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

27 Figure 17 Projected additional household natural gas use and gas savings by E3 Programs, Australia 27

28 Savings of E3 Programs by Sectors Residential The projected reduction in residential sector electricity use due to E3 Programs is illustrated in Figure 18. Until 2008, the savings have been dominated by the original energy labelling programs and MEPS for refrigerators and electric water heaters. About half the projected savings between 2009 and 2020 will come from the continuation and enhancement of existing measures, and half from new measures. Water heaters will account for over 33% of the projected savings from 2009 to 2020 (mostly from WH GEMS), and refrigerators and freezers for 29% in Figure 19. The other major contributors to projected electricity savings are televisions and set top boxes (over 10%), lighting (over 8%) and air conditioners (nearly 8%). The red trend line in Figure 20 indicates the total residential sector electricity savings estimated in the 2005 Impacts Study. Apart from WH GEMS, the 2008 projection is very similar to the 2005 projection. While several new measures have been added to the Work Plan (eg televisions) other programs have been delayed or abandoned in favour of new approaches. In some cases, a more detailed analysis has reduced the projected impacts compared with initial expectations. There has also been a major increase in the historical savings estimate, due to the post-evaluation of the refrigerator and freezer measures. Figure 20 illustrates the trend in total residential electricity use from 2000 to The top line (black) indicates the trend as it would have been had the E3 Program not been introduced. The second line (red) indicates the current trajectory of household electricity demand given the E3 measures already in place. The third line (green) indicates that the addition of the new E3 measures proposed in the Work Plan could actually stop growth in household electricity use altogether. E3 measures already implemented will reduce household electricity use in 2020 by about 13% compared with BAU, and measures currently planned could bring about a further reduction of nearly 15%. The relative magnitude of savings from old and new measures is shown at the bottom of the diagram. Figure 18 Historical and projected impacts of E3 Programs on residential sector electricity use, Australia WH GEMS WELS savings (WH) Swimming pools & spas Standby Lighting PCs, monitors External Power Supplies TVs & STBs Airconditioners Electric water heater MEPS CW, DW, CD Refrigerators & freezers Total Residential Savings (2005) 28

29 Figure 19 Share of projected residential sector electricity savings, Figure 20 Projected total electricity use in the residential sector 29

30 Figure 21 Projected per capita electricity use in the residential sector Figure 21 illustrates the trends in electricity use in the residential sector on a per-capita basis. 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 an annual rate of reduction of 0.8%. The impacts of residential sector E3 measures on household natural gas use are indicated in Figure 17. The impacts on household LPG use would be similar, but have not been separately modelled. Non-Residential Sectors The projected reduction in electricity use from E3 measures outside the residential sector are illustrated in Figure 22. Up to 2008, the savings have been dominated by the motors, transformers and packaged air conditioner Programs. Because these and other products covered by non-residential measures are used widely in manufacturing, mining, utilities and commercial buildings, it is very difficult to allocate savings to specific sectors of the economy. Electricity savings below BAU are projected to reach about 10,300 GWh per annum by 2020 (compared with nearly 22,000 GWh per annum in the residential sector). This is slightly less than projected for the non-residential programs in the 2005 Impacts Study (indicated as the red trend line in Figure 22). 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%), as seen in Figure The estimates for transformers may be conservative, because the impacts of a proposed increase in MEPS levels have not been included. Energy losses from transformers vary dynamically with load and the impacts of particular MEPS levels are difficult to model. 30

31 Figure 22 Historical and projected impacts of E3 Programs on non-residential sector electricity use, Australia Figure 23 Share of projected non-residential sector electricity savings,

32 Combined Figure 24 illustrates the historical and projected electricity savings from the entire E3 Program, and compares these with the corresponding savings projected in the 2005 Impacts Study. Although they are substantially higher, the difference is due entirely to the WH GEMS Program (which has not yet been endorsed as a formal E3 measure). Also, the shape of the impact curve indicates about a one year average delay in the implementation of individual measures. The contribution of measures of various types energy labelling only, MEPS only, and programs where the effects cannot be separated are illustrated in Figure 25. Over the full modelling period ( ) it is estimated that about 78% of the energy savings will come from MEPS programs, 11% from labelling programs and 11% from combined programs (Figure 25). Figure 24 Projected electricity savings, all E3 measures, Australia WH GEMS Business Sectors Residential Sector (excluding WH GEMS) Residential + Business (2005) Figure 25 Projected electricity savings by type of E3 measure, Australia Combined programs MEPS only programs Labelling only programs 32

33 Greenhouse Impacts For the reasons detailed in the section Greenhouse Gas Intensities, it is 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. The likely adoption of an emissions cap also changes the effect of the energy saved by E3 Programs from greenhouse savings to greenhouse emissions avoided. Greenhouse savings would be physical reductions from a BAU trend line. However, under a regime in which actual physical emissions are capped (as distinct from emissions on paper, which could be the outcome of a poorly designed scheme), it is difficult to establish a causal link between energy efficiency, fuel substitution and other possible measures that may all contribute to the reduction from BAU required to achieve the cap. Part of the uncertainty is the share of the reduction effort that will be made at the level of electricity generation and the share made at the point of end use. Figure 26 indicates the weighted national average of the State and Territory intensities illustrated with a 10% reduction cap and no cap. The weighted national average intensity used in the 2005 Impacts Study is also indicated. Figure 26 Weighted average State and Territory greenhouse gas intensities 33

34 Figure 27 illustrates the trend in annual emissions avoided as calculated in the 2005 Impacts Study and in the present Study, with and without cap. Table 3 summarises the emissions avoided over the full period modelled ( ), the Kyoto commitment period ( ) and looking forward only ( ). 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. Table 3 also indicates that, over the period , about 83% of the emissions avoidance effort will come from E3 Programs, and 17% from reductions in electricity supply intensity. In other words, the E3 Program will reduce emissions from energy use in the targeted end uses by nearly 5 times as much as reductions in the emissions intensity of the electricity. Figure 27 Emissions avoided at various greenhouse gas intensities Study - no cap 2005 Study - no cap 2008 Study - 10% reduction cap Table 3 Emissions avoided over key time periods Mt CO 2 -e Kyoto period Mt CO 2 -e In 2020 Mt CO 2 -e 2005 Study no emissions cap Study no emissions cap Study with 10% reduction cap Reductions due to cap Reductions due to E3 Program impacts E3 Program impacts/emissions avoided 85% 98% 83% 66% 34

35 Savings by Jurisdiction The State and Territory shares of projected electricity savings from E3 Programs are illustrated in Figure 28. 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. Because the WH GEMS program leads to a shift from electric resistance water heating to gas and other types, net gas consumption increases by 1.9 over the period Victoria has a net saving of 24.2 PJ, because it starts with a low stock of electric water heaters and benefits most from E3 measures to improve gas appliance efficiency. WA (1.4 PJ) and the ACT (1.8PJ) also have net gas savings. NSW has a net increase of 15.0 PJ in gas use, Queensland 6.9 PJ and SA 6.3 PJ. