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Pears Report: Risky business?

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Transforming our energy system may prove far less risky than propping up traditional over-built electricity supply, suggests Alan Pears.

THIS summer has exposed yet another aspect of the fragility of our traditional electricity grid, with several failures in local distribution networks—the so-called ‘poles and wires’. As former ATA staffer Craig Memery has reminded us in a recent article (, the vast majority of power failures—97.2% on Craig’s figures—happen within local networks, with just 0.24% from insufficient generation.


Once again we face a choice between propping up traditional over-built electricity supply infrastructure or driving transformation. The first involves inefficient capital investment in power lines and equipment capacity used for just a few hours a year; the second involves innovation with  confusing options and other risks.

Energy efficiency, demand management, distributed storage, local renewables and new business models all have roles to play (as described in my columns in ReNew 140 and 141 and my article in The Conversation (

The risks seem very different depending on whether you look at the supply or the consumer side of the meter.

The supply side includes generation, wholesale markets, high-voltage long-distance transmission and local networks of poles and wires. The wholesale electricity market is fundamentally about supply and demand. When supply exceeds demand, prices fall and the consumer is king. When supply is tight, suppliers exploit the situation to maximise profit. Policymakers are frantically trying to develop better mechanisms to reward actions that ‘keep the lights on’, but this is a politically difficult area.

Networks are regulated regional monopolies, but regulation has failed to limit price increases, while network operators have failed to maintain reliable supply in extreme weather.

On the supply side of the meter, the situation is increasingly risky. Building a large power generator, transmission line or energy storage facility takes time and locks up a lot of capital for years: will there be a long-term revenue stream to repay the cost and provide profit? Will consumers continue to tolerate paying for poor decisions?

On the consumer side, if they were available, innovations such as better-insulated fridges that could keep food cold during a 10- or 20-hour power failure and use smart sensors and controls to maximise use of on-site rooftop solar generation—and in the process use $100 less electricity each year—could be attractive. An informed, rational business should be keen to buy behind-the-meter technology such as on-site renewable energy, energy storage and efficient, flexible equipment that could keep production going and income flowing for up to an hour during a power failure—and make money at other times by managing demand.

These products are emerging, allowing  more businesses and households to invest ‘behind the meter’ to take control of reliability and cost, and as a form of insurance.

Local action looks increasingly attractive when you consider the avoided cost of disruption to business, lifestyle or health, combined with increasingly attractive financial returns, lower climate impacts and the opportunity to ‘send a message’ to the energy industry and governments. A rapidly growing industry is happy to provide the technologies and services, although consumer protection issues need a lot more attention.

Snowy 2.0: silver bullet or white elephant?

The proposed Snowy 2.0 pumped hydro storage system provides an interesting example of the dilemmas facing energy investors. Pumped hydro uses cheap, excess electricity to pump water uphill, then produces electricity at other times as the water runs back downhill through a generator. The environmental credentials of pumped hydro depend on the source of its electricity input, design and environmental impacts on habitats.

To profit, it will rely on the gap between buying at cheap wholesale electricity prices and selling at high prices, after allowing for its large ‘round trip’ energy losses of over 30% (, as water flows through a 27 kilometre tunnel between the upper and lower reservoirs.

But the size and frequency of profitable price gaps depend on many factors. If too many energy storage facilities are built before it starts operating or demand response trims peak demand (when prices usually peak), the price gap will close. If improving energy efficiency drives demand down, it undermines the economics of all supply options by shifting the balance between supply and demand (see

Snowy 2.0 won’t be operating until well after the Liddell coal power station closes in 2022, so a lot of new storage and supply capacity and demand-side measures will need to be introduced before then. That will undermine the viability of Snowy 2.0. Given the rapid growth and declining prices of alternatives, Snowy 2.0 may require big subsidies. When price peaks are smaller, all generators operating at the time make less money because the most expensive generator running sets the price for all other generators.

So investors on the supply side of the meter face potentially significant and unpredictable financial risks. Projects that can negotiate long-term contracts and be built quickly have the best prospects. But investing in demand-side modular projects, especially at fringe-of-grid, and packaging high-value services with energy for consumers both look much less risky.

Future urban transport

China has over 150 million electric bikes, for good reason. Their experiment with car-based cities showed very quickly that cars simply take up too much space and conflict with more space-efficient solutions in urban areas. Cars injure or kill a lot of people. So Beijing now has many fenced-off road lanes for use by bikes and other low-speed, compact vehicles.

A lot of money is tied up in a car and the depreciation cost is high: in three years, the value of a new car can halve. According to the Australian Bureau of Statistics, an average household spent $195 per week on motor vehicle-related costs in 2015, of which only a quarter was fuel cost. Many spend far more. Annual fuel use contributes over five tonnes of carbon emissions per household.

The cost of new roads in urban areas is astronomical and the impact of disruption during construction and maintenance is high. The ‘avoidable cost’ of traffic congestion in Australia was estimated at $16.5 billion in 2015, and predicted to increase to around $30 billion by 2030 (see Parking space is expensive; it also forces everyone to travel further by taking up land that could be more productively used and limiting access to railway stations, workplaces and services.

There are much cheaper solutions with lower environmental impact.

Many Australian owners of e-bikes have enthusiastically described how their lives have been transformed. E-bikes deal with the hills, headwinds and sweating that discourage bike riding. They can carry substantial loads, including young children. And they can outpace peak hour car traffic.

But the common complaints from both e-bike users and observers are that they don’t work well with either pedestrians or cars because they accelerate rapidly and go too fast (see, for example, The cheap ones are not very durable and the good ones cost too much. And you can’t take them on most public transport, especially at peak times.

So what do we need? We need e-bikes that have sensors and smart speed controls. When they are near pedestrians, they would slow down and avoid them. They would warn riders of nearby cars or other dangers and slow acceleration to match traffic conditions.

Beyond that, we need new kinds of compact low-speed personal electric vehicles that can be carried on public transport. Already many people use electric skateboards. Some use fold-up scooters that could be motorised. My dream is a fold-up e-scooter with an integrated bag so it can become a wheelie bag on public transport.

Governments should be subsidising smart e-bikes and other low-speed personal vehicles, and accelerating roll-out of infrastructure to support them.

Australia’s recycling crisis

China’s decision to limit imports of low-quality recyclables has disrupted Australia’s pathetically inadequate waste management and recycling system. ‘Waste’ is a valuable resource, for many reasons including that minimising it will save energy and reduce greenhouse gas emissions. But we have failed to invest in the infrastructure and governance frameworks to capture its potential. Numerous studies over decades have shown us what we need to do and technologies are improving fast; for example, see

We need to invest in advanced sorting and reprocessing technologies and ‘close the loop’ by requiring manufacturers to include recovered materials in their products. And we should become world leaders in mining landfills.

Can our leaders lead us on this at last?

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant. He writes a column in each issue of ReNew: you can buy an e-book of Alan’s columns from 1997 to 2016 at

Read more articles in ReNew 143.


The Pears Report: Houses are public assets, too

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Why can’t we support long-term investments in energy-efficient buildings for the benefit of all in the community, the way we’re prepared to invest in infrastructure like roads, asks Alan Pears?

I have had a long-standing involvement in building energy rating, regulation and building energy assessment. There are encouraging signs that the next round of building energy regulation for non-residential buildings will drive significant improvement— if it is enforced.


But progress in the residential sector is painfully slow. New homes should be assets that help deliver a healthy, zero (or beyond zero) emission future. This will require a dramatic increase in thermal performance (both summer and winter) of new homes and strong enforcement of standards. I am very concerned about the long-term costs and impacts of failure to act faster.

Incentives, finance, accountability
The situation seems pretty clear to me. We need long-term low-interest finance combined with incentives and mandatory measures for new buildings and existing ones, especially where the decision-maker doesn’t pay the ongoing energy bills. We need accountability through checking actual performance. High-profile rating and benchmarking of performance (with promotion and education so people use it) must be built into information given to home buyers and potential tenants.

Over 30% of households are rentals. Many more have limited financial resources. Houses last 75 years or so on average: they are a form of public infrastructure that private decision-makers create and operate. We finance power stations, roads and buildings over 25 years or more, so why not the cost of upgrading building performance to be future assets in a zero-carbon world?

The energy efficiency of homes is a major influence on health, comfort, energy costs and how much energy supply infrastructure we need. Renewable energy, like efficient heating and cooling equipment, is important. But efficient buildings need a lot less energy supply infrastructure. They are less vulnerable to supply interruptions and appliance failure. They are nicer to live in.

The widely used CBA/HIA housing affordability index ignores the ongoing costs of running a house. It focuses attention on the ‘sticker’ price—yet very few people pay cash for a house. The rest of us are more interested in the net cashflow: can we afford to pay the loan off while paying the running costs and health care bills? Yet few talk about that as an affordability indicator.

The present National Construction Code largely ignores the costs of peak energy demand, health and amenity costs, as well as carbon emission costs and the adequacy of performance in a changing climate.

A package of high building efficiency, high equipment and appliance efficiency, on-site renewable energy and storage can now be cashflow-positive if financed through a mortgage. Reduced health care costs, improved amenity and reduced energy infrastructure costs add value. And we need to ensure the value of long-term benefits is not discounted away by economic analysts. Of course, including a realistic carbon price would make this look even better.

Tenants and financially stressed households, especially those in existing poor-performing homes, suffer most. When we as a society recognise the broader social benefit of helping people to look after themselves, we act. Owning a home, no matter how inefficient and uncomfortable, has long been seen as a socially beneficial outcome, so governments have encouraged banks to loan money. The financial sector is happy to loan money to businesses that claim they will deliver a social benefit by growing the economy—although the reality often falls short. So why don’t we provide appropriate finance for low-carbon housing?

We need to recognise that the emerging reality in energy and climate is a shift from governments and big business making big long-term investments to individuals and small businesses investing in on-site energy efficiency (appliances and buildings), renewables, storage and smarts. So we need structures that support such action—for tenants, vulnerable households, financially stressed households, small businesses and communities.

Supporting great causes is one way to manage guilt and frustration about climate change. The ATA’s project to install solar-powered lighting units in remote East Timorese villages involves and educates the whole community. Give the Gift of Light: Photo: Susanna Rossi.

Managing guilt and distress on climate change
It’s coming up to Christmas and summer. It’s a time of reflection and celebration, and guilt and frustration for many who are working towards a better world. It’s also the beginning of what could be a nasty bushfire season, driven by ongoing climate change.

How much responsibility should I take for action to cut climate impacts?

This question exercises my mind quite a bit. I’m lucky, in that I can (at least occasionally) point to policies, programs or actions I’ve helped to implement that have shifted national, state or local governments. More often, I can see action I’ve taken that has simply helped to reduce the back-sliding as anti-climate action groups, powerful interests and captive policy makers push their agendas.

In my personal life I, like many others, do what I can to cut my impacts and support positive local action. But it’s difficult for many people to feel they have done enough. One lesson from life cycle analysis is that we depend on many complex systems to deliver the services and products we rely on. While the final buyer could, in theory, select low-carbon, ethical options, there are serious practical barriers.

Information is scarce, and the indirect influence of financiers, governments and decision-makers within the supply chain has effects on environmental and social impacts that can’t be easily unravelled. In particular, most people depend upon governments to provide infrastructure to allow them to travel to work with minimum impact, design cities to deliver equitable outcomes, and set and enforce rules for industry and business to behave responsibly and report on their impacts.

Australian governments have, on the whole, failed to support people who want to deliver a low-carbon, equitable and successful society and economy. What can I do if the only realistic way I can get to work involves driving a car a long distance on a congested road?

Governments have a serious governance problem: even if an individual government does good work, there is no guarantee that this will not be unravelled by a future government. And they seem to be prepared to facilitate projects that add to our problems, providing finance, regulating to support and turning a ‘blind eye’ to failures. Just look at the chronic failures in energy markets, housing, transport and climate policy!

So where does this leave those of us who want to make a difference on climate issues?

We can do lots within our own lives, using less fossil fuel, buying less ‘stuff’ and buying less of the ‘stuff’ that we are confident has a high impact. Some things matter a lot more than others: the steel and cement in building construction is emissions-intensive. While beef and lamb are emissions-intensive, so are highly processed foods and visits to energy inefficient restaurants. Driving to shops and inefficient old fridges can also be significant contributors to a household’s emissions. We need much better consumer guidance. But we also need to look beyond this: a modern, sustainable society should not involve wearing hair shirts and freezing in the dark!

Those of us who have some capital could help others to afford clean energy solutions by investing in funds that finance rooftop solar and energy efficiency measures for vulnerable households (e.g. Corena and ClearSky Solar, or look for local community groups investing in solar projects). These investments can deliver a good, reliable return while helping others to be part of the solution instead of victims. Owners of rental properties can install low-emission equipment and upgrade performance while, in many cases, capturing tax deductions and depreciation allowances.

One of my favourite Christmas and birthday strategies is to buy friends and relatives carbon offsets instead of presents. The UN website ( allows you to choose projects that deliver useful economic and social outcomes as well as cutting emissions. While some people criticise the UN offset scheme (with some justification) because it lacks rigour, by choosing your projects, you can guarantee some benefit. And the pragmatic reality is that, if you and I don’t buy and surrender these offsets without emitting, big businesses and slow-moving governments (like ours) can buy and surrender them because they are ‘legal currency’ in the global abatement scheme. And we should buy them while they’re cheap!

Government priorities and actions matter. So harassing your representatives of local, state and national governments is important. Community action, both for advocacy and practical projects, is vitally important. The reality is that governments are mostly followers, not leaders, so community leadership is powerful.

Lastly, we should applaud people, communities, businesses and organisations, and even politicians, who take significant action on climate. They need all the support we can give them. And maybe we can celebrate a bit with the odd glass of Australian red wine from a cask—much lower carbon impact than white wine from a bottle!

The Energy Efficiency Council awards include a gong for Energy Efficiency Champion for “an individual who has advanced the energy efficiency sector through outstanding advocacy, research, education or projects.” That’s a neat summary of the efforts of regular ReNew contributor Alan Pears, who took out the award in November 2017, to a standing ovation.

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant. He writes a column in each issue of ReNew: you can buy an e-book of Alan’s columns from 1997 to 2016 at

This article was first published in ReNew 142.


The Pears Report: Summertime, and the living ain’t easy

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With summer approaching, there’s a flurry of activity to ensure reliable energy generation under peak loads. We also need to look at the way our Star-rated buildings cope in the heat, says Alan Pears.

THOSE who have watched in bemusement the large numbers of new homes with black roofs and no eaves might be interested in some recent research. This has found that our 6 Star regulations are doing a good job of reducing winter heating energy use. But the way some designers use the rating tools may be making summer performance worse.


Basically, it’s possible in most locations to meet the 6 Star regulations with measures that improve winter performance. But this means homes can still let in summer sun and their improved insulation means they can behave like solar ovens, cooking their occupants. This can be relatively easily fixed by installing effective summer shading and also looking at orientation and areas of glazing.

Summer overheating is not benign. Analysis of outcomes during the very hot week preceding Melbourne’s 2009 Black Saturday fires showed that, just as extreme hot weather drives big peaks in cooling energy demand, it causes other peaks, too (see Twice as many people died from the heat in the days leading up to the fires as died in the fires. 374 people died, 62% more than in the same period the year before, many of them elderly.

Pressures on health services peaked. There was a 46% increase in ambulance callouts, with a 34-fold increase in heat-related conditions. Hospital emergency departments saw a 12% increase in demand, with an eight-fold increase in heat-related problems. There was almost a three-fold increase in patients dead on arrival.

RMIT research (a 2016 PhD by Niki Willand based on detailed analysis of a CSIRO field study), found the analysed 5 and 6 Star-rated homes were hotter than 4 Star ones on average, and had higher cooling energy use. This is due to the ‘solar oven’ effect. A 6 Star house can be designed to work well all year round, but winter performance dominates the rating rules.

None of the costs and human impacts of these statistics have been factored into national building code considerations. Indeed, it seems there will be no major changes to the regulations until at least 2022.

There is a glimmer of hope, though. The Victorian government’s new apartment planning guidelines include reasonably strong summer cooling energy limits (see as well as the annual energy limits. These will force designers of apartment buildings to rethink their approach. Let’s hope this spreads to all new homes.

The trend towards dark roofs is watched in bemusement by those concerned with summertime overheating of our houses. Image: iStock—mbolina

Energy pricing demands a response
When energy assets were being sold off, many politicians thought that people would blame the industry for any problems, not governments. Sorry guys. Everyone knows you write the rules and supposedly enforce them.

So governments are finally acting, after blackouts, skyrocketing prices and evidence that vulnerable households are worst affected. This is a crisis for neoclassical economics, which has driven energy (and other) reforms based on competition and ‘light-handed’ regulation.

The energy market is basically working the way it was designed to: high prices signal the need to invest in more supply capacity—and energy efficiency has never been on the agenda. Businesses exploit weak regulation and lack of enforcement to capture profit and shift costs onto others. The recent coal power station closures and high gas prices have really been the first test of the market’s design: it has failed.

Business and households both prefer stable, predictable, affordable energy costs and increasingly they simply can’t function without reliable electricity supply. Gas consumers have been lulled into complacency by extremely low prices for decades. They have been stunned by the effects of suddenly opening up gas markets to international prices, combined with exploitation of local shortages by gas suppliers.

There is now a flurry of activity. States are reinforcing supply and adding storage capacity. Rooftop solar and new large-scale renewable energy are both booming.

The Australian Renewable Energy Agency (ARENA) and Australian Energy Market Operator (AEMO) have bypassed the energy market to set up a long-overdue demand response mechanism. Consumers who agree to cut back power usage at critical times will be paid for their efforts. This was first called for by the 2002 Parer Review and energy policymakers have studiously avoided implementing it since then.

ARENA has been swamped by offers. It was looking for 170 megawatts (MW) of demand response. Bidders have offered 693 MW by December this year and 1938 MW by December 2018 (see Why am I not surprised?

So summer power supply now seems secure. Indeed, South Australia may need less emergency generation capacity than expected. We should be using this short-term breather to invest aggressively in energy efficiency, to lock-in lower demand and lower energy costs. No guarantees on that though, given past performance.

Billing reform
Federal and state governments finally seem to have realised that consumer electricity prices have three big components: wholesale energy price, delivery costs (mainly network infrastructure) and retail charges (including fixed charges). All must be addressed, but they require different strategies.

The Victorian government (see and the Australian Competition and Consumer Commission are running inquiries into retailer charges. There is evidence that consumers who fail to seek out discount deals or can’t meet criteria such as paying on time via direct debit are paying a lot more than ‘engaged’ customers. So vulnerable customers are paying higher prices; so much for social justice.

Prime Minister Turnbull has called energy retailers to Canberra to discuss this and retailers have agreed to some changes. These include attempts to better inform consumers when fixed-term contracts finish. Late payment of a bill will no longer mean a consumer loses access to discounts. What a breakthrough! I’m hopeful that the Victorian government will take stronger action.

Driving prices up
Electricity network operators have over-invested to maximise profit. They have been able to overrule the weak Australian Energy Regulator in the courts, adding billions to consumer costs.

The federal government plans to block the operators’ right to appeal (see Over time, that will help to bring network charges down. But it won’t be enough: asset values are way above likely market values in an emerging fair market and only asset write-downs will fix that. Policymakers and governments seem reluctant to unravel this welfare scheme for powerful incumbents.

Wholesale electricity prices have been driven up by a combination of factors, including Tony Abbott’s war on renewables (see my column in ReNew 139), closure of coal power stations, the gas price explosion and failure to drive energy efficiency and demand response. While gas prices seem likely to stay high, their impact on wholesale prices should be reduced by the responses outlined earlier.

But we do need to recognise that, in the past, wholesale electricity prices have been held unsustainably low by excess generation capacity. Regardless of the types of new generation built, it will be a challenge to achieve big price reductions for this cost component unless we manage to engineer oversupply by driving demand down and encouraging new renewables beyond both state and national targets.

Governments and policymakers still seem to be struggling to grasp that it is the total bill, not the unit price, that impacts on consumers’ hip pockets. Greater emphasis on energy efficiency, so we use less and pay less, and reducing outrageously high fixed charges would help.

Climate change is driving extreme temperatures. Very warm monthly daytime temperatures that occurred just over 2% of the time in 1951–1980 now occur over 11% of the time. Source: Bureau of Meteorology Australia,

Energy past, present and future
Sometimes it’s interesting to look back, to understand how things evolve. I was recently asked to look at historical energy use in Australia, which raised some interesting points.

Energy consumption (measured at the meter or fuel bowser) has more than quadrupled since 1961, while carbon emissions have increased by a factor of almost five. Energy-related emissions per person have more than doubled.

Oil has maintained a roughly 50% share, although more of it was used for non-transport purposes like heating in 1961, before the oil crisis and availability of cheap gas. Today around three-quarters is used for transport.

Home and business wood use has fallen from 18% to 2% of total energy, while direct coal use has crashed from 23% to just 3%. Gas has been the big winner, increasing from 2% to 20%!

Electricity’s share of energy has doubled from 10% to 20%, with renewables providing only 14% of electricity today compared with 19% in 1961. This reflects the shift towards a services economy that is more reliant on electricity, as well as the trend towards more electric technologies in homes.

It will be interesting to watch how things evolve, as we move towards a zero emission economy, gas prices increase, and efficiency and renewables transform electricity use and emissions. S

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant. He writes a column in each issue of ReNew: you can buy an e-book of Alan’s columns from 1997 to 2016 at

This article was first published in ReNew 141.


The Pears Report: Far from the madding policy

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Are we finally moving from energy policy madness to policy making? Alan Pears explores the glimmers of hope.

THE THREAT of electricity blackouts in southern Australia next summer and our bizarre ‘gas crisis’ seem to be dragging us out of the rock-throwing approach to energy policy making.


Stabilising the situation in southern Australia
While initially the debate over South Australia’s problems was about supply, the need to stabilise the situation before next summer has driven some useful developments on both the demand and supply sides.

A call for bids to provide battery storage resulted in 31 bids. Rooftop solar is booming, and large-scale solar and wind are going gangbusters.
This highlights how fast our 21st century energy industry can respond. It also shows how risky those big projects that take years to implement are. Even PM Turnbull’s ideas for Snowy and Tasmanian hydro will struggle to compete in the new world of modular, distributed energy solutions.

We have also seen a belated recognition that demand response can fix short-term problems. Demand response involves aggregators contracting businesses to cut demand or run backup generators at short notice—when paid a fair price for their contribution. This provides guaranteed reduction in electricity (or gas) demand, reducing the need for additional supply capacity.

It is widely used in other parts of the world, but our energy policy makers have been glacially slow in establishing a framework. States will need to set up demand response mechanisms through energy retailers, which they still regulate, as national regulators are very unlikely to act quickly enough.

Since first writing this, AEMO and ARENA have announced a demand response pilot project ( of 100 megawatts. This is great, as someone is finally responding to the obvious: demand response is the quickest, cheapest way of avoiding blackouts. But the way this is being done has also exposed how broken our national energy market system is: they have had to work around the normal mechanisms. We need much more demand response capacity to break the market power of the gas and coal generators, so there is still a need for states to use their powers over energy retailers to drive demand response.

Energy efficiency programs could also help. When SA suffered blackouts because of a 90 megawatt (MW) shortfall, demand was around 3000 MW. At that time, household cooling was probably over 1000 MW: an ongoing building and air conditioner energy efficiency program could have avoided the problem, as shown in the graph on the next page.

The gas crisis
A sudden increase in wholesale gas prices and the difficulties many industries have had even negotiating new gas contracts have uncovered chronic failure in gas policy. It has also exposed the reality that many former energy ministers and politicians work for the gas (and oil and coal) industry.

For decades, Australian governments have proudly described our low energy prices as a competitive advantage—which has led local industry to complacently maintain appallingly inefficient use of energy. But governments have quietly supported an ‘open’ economy, including world parity pricing for oil and gas. These two positions have never been reconciled. The recent gas crisis has exposed a lot of skeletons.

The suddenness of the shift in east coast gas prices has shocked almost everyone. Yet a 2014 study by Deloitte Access Economics1 predicted a multi-billion dollar shift in annual income to the gas industry from other industries, and over 10,000 job losses.

The gas problem has spilled over to electricity, as high-priced gas generation has replaced lower-priced alternatives, due to factors including Abbott’s war on renewables (see The Pears Report in ReNew 139) and closures of old coal generators.

Logical policy would have assisted or required gas users to improve efficiency as markets were gradually exposed to global prices. But we have inadequately regulated, poorly designed markets.

I wasn’t surprised when the government intervened. A situation where Australians are paying more for gas than countries we export gas to clearly does not pass the PM’s ‘pub test’.

Energy efficiency and productivity—glimmers of hope
Most of Australia’s energy efficiency policies focus on providing consumer information and setting fairly weak standards for new equipment and buildings. Policies providing information on building performance at time of resale or lease are emerging. For existing buildings and equipment, limited information and energy auditing programs dominate. The ACT, NSW, Victoria and South Australia offer financial incentives for some activities under their energy retailer obligation schemes.

While these programs have delivered useful savings, they fall well short of an optimum outcome for society. Many of the benefits they deliver are not even measured or costed, and levels of ambition are low.

To put this in context, Australia is supposedly trying to implement climate policies at least cost. Our energy efficiency policies deliver tens of millions of tonnes of emission reductions at costs of minus $20 to minus $200 per tonne of avoided emissions. Put another way, they often offer benefit to cost ratios of around 8 to 1—saving Australians $8 for each dollar invested. Yet the Emission Reduction Fund pays around $12 per tonne of emissions avoided.

Yes, we have our National Energy Productivity Plan (with funding of $18 million), the $200 million NSW five-year plan and many others. But we spend tens of billions of dollars each year wasting energy. And if we included the cost of carbon emissions, that waste would increase by more billions. We have the balance very wrong.

One problem in mobilising improved energy efficiency and productivity is that decision-makers rarely invest in energy saving measures costing more than two or three times their annual savings—a two or three year payback. This is equivalent to delivering 30% to 50% annual interest. We don’t expect that from any other investment, including renewable energy.

There are lots of reasons for this that I’m not going into here. What interests me is that the potential to change this financially disastrous situation is beginning to take shape.

Residential peak electricity demand for South Australia, 2015. This shows the activities contributing to household electricity demand at the times of summer and winter peaks, compared with their average contributions when annual consumption is divided by the number of hours in a year. Over the whole year, heating and cooling is a relatively small proportion of average electricity demand, but it is a large proportion of the (much higher) summer and winter peak demand. Source: EnergyConsult.

Beyond energy audits
It is difficult to pinpoint the actual causes of energy waste in many appliances, buildings and industrial processes. Traditional auditing and sub-metering approaches don’t pick up many less obvious problems. Even when a problem is identified, someone has to do something about it. This costs money and time, and diverts focus from core activities. It involves risks, such as working with a contractor you haven’t used before or changing a process central to delivering your business income or your health or safety. And you have to find the money upfront.

Sophisticated analytical techniques are emerging that reduce or avoid the need for physical energy audits and sub-metering. Dynamic real-time benchmarking against models that predict ‘ideal’ performance can identify emerging problems and alert operators. Machine learning can identify the energy-consuming characteristics of each item of equipment to work out where energy is wasted as well as how much (see for example this CSIRO project:

These systems can calculate the cost of energy waste. They can also offer businesses and households tangible benefits that are often worth far more than the value of the energy saved, such as avoiding failure of a production line. Avoiding loss of a fridge full of food or avoiding the need to quickly replace a failed hot water service can avert a family crisis: what’s that worth?

New financing models
Another changing dimension is the emergence of new financing options to remove upfront cost barriers, not just for energy efficiency investments but for renewables, storage and other options. Financing can be packaged with ongoing monitoring and management systems and other services.

More households and businesses are placing value on insuring themselves against price rises and reliability issues of conventional energy systems, while the costs of alternatives are falling and their user-friendliness is improving.

Innovation across many fields is transforming energy and resource requirements and fundamental business design for delivery of many products and services, and converting demand for products (and infrastructure) into services. Online shopping, health care and many other services create remarkable changes. Distributed manufacturing, 3D printing, computerised design, prefabricated building and many other changes are transforming production. Many also fit well with development of ‘closed loop’ resource use.

My awareness of these remarkable changes was raised recently by my involvement in writing a report for the Australian Alliance for Energy Productivity.2 This report scans emerging innovations that may have a big impact on energy productivity and efficiency. It is amazing how much is happening, even in Australia. There may yet be hope for Australia to become a low-carbon, successful 21st century economy! S

1. Deloitte Access Economics: ‘Gas Market Transformations— Economic Consequences for the Manufacturing Sector’,
2. Australian Alliance for Energy Productivity (A2eEP): ‘The Next Wave’,

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant. He writes a column in each issue of ReNew: you can buy an e-book of Alan’s columns from 1997 to 2016, complete with analysis of a range of energy policy themes, at

This article was first published in ReNew 140.


The Pears Report: Reflections on reflections

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Two decades on and 75+ ReNew columns later, Alan Pears is still positive about our clean energy future. How does he do it? Alan reflects on the clean energy facts we all need to know.

It was a real thrill to launch the eBook of my first 75 ReNew columns at the recent All-Energy conference in Melbourne. The ATA team did a great job in production and organising the launch. And I really appreciated former Greens leader Christine Milne’s contribution through writing the foreword.


One thought-provoking question from the audience at the launch was: “Don’t you get bored because we just keep going round in circles on energy policy?” Indeed, this question set me thinking: how do I remain so enthusiastic and positive about energy transformation, when progress is so much slower than it should be?


I’m lucky. I work across a wide range of issues and with a lot of different people. So there is always something positive happening—somewhere. Even when things look stuck or are going backwards on the surface, it is usually possible to find some underlying positive innovation or a subtle shift in the fine print. I also have a tendency to look for the fundamentals, whether it is the underlying physics that shows how inefficient we are, or why and how people react the ways they do. I am always learning.

I also feel pleased that, over almost 20 years, I have provided ReNew readers with an insider’s perspective—from an independent, sometimes practical, sometimes naively idealistic person—on events, trends and possibilities on energy and climate issues.

I also recognise that those of us who drive change have to make a strong case and present it well. People need good reasons to change. And they need to feel confident that change won’t have adverse consequences for them, their families and friends. Of course, powerful vested interests manipulate the situation to highlight the risks of change and overstate the benefits of sticking with the status quo. The blockers have slowed (and sometimes reversed) change, cost Australia many billions of dollars and amplified the cost and pain from climate change, but their effectiveness does force change agents like me to do our homework—over and over again! And to become more creative and effective in communicating and influencing.

At the same time, I have felt my share of despair and anger as sensible policy has been blocked, reversed and abused. I have been frustrated as I have seen exciting technological and social developments squashed, and abuse of power run rampant. A few issues have caused me serious distress.

The appalling story of Australia’s energy market reform process is almost beyond belief, even for me at my most cynical. The naivety, arrogance and ruthlessness of key players and the failure of our leaders to pull them into line stand out. The unnecessary cost and pain of this process is beyond calculation.

The fact that, over 40 years after we realised that people want services, not energy, we still have an industry focused on providing more energy and trying to perpetuate the myth that we need more energy to build a better economy is truly devastating. The failure to integrate climate and energy policy, when fossil fuels produce three-quarters of Australia’s climate impact, will go down as one of the most tragic leadership failures of our time. Maybe that is belatedly beginning to change.

I am also struggling to understand how, 25 years after I helped introduce Australia’s first building energy regulations, some powerful building industry groups oppose sensible energy regulation even more aggressively and more righteously than they did then. Something is really wrong.

As we debate how to manage the closure of old coal-fired power stations, and the problems faced recently by South Australia with volatile energy prices and blackouts, I am completely bemused by the ensuing debate—and the level of ignorance, vitriol and blatant lying shown among the debaters. I am also (yet again) puzzled that the debate makes little or no reference to the major roles energy efficiency improvement and smart demand management could play in delivering solutions.

The election of Donald Trump as US president reinforces the need to focus on what we can do. I’m reminded of the old saying that smart people learn from the mistakes of others, while the not-so-smart have to make their own mistakes. Unfortunately, the education of Mr Trump on climate and basic energy trends will be very costly. But I hope it inspires many to do more, just as Tony Abbott’s war against climate and clean energy policy has had some surprisingly positive outcomes in Australia.

Some clean energy facts
So we don’t have to waste even more time debating our energy future, I thought it might be useful if I listed a few things we really know about energy.

1. Leave it in the ground
Two-thirds of global greenhouse gas emissions and three-quarters of Australia’s emissions result from fossil fuel extraction and burning. Most of the world’s existing ‘profitable’ fossil fuel reserves must be left in the ground to avoid dangerous climate change. Spending money on exploration and building extra fossil fuel supply capacity is money down the drain.

2. We know it creates more jobs
An energy-efficient renewable energy future creates more jobs than conventional energy, because most of the new jobs are in light manufacturing and services sectors, which are much more employment-intensive and much less capital-intensive than traditional energy supply industries. We have known this for decades.

