Prevention is Cheaper than Cure - Avoiding Carbon Emissions through Energy Efficiency

Transcription

1 Prevention is Cheaper than Cure - Avoiding Carbon Emissions through Energy Efficiency PROJECTED IMPACTS OF THE Equipment Energy Efficiency Program to 2020 An initiative forming part of the Australian National Framework for Energy Efficiency and the New Zealand National Energy Efficiency and Conservation Strategy JANUARY 2009

2 GEORGE WILKENFELD AND ASSOCIATES Pty Ltd ENERGY POLICY AND PLANNING CONSULTANTS PO Box 934 Newtown NSW 2042 Sydney Australia Tel /Fax (+61 2)

3 Contents Summary 4 Glossary 6 INTRODUCTION 7 BACKGROUND 7 DATA SOURCES AND METHODS 8 PRODUCTS, PROGRAMS AND MEASURES COVERED 8 KEY DATA AND ASSUMPTIONS 11 Ensuring Consistency 11 Greenhouse Gas Intensities 11 Energy and Carbon Prices 14 ENERGY AND GREENHOUSE IMPACTS 15 SELECTED PRODUCT CATEGORIES 15 Refrigerators and Freezers 15 Electric Water Heaters 17 Lighting 20 Air Conditioning 22 Television, Computer and Electronic Equipment 23 Gas Appliances 26 SAVINGS OF E3 PROGRAMS BY SECTORS 28 Residential 28 Non-Residential Sectors 30 Combined 30 GREENHOUSE IMPACTS 33 SAVINGS BY JURISDICTION 35 COSTS AND BENEFITS 37 General References 42 Product and Program Specific References 43 3

4 Summary This analysis of the projected impacts of the Equipment Energy Efficiency Program over the period updates the impacts analysis published in It takes into account the latest information on programs implemented, and those still to be implemented over the next 3 years, as described in the E3 Program s work plan for Residential Energy Savings In the residential sector, energy savings are projected to be nearly 22,000 GWh per annum by Water heating represents over 33% of the projected savings from 2009 to 2020 (mostly from the phaseout of electric resistance water heaters), and refrigerators and freezers will account for 29%. The other major contributors to projected electricity savings are televisions and set top boxes (10%), lighting (8%) and air conditioners (8%). Until 2008, refrigerators dominated the energy savings among electrical appliances. E3 measures already implemented will reduce household electricity use in 2020 by about 13% compared with business as usual (BAU), and measures currently planned could bring about a further reduction of nearly 15%. For residential sector electricity demand to be held constant while population grows, the average consumption of household electricity per capita must decline. ABARE projects that BAU household electricity use per capita will increase at about 1.0% per annum. However, the E3 Program could lead to a reduction of 0.8% per annum. Non-residential Energy Savings Electricity savings below BAU are projected to reach about 10,300 GWh per annum by 2020 in the nonresidential sector. This is slightly less than projected for the non-residential programs in the 2005 Impacts Study, as a result of delays in implementing regulatory proposals. Lighting products will account for nearly 30% of the projected electricity savings between 2009 and 2020, followed by transformers (21%), air conditioning products (20%), motors (13%) and computers and electronic devices (9%). Total electricity savings from all sectors targeted by the E3 Program are projected to exceed 32,000 GWh per annum by The Program is still focussed on the residential sector, which will account for more than two thirds of total energy savings. Almost 80% of the energy savings will come from pure MEPS programs, and the other 20% from labelling or labelling combined with MEPS. 1 When you keep measuring it, you know even more about it: Projected Impacts , April

5 Greenhouse Impacts The 2005 Impact Study estimated that emissions avoided due to E3 Programs over the period would be Mt. The present Study estimates Mt over the same period, or Mt if electricity emissions intensity falls, under the influence of a 10% reduction carbon cap. By 2020, greenhouse abatement from the Program will be in the order of 19.5 Mt per annum, about two thirds from greater efficiency of energy use and the rest from declining emissions intensity. Looking forward over the period , it is estimated that about 34% of total program savings will occur in NSW, 24% in Queensland, 20% in Victoria, 9% in WA and the remaining 13% in the other four jurisdictions. The greenhouse emissions avoided in each jurisdiction depend on the emissions intensity of the electricity supplied changing these percentages slightly. NSW would account for about 36% of total emission avoided over the period , Queensland for 25%, Victoria for 22%, WA for 8% and the others for 9%. Costs and Benefits For Australian energy users as a whole, the entire E3 Program is projected to return net benefits of $22,437 million (NPV in 2008, at a discount rate of 7.5%) over the 16 years This gives an overall benefit/cost ratio of 2.9. As a point of comparison to past studies, the program will save the community $5,200 million (net present value) in the year 2020 alone. Unlike previous studies, the benefit (not cost) of each tonne of CO 2 -e avoided by the E3 Program needs to be adjusted to account for the share of emissions avoided that will come from projected falls in the intensity of electricity supply brought about by the Carbon Pollution Reduction Scheme (CPRS). Even with this adjustment, the Program will save energy users about $56 per tonne of emissions avoided (at a 7.5% discount rate) about twice the corresponding estimate in 2005, and nearly back to the levels estimated in This indicates that the E3 Program is even further from exhausting cost-effective opportunities to increase energy-efficiency, now that the value of savings has been increased by the CPRS. 5

