Energy Efficiency

What is Energy Efficiency?

Australia’s energy sector has a big climate impact. This makes energy efficiency—reducing the energy used to do the same amount of work—central to reducing the country’s greenhouse gas emissions. While energy efficiency can cost money up front, it tends to save money for homes and businesses in the long-term. This makes energy efficiency a win-win solution. The benefits of energy efficiency can be realised in all aspects of society and the economy where energy is consumed. Although energy efficiency is sometimes overlooked as a source of emissions reductions it is vital in the transition to net zero emissions.

Why Energy Efficiency?

Increasing energy efficiency directly reduces the emissions created by activities like manufacturing, heating and cooling in buildings, and vehicle operation. Although there are many ways to reduce the emissions intensity of different activities (including in your own home), achieving widespread emissions reductions requires government policy. An example of an ambitious efficiency goal is Germany’s target of reducing its energy requirements by 50% by 2050 whilst maintaining its status as a manufacturing powerhouse (1). Australia has a long way to go on improving energy efficiency – in one recent study, Australia ranked 18th out of the 25 largest economies for its performance on adopting and implementing energy efficient technologies and standards (2).

Energy Efficiency in Australia

Australia has adopted energy efficiency standards within different sectors, but some key industries still lack basic regulation. Compared to other developed countries Australia has relatively well-established standards for buildings and appliances. However, when it comes to transport and industry, Australian standards are either non-existent or outdated. The opportunity to improve energy efficiency not only offers a means of lowering emissions, but also saving consumers and businesses money in household and operational energy costs.

Building Standards

Australian building standards, or the “National Construction Code” (NCC), ensure there is a minimum level of insulation and design requirements for new residences. These standards help to reduce the emissions and running costs of residences while ensuring that homes stay at a comfortable temperature all year round. However, the majority of homes in Australia (3) have been constructed prior to the implementation of modern efficiency standards . The result of this is that many existing homes have less efficient designs and are built with low heat retaining construction materials. This means these homes are, in general, more costly to keep warm in winter and/or cool in summer, consume more water and are less comfortable to live in.

Improving the thermal comfort of a home can be relatively straightforward, with each addition acting to improve the overall thermal comfort and energy savings. Insulation, draught proofing, shading and wind breaks all offer a means of reducing heat gains and losses.

State and territory governments, and even some local councils, are implementing their own programs to promote energy efficiency in the home. For example, the Energy Efficiency Improvement Scheme rolled out in the ACT has by itself benefited nearly half of ACT’s households and 20 per cent of businesses through their involvement in the scheme (4). This was done by setting a requirement for energy retailers to improve the energy efficiency of their customers. This program, only currently employed in the ACT, shows an interesting way to leverage energy providers to engage in reducing the emissions intensity of the grid, while helping their customers achieve energy savings.

Currently, one of the difficulties involved in implementing energy efficiency is the lack of incentive for landlords to install energy efficient appliances and components in their rental properties. The result of this is higher energy prices for renters, who make up 30.9% of households (4), which is likely to increase given previous trends. One method which offers a cost effective way to implement this is to change the classification of energy efficiency “improvements” into “repairs”. This means landlords can receive a tax benefit from the installation of these measures and in doing so pay off the cost quickly. Alternatively creating minimum energy efficiency standards for rental properties offers a means of addressing this issue.

Appliance Standards

There are two kinds of appliance standards: those that set minimum performance requirements for new appliances, and mandatory labelling that informs users on appliance energy consumption, helping make better long-term investments. In 2018 these standards offset the equivalent of half of Queensland’s household greenhouse gas emissions (5), and each year save the average Australian household between $140 and $220. So far, these standards have saved the Australian economy between $9.4 to $18.9 billion dollars.

Despite these achievements, there are still significant energy savings that could be realised by creating efficiency standards for a broader range of appliances. For example, pool pumps and other energy consuming appliances are currently not covered by an efficiency standard, and including these appliances in energy efficiency standards could help to drive deeper cuts to emissions, and savings for consumers.

Transport Standards

Transport efficiency standards are essentially non-existent in Australia. The result of this is not just higher emissions from the transport sector, but also more expensive transport options for Australians (6). For the average Australian switching to a more efficient vehicle (usually around $1500 more expensive) will pay itself back in under 2 years (6), and cost less over its lifetime.

Due to the long life of vehicles the effects from changes in transport standards often take a number of years to be realised. This causes a lag between the implementation of a scheme related to energy efficiency and the benefits generated by it. For example, today the average age of all vehicles in Australia is 10.1 years (7). That means if the government implemented a standard to improve the average emissions by, say, 15 per cent, it would take 10 years to achieve this reduction. Therefore, reaching net zero emissions by 2050 would require improving the standards between now and 2040 (or only 2 lifespans of the average vehicle!).

Although Australia’s fuel excise tax (currently $0.423/L for diesel and petrol) has been linked to a slight preferencing towards lighter, more fuel efficient vehicles (8) fleet emissions have been increasing since 1992 (6). The government could incentivise more efficient vehicles by having car owners whose vehicles emit less pay less each year on their annual registration (similar to the ownership tax implemented in Denmark). Other options include a Fuel Efficiency Rating Label (similar to the labels used for appliances) for cars, allowing new car buyers the opportunity to compare the costs linked to driving different vehicles. If this is to be done, it is important that the Australian government reinitiate independent efficiency testing for real world scenarios, as manufacturer efficiency testing has been shown to be a poor reflection of this (9). Or at a smaller scale local councils and state governments could push for greater charging infrastructure and other benefits such as reserved parking for electric vehicles, or more bike racks and paths to enable higher uptake of alternative transport methods.