3. And it’s cheaper
An energy-efficient, renewable energy future will be cheaper than a ‘conventional’ energy future, even if we don’t introduce a carbon price. Much of our existing energy supply infrastructure will have to be replaced over the next few decades anyway, so comparison of the cost of a clean energy future with existing energy costs is invalid—the real choice is between different investments, and should include a science-based carbon price. A lot of energy efficiency potential is profitable (the ‘lunch you are paid to eat’ as pointed out by Amory Lovins decades ago). While renewable energy has been expensive in the past, costs are declining rapidly (and performance is improving), and it already seems to be cheaper or similar in cost to building new traditional energy plants. Interestingly, a clean energy future will also be mostly privatised—in a democratic way.

4. Plus more reliable and resilient
A well-designed, efficient renewable energy system should be more reliable and resilient than a centralised system, as local energy storage, smart management and generation reduce reliance on networks (where most disruptions occur) and transmission lines. Debate about supply of base load power can only be described as outdated and misinformed.

5. Developing countries benefit too
An efficient, clean energy future offers many developing countries multiple benefits including lower energy import costs, better services to the rural poor and lower pollution.

6. Transport is not just about EVs
Transport is a very challenging energy problem, not because it can’t be fixed, but because very few countries and cities even understand the fundamental problems. A car-based society is not practical, equitable or economic. Electric cars are only a small part of the solution. Virtual service delivery and workplaces, coordinated planning, comprehensive public transport, low-speed electric vehicles (with suitable infrastructure, speed limits and rules to ensure safety for all, including pedestrians), and better-organised walkable cities are needed.

7. Fly lower and less
Air travel is a much bigger climate problem than most people realise. The overall warming effect of air travel is two to five times the value calculated using Kyoto carbon accounting. And most of this impact is due to the release of emissions at high altitude, not CO2—so switching to renewable aircraft fuel doesn’t fix the problem. Flying lower and less, and transitioning to electric aircraft, will be necessary.

8. New buildings remain a problem
We are constructing buildings and urban infrastructure that will be future liabilities, not assets. And we are not providing the necessary infrastructure to support a successful economy and equitable, enjoyable lifestyles. The failures are deep and systemic. I really don’t know how we fix this one.

9. Add monitoring to appliances
Our appliances and equipment are ‘dumb’, as well as inefficient. They must all have built-in real-time monitoring, benchmarking and feedback systems so faults are detected, operation is optimised and inefficient products are exposed.

10. Skills currently in short supply
We have very limited numbers of designers, tradespeople, professionals and customers who are competent to deliver energy-efficient low-carbon solutions. We have poor supply chains to deliver what is needed. Training capacity is limited and certification weak. We have few incentives and many disincentives regarding sensible decision-making and action.

Overall, it’s a miracle we have progressed as far as we have! Based on our track record, it will also be a miracle if humanity gets out of the hole we’ve dug without a lot of pain, misery and conflict. But we have the tools and some smart people. The problems are our leadership, short-sightedness, the misguided fear we will be worse off in a clean energy future, and lack of vision and practical focus.
Merry Christmas and Happy New Year!

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

This article was first published in ReNew 138.


The Pears Report: Post-election shakeout

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Alan Pears takes a closer look at the interesting energy picture post the election.

THE energy picture is now fascinating. Energy (and environment) minister Frydenberg faces some short-term challenges. He must sort out the electricity and gas market messes. Strongly critical senate inquiries and a scathing Productivity Commission report look even more credible after problems with Basslink and South Australian electricity prices and supply, and high and volatile gas prices that have also driven up electricity prices.


The new Liquefied Natural Gas export plants in Queensland face serious financial problems, while creating traumas for industrial gas and electricity users. Powerful energy companies are using their market power to block competition. And greenhouse gas emissions from energy are increasing.

These challenges are compounded by the government’s weak post-2020 energy and climate policies that contrast with its international commitment to cut emissions by 26–28% by 2030.

One change that may help the minister is the separation of the resources sector from energy and environment. This may reduce the influence of some powerful interest groups on management of our energy future—and about time, too.

When industries decline

The financial sector has noticed that the fossil fuel industry is in decline and has responded by reassessing the value of fossil fuel assets—downwards. Once decline is clearly locked in, a number of forces emerge.

First, as ‘higher cost’ mining facilities are sold off at bargain prices, their new owners can cut prices, driving a ‘death spiral’ as lower cost mining facilities face tougher competition.

In the past, large businesses stopped the spiral by buying up smaller, higher cost producers then ‘managing’ their production, so that the demand-supply balance was restored at reasonable prices. Low cost producers might even flood the market with cheap product, to kill off their higher cost competitors, as has been happening in the global oil and iron ore markets.

But a combination of global economic problems and growth of competing solutions is blocking a return to ‘normality’ in the fossil fuel and mining sectors. In our world of disruptive solutions, these competing solutions include energy efficiency, renewable energy, shifts to high efficiency electric technologies, ‘virtual’ solutions replacing physical ones and radically different business models.

This highlights the failure of industries and policymakers to grasp a fundamental that US energy expert Amory Lovins was pointing out in the 1970s. People do not want materials, infrastructure, products or energy: they want services that provide ‘perceived value’, regardless of how they are delivered.

Another major outcome of an industry’s decline is that it loses many of the hidden benefits communities and governments have been providing it. Indeed, demands for more accountability and better performance build, just when the industry’s capacity to deliver them is declining.

As people realise that fly-in-fly-out, highly mechanised mines and power stations don’t create many local jobs—so there won’t be jobs for their kids—and that they pollute and undermine other economic activity, they are much less tolerant of mining and fossil fuels. At the same time, coal seam gas and mega-mines have much more visible impact. Concerns about mine rehabilitation are not being addressed, resources companies are cutting corners and government regulators are failing to hold them to account. Communities are realising they will be left holding the ticking bombs.

At a government level, community pressure and the need to maintain revenues while finding money for mine rehabilitation and decommissioning of old power stations are driving efforts to capture more revenue from fossil fuel and resources industries. In the past, policymakers simply discounted these future costs to negligible levels, but that doesn’t work now. Governments now realise that if the mining industry doesn’t pay, it will hit their budget bottom lines—soon.

Industry advertising campaigns, misuse of statistics and ‘behind closed door’ lobbying have successfully blocked higher taxes and stronger controls in the past. But as an industry’s influence declines, these strategies don’t work as well.

At the same time, it is possible for an industry, governments and communities to maintain denial about unstoppable trends for a surprisingly long time. Indeed, there will be bargains for buyers of some mines, and smart owners can use new technology and creative business models to cut costs, out-compete others and shift risk.

It is also in the interests of existing businesses to try to maintain confidence: not only does each extra month of production produce a lot of money, but it gives them more time to sell off assets to poorly-informed buyers, and to move into new areas of activity.

As they say, change is a time of threat and opportunity.

Where to for industrial, business and home heat?

In Australia, the focus of climate and energy policy has been electricity. It’s a core input to essential energy services, it’s expensive, and it’s responsible for a third of Australia’s greenhouse gas emissions. But provision of heat is responsible for half as much climate impact as electricity, or as much as transport. And often the equipment that uses gas or oil uses a lot of electricity as well. Recent rapid increases in gas prices and price volatility have focused attention on reducing dependence on gas, much of which provides heat.

Australia’s emissions from burning fuels for heat production are broken down in the pie chart above. There is exciting potential to cut these emissions by measures including improved energy efficiency, rethinking industrial processes to reduce the need for heat, and switching from gas and oil to high efficiency electric technologies driven by renewable electricity.

Many households are already moving away from gas to high efficiency reverse-cycle air conditioners, heat pump water heaters and induction cooking. But we need better-insulated hot water tanks and ovens, as well as thermally efficient buildings and smart electricity management systems, to minimise costs and maximise benefits.

In the commercial sector, gas use, mainly for space heating, hot water and cooking, is often appallingly inefficient. Inefficient (often old and poorly maintained) boilers, large losses from pipes and ducts, poor control systems, thermally poor buildings, and inefficient gas cooking provide very large potential for savings. Past low gas prices have led many to be sloppy in their use of gas.

Gas use in industry is often surprisingly inefficient, too. When losses from poorly insulated steam pipes and leaky fittings, ancient and inefficient boilers up to 50 years old and inefficient process equipment are considered, the waste is staggering. Under the Energy Efficiency Opportunities program (shut down by the Abbott government, despite outstanding cost-effectiveness and global recognition), companies were required to develop computer models of the energy and material flows through their processes and to benchmark efficiency against theoretical optimums. Many firms, and their experienced engineers, were very surprised by the scale of inefficiency and the scope for cost-effective efficiency improvement.

Industrial-scale electric heat pumps can now efficiently provide steam using renewable electricity. Improved catalysts are reducing the temperatures of processes. Green chemistry and advanced metallurgy are creating more productive processes, higher quality products and lower process temperatures. Smart controls and monitoring systems reduce reject rates (and the energy wasted producing items that can’t be sold). Improved heat recovery and heat/cool storage increase flexibility and allow previously wasted energy to be utilised.

At the point of use of products, ‘virtual’ solutions are replacing physical products and movement. These include weight reduction and shifting to lower emission impact materials (e.g. engineered timber replacing steel and concrete, and cement made from geopolymers). Increased recycling means lower temperature, less energy-intensive processes replace production of virgin materials.

We are also seeing exciting potential to replace fossil fuels with renewable energy across all combustion activities: ARENA recently funded a study that explored these possibilities.

Across all elements in the supply chain, the multiple benefits of new solutions, ranging from cooler commercial kitchens to lower reject rates and improved staff productivity, amplify the energy benefits.

The big question is whether Australians will capture these opportunities or continue to see themselves as victims of change. Maybe the emerging focus on energy productivity and innovation can help.

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

This article was first published in ReNew 137.


The Pears Report: Basslink blues, abatement buy-in

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Is a second Basslink cable the best solution for Tasmania? And with the UN now trading carbon offsets, how can you become a voluntary abater? Alan Pears reviews the options.

As a commentator who argued against the construction of the Basslink cable, recent proposals for a second cable between Tasmania and the mainland have led me to review my position—but not necessarily change it.


It’s easy to argue that Tasmania needs a backup cable and that this could also provide benefits. But it’s not so simple.

The existing cable has brought both benefits and costs. On the one hand, Tasmania could profit from exporting peak power at high prices and from selling renewable electricity when there was a carbon price. It could also import cheap off-peak power from the mainland— increasing its greenhouse gas emissions.

But it costs 2 to 3 cents per kilowatt-hour (kWh), or $20 to $30 per megawatt-hour (MWh), to cover cable costs and energy losses. That’s a lot when, due to excess generation capacity, wholesale prices have been depressed to around $40/MWh in 2015–16 in Victoria, where Basslink feeds into the mainland grid. Peak prices have fallen due to renewable generation, energy efficiency, demand management and industry restructuring.

Basslink provided an excuse for Tasmanian governments to continue to ignore energy efficiency improvement. This would have cut consumer bills, made better use of existing generation capacity and provided benefits such as more comfortable homes and more productive offices. Development of new renewable energy generation in Tasmania has not exactly boomed. Tasmanians are also paying a high price for the failure of Basslink. So it’s not clear that Basslink has delivered a benefit relative to other paths. A retrospective study of what could have been done with the Basslink money could be interesting.

The economics of an additional cable are very sensitive to mainland electricity prices and the possible reintroduction of a carbon price. The ability of a second cable to provide useful backup also depends on what happens to Tasmanian electricity demand, investment in new renewable energy generation and rainfall for hydro generation as climate change plays out.

To compete with mainland renewable generation, Tasmanian generators will have to factor in the extra cost and energy losses of using the cable, so they would have to be significantly more productive than mainland generators.

Using the money saved by not building an extra cable (maybe a billion dollars or so) to instead invest in energy efficiency and new renewables, as well as revised dam management practices, could avoid the need for a backup cable and offer other benefits.

Also, instead of exporting to the mainland, it may be more profitable to divert excess electricity to running electric vehicles (or, given Tasmanian conditions, plug-in hybrids), which would offset the much higher cost per unit of energy of petrol and diesel fuel, and use a local resource to avoid import costs. And plug-in hybrids can easily switch to petrol if there is a power shortage.

I don’t have the data to make a call on whether or not another cable is a good idea. But I am inclined to be sceptical. Its cost must be compared with alternative options. And the risks of even greater exposure to mainland electricity market vagaries must be carefully weighed up.

Reframing thinking about emerging energy solutions
Recently we have seen intense discussion about the economics of storage and large solar thermal generation relative to other options. Many consider their economics are improving but are not quite there yet. My recent observations of events in Australia and other countries lead me to a different perspective.

Tasmania has been thrown into turmoil by the failure of the Basslink cable—with the low dam levels adding to the pressures and public debate about who to blame. A few years ago, Melbourne faced rolling blackouts as a major powerline to New South Wales was shut down due to a bushfire. And some Queensland power stations had their output limited by lack of cooling water during the last drought.

I’ve just come back from Japan, where the new green buildings and urban developments I saw are designed to run independently of the electricity grid for at least three days. A combination of on-site generation, storage, extreme energy efficiency and smart management systems deliver this capacity. They have realised that they need to be able to cope with natural disasters and technical failures without disruption of core services.

So the discussion about energy storage, distributed generation and smart management using a lot of data is completely different in Japan. They are simply getting on with a transformation. And, as in other fields, they are finding that lessons from experience allow them to reduce costs, identify benefits they hadn’t previously recognised and capture opportunities in new markets.

The contrast with Australia is remarkable. Our energy war, piecemeal approach and focus on narrow short-term costs are seriously undermining our future. Basically, we are being distracted by the detail while others are just shifting to a new paradigm. That’s how losers behave.

Climate targets and meeting them
The urgency for action on climate change is building. It now seems to me that responsible businesses, communities and individuals must reframe their targets towards ‘beyond zero emissions ASAP’, not just gradual reduction or even net zero emissions by 2020 or 2030. The good news is that it’s becoming cheaper (or even more profitable) and easier to cut emissions.
This means aggressively cutting our emissions both from our own emission generating activities and from the inputs to our lives and businesses.

Voluntary abaters must also buy and cancel offsets to balance the emissions we can’t avoid and to go beyond zero emissions. An exciting development here is that the United Nations has now set up a carbon offset trading website where individuals can buy and surrender internationally recognised carbon permits ( I found a range of projects with offset costs from US$0.50 to US$5 per tonne of emissions avoided. One project even met the Gold Standard (see, set up by WWF and endorsed by over 80 NGOs) for very high quality credits. You can select the ones you like best, based on the details provided.*

I road-tested the site by buying 100 tonnes of offsets from a small run-of-river hydro plant in India.

So instead of just thinking about donating to worthy international charities, you can now choose to support projects that cut emissions and also deliver worthwhile social, economic and environmental benefits for their host communities—at bargain prices.

Now is a good time to buy quality offsets: they are unlikely to ever be as cheap again. And if we don’t buy and surrender them to cut global emissions, high emitters will buy them up at low prices to offset their emissions. If enough people buy up permits to reduce the present glut, prices will increase to a point where high emitters may actually focus on reducing their emissions instead of just buying compliance with cheap permits.

There is debate about the rationale for buying international offsets. The present low prices for offsets are an outcome of a number of factors, including weak targets, over-generous allocations of free permits, poor trading scheme design, lower than expected economic growth since the GFC, declining emission intensity of economies and corruption. However, once they are
certified by an approved scheme, they are legal ‘currency’, regardless of their quality.

Some argue that governments should act to disallow existing poor quality permits. But in my view this is unlikely, despite being desirable. This is effectively retrospective removal of a right to emit and would create a precedent many fear could then be applied in other policy areas. International negotiations are messy enough and, to me, it seems unlikely that agreement would ever be reached to do this. In any case, if you buy offsets you consider to be credible and which deliver additional benefits to communities, they are unlikely to be made invalid and they deliver tangible other benefits beyond
emission reduction.

The Australian government could work with the international community to improve the integrity of international carbon certification schemes, as well as its own Emission Reduction Fund rules

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

* Another great option for offsetting emissions is through C3 run by the ATA (ReNew’s publisher). This combines offsetting emissions with renewable energy credits and donations to local community groups.

This article was first published in ReNew 136.


The Pears Report: Global energy markets

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Following his participation in two international summits recently, Alan Pears reflects on approaches to a transitioning energy market, both internationally and in Australia.