6 Glossary AGO Australian Greenhouse Office (merged into DEWHA, early 2008) ANZ Australian and New Zealand AS Australian Standard AS/NZS joint Australian and New Zealand standard BAU Business as Usual CBA Cost-benefit analysis CO 2 -e Carbon dioxide equivalent COP Coefficient of Performance CPRS Carbon Pollution Reduction Scheme DEWHA Department of the Environment, Water, Heritage and the Arts (Australia) E3 Equipment Energy Efficiency (Program) EECA Energy Efficiency and Conservation Authority (New Zealand) EER Energy Efficiency Ratio ELV Extra low voltage (halogen gas-filled incandescent lamps) GLS General lighting service (ie incandescent lamps intended for bayonet or screw sockets) HE High Efficiency HH Household MCE Ministerial Council on Energy MEPS Minimum Energy Performance Standards GAEEEP Gas Appliance and Equipment Energy Program NAEEEP National Appliance and Equipment Energy Program (predecessor of the E3 Program) NAEEEC National Appliance and Equipment Energy Efficiency Committee NFEE National Framework for Energy Efficiency NPV Net Present Value OBPR Office of Best Practice Regulation PAC Packaged Air Conditioner RIS Regulatory Impact Statement WELS Water Efficiency Labelling and Standards WH GEMS Water Heater Greenhouse and Energy Minimum Standards 6

7 Introduction Background This document estimates the impacts (historical and projected) of the Equipment Energy Efficiency (E3) Program on energy use and greenhouse gas emissions in Australia and New Zealand. 2 It also estimates the value of energy saved and compares this with the cost of the Program to energy users. The history, structure and scope of the E3 Program, which is an initiative of the Ministerial Council on Energy 3, are described in a number of documents, including the annual Achievements reports (2008/03). 4 This is the fourth Impacts Study. Table 1 summarises the dates and key characteristics of the earlier studies. The physical modelling period is the period over which the energy impacts of each measure are compared with the business as usual (BAU) case, which is generally the estimated energy use of that product or sector in the absence of the measure. For measures which commenced before the start of the modelling period (eg the energy labelling of refrigerators, which became mandatory in 1986), only impacts during the modelling period are estimated. Energy impacts before 2000 or after 2020 are not taken into account. The great majority of E3 measures have taken effect, or are expected to take effect, between 2000 and The value to energy users of the energy saved through E3 measures can be calculated by multiplying the energy saved by the energy prices which users pay. Similarly, the greenhouse benefit of measures can be calculated by multiplying the energy saved by the greenhouse intensity of the energy delivered (eg kg CO 2 -e/kwh for electricity). Both energy prices and greenhouse gas intensities vary over time as well as from State to State, so differences in the projections used in different studies affect the comparability of estimates. A further complication is the discount rate used to calculate the net present value (NPV) of expected future costs and benefits. The most accurate way to compare two measures is to use the same discount rate, the same accumulation period for cost and benefits, and the same time point of comparison. For example, the apparent benefit/ cost ratio of a measure to be implemented in, say, 2011 will appear different if the point of evaluation (or point of decision ) is mid 2008 than if the point of decision is mid-2010, even if the same energy price projections and the same discount rates is used. This complicates comparisons of the projections in the four studies in Table 1, especially the cost-benefit ratios. Table 1 Previous Impact Studies Published Document Reference Physical Modelling Period Cost-benefit Accumulation Period (16 yrs) First Study, 2000 GWA (2000) Second Study, / , (a) Third Study, / Fourth Study, 2008 [This document] (a) The second accumulation period was modelled in the subsequent study in order to calibrate the findings of the Third and Second Studies. Although the length of the accumulation period is the same (16 years) shifting the starting point changes the Net Present Value (NPV) calculations. 2 In this report references to the E3 Program as a whole are capitalised, while individual measures are sometimes also called programs in lower case. This report covers Australia only. 3 The E3 Program forms part of the Australian National Framework for Energy Efficiency (NFEE) and the New Zealand National Energy Efficiency and Conservation (EECA) Strategy. 4 E3 publications which can be accessed at are called up by their library reference numbers. Direct weblinks are included in the References. References given by author and year precede the E3 numbering system, but may also be found on the E3 website. 7

