The faceless candidate

This is the post I was going to run here on Monday before the ACCC paper on electricity prices landed and required priority attention. I’m of the view that this is still one of the most important energy issues for Australia going forward and deserving of a lot more meaningful focus by policymakers: 

Here’s an odd thing: our local media and green activists, so eager to bag Australia at any opportunity in the energy arena, especially when it relates to carbon emissions, seem to have completely missed a new example of where we appear deserving of criticism and our federal government needs to lift its game.

My source is the new International Energy Agency review of global energy efficiency, released earlier this month.

At one level, this 143-page document (available free on the agency website) contains a fair amount of encouraging news.

It declares “the world continued to generate more value from its energy use in 2016,” recording that global energy intensity (measured as the amount of primary energy needed to produce one unit of GDP) improved by 1.8 per cent last year and has tracked at an average rate of 2.1 per cent annually since 2010.

The IEA points out that the saving last year (measured as the difference between actual GDP and the notional level had energy intensity stayed where it was in 2015) was equal to twice the size of the Australian economy: $US2.2 trillion.

In 2016, the agency adds, the world would have used 12 per cent more energy without the efficiency improvements since 2000, equivalent to adding another European Union’s energy consumption. Without the electricity productivity gains in the IEA nations and major emerging economies since 2000 more than 1,000 gigawatts of additional power plant capacity (costing $US1.9 trillion) would now need to be in use.

Gains in efficiency, it says, last year helped households across the world save between 10 and 30 per cent in annual energy spending. For factories globally, use of energy per unit of economic output fell nearly 20 per cent between 2000 and 2016.

Needless to say, performance in this area is patchy and the countries with strong programs lift the global averages. A case in point is Germany – where the famous Energiewende program has increased household power bills hugely but German householders appear strangely quiescent to outside observers. German households spent seven per cent of disposable income on all energy bills in 2016, with electricity a big part of the picture. But energy efficiency helped them save $US45 billion in 2016, according to the IEA.

We also hear a great deal about big spending on solar and wind generation. Well, the global investment in energy efficiency last year was more than $US230 billion, with China well to the fore.  Without China, the fall in global intensity in 2016 would have been 1.1 per cent. Chinese energy demand growth is now running at just one per cent a year; the IEA says it would be seven per cent without the energy intensity improvements.

And there’s this: 77 per cent of the recent global emissions abatement achievement – greenhouse gases have held steady at around 32 billion tonnes of carbon dioxide equivalent since 2014 – is down to improving energy intensity versus 23 per cent for changes in the fuel mix.

Now here is the bum note for Australia: the IEA report includes a focus on percentage improvements for energy efficiency in 28 countries between 2000 and 2016; our performance is the fourth worst. Only Mexico, Finland and Brazil are below us on this ladder. Way above us in percentage terms (performing up to five times better) are Ireland, the Netherlands, the UK, Japan, Switzerland and China in that order.

This news has passed over our collective heads here in the past 10 days since the report came out.

Where is Labor shouting the odds about this situation and promising to do so much better if it wins national office? Its official policy, after all, is to double energy productivity by 2030. More importantly right now, where was even a single sentence in Josh Frydenberg’s headland speech to last week’s “national energy summit” conference referring to the importance of energy efficiency in dealing with the crisis that is now in the headlines daily? Literally, he said not a word on the topic.

Of course, the issue is not being ignored by the federal government. You can dig in to its website to find it declaring “managing energy use is a critical issue for Australia” and outlining national programs for pursuing improvements. What you won’t find is top level promotion of the issue, still less acknowledgement of the warning by the Academy of Technology & Engineering nearly two years ago that this country has languished at or below the OECD average for energy productivity for two decades and the current approach won’t improve this. Go to an important op-ed Frydenberg published in The Australian on 21 August and you will find a passing reference to energy efficiency – he lumps it in with solar subsidies and so forth in noting that “green schemes” account for eight per cent of the average household power bill.

There’s another bar chart in the IEA report that shows up our less than stellar performance in this area. It measures the coverage potential of mandatory energy efficiency codes and standards – this time in 37 countries. Australia and New Zealand sit right at the bottom of the ladder with Chile and Brazil. The top five are China, Japan, the UK, Germany and the US. I’d be the last to argue that bureaucracy and red tape are a satisfactory measure of virtue, but there is a message for us there, too, surely.

The point at issue is not that Australia has done nothing about energy productivity but that it has done nowhere near enough in its own interests.

The Energy Efficiency Council in a submission to the federal government’s climate change review (which is due to report before the end of 2017) puts its this way: “While energy management has delivered substantial reductions in greenhouse gas emissions over the past 20 years, Australia has barely tapped its potential. The Australian government has set a target to improve energy productivity by 40 per cent by 2030 and numerous studies suggest that we have the potential to further strengthen the economy by doubling energy productivity by 2030. However, with the current suite of policies in Australia, we will not meet the government’s current energy productivity target, let alone more ambitious goals.”

The Climate Change Authority a year ago gave energy efficiency a solid plug in its review for the Turnbull government of abatement policies. It pointed to

  • Energy efficiency being one of the fastest and most cost-effective ways to reduce emissions
  • Many efficiency opportunities being low or negative cost
  • The benefits from improving efficiency include job creation.

Lobbyists here for energy efficiency were more than a little disappointed with the Finkel report failing to follow this up strongly. They complain Finkel dwelt too much on the supply side and nowhere near enough on the demand side even while giving lip service to the need to accelerate the roll-out of energy efficiency measures. The panel’s big failing, they assert, is no recommendation on mechanisms to foster greater take-up of energy efficiency technologies in homes and businesses.

As the lobby sees it, the tragedy of the policy debate is that energy efficiency seems far harder to grasp than the arguments for attention to generation (whether dispatchable power or wind and solar). It is, they complain, “the faceless candidate waiting for a decent seat at the policy table.”

The new IEA report seems to give credence to that perception.

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