My opportunities to present at an Asia–Pacific Economic Cooperation (APEC) energy ministers’ conference and also an Association of South-East Asian Nations (ASEAN) energy summit late in 2015 gave me some fascinating insights into the energy picture beyond Australia. There was no debate about climate change—the science is accepted, the evidence is clear, and the impacts are real and terrifying. The two forums, however, showcased quite different approaches to addressing the issue.


Among APEC ministers, there was intense discussion about how best to help the rural poor gain access to renewable energy off-grid or on microgrids. APEC energy leaders were, on the whole, quite progressive, and my presentation on the future role of clean energy generated a very positive response.

Energy efficiency was seen as a key priority, as was equitable access to energy and, of course, renewable energy. The Philippines has identified renewable energy resources 13 times larger than present capacity. Several speakers outlined goals to reduce energy intensity (energy use per unit of GDP); for example, China aims to achieve a 45% reduction by 2030 relative to 2005.

The need to attract private capital was also a major theme. Most focus was on large projects, although some emphasised the role of micro-enterprises. Of course, investment in energy efficiency and distributed renewables is a very effective way of using private capital!

Coal was mentioned, but without great enthusiasm. Coal is a problem for most APEC countries—coal imports add to their balance of payment problems, as well as pollution. APEC is supporting efforts to develop clean coal technologies as one of a number of themes, but my impression was that this is more because those supporting this approach are prepared to fund the work.

And APEC is not interested in upsetting powerful groups. Its focus is more about fostering dialogue and sharing experiences. Indeed, several people expressed their relief that newly appointed Australian energy minister Josh Frydenberg attended and participated constructively; Australia, one of the key drivers of the creation of APEC, had vanished from the scene since the election of the Abbott government, much to the bemusement of many.

The first day of the ASEAN summit in China was a very different matter, and reflected much more the Australian situation. It was dominated by presentations on large-scale generation projects—mainly renewable and nuclear—and grand visions of huge inter-country power grids that would enable the diverse renewable energy resources of the region to be shared, while also building regional cooperation. All this was based on an assumption that regional electricity demand would triple or quadruple—trending towards the US level of per capita consumption.

I was the only one of about 20 (all-male) speakers from the energy sector who questioned the assumption of massive energy growth, the logic behind large projects and the belief that inter-country grids would improve relationships. I was relieved when, at the end of the first day, quite a few people thanked me for my ‘intervention’. Clearly not everyone at the summit was excited by the scenarios presented. For me, this highlighted the enormous and powerful cultural forces within the energy establishment driving large-scale, capital-intensive solutions. I come from a very different perspective!

The second day was an incredible contrast. I presented at the Smart Cities forum—one of four streams; the others being nuclear, power grids and PV. Presentations discussed smart use of ‘big data’ to optimise building performance, applications of smart grids and case studies of low-carbon urban development. By the end of this day, my optimism had returned.

One of the interesting aspects of these experiences was the significance of the informal discussions and networking, which is difficult to achieve via the internet or correspondence. On the second day, I sat next to one of the key speakers from the previous day, and we discussed the concept of energy services and how people didn’t actually want energy. His summation at the end of that day included some of the points I had raised with him! On the following day we had a site visit to Yingli Solar, the fourth-largest PV manufacturer in China. A Chinese energy policy maker sat next to me on the bus, and we discussed the issues I had raised on the previous days. Our bus driver got lost, so our conversation continued for nearly an hour!

Now I’m back in Australia, slogging away writing my submission to the Victorian Essential Services Commission Inquiry into the ‘true value’ of distributed generation and trying to generate some interest in Australia’s National Energy Productivity Plan. Reality bites!

How to drive energy efficiency and productivity

Australia’s National Energy Productivity Plan (NEPP) was launched last December. Its aim is to deliver more economic output per unit of energy consumed. It includes quite a few worthwhile actions, but its weakness is lack of focus on the institutional and funding arrangements needed to drive outcomes.

To date, the Australian Renewable Energy Agency (ARENA) and the Clean Energy Finance Corporation (CEFC) have proven effective at driving renewable energy research, innovation and commercialisation. Energy efficiency investments already represent about 30% of CEFC’s funding. But ARENA’s agenda is focused more narrowly.

One practical step forward would be to rename ARENA as AEPA (Australian Energy Productivity Agency) and broaden its terms of reference to include energy efficiency—and provide it with more funding. This would not solve the broader institutional blockages to energy efficiency, but it would start building Australia’s capacity to drive decarbonisation in an integrated way.

Low fossil fuel prices—what do they mean?

Over the past year we have seen global oil, coal and liquefied natural gas prices crash. Not many predicted this. It seems to be the result of over-production and lower-than-expected demand. For me, this is a very interesting phenomenon.

Usually, low prices would drive up demand until production was matched by demand. But not this time. Many economists argue that the problem is that low economic growth is limiting demand growth. But there seem to be some other factors at work.

First, global economic development, especially in China, is shifting from physical production to services, which are much less energy intensive (that is, they use much less energy per unit of economic activity). Second, services are displacing resource production and manufacturing, reducing average energy intensity of the existing economy. Third, distributed clean energy is swamping traditional energy supply, as it is now cheaper and much less risky. Fourth, modular, mass-produced energy solutions (both supply side and demand side) are accelerating, driven by remarkable innovation and cost reduction.

While traditional economists keep hoping that demand will recover to take advantage of the low prices, we are seeing some very different responses. For example, the Indonesian government has taken the opportunity provided by falling oil prices to remove subsidies on diesel and other petroleum fuels. This positions Indonesia to shift to a low-carbon future and improves government revenue significantly while also reducing oil import costs.

So the global economy seems to be moving on, beyond fossil fuels. As an OPEC sheik said in the 1970s, “the Stone Age didn’t end because we ran out of stone”.

Some organisations, such as banks and big fossil fuel producers, will try to fool investors by continuing to deny the need for change while they quietly shift their own investments, selling to those silly enough to believe that fossil fuel projects are good investments, then admit afterwards that change was necessary, and claim that they have managed the transition competently.  I’m glad my investments are in other sectors!

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

This article was first published in ReNew 135.


The Pears Report: Creative policy paths

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Alan Pears considers the newly minted potential for indirect action in Australia—how creative can we get?—along with important considerations for fuel use in vehicles.

Things sometimes move fast in politics. Since October we have had a new national energy minister and, just as important for energy, a new prime minister. PM Turnbull understands innovation and is familiar with the challenges emerging business models face from powerful incumbent industries. He knows he can’t rely on a resources boom to pay Australia’s bills. He also has rooftop solar on his own home and investment properties.


But both our PM and energy minister are pragmatic politicians who have to manage an anti-clean energy (and climate denial) faction and some politically powerful donors. We’ll have to read between the lines to work out their real agenda(s) on energy and climate.

We need to emphasise some key benefits of clean energy solutions. They are good for job creation across a wide range of skills and regions. They mostly grow the light manufacturing and services sectors, which are more employment-intensive and recirculate capital faster than the traditional energy sectors. They are also a great way of privatising and democratising the energy sector while winning votes, not losing them. Guess who owns and benefits directly from all those efficient appliances and buildings, and distributed energy systems? Voters.

They also provide a useful way to wean the energy sector off ongoing subsidies. Upfront subsidies may be needed until economies of scale are captured and institutional barriers broken down. But clean energy is cheap to run or cuts ongoing costs, costs are declining, and many options are already cost-effective and just need finance and promotion. So the need for ongoing support is minimal.

It is becoming cheaper for a government to subsidise energy-efficient equipment and rooftop solar/storage for a low-income household than to keep subsidising their (increasing) energy bills. And the sense of control and links to their energy-using actions may actually empower them—with the right education, feedback and support. The same approach could apply to struggling businesses.

The Clean Energy Finance Corporation and ARENA are now ‘back in business’ and in the environment portfolio, along with a new minister for cities. And the essential role of public transport in increasingly dense cities is now recognised.

‘Indirect Action’ on climate: a creative policy path
Maybe the present awkward situation on climate policy within the government could be beneficial in the long term. The politicisation and artificial polarisation between carbon pricing and ‘Direct Action’ has been a major block to effective action. Labor shut down useful energy efficiency programs because they were not ‘complementary’ to carbon pricing. There are still quite a few policy makers who think a carbon price will fix everything. At the same time, the government’s ‘Direct Action’ strategy is clearly inadequate and leaves taxpayers funding an increasing burden. As I have said for a long time, we need both a pricing mechanism and real direct action.

Of course, the government must know that they will really need CEFC and ARENA to deliver on their present and future climate targets.

But they have to tread warily to manage the climate deniers and powerful vested interests.

This is where ‘Indirect Action’ enters the picture as a complement to both ‘Direct Action’ and some form of carbon pricing. Indirect Action targets a wide range of policies and measures across the economy that make sense for reasons other than climate response, but also happen to cut emissions, maintain existing carbon sinks or store carbon.

Public transport can easily run on renewable energy and cuts emissions more as occupancy increases. Rail freight could do with some attention, too. And Infrastructure Australia has a long list of cost-effective projects that will create lots of construction jobs. And interest rates are very low, so now is the time to borrow for investment in infrastructure to underpin future social and economic success.

‘Virtualisation’ of goods and services can use the NBN and intelligent technologies to replace physical transport and physical products. This cuts direct emissions and ‘embodied’ emissions associated with mining and production of materials and products. This is a major area for business development and innovation. This also meshes well with the increasing focus on ‘energy productivity’, code for capturing more economic activity from each unit of energy. COAG’s Energy Council has just released a National Energy Productivity Plan that starts to deliver on this.

Housing policy can require buildings to be energy efficient and use first home buyer schemes to incentivise builders to sell low-carbon, smaller dwellings. Urban planning can cut costly and space-consuming dependence on car ownership (fuel is only about a quarter of the cost of car ownership) and time wasted travelling.

Measures that reduce oil use help our balance of payments, as we are increasingly net importers of oil. And they will help us to meet our International Energy Agency obligation to have a strategic store of oil in case of supply disruption.

Gas users on Australia’s east coast face higher gas prices, as prices are driven up towards international prices by the new liquefied natural gas plants in Queensland. Many National Party supporters are concerned about the long-term impacts of coal seam gas development on their land and water. Improving efficiency of gas use and shifting to low-carbon alternatives can help to deal with these issues.

Pressure is increasing on governments to fix our flawed electricity market, so consumers and emerging alternatives have a fair go.
These are just a few examples of Indirect Action that can be pursued without allowing climate deniers to retake control of the climate agenda. And they could win a lot of votes while helping position our economy and society for the future.

Asian traffic!
After a recent visit to Jakarta, where I experienced serious developing city traffic congestion, I thought I would explore the fuel consumption impacts of this congestion using the transport calculator I developed for the EPA Victoria Greenhouse Calculator. I assumed a ‘small’ car (Corolla size), 10 km/h average speed, with stops every 50 metres and a Darwin climate. The results are only approximate, as the model is fairly basic and changes in environmental and traffic conditions and driving techniques can affect the outcomes significantly.

The big message was that air conditioner usage was almost half of total fuel use under these conditions. Fuel consumption for movement was, surprisingly, not very different from typical Australian usage. It seems that the reduction in aerodynamic drag from slower speeds may offset the long periods of idling and inertia effects of frequent stops and starts from low speed.

A well-designed hybrid (e.g. a Prius) used half as much fuel overall and saved two-thirds of fuel used for movement. The large savings reflect the potential to recover and reuse a lot of braking energy from the stop-start driving, and the higher efficiency of the Prius engine.

A focus on optimum car air conditioner efficiency and the thermal performance of the car body could save a lot of fuel! High efficiency air conditioners and refrigerants with evaporative cooling of the condenser—which could be retrofitted—could help a lot. So could a light colour or ‘cool roof’, or insulation of roof, shading (e.g. the old ‘tropical‘ roof used on 4WDs) and effective heat-reflective coatings or shading of windows. Some of these options could increase aerodynamic drag when a car finally escapes the congestion, though, so careful design is needed.

This looks like fertile ground for research into new cars and their air conditioners, and retrofit measures.
Of course, improved urban planning, effective public transport and electric bikes would reduce the time wasted (and productivity lost) trapped in traffic and cut air pollution too.

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

This article was first published in ReNew 134.


The Pears Report: Changing states

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Alan Pears looks at the rapid changes in electricity policy, provides some practical perspectives on carbon pricing and discusses some good news about the national appliance energy efficiency program.

We are seeing some interesting developments in clean energy at the state level as the states (predictably) move to fill the hole left by the national government.


Victoria has announced it is developing an Energy Efficiency and Productivity Strategy to be released this year. It has also announced development of its Renewable Energy Roadmap intended to re-establish Victoria as a “global renewable energy leader”. In Western Australia, former head of the Institute of Public Affairs (a conservative lobby group), now energy minister and treasurer, Mike Nahan has flagged a central role for solar. Meanwhile, the ACT and South Australia continue to lead the pack.

In contrast, the electricity industry continues its struggle to come to terms with the significance of energy efficiency and demand-side management. AEMO has just released its latest Statement of Opportunities (SOO). It predicts higher consumption and peak demand than previously, reflecting stabilising prices, loss of momentum in energy efficiency policy and slower PV growth—with no discussion of the importance of actively driving demand management harder to avoid this. Its low-demand scenario suggests planned generation is adequate to beyond the next decade, while its medium scenario requires investment to provide 5780 megawatt hours of additional supply over the next decade, 3.2% higher than 2014–15 consumption. AEMO does, however, flag that next year’s SOO will include analysis of demand management. That could dramatically change the outlook.

Energy companies continue to lobby for the right to apply anti-clean energy measures such as high fixed charges and low feed-in prices, while moving into the solar PV market!
The Energy Networks Association published a paper in August proposing a range of options, including grid connection fees, network exit fees, payment for grid access and payment for risk of stranded assets. It continues to assume that network operators are entitled to make a profit, and that their shareholders should be protected from losses. The age of entitlement continues.

Carbon pricing
We need some practical perspectives on carbon pricing. Although I wouldn’t call a carbon price the ‘centrepiece’ of climate policy—as Labor has claimed in the past—it is important because it sends a signal to change, particularly to investors. And the revenue a carbon price raises can fund other abatement action. To cut emissions we now face a choice between ‘polluter pays’ (pricing emissions) and ‘taxpayers pay the polluter’ (the Emission Reduction Fund).

By removing Labor’s carbon price but leaving in place assistance measures, this government has not saved Australians any money: in fact it may have increased costs to taxpayers. Under Labor, the assistance was funded by revenue from the carbon price. It must still be funded, but now through consolidated revenue, gained from taxes or borrowings eventually repaid by taxpayers, or offset by reduced services. On top of this cost, we must also pay for ‘Direct Action’. Simple slogans can be very misleading.

The good news is that the cost of managing climate is proving to be far lower than expected: many measures such as energy efficiency and some renewables are even profitable. The polarised politics of ‘carbon taxes’ and ‘Direct Action’ is dumb and distracting. We need both a price on carbon emissions and direct action, along with other measures.

Empowering people to cut emissions
I and others from the Voluntary Carbon Markets Association spent a lot of time trying to get Labor to modify its carbon trading model to empower individuals, business, and local and state governments to cut emissions. Our basic concept was that all voluntary abatement should be matched by the government cancelling Kyoto permits (allocated by the UN based on our national target). This would ensure our efforts were recognised as globally ‘additional’ abatement beyond government-driven measures.

For example, if Australia has a target of 500 million tonnes (Mt) of emissions in a given period and households are expected to emit 60 Mt, this means other emitters are able to emit 440 Mt (440+60=500 Mt). But if households (or some other group) voluntarily cut their emissions by an extra 10 Mt in that year down to 50 Mt, the government should cancel 10 Mt of permits. The target would then effectively be 490 Mt so other emitters still have a target of 440 M t (440+50=490 Mt). If the government doesn’t cancel permits, other emitters would now be able to emit 450 Mt and Australia would still meet its 500 Mt target (450+50=500 Mt). So those other emitters would be ‘free riding’ on the voluntary efforts of households. And from a global perspective, Australia’s emissions would not be reduced below the 500 Mt it was originally allowed to emit; the planet would not see a reduction in emissions as a result of the efforts of households and their efforts would not lead to additional abatement beyond what the Australian government has previously agreed to.

After a carbon price was introduced, conservative state governments justified cutting abatement action with the excuse that their actions would not be additional to national action—so there was no point in a state having its own climate target or actively pursuing emission reduction. We had warned the national Labor government, but they did not want to hear: the arrogance of policy makers swamped our efforts.