8 Data Sources and Methods The implementation of each E3 measure generally follows the same sequence: The E3 Committee commissions a product : this generally includes a preliminary estimate of the current and projected energy consumption of that product and the potential for reducing it through measures such as energy labelling or MEPS; If the E3 Committee then considers that the measure warrants further evaluation, it commissions a Draft Regulation Impact Statement (RIS), which includes a full costbenefit analysis (CBA) based on the best available projections of BAU energy use and with-measures energy use. Once approved by the Office of Best Practice Regulation (OBPR) the Draft RIS is released for public consultation. It is modified as necessary in the light of any comments received, and then finalised for submission to Ministers for decision. If the measure is implemented there may be follow-up studies to monitor its effectiveness. To date, there has been only one full scale post-evaluation study, on energy labelling and MEPS for refrigerators and freezers (2006/14). The present report estimates the impact of each measure by drawing on the best available data: the RIS if one has been prepared, or failing that, the product profile. A list of the documents used for each product and measure is included in the references. The E3 measures already implemented, and those for which implementation dates have been fixed, are listed at The latest of these (for External Power Supplies and Set Top Boxes) are due for implementation in December 2008 (Australia) and April 2009 (New Zealand). The E3 Program is organised in 3-year Work Plans, and at the time of writing, the Work Plan for the July 2008 to June 2011 triennium was being finalised. All the measures in the draft Work Plan have been included in the present study, on the assumption that they will meet their target implementation dates. Products, Programs and Measures Covered Successive Work Plans and Impacts Studies have described and grouped products and programs in a number of different ways, which creates the risk of either omitting or double-counting impacts in the present study. As the variety of equipment and the complexity of product energy use increases, it is becoming common for different aspects of product energy use to be targeted by different measures. For example, there are global initiatives, in which Australia participates, to reduce the standby power consumption of all electrical equipment. There may also be MEPS for the on-mode energy use of some of the same products, as well as an energy label which ranks products according to their total energy use, both standby and on-mode. Table 2 lists the products and measures that will be covered by the E3 Program by the completion of the Work Plan (assuming measures still in the planning stage are approved by Ministers and implemented by the target dates). The commencement year for each measure is given. The second dates for MEPS programs indicate when more stringent standards take effect. Label enhancements indicate a re-scaling of the star label, when products previously rated at 5*, say, are re-rated to about 3* to renew the commercial incentive for suppliers to further increase product efficiency. 5 Re-ratings are sometimes accompanied by minor changes in the energy tests and in label design and the content, which are intended to maintain buyer motivation to seek out more energyefficient products and to ensure that label rankings continue to reflect actual product energy use. As Table 2 indicates, the impact of some programs is wholly or largely confined to the residential sector, while other programs target non-residential energy use. Some programs have significant impact across all sectors because the target products may be installed in homes, commercial buildings or factories. Lamps and computer equipment are obvious examples. The last two measures in Table 2 are not strictly speaking part of the E3 Work Plan, but their energy impacts have been modelled because they interact so closely with E3 measures. Water Heater Greenhouse and Energy Minimum Standards (WH GEMS) is based 5 The impacts of the proposed introduction of a 7* to 10* optional extension scale for the standard 6* label have not been separately modelled, as it is difficult to estimate the number of models that might become eligible for the higher ratings, and if so whether their suppliers will choose to take advantage of the label extension option or to continue to label with 6* on the standard label. 8

9 on an undertaking by the Commonwealth Government to set greenhouse standards for water heaters installed in new dwellings and, eventually, all water heaters sold in Australia. These would have the effect of excluding conventional electric resistance water heaters in singlefamily dwellings, in favour of solar-electric, heat pump, LPG or (where natural gas is available) gas or solar-gas. The final program is Water Efficiency Labelling and Standards (WELS), which is administered by DEWHA. This impacts on the water use efficiency of clothes washers and dishwashers, beyond the effects of energy labelling alone, and hence further reduces their demand for energy to heat water. The reduction in water use from WELS also reduces the demand for pumping by water and sewerage utilities, and for energy use from future desalination plant (beyond those already under construction). The previous Impacts study identified 27 distinct programs in the Work Plan. These are listed in Table 9, along with 5 additional programs identified in the Work Plan. The two Work Plans were analysed with the aim of: Identifying programs which have been implemented as intended, delayed or otherwise revised; Identifying new programs; and For programs in the previous Work Plan, comparing the latest documents (RISs, CBAs, product profile, fact sheets etc) with those used to compile the previous Impacts Study. There are many factors influencing estimates and projections. For several measures, later studies have led to either increases or reduction in impact projections. For others, the impact projections are more or less unchanged, but later studies have increased confidence in these projections. The lighting and standby programs are in this category. Some programs are unchanged in scope but have been delayed in their implementation. For these programs the impacts will be lower in 2020 than previously projected. Some programs have been recast and recombined in complex ways, and the more recent analyses cover a different scope from the earlier analyses. This applies especially to air conditioners intended for household use (including some 3-phase models). Some programs fill in the detail for omnibus programs (eg standby energy). However, some are now likely to deliver savings beyond what was previously projected (eg measures for set top boxes and external power supplies will deliver on-mode energy reductions as well as standby mode reductions). Some programs will have higher impacts than previously envisaged because growth in that end use of energy is now projected to be higher (eg televisions). Finally, the impacts of some measures already implemented (ie labelling and MEPS for refrigerators and freezers) have been re-evaluated. 9

