prices have dropped significantly in the last fortnight, and the price of natural gas has dropped in several countries. COVID-19 could result in Australian businesses energy demand decreasing and residential energy demand increasing, although the extent and duration of this impact is completely unknown.
The EEC is rapidly engaging with its Board and members to assess the likely impacts of COVID-19 on markets for energy management services and products. We anticipate that there will be some delays in securing stock, particularly from overseas. There will also likely be a general reduction in household and business investment, and self-distancing and quarantines could restrict access to buildings to deliver energy efficiency upgrades.
However, the impact of COVID-19 on the energy management sector, as with the economy at large, will be strongly affected by governments’ policy decisions. EEC members will have received our summary of stimulus measures and their impacts on markets for energy efficiency services and products. As the peak body for Australia’s energy management sector, we will continue to monitor the situation and provide members and the broader community with guidance as the situation evolves.
We will also be carefully considering how to engage with Government on the policy front over the coming year. We need to continue to represent our member’s interests, progress the importants strategic conversations around climate and energy that are so important for Australia’s future prosperity. However we are entering a period where managing a national crisis will be of paramount importance for governments around the country. We’ll be engaging closely with members and partners over coming days and weeks to ensure we get the balance right.
See below for our general policy roundup. As always, the EEC’s members will receive a separate, member-only newsletter later in the month that includes more extensive analysis on crucial, topical policy issues.
Net zero news from NSW
We had anticipated that governments would reduce their focus on climate change and energy in the short-term due to COVID-19. So far, this has not been the case. As we notified members, on Saturday the NSW Government announced its long awaited 2030 climate target along with its Net Zero Plan Stage 1: 2020–2030.
The target, reducing statewide emissions by 35% by 2030, is significantly higher than the Federal Government’s 26-28% emissions reduction target. The Plan sets out the actions the NSW Government will take to achieve its target, and is underpinned by the recent $2 billion dollar MOU between NSW and the Commonwealth.
Like most policy frameworks, there is a lot of detail to flesh out. However both the target and the Plan provide a lot of scope for energy efficiency, energy management and demand response to play a central role in driving NSW’s transition over the next decade.
Commonwealth considers emissions play, and invests in the RACE for 2030
The Australian Government has indicated that it will start to announce parts of its Technology Roadmap and its review of the Emissions Reduction Fund, although this may be delayed.
Angus Taylor has stated that "Our [climate change] strategy will be based on a series of detailed pieces of work that we will complete over the rest of this year.” This means that the government’s climate change strategy might not be a single document, but a series of reports, potentially including the forthcoming Electric Vehicle Strategy and review of the National Energy Efficiency Productivity Plan.
Taylor also stated that he would be looking for private investment in emissions reduction to match and significantly exceed government investment. One clear example of this has just been announced – a new Cooperative Research Centre (CRC) called the Reliable Affordable Clean Energy for 2030 CRC (RACE for 2030).
The RACE for 2030 CRC will bring industry and research institutions together for its mission to deliver “High-impact research on boosting energy productivity and integrating clean, distributed energy into the grid, in order to cut bills and carbon emissions of Australian businesses and households.”
The Federal Government will provide the RACE for 2030 CRC with $68.5 million over ten years, which will leverage $87.1 million in cash and $193.5 million of in-kind contributions from 91 partners, including the Australian Alliance for Energy Productivity, the Energy Efficiency Council and several of its members. The CRC’s research partners include the University of Technology Sydney, CSIRO, Monash University, Curtain University, Griffith University, QUT, RMIT University and the University of South Australia.
The CRC will be led by its Chair designate, Lousie Sylvan, and interim CEO, Jon Jutsen. The CRC could play a decisive role improving energy efficiency in Australia, and we look forward to further announcements from the CRC over the coming months. For more information on RACE visit www.racefor2030.net.au
Wholesale demand response back on the cards
Energy market bodies have also delivered significant policy developments. As we advised members earlier this week, the Australian Energy Market Commission (AEMC) has recently released its revised Draft Determination for a Wholesale Demand Response Mechanism.
If this is implemented it will provide another route to reward large energy users if they reduce their demand for electricity during periods when wholesale electricity prices are high.
Banks and networks move ahead of the curve?
Two of the most significant announcements in recent months were actually made by a bank and a network service provider.
In banking, Bank Australia has announced a new Clean Energy Home Loan to encourage home retrofitting. Instead of a loan for the retrofit, the Clean Energy Home Loan offers households a 0.4 per cent reduction in the interest rates in their main mortgage (e.g. from 3.2 per cent to 2.8 per cent) if they buy a more efficient home or substantially retrofit their home. Households can use various rating systems to demonstrate the efficiency of their home, including NatHERS, the Victorian Residential Energy Efficiency Scorecard, GreenStar and Passive House Certification.