Recently, one of the emissions trading scheme (ETS) architects, Martin Parkinson, gave a speech (reported by Gareth Hutchens, The Age 30/6/15) in which he acknowledged that they had failed to engage and empower the community. Hutchens wrote:
“[He] never gave enough weight to the fact, when designing the trading scheme, that voters wanted to feel they were making a contribution to emissions reductions, and emissions trading systems do not provide them with that feeling because they are too abstract. ‘We got so hung up on the [idea that] we’ve got this really big problem that we have to deal with, and we’ve got to do it at least cost to the economy, so we delivered a least-cost way of doing it,’ he said.”

The situation is even worse now. The present government is using our money to pay polluters to cut emissions (including subsidising things they were already doing). And abatement actions that households, businesses, and local and state governments take which fall outside the Emission Reduction Fund (like installing rooftop solar or saving energy) allow the government to use our investments to make it easier to meet its weak and globally irresponsible abatement targets.

Positive news for energy efficiency
COAG has announced that the national appliance efficiency program (GEMS) has survived a review, and will even be expanded because it is so cost-effective. This is a relief for the many who were concerned that this review was yet another government attempt to undermine progress in clean energy. The Alternative Technology Association (ReNew’s publisher) played a key role by making a comprehensive submission.

The program faces other hurdles, including the requirement that any additional regulations be offset by reductions in related areas. And undoubtedly the Office of Best Practice Regulation will continue to do its best to delay and block new Mandatory Energy Performance Standards, which it opposes on ideological (neo-classical economic) grounds.

State energy policies
I’ve recently been spending some time in South Australia and the ACT. This has led me to ask what makes them so different in their approach to sustainable energy? Could it be that the lack of powerful coal and resources industries makes it easier for them to be more progressive?

It will also be interesting to see how the Victorian government responds to a scathing study by the Brotherhood of St Laurence that shows the state’s retail electricity market model is a disaster. It delivers remarkably high profit margins for retailers while many disadvantaged people pay the highest prices. This is the model lauded by many in the electricity industry as the template other states should use!

Alan Pears, AM, is one of Australia’s best-regarded sustainability experts. He is a Senior Industry Fellow at RMIT University, advises a number of industry and community organisations and works as a consultant.

This article was first published in ReNew 133.

Alan Pears

The Pears Report: The policy bizarre

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Is Australian energy and climate policy beyond rational discussion? Alan Pears reviews recent developments and presents his recipe to improve the effectiveness of appliance Star ratings.

I can’t write this column without discussing the ongoing debacle that is Australian energy and climate policy, although I would much prefer to ignore it.


The Energy White Paper (EWP) has been published ( It was as awful as I predicted. Anyone who relies on it for business planning will likely lose a lot of money. It is completely out of touch with reality: its focus is on growing fossil fuel exports, ongoing privatisation and outdated approaches to reform of electricity and gas supply.

One potentially significant element of the EWP was the proposal to develop an Energy Productivity Plan. In principle this is a very good idea, as it could drive energy efficiency and improve cost-effectiveness of energy utilisation. But don’t hold your breath. There is no timeframe, no clear institutional framework, nor any firm resource allocation. And the kinds of policy measures needed to implement such a plan are anathema to our present Australian government and the powerful interest groups that dominate energy policy.

We have also had a consultation on the National Carbon Offsets Standard. This is not exactly riveting stuff for most people, but it is very important. It sets the rules on how businesses (and their products) and households can be certified as being ‘carbon neutral’. Unfortunately, the consultation paper forgot to discuss GreenPower, while it focused, instead, on the fine print of the fundamentals. It did not confront the issue of how to ensure voluntary abatement action be treated so that it is ‘additional’ to other abatement action.

From a narrow carbon accounting perspective, almost all Australian voluntary abatement action, including installing rooftop PV, energy efficiency improvement and buying GreenPower, does not reduce Australia’s greenhouse gas emissions. It simply makes it easier for the government to meet its weak target and leaves more room under the target for others to emit more. This is, to put it mildly, disempowering!

We’ve also seen the first auction under the Emission Reduction Fund. The average price polluters were paid to offset emissions was $13.95/tonne. However, few of the funded measures will deliver direct abatement through reducing emissions. Most involve storing carbon or not clearing land. And a fair proportion of this won’t occur before 2020. An unknown amount of it is just a continuation of activities that were already being supported under the previous government’s Carbon Farming Initiative. Environment Minister Hunt continued to use creative economic analysis to suggest this was cheaper and more effective than carbon pricing.

Australian energy and climate policy is just so bizarre that it is beyond rational discussion, I’m afraid. If you want my more detailed views on all this, my submissions are available at the relevant government websites. My Energy Green Paper submission is at; the White Paper does not change the relevance of my comments on the Green Paper. My submission on Australia’s 2020 emission targets is at and my submission on the national carbon offsets standard is at

At least there do seem to be some signs that progressive state governments are beginning to move to fill the vacuum created by our truly remarkable national government.

Reframing appliance energy efficiency
To date, Australian appliance energy efficiency policy has focused on new appliances and, within that, on information (via labels) and mandatory minimum performance standards. Despite extremely limited resources, lack of high-level political support and white-anting by anti-regulatory econocrats, this has been a fairly successful approach. As I pointed out last year (, a typical Australian household is saving around $300 on annual energy bills and the overall cost has been minus $119/tonne of CO2e avoided. Not bad value!

But we can do a lot better. Here’s my recipe for success.

First we need to sharpen and broaden our approach to new appliances. We need simplified labels on a wider range of products such as lamps and fans. Instead of the present label, these would carry simplified Star ratings only, but also carry a QR scan code, so a smartphone user can access background information. For products with relatively low energy usage, it can be difficult to justify a ‘proper’ energy label. But a rating that’s simply printed on packaging has minimal cost. This approach could also be applied to many products like digital photo displays: Choice found that the worst of these were serious energy wasters, but no one knows which are the good ones.

We also need to incorporate automated diagnostic monitoring into new appliances, so they tell us if they are not working properly. This is not hard for modern products that include sophisticated monitoring and computing capabilities. One example that does this is the Siddons Bolt-on heat pump hot water service.

We need to sort out the consistency of messaging via labels. A 4 Star fridge is very efficient, while the best TV or air conditioner is 7 Stars. Our 6 Star homes would be illegal in many countries. No wonder people are confused. And lack of effective promotion of what labels mean allows confusion to be misused by salespeople. For example, a home salesperson might tell potential buyers that a house is 6 Stars, so they don’t need to think any more about energy efficiency. Unfortunately that’s not the case.

Our mandatory performance standards are generally weak, as shown by the wide range of Star ratings of products on the market. We could adopt stronger approaches. For example, the Japanese ‘top runner’ program requires all products to be at least as efficient as today’s best performer within a few years. Or we could just say that anything using more than twice as much energy as ‘best on market’ is illegal!

We need to look beyond new products. Many people buy secondhand products, but there is no information on their energy performance. As a basic step, requiring energy labelling consumption data to be included on appliance specification plates seems obvious. At least the secondhand retailer or enthusiastic buyer could gain access to the information. We could go further and require all registered secondhand sales agents to place clear information on energy use on appliances they sell—using the information on the specification plate as a source.

We also need to remove old, inefficient equipment from the stock. Old, often faulty fridges can use up to eight times as much energy as modern equivalent products. Many industrial boilers are up to 50 years old, and appallingly inefficient. Replacing (and recycling the materials from) these items would deliver big environmental and economic benefits, while cutting consumer energy costs. But we need to be able to identify such disasters. This can be done by analysing energy usage data, but it will require some effort by governments and energy companies. At present, energy suppliers have little incentive to do this.

Lastly, we need to be thinking in lifecycle terms. Apple, for example, includes full lifecycle analyses of all their products on their website. For efficient products such as iPads, embodied emissions comprise over half of lifecycle impacts. Operating energy use is only 15%.

More broadly, one Australian study suggested that effective recovery and recycling of waste materials, particularly metals, would cut Australian greenhouse gas emissions by over 5%. And the concentration of valuable rare metals and other materials in wastes can be tens of times higher than in ores we now mine. Failure to capture and use these valuable resources and energy savings is just dumb.

But when neo-classical economic theory and powerful incumbent groups drive policy, it’s not surprising that we end up with dumb policies.

Alan Pears is one of Australia’s best regarded sustainable energy experts. He teaches part-time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

This article was first published in ReNew 132.

Alan Pears

The Pears Report: Electricity industry potential

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The electricity sector is broadening, with yet more complexity in store. Alan Pears examines the opportunities and risks.

Our definition of the electricity sector has broadened in recent years, but it will become even more complicated. If we step back and look at the fundamentals, we can see why. As I’ve noted before, people (and businesses) don’t want energy (or electricity)—they want energy-related services, such as lighting, cooking, heating, clothes washing and internet.


The overall costs of an electricity-related service are comprised of both supply-side and consumer-side costs. These include:

  • supply-side costs of the electricity used, reflected in the retail price and fixed charges for the electricity
  • consumer-side costs of electricity supply infrastructure, such as wiring, on-site generation, storage and electricity management systems
  • consumer-side costs to purchase and install energy-consuming equipment
  • ongoing consumer-side costs of maintenance and ‘consumables’, such as provision of cable TV and internet services, repairs, detergent, etc.

Estimating the consumer-side costs

Since no one else seems to have attempted to estimate the costs on the consumer side of the meter, here’s a try.

The 2010 ABS survey of household expenditure on goods and services shows average weekly household energy bills were then $32.52 (more like $40 to $50 now). But the weekly average purchase and non-energy-related operating costs of appliances, IT and AV equipment, internet and phone amounted to $93.26. Of this, $36.78 covered appliance purchases and $44.97 covered the payments to providers for internet, pay TV and phone usage.

So, in 2010, direct energy costs comprised only about a quarter of the total household cost of providing energy-related services (excluding spending on building features such as insulation, house design and draught proofing, but still including heating and cooling appliances and running costs).

We should also keep in mind that each appliance purchase locks in energy use for a decade or more; $1000 spent on a new fridge can lock in $1000 of energy waste over 15 years if you choose ‘worst on market’ instead of best.

The big money for businesses and the big savings for consumers are not in supplying energy, but rather in the provision of smart, energy-efficient and renewable energy appliances, equipment and associated services on the consumer side of the meter.

More profit in retail electricity

Based on the Bureau of Resources and Energy Economic’s 2011–12 energy data and my best guesses at electricity prices for each sector, residential consumers provide 43% of electricity revenue, but use only 28% of the electricity. Business retail electricity consumers pay around 45% of total electricity costs while using around 35% of total electricity. This reflects the high network usage and administrative costs for the small consumers in these sectors.

Despite several hours of searching, I couldn’t find out how much industry pays for electricity and gas—from publicly available information (!)—so these numbers are rough. But it seems that a profitable electricity business needs to focus on retail customers (residential and business), not big industry.

The potential profit margins, and the number of places in the supply chain where margins can be added, are greater for retail customers. In contrast, big industry is quite capable of negotiating low electricity prices—or even subsidies.

Opportunities—and risks

There are both big opportunities and risks for the electricity industry in this complex retail space on the consumer side of the meter.

Businesses selling on-site energy efficiency improvement, generation and storage to retail customers compete against high electricity prices—unless the electricity retailers can fool regulators into allowing them to charge high fixed fees… So, it’s not surprising that PV businesses have targeted residential and, increasingly, commercial customers. It’s also not surprising that attractive financing packages and buyer-friendly installations are important.

Broader issues such as what services customers really want, trust in providers, packaging of overall deals and social and environmental impacts of options will increasingly influence decisions that drive electricity demand.

Potential for the appliance and building industries

Many markets, including appliances, building, property, installation, insurance, IT and telecommunications, will influence the future of our electricity sector, as much as or potentially more than the energy industry itself. Players in these markets understand customers better and can move very fast. They are bigger and more powerful than the energy industry. But, at present, they are fragmented.

Once the appliance industry focuses on energy issues, they will see many opportunities. For example, adding built-in micro-storage and smart controls to an induction cooktop, dishwasher, oven or air conditioner cuts installation costs by avoiding the need to upgrade wiring capacity within a house and/or offers better quality services. This ‘added value’ will offset the extra cost—and help cut peak demand costs. Indeed, such micro-storage may also help overall household management of electricity.

There is potential for an appliance manufacturer to partner with a major builder and renewable energy business to offer a house full of high-efficiency new appliances, ‘smarts’ and PV system for ‘free’ (actually paid off via your mortgage) in a new home package. Some banks could even offer a discounted interest rate for such a home.

The appliance manufacturer would gain an ongoing relationship with a household to leverage future sales and get valuable feedback on appliance performance, reliability and user behaviour. The builder would save on wiring and gas plumbing costs, while offering home buyers a very attractive package. This model could easily roll out to low-income households.
Meanwhile, the traditional energy sector, protected by outdated policy frameworks, looks at the supply side of the meter, where scope for profit and customer benefit is much smaller.

Where to on energy policy?

State and local governments, reflecting what I call ‘competitive democracy’ are filling the vacuum created by bizarre national government policies, by supporting renewable energy projects and, in some cases, energy efficiency, as they seek electoral popularity. In some cases, concern about climate change even drives policy!

Global factors are driving closure of Australian energy-intensive industries that are too small to compete globally or rely on outdated technologies. Indeed, free trade agreements and other government policies are making this problem even worse for energy suppliers by driving industry closures.

Global oil, coal and gas prices have fallen —driven by a complex combination of excess (but high cost) supply and lower-than-expected demand. It seems that many economies really are decoupling energy growth (and greenhouse gas emissions) from economic development. And, with asset values of fossil fuel producers and traditional energy utilities crashing, their problems will grow as investors shift their money to safer options. Already, those who have not yet divested from fossil fuels have lost a lot of money.

Existing Australian policies and regulatory requirements, despite being fairly weak by world standards and poorly enforced, are driving step changes in new building and appliance efficiency. Product manufacturers (mainly from overseas) are providing more efficient products because of global demand. And business must respond to higher electricity and gas prices by improving energy efficiency.

So, no government can provide policy certainty in energy. At the same time, declining demand (due partly to energy efficiency improvement) and increasing support for renewables at many levels, means excess supply capacity will remain unless incumbent energy businesses close down a lot of existing obsolescent or high-production-cost plants. And if this happens, governments will face criticism for allowing it, given that it will likely increase consumer energy prices!

Meanwhile, the Australian government and its policy makers are preparing our next Energy White Paper. The Green Paper, published in late 2014, provides little basis for this policy document, as most of it was simply irrelevant to the fundamentals of the situation (see my submission at Of course, official government energy policy is usually out of touch: its main aim seems to be to support ongoing economic growth (based on past directions) and reassure incumbent industries and their investors. So it will be interesting to see what the White Paper actually says, and what government actually does.

I don’t know of anyone who can predict where this will lead. But it is a risky time for owners of large fossil fuel assets and investors in any large energy project that takes five years or more to implement. So, my money is on modular and smart solutions that can generate cash flow quickly, through incremental rollout. S

Alan Pears is one of Australia’s best regarded sustainable energy experts. He teaches part-time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

This article was first published in ReNew 131.

Alan Pears

The Pears Report: The end, not beginning, of an era

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Alan Pears explains why coal seam gas is not the answer and, when it comes to energy-efficient homes, why the cooling side of the equation needs some attention.

Coal seam gas (CSG) has been widely promoted as a game changer that will drive a gas boom. It’s not. It’s a desperate attempt to prop up the fossil-fuel era. It is also a conflict between the established energy industry (backed by governments) and just about everyone else, including state governments desperate to win votes.


However, the predictable failure of CSG will shift the balance in favour of sustainable energy: efficient, smart, renewable, distributed energy-service solutions.

The gas industry and the federal government are throwing everything at supporting CSG. Even the east coast ‘gas crisis’, caused by companies building natural gas plants in Queensland without locking in their gas supplies, has been used to try to justify more CSG development.

The reality of CSG

The CSG reality is that very large numbers of gas wells must be drilled and networks of pipelines built, conflicting with tourism and agriculture, placing underground water resources at risk, exposing people, animals and plants to toxic chemicals, and potentially leaking methane, a very active greenhouse gas.

In addition, the wells don’t produce gas for very long, and they must then be managed for an unknown period to limit impacts on the local environment and underground water resources. And it’s not cheap gas: in fact, high international prices are needed for it to be profitable.

The gas industry has blamed ‘cowboy’ operators for problems. But how do they respond when a responsible operator like AGL is found to have methane leaks from nearly a tenth of its CSG wells in NSW? (

The NSW Chief Scientist has published a thorough report on CSG. While she finds it is possible to manage CSG responsibly, she spends quite a bit of her 24-page report outlining the difficulties in ensuring strong regulation and enforcement, funding to deal with problems during and after production from wells, and strong governance mechanisms.