10 Table 2 Products and measures covered by E3 Program Product or product group Measure Residential Other Household refrigerators & freezers Energy labelling 1986 Label enhancements 2000, 2008 MEPS 1999, 2005 Electric storage water heaters (large) MEPS 1999 Electric storage water heaters (small) MEPS 2005 Electric storage water heaters (miscellaneous) MEPS 2005 Clothes washers, dishwashers, clothes dryers Household air conditioners Labelling 1986, 1990 Label enhancements 2000 Energy labelling 1986 Label enhancements 2000, 2010 MEPS Packaged air conditioners MEPS 2001, 2010 Chillers MEPS 2009 Close control air conditioners MEPS 2009 Televisions Labelling 2009 MEPS 2010 Set top boxes MEPS 2009 (a) External power suppliers MEPS 2009 Icemakers MEPS 2009 Refrigerated drinks vending machines MEPS 2006 Commercial refrigeration MEPS 2006 Fluorescent lamp ballasts MEPS 2003 Linear fluorescent lamps (tri-phosphor) MEPS 2005 Incandescent lamps MEPS 2009 Motors (3 phase) MEPS 2001, 2006 Power supply transformers MEPS 2004 Standby energy (range of products) MEPS 2012 Swimming pool & spa equipment MEPS 2010 (a) Gas water heaters MEPS 2009 Gas space heaters MEPS 2010 Gas ducted heaters MEPS 2010 Personal computers & monitors MEPS 2010 Water heaters Greenhouse Standards 2010 (a) Clothes washers, dishwashers, showers, taps Water Efficiency Labelling and Standards 2006 energy impacts (a) (a) (a) These programs not included in Residential Sector study (EES 2008) 10

11 Key Data and Assumptions Ensuring Consistency The product studies and RISs listed in the References were prepared over a period of nearly 15 years, and about 10 separate consultancy firms were involved (most carried out more than one study). Although each RIS follows guidelines published by the Council of Australian Governments (COAG), there is considerable latitude in interpretation, in modelling approaches and in key assumptions such as energy prices and greenhouse gas intensities. After the 2005 Impact Study, it became apparent that there was a need for greater consistency between RISs, partly to streamline their assessment by OBPR and partly to enable their projected impacts to be combined more transparently and accurately. A Guide to Preparing RISs (2005/19) was published as a template for consultants. It also includes sets of population, household numbers, energy price and greenhouse gas intensity projections for each State and a format for common output tables, so that CBA data from all RISs can be combined. Although this has greatly improved RIS consistency, it has been necessary to update the input values from time to time, as energy prices and greenhouse gas intensities have changed. The following procedure was therefore followed in order to ensure consistency in the present Study: All program impacts have been expressed in energy terms (eg GWh of electricity or PJ of natural gas saved each year); A common set of energy prices and greenhouse gas intensities has been applied to all programs; The projected increases in product costs were retained from the original RISs where possible. Therefore, the greenhouse impacts and benefit-cost ratios for each program reported in this Study may be slightly different from those in the RISs from which they are drawn. In the past, the RIS authors have had to make their own estimates of the projected BAU energy demand of the equipment types they were considering. As these were done in isolation and without regard to the energy use of other classes of equipment, they differed slightly in some cases significantly from those in a recent study of energy use in the residential sector as a whole (EES 2008). Therefore it was necessary to scale the sector estimates down (and sometimes up) so that they were consistent with the estimates for the residential sector as a whole. This enables the combined impact of E3 measures targeting the residential sector to be expressed as a percentage of what energy use would be if the E3 programs were not implemented. The impacts of the E3 measures already implemented and some of those still to be implemented have already been taken into account in Energy Use in the Australian Residential Sector, , so their effect should not be double counted. The measures not already included are indicated in Table 2. Greenhouse Gas Intensities At the time of the 2005 Impacts Study, Australia had not ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change and there was no prospect of a national cap on greenhouse gas emissions or a scheme to allocate (or auction) tradeable permits to emitters. Energy prices were projected on the assumption that they would not include a price for emission permits, and although emissions reductions from E3 measures were calculated, they were not given a monetary value in the cost-benefit analyses. The Commonwealth Government has now ratified the Kyoto Protocol, so Australia is committed to its Kyoto target of keeping average emissions over the 5 year period to no higher than 108% of 1990 emissions. The Government is also committed to the implementation of a Carbon Pollution Reduction Scheme (CPRS) which will include a declining cap on emissions and a system of tradeable emissions permits, to take effect from July 2010 (DCC 2008). However, the Government has not yet indicated the rate at which the emissions cap will decline, the rules for permit allocation and possible compensation of affected parties, the rules for linking the CPRS with similar schemes in other countries, and many other details which together will determine the price of permits and hence the likely response of emitters. The Garnaut Climate Change Review has recommended that, if other countries also take action, Australia s target should be to reduce emissions net of international trading by 10 per cent from 2000 levels by 2020 (30 per cent per capita), and 80 per cent by 2050 (90 per cent per capita). This is a reduction of 17 per cent (27 per cent per capita) from the levels that are expected in 2012, at the end of the Kyoto period (GCCR, 2008). A recent study by ACIL Tasman projects that with a national cap which restricts national emissions in