This type of approach is similar to the home loans supported by the KfW Bank in Germany. While there are already several attractive loans on the market in Australia that support retrofitting, households are only likely to consider them if they are already interested in retrofitting. The Clean Energy Home Loan motivates households that aren’t already thinking about sustainability to consider improving the energy efficiency of their home.
Bank Australia is by no means that only bank that is developing new products to encourage the construction and retrofit of more efficient homes, and I expect that several banks will introduce new loan products in the next years. The EEC does not endorse this particular loan, and we encourage anyone interested in sustainable financing to compare the products that are available on the market.
In energy networks, Evoenergy, the ACT’s electricity and gas distribution service provider, has released a draft plan for 2021-26 for its gas network. Pages 16-20 of the Plan set out a significant shift in direction that is worth looking at in detail.
The draft plan states that decarbonising the ACT’s gas system could involve three options – full electrification of homes and businesses, transitioning the gas supply to ‘renewable gas’ (e.g. hydrogen or bio-methane) or a combination of the two. Evoenergy’s plan states it isn’t yet clear which option is the best, and therefore proposes to minimise further investments that could become sunk – specifically it won’t expand the gas network to new suburbs. This lines up with the ACT Government’s recent decision to remove the mandate that all new suburbs in the ACT needed to be connected to the gas network.
Evoenergy’s strategy is strongly influenced by the ACT Government’s statements around transitioning away from gas, and this context doesn’t apply in other states and territories. However, I think that Evoenergy’s draft strategy still has national ramifications, in part because they have clearly articulated a sound point - there are prospects for gas networks to carry zero-emissions fuel, but the potential costs and benefits are still unclear compared to all-electric homes.
Households can now install high-quality appliances for cooking (induction stoves), water heating and space heating and cooling (heat-pumps). Renew released this excellent report in 2018 that concluded that it is cheaper to build an all-electric home than a dual-fuel home (electricity and gas). For existing homes, the cost-effectiveness of switching to an all electric home depends on how many appliances need replacing, but this equation will change as the price of various appliances and fuels change.
This issue has significant implications for energy management, as all-electric homes have the potential to both be more energy-efficient than dual-fuel homes, and will place greater demands on the electricity system. For the moment, it seems likely that more and more developers will build all-electric homes, especially apartments. In this context, gas networks should all be considering whether they adopt Evoenergy’s approach.
The Energy Efficiency Council is postponing the the National Energy Efficiency Conference 2020 to minimise the potential for transmission of COVID-19 and ensure that we deliver the highest quality event possible.
We did not make this decision lightly. The Conference plays an important role in Australia’s energy sector, forging links between industry, government and experts, and progressing debates on critical energy management issues. However, after careful consideration, we have concluded that a delay until later in the year is in the best interests of attendees, speakers and the broader community.
Conference to be rescheduled for second half of 2020
The Conference was scheduled to take place in Melbourne on 26 and 27 May 2020. We are working with our partners to determine a revised date for the Conference in the second half of 2020; I’ll be in touch with an announcement on that front very soon. In the meantime, we will be reopening ‘early bird’ Conference tickets.
I want to thank our Conference sponsors and partners for their incredible support as we have worked through this process. Your commitment is deeply appreciated, and helps us manage the challenges of shifting an event of this magnitude at short notice.
National Energy Efficiency Awards
The Awards ceremony for the National Energy Efficiency Awards has also been deferred from May to the second half of 2020. As a result, the deadline for Awards submissions has been extended to June 30, 2020. Everyone that has previously submitted nominations will also have the opportunity to update their nomination prior to June 30.
A new date for the Awards ceremony will be announced soon.
Broader response to COVID-19
Like organisations across the country, we are monitoring health advice closely and putting sensible risk management measures in place for our staff and all our public facing activities.
At this stage we are proceeding with smaller events such as training. However, a full credit (for use at future Council training or events) will be provided to any person unable to attend as a result of feeling unwell and needing to self-isolate in accordance with the latest public health guidelines.
As an organisation we have a particular focus on energy and carbon issues, however those conversations don't happen in a vacuum. The immediate task for Australian families and businesses is to navigate the dual challenges – bushfires and pandemic – that have marked the start of this year. Our thoughts are with the victims of both crises, and we’ll be doing what we can to support the broader community effort to ensure we all emerge on the other side stronger than ever.