It seems obvious that these requirements cannot be met by any Australian government. Voters know that no present government can lock in comprehensive environmental regulation and enforcement to ensure future governments manage derelict wells for decades or longer. We simply do not have the governance capacity to properly manage the long-term impacts of CSG.

CSG is more trouble than it’s worth. We have wasted too much time failing to address climate change to be able to enjoy the luxury of using fossil gas, especially leaky CSG, as a transition energy source. The global carbon budget is just too tight.

Moving on

At the same time, technology development, economies of scale and emerging creative financing solutions mean that efficient, smart renewable energy solutions can deliver practical, lowest cost solutions.

While Australian governments and the energy industry wallow in denial, the International Energy Agency, World Bank and numerous leading economists have joined climate scientists and the sustainable energy industry to support this transformation and proclaim that it is practical.

As former Saudi oil sheikh Ahmed Zaki Yamani said in the 1970s (, ‘the stone age didn’t finish for lack of stone’. We have now moved beyond fossil fuels, although we can acknowledge that they have provided a useful technological base on which we are building our sustainable energy future. The shift away from fossil fuels is reflected in the industry’s increasing difficulty in accessing capital.

Why do new energy-efficient houses need cooling?

Last year, CSIRO’s field evaluation of 5 Star homes reported some interesting findings. One big issue was a widespread lack of compliance, due to near-total failure of enforcement by governments and local councils. Another important finding was that, although the efficient homes had much lower heating energy use, their cooling energy use was not lower. The reasons for this outcome are complex, but it’s time we addressed them.

One reason may be that the default settings for cooling use in the NatHERS calculator seem to underestimate cooling. The thermostat temperatures and user behaviour patterns were set many years ago, based on quite limited information. Research has shown people typically use lower thermostat settings (see A 2008 South Australian study proposed changes, but these have not yet been formally regulated.

When estimated cooling energy is too low, it has little impact on the energy rating. In climates that require both heating and cooling, designers are more likely to focus on building features that reduce heating.

This under-emphasis on hot weather performance in the energy rating scheme means features like dark-coloured roofs and absence of eaves have unrealistically low impact on rated summer performance. In cooler climates, the overall annual outcome can even improve the Star rating, as benefits from more winter solar gain outweigh worse summer comfort!

The energy rating is also averaged over the whole building. So some rooms may perform poorly without adversely affecting the overall energy rating. And the rating is for total annual heating and cooling. Separate heating and cooling ratings would ensure the home performs adequately all year.

The nature of modern building designs is having its impact, too. The upper storey of a two-storey house has no links to the stable temperature of the ground, and is exposed to higher solar radiation. If glazing is not very carefully designed and managed, it becomes a ‘solar oven’—although the amount of energy required to cool it is not very large if it is well insulated.

More broadly, we need to realise that a high thermal performance home (with good insulation, draught proofing and well-designed glazing) requires very little additional heat to raise its internal temperature above the outdoor temperature—in both winter and summer. Extra internal mass or phase-change materials can help to stabilise the temperature, but climate change is increasing overnight summer temperatures and the duration of hot spells, so thermal mass is becoming less effective.

Careful design is increasingly important, especially glazing and adjustable shading, so that summer sun can be screened out.

Air leakage and poor management of ventilation is another culprit. When an exhaust fan or rangehood is running in hot weather, it is actually bringing in a lot of hot outdoor air—equivalent to a cooling load of 2 kW or so. On a hot windy day, having a window on one side of a house open, even a little, can combine with exhaust fans, fixed ventilation in a laundry or another open window on the opposite side or upstairs to create heat input of up to 5 kW. So, leaky open-plan homes with doors to permanently vented laundries and bathrooms left open can have high cooling costs. Improved building quality and user education are needed.

Of course, this does not mean that 5 or 6 Star homes are a bad idea. If they are built properly and well managed, their peak cooling energy requirements are small, and hourly cooling cost is low, especially when combined with a high efficiency (5 to 7 Star) air conditioner.

We need to further strengthen regulations and enforcement, sort out the under-emphasis on summer performance in the rating scheme and educate home operators. We should also take advantage of the feature in rating tools that allows an energy rater to look at performance of each room or zone during weeks of hot and cold weather. Then designers could identify and address problem rooms.

Also, summer is the time when a typical rooftop PV owner may have excess free electricity. Using some of this for cooling to be comfortable (especially once we get batteries to store daytime generation for evening cooling) need not create load problems for the grid.

Alan Pears is one of Australia’s best regarded sustainable energy experts. He teaches part-time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

This article was first published in ReNew 130.

Alan Pears

The Pears Report: Future Global Energy Giants

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Alan Pears considers the interesting future for energy providers and energy efficiency in Australia, and globally.

Energy and climate policy are certainly entertaining at present. The dominance of crude politics over reality continues.


Australia becomes a world leader at being a climate laggard by dumping its carbon price. Electricity companies apply further restrictions and charges to rooftop PV (but not to air conditioner owners). Governments use shonky economic analysis to justify dumping carbon pricing, the Energy Efficiency Opportunities program, Victorian Energy Efficiency Target and, possibly, the Renewable Energy Target. And the PUPs gambol.

Meanwhile, electricity consumption continues to decline, gas prices accelerate upwards, global coal prices continue to fall and it looks as though we may have a record hot year globally. Then, Senator Ricky Muir turns out to be a renewable energy enthusiast: maybe when camping he uses renewable energy? Or perhaps he’s just an ‘ordinary Australian’: most of us support renewable energy.

Is it time for energy efficiency to shine?

President Obama and PM Abbott have apparently agreed that the November G20 meeting in Brisbane will discuss energy efficiency as a proxy for climate policy. There are also whispers around Canberra that ‘energy productivity’ (more economic output per unit of energy consumed) is gaining support.

The International Energy Agency has declared energy efficiency to be the biggest ‘source’ of energy for OECD countries. IEA also sees energy efficiency as the biggest and lowest cost contributor to climate response.

So maybe the signs are looking good—at last. It would be really nice to stop bashing my head on brick walls after 35 years!

But I’ll believe it when I see it. Unfortunately, many policy makers still believe that since energy efficiency is often cost-effective, the market will just adopt it, maybe with a bit of extra information. But it’s not that simple, and most effective energy efficiency policies involve measures that are unpopular with deregulatory, ‘small government’ thinking and powerful vested interests.

Why are developing countries shifting away from fossil fuels?

Fossil fuels create problems for developing countries, including China, despite the development benefits they bring. A US Agriculture Department study estimated that the $137 billion increase in oil import costs for developing countries in 2005 exceeded the official aid ($84 billion) they received.

Many governments subsidise energy, adding to budget pressures. Then there’s the indoor and outdoor air pollution, health impacts, fuel spills, inequity, fuel theft and more.

Governments are realising that improving energy efficiency, renewable energy and distributed energy systems can help solve all these problems. Shifting to efficient renewables (e.g. LED lighting powered by solar) reduces energy costs, improves quality of services, cuts the need for fossil fuel subsidies and reduces import bills. And it also happens to cut their greenhouse gas emissions.

Australian government and fossil fuel energy policy advisers have underestimated the significance of these benefits and overestimated the amount of energy needed in predicting export demand for their products. So they are repeatedly surprised as their profits decline.

Future global energy giants

It’s easy to get bogged down in the short-term battles for success in both climate change policy and our rapidly changing, cut-throat energy markets. But it is interesting to take a broader view.

We need to remember that energy is a ‘derived need’. That is, what we actually want are services, rather than energy. Receiving those services may involve consumption of more or less energy of different forms at different times, depending on technologies and behaviour. So the amount of energy we actually need can be very different from, and much less than, what we now use.


Businesses that sell high-efficiency, smart, flexible ways to provide services linked to energy will be winners. That’s appliance and equipment manufacturers, retailers and installers, builders, building product suppliers, financiers, internet-based businesses and specialist advisers who can market attractive packages. This could include smart systems that manage energy use to match availability, minimise costs and work with storage and on-site renewable energy. Integrating their energy-related offerings with other non-energy services will amplify opportunities. Finance schemes, home performance monitoring, maintenance contracts and optimised insurance packages are just a few possibilities.


Businesses that combine distributed energy, energy storage, energy efficiency and smart management are also looking good, especially in developing countries and at fringe-of-grid in developed countries.

Many niche markets are actually quite big. For example, many developing country electricity grids suffer frequent blackouts that impact on business productivity and quality of life. Many now use small petrol and diesel generators to cope, but this is expensive, dangerous, noisy and polluting. Energy-efficient equipment combined with storage, on-site low-emission electricity generation and grid-interactive capabilities can solve these problems.

Even larger markets will become available as our electricity industry shifts to time-of-use pricing or other pricing options, and all consumers, not just those with solar, see stronger signals to manage the amount and timing of energy use. For example, in NSW, afternoon to evening time-of-use prices are now over 50 cents per kilowatt-hour—a strong incentive to reduce usage from the grid at those times. And, if adopted, ‘capacity charges’ (which involve charging consumers for the peak supply capacity they use instead of the amount of electricity they consume) will drive more rapid adoption of storage and smarts to limit peak demand at a consumer level and avoid high costs.


At the other end of the scale we have energy-intensive industries that are global in scale: miners, mineral processors, metal processors, chemical companies and large-scale manufacturers and their like. Traditionally, they have sought large amounts of cheap and reliable energy.

But their world is changing. ‘Ores’ from landfill sites, wastes and replacement of existing building and equipment stock provide an increasing resource that can be more concentrated than that from traditional mining. For example, one tonne of old mobile phones contains 400 grams of gold, 80 times as much as is present in a tonne of typical gold ore (

3-D printing, biomimicry, green chemistry, dematerialisation, material switching and other changes are also transforming the fundamentals of energy-intensive industries. 3-D printing supports decentralised manufacturing and involves building up a product, instead of wasteful machining; green chemistry allows new materials to be created that are stronger, lighter, more effective or improve process efficiency; and dematerialisation uses less (or no) material to deliver a given service.

So it’s not at all clear how much energy these industries will actually need in the future, but it will be a lot less than conventional analysts predict.

Nevertheless, the bulk energy supply sector will still have a big market. But what forms of energy will it supply?

There are synergies between the oil industry’s drilling expertise and countries with large geothermal energy resources: sophisticated drilling capabilities are critical. The Pacific ‘ring of fire’ countries and others near boundaries of tectonic plates seem well positioned to access enormous amounts of reliable energy. The Philippines has been developing geothermal technologies since the 1970s, while Iceland has already attracted energy-intensive industries to use its geothermal and hydro energy resources.

Companies that can mobilise and adapt existing expertise and large amounts of capital are well positioned, as they can leverage these to gain market share in emerging markets. Countries with large renewable energy and mineral resources (both recovered and virgin) and whose governments support their development could also benefit—if they can capture a fair share of the returns from their exploitation. Australia’s solar resources offer opportunities: as Ross Garnaut has suggested, we could become a sustainable energy powerhouse by utilising our enormous renewable energy resources.

Countries and businesses that can produce forms of renewable energy suited to export and storage, and businesses that can link these to existing and new energy-consuming equipment that delivers valued services, will be well positioned.

Supply chains that can deliver sustainable transport solutions, in particular, will grow. Electric vehicles (including public transport and low-speed vehicles) will benefit from improving battery technologies and expanded renewable electricity generation. Technologies that use heat or electricity to produce renewable liquid or gaseous fuels for export and that are usable by existing vehicles will be of increasing interest. Oil-producing countries may be able to use their existing cashflow to fund such developments to maintain their market position in a zero-emission world.

Just as discovery of oil and gas in Bass Strait and the North West Shelf transformed Australia’s energy prospects and industrial development, the new renewable energy revolution will create surprises. Countries traditionally seen as importers of energy, such as Japan, could become energy giants, and threaten existing major energy suppliers.

There’s a message here for Australia, as we could be a big winner in the global race towards an energy-efficient, renewable energy future. But it would mean cannibalising our existing energy industries, a bit like the situation Kodak faced when it developed digital photography. Kodak lacked the courage to embrace the future. Will we?

Alan Pears is one of Australia’s best recognised and most highly awarded commentators on sustainable energy and climate issues. He teaches part-time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

This article was first published in ReNew 129


Induction cooktop

The Pears Report: Peak demand and ‘enoughness’

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Why should we expect unlimited access to energy when we can take responsibility for how much energy we use, asks Alan Pears.

THE JANUARY 2014 extreme weather in southern Australia reignited debate over the role of air conditioners in driving peak demand. A few issues have emerged.


A thoughtful study by Ric Brazzale of the REC Traders Association reframed debate about how useful PV is in managing peaks. Since electricity data from the Australian Energy Market Operator (AEMO) does not include PV output, because it happens on the consumer side of the meter, Ric recreated the real demand profile by adding estimated half hourly PV output to the AEMO demand profile. This showed actual peak demand occurred earlier in the day, when PV was producing much more electricity.

This challenges the simplistic approach usually taken, of just looking at PV output at the time of the AEMO peak. Ric also pointed out that PV helped to significantly reduce average prices on peak days below those before the Black Saturday fires. Of course, reducing peaks and peak prices undermines generator and network profits, which is seen as a bad thing by the incumbents and some policy makers.

As demand-response bidding, energy efficiency and energy storage progress, summer peaks will become less of a problem—and less profitable for the electricity industry. I can only wonder how much cheaper electricity costs would have been if the networks had invested in these solutions instead of more powerlines.

As the owner of a small high-efficiency air conditioner operating in a well-insulated and shaded room, my peak cooling load in the heatwave was around 300 watts during ‘cool down’ on arriving home, and around 125 watts at times of extreme heat. That’s much less than a plasma TV or six halogen lamps.


All this brings me to an issue raised in the 2013 book Smart Utopia? by Yolande Strengers. She asks why the electricity industry is expected to provide unlimited power supply at all times.

This piqued my interest. In industry, I have found that the engineers who provide services such as steam and refrigeration often run grossly excess plant (and waste a lot of energy) in their quest to provide as much energy as users ask for, even if the request is unreasonably high. In the 1980s, I found the electricity industry shared this culture.

There is certainly a historical reason for this: without our modern energy options (which allow us to reduce and shift demand), many activities were critically dependent on reliable electricity supply. Indeed, many activities still are, but need not be.

The political price of supply shortages has traditionally been high, as daily life, health and business activity have been affected: heads of electricity agencies can lose their jobs, politicians can lose power. Engineers have a professional pride in providing what their clients ask for, and don’t like being blamed for shortfalls.

But modern energy solutions allow us to limit expectations of the traditional electricity supply system and, instead, place some responsibility on consumers. Such expectations would need to be phased in, with issues faced by tenants and financially stressed people recognised and transitional costs addressed. Incentives and support mechanisms, not just pricing, must be used. The alternative may be a mess, as those who are active, informed and have access to capital will look after themselves while others suffer.

This should be a core focus of energy reform policy.

Energy Issues Paper

In mid-December 2013, the government released an Energy Issues Paper and called for submissions by 7 February 2014. This process is a lead-in to release of a Green Paper in May and an Energy White Paper in September.

The Issues Paper seems to be focused on a list of short- to medium-term problems that the government thinks it needs to address. As far as it goes, this is useful, although the way issues are presented seems to disproportionately reflect the views of incumbent energy organisations and some policy makers.

Hopefully the Green Paper will take a broader view. Let’s face it, when the phrase ‘climate change’ does not appear in an energy policy document, our policy makers are struggling to be credible.

And I wish energy policy people would learn to differentiate between the price of energy and the cost of delivering energy-related services. Price matters much less if you are efficient and can avoid periods of high prices. The policy focus on price distorts energy policy towards measures that increase long-term total costs and social and environmental impacts.

Standing Council on Energy and Resources delays demand management bidding, yet again

A major criticism by the 2012 Senate Inquiry into the electricity industry, and by the Productivity Commission’s 2013 report into electricity networks, was the glacially slow progress on implementation of demand-side action. The Parer Review of 2002 and other studies have repeatedly highlighted the need to get the demand side of the market working. So it was very disappointing to see the ministers from states and commonwealth on the Standing Council on Energy and Resources decide at their December 2013 meeting to delay, yet again, rule changes to support implementation of a demand-response bidding scheme.

The only winners from this delay seem to be incumbent electricity generators and network owners. And some more demand management in the January heatwave would have been handy.

Sydney car trips

The bizarre outcomes of a car-based society were reinforced for me recently by some NSW transport statistics. Apparently 22% of all Sydney weekday car trips are to ‘serve passenger’. That is, they are unpaid chauffeuring trips, where the driver doesn’t actually want to go to the destination.