12 to 10% below 2000 levels the trajectory endorsed by Garnaut permit prices would rise from $20/tonne in 2010 to $45 in 2020 (ESAA, 2008). There would need to be a dramatic fall in not just the emissions intensity of electricity delivered, but in the absolute emissions from generation. For Victoria, which has the highest intensity power stations, this would mean the closure of 3 out of the 4 major brown coal generation plants in the Latrobe Valley. The projected average greenhouse gas intensity of electricity delivered in each State with and without a CPRS is illustrated in Figure 1 and Figure 2. A national weighted average is also shown, as well as the average intensity used in 2005 Impacts Study. The average greenhouse gas intensity of electricity supplied in any year is calculated by dividing total annual emissions by total electricity delivered. However, if electricity demand rises, and/or older power stations are retired, new sources of generation need to be commissioned. The marginal greenhouse gas intensity is the emissions from the new sources of generation only, divided by the additional energy they supply. If the CPRS is to be successful in capping and then reducing national emissions, then the marginal intensity of generation will have to be very low. Figure 1 indicates that, for an overall 10% reduction in national emissions, the national average intensity of electricity delivered would need to be no higher that 0.60 kg/kwh delivered by Given the large number of existing coal fired power stations that will survive through the period, even if most brown coal power stations are closed, the marginal intensity of new generation will have to be significantly lower than the average intensity. A mix of, say, 50% gas-fired generation and 50% renewable sources would have a combined intensity of between 0.2 and 0.3 kg/kwh delivered. 6 These issues are relevant in assessing the greenhouse benefits of E3 Programs. In the past, before a national CPRS was envisaged, it was assumed that new generation would be somewhat less greenhouse intensive than existing generation, because of increases in new black coal generation efficiency and a small shift to natural gas and renewable generation brought about by State government programs such as the NSW Figure 1 Projected emissions intensity of electricity delivered, with CPRS NSW+ACT Vic Qld SA WA Tas NT National Wtd average 2005 wtd average Source: Derived by author from ESAA (2008) 6 In theory, coal fired power stations with carbon capture and storage (CCS) could have an intensity of 0.2 to 0.3 kg CO 2 -e/kwh, but these are not expected to be commercial within the projection period. ESAA (2008) concluded that: By 2020 we assume that carbon capture and storage is still in a demonstration phase, as is integrated gasification and combined cycle generation. 12

13 Figure 2 Projected emissions intensity of electricity delivered, without CPRS Source: Derived by author from ESAA (2008) Greenhouse Gas Abatement Scheme (GGAS) and the Queensland 13% gas generation requirement, and the Commonwealth Mandatory Renewable Electricity Target (MRET). Therefore, the greenhouse impact of individual E3 measures was calculated at the marginal greenhouse gas intensity that reflected the expected mix of new generation, as indicated by the broken line in Figure 1 and Figure 2, which trends down to 0.8 kg/ kwh in Applying the same approach now would mean using a marginal intensity of 0.2 to 0.3 kg/kwh, which means that by 2020, a kwh saved by the E3 Program would appear to have only about a third of the greenhouse benefit it had before the CPRS was envisaged. This would be a false conclusion, because it presupposes that all the required greenhouse reductions will be achieved in the energy supply system or in the nonenergy part of the economy, whereas in reality a large part potentially the majority will be achieved by a reduction in energy demand (accelerated by the ability of E3 measures to overcome failures in the market for energy services). In fact, it is projected that the current suite of E3 measures is likely to hold electricity use steady, in the residential sector at least, so no new generation would be needed to supply the sector. Therefore it can be argued that the marginal intensity for E3 measures targeting the residential sector intensity would be identical to the average intensity, which is currently about 1.0 kg CO 2 -e/kwh (Figure 1). It could further be argued that a reduction in demand is a pre-condition for the retirement of the most greenhouse intensive power stations (ie the brown coal power stations), so the marginal benefit of each kwh saved would be about 1.4 kg CO 2 -e. It is obviously difficult to definitively establish the greenhouse benefit of each kwh avoided in this period of transition to a regime where national emissions are capped, but at a level still to be decided. Given that the plausible range for marginal intensity is anywhere from about 0.2 to 1.4 kg CO 2 -e/kwh, the projected average intensity trends in Figure 1 will be used for each State: a sales-weighted national average of 1.0 kg CO 2 -e/kwh delivered in 2008, falling to about 0.6 in This 7 Impacts are aggregated from State data using State-specific energy prices and intensities, so national averages are derived at the end of the calculations, not used as the basis for calculations. 13

14 is about 0.1 kg/kwh higher than the marginal intensity used in the previous Impacts Study for 2008, but about 0.2 kg/kwh lower in Therefore, the average emissions avoided per kwh saved over the period 2008 to 2020 is roughly similar in both studies. Energy and Carbon Prices Energy prices faced by energy users in each State are projected without carbon emission permit prices, and then permit costs are calculated from the greenhouse intensity of that State s electricity supply (as illustrated in Figure 1) and natural gas supply and the projected carbon price. Underlying (ex-carbon) retail energy prices are projected to increase at a real rate (excluding inflation) of 0.5% per annum over the projection period. 8 The price path for emission permits, taken from ESAA (2008), is assumed to be $20/tonne in the first year of the CPRS, rising to $45/tonne by Figure 3 illustrates the national weighted average value of electricity saved by E3 Programs over the period 2006 to This covers both the residential sector and the non-residential sectors, where average prices are slightly lower. The underlying average price of 15.0 c/kwh in 2008 is projected to rise to 16.5 c/kwh in 2020 (excluding the effects of inflation). If the price of emissions permits is passed through without markup and emissions intensity falls only as indicated in Figure 2, average electricity price in 2020 would be about 20.7 c/kwh, or about 26% higher than the BAU (no permit) price. However, if the greenhouse intensity of electricity supply declines under pressure of a 10% national emissions reduction target, as illustrated in Figure 1, the number of permits required to meet electricity emissions would fall. The price impost in 2020 would be 3.2 c/kwh, or about 20% higher than the BAU (no permit) price. Figure 3 Projected electricity prices and emissions permit prices, Australia 8 The overall benefit/cost ratio of the E3 program is fairly insensitive to the assumed rate of increase in ex-carbon energy prices. Doubling the rate to 1.0% per annum, for example, only increases the overall benefit/cost ratio from 2.6 to 2.7 (at 7.5% discount rate). 14

15 Energy and Greenhouse Impacts Selected Product Categories This section discusses energy consumption and energy savings in the key technology groups, some of which extend across non-residential as well as residential sectors. It does not cover each of the measures in Table 2 in detail. Refrigerators and Freezers Household refrigerators and freezers have been covered by the E3 Program and its predecessors for nearly 22 years. The impacts are well documented, having been subject to thorough post-evaluation (2006/14). Figure 4 illustrates the total electricity consumption of household refrigerators and freezers in Australia compared with a BAU case in which no labelling or MEPS measures had been implemented. It is estimated that even in the BAU case, the average energy used in household refrigeration would have declined by about 16%, from about from 1250 kwh/yr per household in 1985 to 1050 kwh/hh in However, accelerated efficiency improvements brought about by energy labelling and two rounds of MEPS will have reduced refrigeration energy requirement per household to about 650 kwh/yr, or 48% less than in This is about 38% lower than if E3 measures had not been implemented. In fact, the rate of increase in energy efficiency has exceeded the rate of increase in population and in household numbers, so total electricity used in household refrigeration has declined. The quantity of cold space per household has remained fairly constant: while the ownership of stand-alone freezers has been falling, the average number of refrigerators per household and their average volume has been increasing. The quality of refrigeration service has also been increasing, in that a growing share of the refrigerators in use are now frost-free, with better temperature control and no need for manual defrost. Therefore the effective increase in energy efficiency has been even greater than indicated. Figure 5 illustrates the energy saved per year from separate E3 measures for refrigerators and freezers. Historically, the majority of energy savings have come from energy labelling because the measure has been in place for so long, but it is projected that about two thirds of the savings in the period 2009 to 2020 will come from MEPS, which were implemented in 1999 and made more stringent in