What is the cost of this planning failure in terms of time, inconvenience, congestion, parking issues, pollution, health and lack of independence? Surely it is time that local and state governments ensured our cities supported low car-dependency living? This would be much better for the young, old, parents, disabled, carers, poor and obese.

Emerging opportunities for energy storage

I wonder who will be first to actively promote an easy-to-add-on storage and smarts package for existing rooftop PV owners? This makes good business sense because hundreds of thousands of PV owning households are getting only 8 to 10 cents per kilowatt-hour for their exports, while paying 30 to 50 cents for energy in peak periods. These people are already committed to PV and frustrated with the efforts of the electricity industry and its policy makers to undermine their financial returns.

A second area for storage that I haven’t seen discussed is at the micro-level, building storage into appliances, or integrating (or plugging in) storage into local wiring within a building. This limits peak demand charges, offers potential savings on upgrading wiring and reduces wiring resistance losses in existing buildings.

Advances in supercapacitors may play a key role here. New Mazda cars use them instead of batteries for energy recovery and storage, and the CSIRO-developed UltraBattery uses supercapacitors to mediate between the battery and the load, to extend battery life and reduce losses. Research on graphene also seems likely to improve supercapacitor performance.

One example of this potential is in the installation of induction cooktops in existing homes. Most induction cooktops have ‘boost’ modes that can use over 3 kilowatts per pot, so manufacturers can claim they heat up quicker than gas. This potentially high peak demand can require upgrading of wiring back to the circuit breakers or even back to the street. But the amounts of energy required are not particularly large, so quite small amounts of storage would make a difference. For example, to boil two litres of water on an induction cooktop consumes less than a quarter of a kilowatt-hour.

A proviso is that the benefits must be balanced against the losses in the storage system.

When you look at the fine detail, the economics of appropriately designed distributed storage solutions could be much better than many expect.

Alan Pears has worked on sustainable energy issues since the late 1970s. He is one of Australia’s best recognised and most highly awarded commentators on sustainable energy and climate issues. He teaches part time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

Read more articles on energy efficiency in ReNew 127.

Alan Pears

The Pears Report: Poles and wires welfare

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The Productivity Commission fights against protection in all other industries—why not in electricity? asks Alan Pears.


The 2012 Senate inquiry into electricity costs delivered a damning report on the performance of energy policy makers and regulators (see my column in ReNew 123).

Now the Productivity Commission has issued its own 820-page report. It is even more scathing.

Just about every criticism made in submissions to the Senate inquiry has been supported.

Statements include:
“These flaws require a fundamental nationally and consumer-focused package of reforms that removes the interlinked regulatory barriers to the efficiency of electricity networks. Reforms made in late 2012, including improvements to the regulatory rules, better resourcing of the regulator and greater representation of consumers, have only partly addressed these flaws.”

“Delays to reform cost consumers across the National Electricity Market (NEM) hundreds of millions of dollars.”

“There is, in effect, no point in simply fixing a punctured tyre if the car has no engine.”

I couldn’t have said it better myself…

It seems to me that the commission had to take a strong stand.

There is such widespread agreement that the energy market is a mess that to make apologies would be to undermine the future of the Productivity Commission’s broader agenda of competition and privatisation. To their credit, they have made strong recommendations with delivery dates.

Yet electricity industry welfare remains

Underlying the commission’s thinking, there is still a deep tension between open and fair markets and an assumption that the incumbent industry must be protected so it can recover its costs. So new market entrants such as solar electricity must receive only the value the incumbent industry places on their input, and pricing structures must allow incumbents to maintain their viability. This is simply a welfare scheme of a type that the commission fights against in all other industries.

The gas industry is not paid according to what it saves the existing electricity industry when someone switches to or from gas cooking. Online media are not paid what they save the hard copy media. And so on.

A classic example of the ‘welfare’ approach is the commission’s conclusion that rooftop solar should, in the short term, be paid only what it saves on generation and, in the longer term, what it saves the networks. In the meantime, it proposes that retail electricity prices should be deregulated: a licence for the incumbent industry to use its market power to block emerging competitors.

The value of rooftop solar

Rooftop solar should be allowed to sell power to neighbours independent of the grid, or be paid the retail price at the time it exports, in the same way that consumers benefit at the full retail electricity price if they save electricity or switch to gas.

On the one hand, the rate paid to PV owners should be higher than the retail price, because this is ‘green electricity’ being fed into the grid, which is worth more. On the other hand, it is fair that the PV owner pays for use of the part of the network they actually use: that is, the very small part of the network used to deliver the PV-generated power to whoever uses it. However, this latter is very different from saying that they should be paid only the wholesale electricity price, or close to it, which assumes they use the whole network and transmission system and deserve no credit for reduced power-line losses.

In theory, such an arrangement should force networks and retailers to introduce cost-reflective tariffs. But they have enormous market power and will not do this unless they are very carefully supervised, and independent analysis is done to cross-check their pricing approaches.

To avoid cost impacts on the grid beyond the neighbourhood level, a network could choose to install local energy storage to absorb the excess PV output at appropriate times. This storage could also enhance network profits if used to store cheap electricity for sale into the grid at times of high prices. So the cost of storage to solve the PV problem could be offset by the potential for greater profits.

Who pays to cover fixed costs?

The argument for higher fixed charges to cover network capital costs is also flawed. As the industry itself tells us, much of the network infrastructure is old. Logically, this should mean its capital value is heavily depreciated, so fixed costs are low for much of the grid. But the buyers of networks paid inflated prices, so their fixed costs are high. Why should consumers pay this cost?

These were business decisions: shareholders, not consumers, should pay the price of poor decisions. And governments that have chosen to inflate the value of their network assets need to take responsibility for their decisions, not solve their problem by killing energy innovation and cost reduction.

The commission needs to step back and imagine what a truly competitive energy services sector might look like, and frame its policy recommendations accordingly.

Debating (again) a national scheme for energy savings

In recent years, several state-based schemes that create energy retailer obligations to deliver greenhouse gas abatement via end-use consumers have appeared. These include the NSW Energy Savings Incentive (based on the previous Greenhouse Gas Abatement Scheme), the Victorian Energy Efficiency Target (promoted as the Energy Saving Incentive) and South Australia’s REES. The Victorian and NSW schemes use trading mechanisms.

Debate about such schemes has a long history, which is worth considering as we debate the federal government’s recent report on the costs and benefits of a National Energy Savings Initiative (NESI).

In 2003, the NSW government introduced its Greenhouse Gas Abatement Scheme—the world’s first emission trading scheme. Abatement certificates could be created through a variety of actions, including energy efficiency.

In 2007, Democrat Senator Lyn Allison (a long-term advocate for energy efficiency) proposed a similar national scheme. This was considered by a Senate Inquiry. I made one of 17 submissions, and also presented evidence. It was very clear that many influential people in the Canberra bureaucracy and politics were strongly opposed to such an approach. In my evidence, I warned that if the federal government didn’t act, individual states would, and we would have to clean up the mess in the future.

The inquiry concluded that the (then) proposed Carbon Pollution Reduction Scheme would deal with this issue within a broader framework. It didn’t. So the Victorian and South Australian governments introduced schemes in 2009.

In its conclusion, the inquiry commented that “An energy efficiency scheme set up in isolation from other climate change strategies may increase the cost of securing emission reductions…“ It’s strange how energy efficiency has to ‘fit in’ while energy market policy is allowed to conflict with policy on climate change. In practice, the present carbon trading scheme doesn’t effectively address energy efficiency either.

The 2010 Prime Minister’s Energy Efficiency Task Group proposed a national scheme. But powerful econocrats argued that carbon pricing would make such a scheme unnecessary, while energy retailers, who would carry the obligation, were not excited by the idea of paying to undermine their profits from energy sales. So it was to be “investigated”, not implemented.

Three years later, we have a paper reporting on (very conservative) economic analysis that shows substantial net economic benefit from a national scheme based on the NSW and Victorian models. I wish I could get excited about this, but the reality is that this was obvious a decade (indeed, several decades) ago.

The questions remain. Will a national scheme actually be introduced against the opposition of vested interests whose business models are falling apart along with purist economic policy designers? Will a weak target be set, creating yet another ‘boom and bust’ sustainable energy market? Will the scheme be designed to deliver real savings? Will it integrate incentives for avoiding peak demand and storing energy?

Don’t hold your breath.

Alan Pears has worked on sustainable energy issues since the late 1970s. He is one of Australia’s best recognised and most highly awarded commentators on sustainable energy and climate issues. He teaches part time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

Buy ReNew 125 at the ATA webshop.

Alan Pears

The Pears Report: Energy inefficiency

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According to the International Energy Agency, energy efficiency is the key to carbon abatement—but that’s not evident in a range of recent reviews in Australia, writes Alan Pears.


The Australian Energy Market Operator (AEMO) was instructed by the government (under pressure from the Greens) to prepare a comprehensive 100% renewable scenario for the National Electricity Market. This was released recently.

Unfortunately AEMO still seems to be trapped in a supply-side straightjacket. They use demand projections that all involve ongoing growth, so the benefits of declining demand are ignored. In their scenarios, the annual peak demand will shift back to winter evenings because of the impact of PV on summer demand. Major contributors to winter evening electricity peak include lighting (residential and commercial), heating, cooking, TVs and electric hot water. All of these loads can be dramatically reduced by energy efficiency and demand management measures. Time-of-use pricing will drive this trend even faster.

AEMO also presents the cost of the renewable scenario relative to prices now, rather than relative to where prices would head anyway under the more costly business-as-usual scenario. This just perpetuates the false debate about the cost of renewable energy, although the AEMO report still shows a renewable future is affordable.

AEMO has done Australian society a disservice by failing to factor in realistic energy efficiency potential. If the energy supply industry uses these scenarios to plan investments, it will be badly burnt financially. And guess who will pay…

The role of the carbon price

The recent crash in the EU carbon price reflects a combination of lower economic (and fossil fuel) growth than expected, as well as the impact of overly generous exemptions and lack of political commitment. This situation is the outcome of being generous to powerful interests during its development, on top of the traditional inability of economic modellers to factor in market failures and innovation when projecting future emissions. The GFC has contributed too.

It highlights the reality that, while a carbon price is important, it is just one element of an effective response to climate change. We do need ‘direct action’—but serious commitment, not the Coalition’s unrealistic and misleading approach.

The linking of Australia’s carbon scheme to the EU means their politics will drive our carbon price and it will be much lower than expected. Given the broad business support to keep the carbon pricing scheme, a future Coalition government should drop its commitment to remove it. Business needs the policy stability created by carbon trading, and the low price leaves plenty of room to adapt. But ideology is a powerful force.

Within Australia, a key failure in the design of our carbon pricing scheme has been the government’s refusal to build in mechanisms for voluntary energy efficiency and energy-related emission reduction to cancel permits—and so make such activities ‘additional’ abatement beyond the carbon cap.

Basically, unless this is done, cutting an individual’s emissions simply frees up permits under the fixed cap for others to pollute more. The carbon permit pie stays the same size, but the voluntary energy efficiency or renewable energy action means that person’s share of the permit pie is reduced, leaving more room for others to pollute. This is an accounting problem, not a justification to stop cutting emissions, but it has provided an easy excuse for conservative state governments to opt out of abatement activity, forced progressive businesses and councils to shift to buying international offsets (‘abatement leakage’), and disempowered the community.

The fundamental problem is that while voluntary action in Australia to cut energy-related emissions is good for the global environment, it is not recognised in our carbon scheme’s accounting approach. Efforts of groups such as the Voluntary Carbon Markets Association failed to force the government to fix this glaring accounting problem. The Climate Change Authority is meant to address this in its review, but they have many other big issues to address.

What makes it more frustrating is that the government has established the Carbon Farming Initiative which fixes this problem for agriculture and forestry. Their carbon storage actions create additional tradeable certificates. But apparently energy is not important enough to deserve fair treatment.

COAG’s evaluation of energy efficiency programs: behind closed doors

In April 2012, the Council of Australian Governments announced that national and state governments would review 74 energy efficiency and carbon reduction programs to ensure that they were ‘complementary’ to carbon pricing and compliant with COAG’s principles for efficiency, effectiveness, equity and administrative simplicity. The results were meant to be released at the April 2013 COAG meeting.

We have already seen some state programs cut under this process. One victim was Victoria’s Environment and Resource Efficiency Program. This required about 250 larger business energy and water users to conduct audits, prepare action plans and implement measures identified that had payback periods shorter than three years. In practice, this scheme was delivering around $90 million of savings at an average payback period of under a year: that’s better than 100% annual return on investment, and a carbon cost well under minus $100 per tonne of CO2 avoided. Yet business cheered when the program was shut down. We live in a strange world.

COAG did release two papers on the outcomes of the review process. The papers do not provide any information on which programs will continue, be shut down or modified. They do tell us that 61 of the 74 programs have been reviewed, and that 34 measures will continue, 15 have been discontinued and 7 rationalised. Eighteen await decisions. Interestingly, 49 measures were found to be both complementary to carbon pricing and to meet the COAG principles. Another 18 measures have been shut down or have reached completion. An additional 88 measures have been identified for review, 50 of which are federal programs.

One of the reports states that about half of the reviews have been published, but provides no web links or other information on where these can be accessed.

This situation is most unsatisfactory. We do not know which programs are being closed or continued, nor why some measures were found to comply but have still been shut down. We are not told what the other measures already shut down are, nor what the additional 88 measures to be reviewed are.

This whole process is a serious failure of transparency. It adds to the uncertainties faced by the energy efficiency industry and potential beneficiaries from programs. Energy efficiency has a hard enough time without this kind of treatment. According to authorities such as the International Energy Agency, energy efficiency is our key carbon abatement option over the next few decades. Australia seems determined to make sure this doesn’t happen here.

PV owners stand up for your rights!

Over a million Australian households are now private electricity generators—more than 10%! Yet they get a raw deal. Now is the time to tell your local MP that you demand a fair deal.

This means prompt and competent service and billing from retailers and network operators. It means either being paid a much higher feed-in tariff (the same as the retail power price at the time of export) or being allowed to sell excess PV power to neighbours via existing power lines for a very small charge. After all, most local PV transfers would be well within capacity limits. Alternatively, we should be allowed to run our own low-capacity cables to neighbours.

Government regulators should limit the size of socially regressive and anti-competitive quarterly fixed charges. It seems that some within the electricity industry (including some regulators) see higher fixed charges as a way of discouraging competition from distributed generation and energy efficiency.

As a matter of interest, the Victorian regulator, the Essential Services Commission, has a specific objective in its legislation to ensure the financial viability of the industries it regulates—that is, the electricity supply industry. So, by law it must oppose competition from energy efficiency and other measures that threaten the incumbent businesses. Clearly this must be changed.

Some community groups are mobilising in this space (such as Solar Citizens—join in!

Alan Pears has worked on sustainable energy issues since the late 1970s. He is one of Australia’s best recognised and most highly awarded commentators on sustainable energy and climate issues. He teaches part time at RMIT University and is co-director of Sustainable Solutions, a small consultancy.

Alan Pears

The Pears Report: If I ran an electricity network…

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As Australia looks for leadership on energy policy, Alan Pears rates the recent Energy White Paper as a fail. Find out why.


SINCE my last column, we have seen the release of the final Energy White Paper and the report of the Senate inquiry into electricity pricing. The final white paper was substantially improved from the draft. But it still rates a ‘fail’.

The core scenario on which future energy policy is based is the International Energy Agency’s (IEA) ‘New Policies’ scenario, which is pretty much our past growth trajectory. The IEA’s ‘450 ppm scenario’ to limit global warming to around two degrees is largely ignored. The brief discussion on page 204, titled ‘Integrating a Changing Climate into Energy Planning’ focuses on climate adaptation and climate impacts on energy infrastructure. The overall position is that cutting emissions is not the responsibility of the energy sector, but is dealt with by other government agencies and COAG councils!

So the Energy White Paper 2012, Australia’s energy transformation fails to confront fundamentals such as the IEA view that, if we are to limit global temperature increase to near two degrees Celsius, global coal consumption will decline by 30% by 2035 and that less than a third of the fossil fuel industries’ proved resources could be burned without exceeding climate limits.
The white paper encourages people to explore different scenarios with the online eFuture model, developed by CSIRO. Unfortunately, this only allows consumption growth scenarios to be explored.
Among other things, the paper argues that fossil fuels are not being subsidised, and that the generous taxation incentives simply reflect the varying risk profiles of different activities. An interesting interpretation.

As usual, energy efficiency is dealt with last, in 16 of the 227 pages of text.

Overall, this will be an interesting document for historians to look back at when they try to explain to future generations how misguided our society was, and why we failed to manage climate change.