16 Figure 4 Historical and projected energy use by household refrigerators and freezers, Australia Figure 5 Historical and projected energy savings by E3 Programs for refrigerators and freezers, Australia 16

17 Electric Water Heaters Reductions in Heat loss Electric resistance storage water heaters are present in about half of Australian households, although this ratio is falling as the market share of natural gas, solar and heat pump water heaters increase. All electric resistance water heaters convert electricity to heat with near 100% efficiency, but all lose some heat from the hot water in the storage tank. These standing heat losses have to be made up by additional electric heating even if no hot water is actually used, and so are largely independent of the volume of hot water drawn off. To date, the E3 Program has focussed on reducing the heat loss of electric water heaters. MEPS, (expressed as maximum daily rates of heat loss), introduced in 1999, immediately reduced the rate of heat loss in new mains pressure electric storage water heater (volume 80 litres and above) by 30%. Figure 6 illustrates the impact of these measures on the total heat loss of electric storage water heaters. Heat loss from the entire stock gradually falls as older units are replaced and stabilise at 30% below BAU. Without the intervention of MEPS, average heat loss levels would almost certainly have remained unchanged, because the only previous instances of reduced heat loss were in response to quasi-regulatory measures adopted by the electricity utilities (these powers were removed in the mid 1990s during the restructuring of the electricity supply industry). The fact that BAU energy use is trending down in Figure 6 reflects a decline in the number of electric storage water heaters in use, rather than any underlying expectation of further efficiency improvement. Figure 7 illustrates the relative magnitude of estimated heat loss savings from large, small and miscellaneous water heaters. Figure 6 Historical and projected heat loss by large household electric water heaters, Australia BAU Energy use (heat loss) GWh/yr With-program energy use GWh/yr Energy savings (heat loss only) GWh/yr

18 Figure 7 Historical and projected energy savings by E3 Programs for electric water heaters, Australia Savings from 2005 MEPS (Misc WH) Savings from 2005 MEPS (Small WH) Savings from 1999 MEPS (large WH) Water Heater Greenhouse and Energy Minimum Standards (WH GEMS) The Water Heater Greenhouse and Energy Minimum Standards program is based on an undertaking by the Commonwealth Government to set greenhouse standards for water heaters installed in new dwellings and, eventually, all water heaters sold in Australia. These would have the effect of excluding conventional electric resistance water heaters in single-family dwellings, in favour of solar-electric, heat pump, LPG or (where natural gas is available) gas or solar-gas water heaters. This would have the following impacts: It would greatly reduce the total electricity used to heat water in households, through the substitution of solar energy and natural gas, and by the substitution of heat pumps (which produce over twice as much useful heat as the electrical energy they use, because they concentrate ambient heat) for resistance elements instead (which produce only as much heat as electricity consumed). It would increase the total consumption of natural gas for household water heating, because a greater share of new water heater purchases would be natural gas; It would reduce the future energy savings from heat loss MEPS for electric water heaters, because very few electric water heaters would be purchased (generally only where exemptions are necessary for apartments or other special cases); Conversely, it would magnify the impact of MEPS for gas water heaters; 18

19 It would increase the average purchase price for new water heaters, because most of the alternatives would cost more than an electric resistance water heater providing the same service; and It would reduce the average running costs of water heaters. For each instance where a natural gas water heater is substituted for an electric resistance water heater, total energy use goes up slightly, because gas water heaters typically convert 60 to 80% of the energy content of the gas to useful hot water, compared with 80 to 90% for electric resistance water heaters (taking into account both conversion and standing heat losses for both types). However, because the greenhouse gas intensity per unit of electricity delivered is typically about 5 times as high as natural gas, the greenhouse impact will drop by about two thirds. Figure 8 illustrates the projected impact of the proposed WH GEMS program on both electricity and natural gas use. The electricity savings from phasing out electric water heaters are net of the savings foregone from the declining impact of heat loss MEPS, which will of course have no additional effect once electric water heaters are phased out (although the energy savings from heat loss MEPS for electric water heaters installed prior to that time will persist as long as those water heaters remain in service). 9 Figure 8 also illustrates the projected additional gas consumption, and the net energy savings (electricity saved less additional gas used). The net greenhouse savings are discussed in a later section. Figure 8 Historical and projected annual energy savings by E3 Programs for electric water heating, Australia Additional net savings from phasing out elec res WH Heat loss savings Net energy savings Additional gas use (GWh equivalent) 9 Strictly speaking the projected heat loss savings in Figure 8 should be reduced and the savings from the electric water heater phaseout increased. This will be done in future modelling however, the projected net impact is accurately shown. 19

20 Lighting MEPS for fluorescent lamp ballasts have been in place since 2003, and efficacy standards for linear fluorescent lamps have been in place since It has been proposed to introduce efficacy standards for both General Lighting Service (GLS) lamps for bayonet and screw fittings, and for extra low voltage (ELV) halogen lamps. MEPS for ELV converters or transformers are also proposed (2008/08). Increased efficacy means more lumens per Watt. The proposed 30% increase in efficacy for GLS and ELV lamps could lead, at the one extreme, to 30% more light for the same energy use, and at the other extreme, to 30% energy savings for the same light levels. In practice, the benefit is likely to be realised partly as energy and partly as illumination. Higher MEPS levels for ballasts, ELC converters and transformers translate directly into energy savings. Figure 9 illustrates the estimated energy impact by linear fluorescent lamps (including their ballasts) and by incandescent lamps (including ELV converters), with and without E3 measures. The energy impact includes both direct energy use and the energy associated with removing the heat produced by lighting in air conditioned buildings. Figure 10 illustrates the electricity savings (both direct and indirect) from E3 measures targeting lighting. The magnitude and rapid build up of projected savings from incandescent lamps (both GLS and ELV) reflects their shorter life, more rapid turnover, widespread use and the greater percentage efficacy improvement. 20

21 Figure 9 Historical and projected energy use by key lighting technologies, Australia Figure 10 Historical and projected energy savings by E3 Programs for lighting, Australia 21

22 Air Conditioning Figure 11 illustrates the energy impacts of the various E3 Programs targeting air conditioning equipment. Although energy labelling for smaller air conditioners has been in place since 1986, its impact has been far more modest than refrigerator and freezer labelling (Figure 5). The great majority of savings are projected to come from progressively more stringent MEPS for household and packaged air conditioners up to 65 kw cooling capacity, and the rest from proposed MEPS for chillers (used in large building air conditioning installations) and close control air conditioners (used for computer and data centres). Figure 11 Historical and projected energy savings by E3 Programs for air conditioning, Australia 22

23 Television, Computer and Electronic Equipment Televisions are the fastest growing sector of household energy use (Figure 12). This is being driven by an increase in the size of flat screens displays, and the fact that over the next decade, most households are expected to acquire a new television and a set top box (or its equivalent as part of the TV itself), as digital broadcasting completely replaces the present analogue system. Average power consumption is projected to increase from 100W in 2005 to 230W in Operating hours per screen are also expected to increase as the TV display becomes a communications and internet hub in its own right. Figure 12 illustrates the projected energy impacts of the proposed energy labelling and MEPS programs for TVs. Computers and electronic equipment also represent a rapidly growing sector of household energy use (Figure 13). Personal (desktop) computer ownership averaged 0.87 per household in 2005, but is projected to reach 1.25 in Laptop computer ownership averaged 0.50 in 2005 and is projected to reach 0.65 in Ownership of specialised games consoles is also rising. However, the number of computers and related equipment in household use is overshadowed by the number in business use (Figure 14). The number of peripherals serving computers is also rising. Apart from printers, this includes broadband modems and internet routers, which are generally left on. Figure 15 illustrates the projected impact of the proposed adoption of the US Energy Star V4.0 standards for off-mode, sleep-mode, standby mode and on-mode power consumption as a mandatory requirement for all computers, servers and computer monitors sold in Australia (2007/12). 23

24 Figure 12 Historical and projected energy use and energy savings by E3 Programs for televisions and set top boxes, Australia Figure 13 Historical and projected energy use by computers and peripherals installed in households, Australia 24

25 Figure 14 Number of computers in use in household and businesses, Australia, Figure 15 Historical and projected energy use and energy savings by E3 Programs for computers and monitors, Australia 25

26 Gas Appliances The E3 Program also covers gas appliances. Figure 16 illustrates the consumption of natural gas in household space heating and water heating, together with the combined impacts of proposed E3 measures (2008/07). The level of cost-effective increases in gas appliance energy efficiency tends to be somewhat lower than for electrical appliances, because the price of a unit of gas is significantly lower than the price of an energy equivalent amount of electricity. The cost differential in favour of gas will probably be widened by the incorporation of emission permit prices into energy prices. Figure 17 illustrates the projected gas savings at a larger scale, and also the projected increase in gas consumption expected from the WH GEMS program. Although the total energy savings from E3 gas programs are now projected to be higher than in the previous Impact Study, the expected shift from electric to gas water heating will be of about the same magnitude. Therefore, the combined effect of all E3 measures impacting on household natural gas use will be close to neutral. Figure 16 Historical and projected natural gas consumption, household space and water heating 26