Senate inquiry into electricity pricing

This report is a thoughtful discussion of the shambles that is our electricity market. It has some useful recommendations and is well worth a read. But the Hansard records of the inquiry hearings are much more entertaining.

Hansard shows how, on one hand, the existing energy sector is unanimous that there have been problems but that they are well on the way to fixing them, so they should just be left alone. On the other hand, they blame each other for the problems and express concern about the lack of information on which to base decisions. For example, the head of the Energy Department’s energy division admitted that his department had done no analysis of demand-reduction activities and their relationship to electricity prices (Hansard 25/9/12). How can the department advise its minister, Martin Ferguson, on energy policy without doing this?

Those outside the mainstream energy sector were unanimous that the problems are serious and will require substantial change. For example, demand management expert Dr Paul Troughton estimated that $16 billion had been spent unnecessarily on electricity supply (Hansard p.67 27/9/12).

The depth of the cultural problem in the energy sector is reflected in a comment by Australian Energy Market Commission (AEMC) chair, John Pierce, in the hearings (Hansard 25/9/12). He drew upon a football analogy, suggesting that the energy sector was just one specialist player, and that there were other specialist players responsible for environmental, social and other policy areas. He suggested that it was ridiculous for other players to try to tell a specialist player how to play as part of a team. He saw the role of AEMC as focused on economic efficiency: others should deal with other issues. He saw AEMC’s role as being “to inform other parts of government what the effect on this efficiency objective is of things they are thinking about…”

He, like others in the energy sector, interpreted the energy market objective in very narrow economic terms and saw no role for energy policy people to help other agencies to develop joint policy. No wonder energy policy conflicts with other policies.

While the inquiry and its recommendations are a very useful step, the big question is whether the energy sector will retake control of the agenda through management of the detail of ongoing changes. Or will they review their approach so it meshes with other government policies?

If I ran an electricity network…

Electricity network operators are the whipping boys of the industry, with some justification. But how could networks become part of the solution instead of part of the problem?

At present, the core business of an electricity network is seen as ensuring reliable and safe supply of electricity to consumers from large power stations and measurement of electricity use for billing purposes. They have no direct links to consumers and their culture is based on building and maintaining poles and wires. Regulators treat networks effectively as regional monopolies—although as I have pointed out before, this is incorrect, as they compete with distributed generation, energy efficiency, fuel switching and demand management—so they are able to exert unfair market power. Networks are also paid based on the size of their assets and the amount of electricity supplied through their wires.

The main risk networks now face to their businesses is that use of their capital-intensive networks will decline, while peaks become more significant. Unless regulators agree to them extracting higher charges from consumers or separating payment from electricity flows, this will reduce their profitability.

So if I ran a network, I would broaden its activities into the competitive areas of the energy markets, both wholesale and retail, as well as the energy services market.

I would install regional electricity storage systems, which I could use to store low cost electricity and sell it at premium prices. This technology could be located strategically to also store exports from PV and other distributed energy systems locally, before they complicate the operation of the main network. This would allow ‘smart’ consumer technologies to interact better with existing ‘dumb’ grids, reducing the need for high risk investment in networks.

I would seek a licence to bid demand management into the wholesale electricity market and set up a subsidiary business to develop this market capacity.

I would minimise additional investment in the existing network so that depreciation and other allowances in tax rules would allow reducing returns from them to be managed.

I would set up another subsidiary business to sell in-home and in-business displays and smart controls, on-site electricity storage, PV and stand-alone power systems, initially for fringe-of-grid customers, people in high fire-risk areas and where networks are under stress. This would include allowing consumers to share use of backup generators and storage within local areas. This could include leasing these technologies and providing ongoing fee-based maintenance and monitoring services, so that those with on-site equipment need not be deeply involved in running their energy systems. It might also include using under-utilised grid capacity to provide low cost backup.

For the existing business, I would develop more sophisticated network pricing schemes so that PV, other distributed generators and energy efficient consumers gain benefit from avoiding demand or exporting electricity at times and places of most use to the network. This would encourage PV owners to consider orienting their panels to generate more in the afternoon or to install storage to allow them to complement the grid. This might be done through adding to existing feed-in tariffs at certain times of day or by offering rebates on energy bills based on actual avoided peak demand/exports at critical times.

Remote management of specific equipment such as pool pumps and air conditioners and voluntary limits on peak demand, in exchange for discounted prices, could also be part of the new business model.
Partnerships with welfare groups, community groups and other businesses, as well as separate subsidiary businesses, will be necessary to overcome lack of consumer trust in network operators, cultural barriers and limited internal marketing and sales skills within the network business.

Some elements of this model depend on changes to energy market rules. But government policy makers should be supportive, as the alternative is higher consumer energy costs and potential business failures among network operators.

Alan Pears has worked in the energy efficiency field for over 20 years as an engineer and educator. He is Adjunct Professor at RMIT University and is co-director of environmental consultancy Sustainable Solutions.

Alan Pears

The Pears Report: A fundamental technology shift

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As energy generation evolves, centralised energy companies will need to evolve as well, or face extinction. Alan Pears explains.


We are part of a vicious technology war on many fronts, as entrenched interests struggle to defend their turf. The fundamental shifts are from traditional physical, centralised technology solutions to a rapidly evolving mix of virtual, decentralised, modular, retail-focused solutions. In media, we see online versus hard copy battling. In transport, virtual transport via communications and electronic devices compete with physical transport and service provision. In water, traditional large water and sewage networks with large dams and treatment plants confront efficiency, local solutions and even waterless solutions. In energy, the battle is between traditional centralised energy systems and the combination of virtual solutions, smart management systems, high efficiency and distributed generation.

Commentator Giles Parkinson has described the crisis facing the electricity industry as its “Kodak moment’: Kodak was an early leader in digital photography, but couldn’t bring itself to cannibalise its core film business by promoting its new approach. So others did it. All existing communication, energy, water, and goods and services retailers are desperately trying to develop new business models and undermine, out-compete or absorb competition from agile, mass-produced, consumer-focused alternatives.

A recent paper from energy company AGL (Economic Policy Working Paper 31) revived the 1980s term ‘death spiral’ as it discussed the future of conventional energy companies. Their cost structure is dominated by capital costs and assets that take a long time to build and last a long time. If energy consumption stops growing (or declines) while peak demand keeps rising, they have to spread increasing fixed costs across lower than expected sales. So they must increase prices and fixed charges to balance their books—but this makes competing options more attractive, which makes the situation even worse: the death spiral.

Policy makers are struggling to understand the emerging reality. For example, they still treat electricity networks as ‘natural monopolies’ and look at emerging technologies in terms of their impacts on the existing electricity industry. As I pointed out to the Victorian Competition and Consumer Commission, mobile phone businesses are not paid based on how much they save landline networks. So why are emerging energy solutions such as PV paid based on how much they save incumbent electricity companies?

The existing electricity industry faces a fundamental problem: the harder they work to block emerging competitors, the more they encourage new solutions and the greater the risk of pent-up demand for alternatives exploding uncontrollably when costs fall enough and technology works well enough. PV is a great example: denying PV owners a fair feed-in tariff encourages a shift to including storage and even going off-grid. Major appliance manufacturers such as Samsung are moving into these markets with enormous economies of scale and sophisticated retail marketing capability.

As the AGL paper points out, these developments create potentially serious challenges for social justice policy. Wealthier people are better placed to invest in PV, energy efficiency and storage to manage their costs. AGL points out that, while families with children at home comprise only 16% of their customer base, they are 24% of customers at risk of disconnection. Yet many are not eligible for welfare support. These families are paying the price for succumbing to building industry marketing and government incentives to buy big, inefficient houses on the urban fringe with poor access to public transport and services. So their problems go far beyond their difficulties with electricity bills.

If we focus on reducing peak demand as well as total consumption, the ‘death spiral’ can be managed. As US energy expert Amory Lovins pointed out many years ago, the electricity sector depreciates the value of its assets each year, gaining tax benefits. So as long as they don’t have to build more capacity, they can hold energy prices stable while consumption continues to decline.

As part of our attack on peak demand, we will face a choice between higher fixed charges and time of use (TOU) pricing. TOU is the lesser of two evils, as high fixed charges are regressive and disempowering. We need to use TOU as part of management of demand, to send signals and manage costs, but we need much more sophisticated and equitable approaches. Victoria’s approach illustrates the problem: consumers pay a high price from 7 am to 11 pm on weekdays. Low income households can’t work around that structure. Alternatives with lower prices from 10 to 2 would allow them to cook a main lunch meal and run appliances. The peak does seem to pass by 7.30 pm, so prices could drop then.

Maybe options with a voluntary limit on peak demand in certain time blocks could also work. In Italy, most households have a 3 kilowatt demand limit—and they think this is pretty normal and reasonable. The Bushlight remote power scheme for Indigenous communities includes negotiated load shedding hierarchies. Their approach shows it’s possible to work with consumers to set priorities to limit peak electricity demand.

As sustainable energy costs decline, there is an increasing financial case for government to deliver social welfare by providing energy efficient equipment and PV systems instead of or as well as traditional energy price reductions. Housing financiers should allow extra funds for higher building efficiency, efficient equipment and PV in their mortgages, and encourage people to consider smaller, more adaptable housing.

Future carbon prices
Conventional wisdom of economists has it that carbon prices will increase as emission targets tighten. Some politicians claim this will drive increasing costs to the economy. This is simply wrong.

First, tighter emission targets will mean we emit less, so we will have to pay for fewer tonnes of carbon dioxide, offsetting the higher unit price. For example, Treasury expects the greenhouse intensity of Australian electricity to decline by around three-quarters by 2050 (Table 5.18 p.103, Treasury modelling report)—so a carbon price four times higher would  have the same overall impact on the electricity price as today.

Second, where we invest in energy efficiency, we save not just carbon cost but also the cost of the energy we would otherwise have consumed. For example, saving 10% of a household’s electricity use offsets its electricity-related carbon cost.

Third, driving innovation harder cuts the carbon cost. A rarely quoted analysis in the IPCC’s 2007 mitigation report (IPCC WG3 Report Cross-sectoral chapter) indicates that more aggressive innovation could cut the 2050 carbon price by 60% for a given target. Why? Innovation means higher energy and resource efficiency, cheaper renewable energy and lower cost renewable and recycled materials. So investment of income from carbon pricing in innovation will pay off.

Alan Pears has worked in the energy efficiency field for over twenty years as an engineer and educator. He is Adjunct Professor at RMIT University and is co-director of environmental consultancy Sustainable Solutions.

Alan Pears

Energy efficiency ignored again

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Energy efficiency measures have huge potential for delivering climate change abatement, and yet they are often overlooked in the debate on climate policy. Alan Pears explains.

Many people watched the recent ABC documentary and panel show on the climate change debate. It was interesting to hear that both Clive Palmer and Nick Minchin were prepared to support renewable energy—if it were cost-effective. However, apart from a couple of passing mentions in the panel session, a sustainable energy option that already meets their criteria for cost-effectiveness and climate change abatement was ignored.


Most international experts, including the International Energy Agency, expect energy efficiency to deliver a third to half of all energy-related abatement over the next 20 years. Yet, if it’s mentioned in Australian climate policy discussion, it’s almost always an afterthought.

It’s not that policy people and commentators don’t think energy efficiency is a good thing, but it’s not ‘top of mind’—mostly they have to be prompted. And they tend to see it as a fairly small contributor to solutions. One British study recently estimated that 88% of all energy used globally is wasted before it delivers a useful service: so the potential for efficiency improvement is enormous.

There seems to be some kind of deep cultural driver for Australians to focus on supply-based solutions. I really don’t know how we can overcome this, because it is so pervasive.

At least there is some money (thanks to the cross benches, especially the Greens) in the Clean Energy Futures package for energy efficiency—although much less than for low-emission energy sources. But we will have to withstand yet another attempt by econocrats to cut energy efficiency programs because they fail the ‘complementary to carbon pricing’ test. That won’t be easy, and it will divert our efforts from delivering results to defending the validity of energy efficiency—yet again.

My recent submissions
I’ve been busy recently producing a few submissions to government inquiries (see links at the end of this article).

My submission to the Draft Energy White Paper is in two parts: part 1 is my annotations on the whole document, while part 2 is a 20-page submission summarising my key points. My main recommendation is that they start again with a new and more inclusive process that reflects a ‘whole of government’ perspective and engages households and services sectors as well as big industry.

In my submission to the Victorian Competition and Efficiency Commission inquiry into feed-in tariffs (FiTs), I pointed out that the whole debate is focused on the wrong issue: it’s not about how much PV saves the energy industry. If we step back, distributed generators should have the right to sell power to neighbours at whatever price they can negotiate: that’s how markets are meant to work. So the retail price is the right benchmark for pricing FiTs. Further, there is a legitimate argument for additional subsidies of distributed generation as an emerging technology that competes with powerful entrenched interests. I proposed that a FiT that provides the same price for exports as for consumption has many advantages.

I also made a submission on the proposed National Energy Saving Initiative. I argued that we need two kinds of certificates, as we have for renewable energy. This will allow flexibility to ensure the scheme really works to deliver outcomes and reward reductions in peak demand and other benefits beyond energy savings.

Passing the buck
The Australian Government’s failure to set up a proper accounting system so that businesses, local and state governments and households can qualify their energy efficiency and renewable energy action as ‘additional’ to the carbon target is now visibly backfiring.
The new Victorian and Queensland Governments have slashed programs on energy efficiency and renewable energy because, under the carbon pricing scheme, reducing emissions would simply leave more room under the carbon cap for other states to increase their emissions.

Under the carbon target, reducing emissions is now the federal government’s responsibility. See for detail on the problem and the solutions. How can such a perverse situation be allowed to occur?

Feedback from a reader
In my column in ReNew 110, I included some thoughts about public transport funding. One reader has responded to my comments. I’m pleased, as I was hoping to provoke some discussion. [Ed note: the reader’s letter appears on p17 of ReNew 120.]

The fact that I proposed two diametrically opposite ideas on rail crossings (one to reduce road delays and the other to allow more delays due to rail crossings) shows that I was floating ideas rather than taking a position.

But to clarify my suggestion that congestion due to rail crossings could be allowed to increase as a way of limiting traffic growth, there are some fundamentals here.

Overwhelming evidence shows that if you increase road capacity, it simply fills up to a new, higher level of traffic without solving the congestion problem. Further, if your policy objective is to reduce car usage, you need to increase capacity of alternatives while also reducing road capacity. Otherwise cars come from elsewhere to fill up the freed-up (effectively lower cost in terms of travel time) space. Economists propose road pricing as a way of limiting road use, but this has equity issues.

I was trying to point out that rail crossings can act as a policy tool to limit car usage and increase pressure on road users to shift to other options. It is imperfect, but all the options have their problems. And the money saved from avoiding construction of grade separation could be spent on extending public transport (PT) and buying more rolling stock.

With regard to the reader’s comment on my proposed PT property levy, his comment is focused on a group of workers who happen to live near good PT but work in PT-poor locations. This is a legitimate concern, but the situation is complicated. First, as congestion (or road pricing) increases, those with the cheapest or most practical options tend to change behaviour first, so this should leave more room for those who really need to use cars. Indeed, giving people who live near PT free or discounted PT travel to offset the levy cost provides an incentive to change behaviour and free up road space. The levy also creates a new incentive for PT agencies to improve and extend PT because they are rewarded with more funds. As our reader points out, we need to find more money to improve and extend PT, and this is one possibility.

The situation for tradies is challenging, but there are some options. First, as a rider on early trains into Melbourne, I’m seeing increasing numbers of tradies on PT, complete with wheelie bags of tools. Obviously this only works where there is PT, or where the tradie can travel part of the way by PT and leave their vehicle somewhere secure where PT finishes, so the trip can be completed by ute.
Second, for tradies working on new housing, there is potential to shift a lot of building construction from on-site work to housing manufactured off site. This would significantly increase productivity by reducing travel time and avoiding rain delays and damage. Countries such as Germany are able to produce high-quality, diverse housing using this approach.

For tradies involved in appliance maintenance, smart appliances and mobile phone cameras increasingly allow remote diagnosis and accurate identification of models, so they can spend less time travelling, and may even be able to carry a lot fewer spare parts.

My key point was that we need some creative ideas because present approaches to transport are not working very well. I hope the debate continues and more ideas flow!

Alan Pears has worked in the energy efficiency field for over 20 years as an engineer and educator. He is Adjunct Professor at RMIT University and is co-director of environmental consultancy Sustainable Solutions.

Alan’s recent submissions
Draft Energy White Paper:
Victorian Competition and Efficiency Commission Inquiry into Feed-in Tariffs:
National Energy Saving Initiative: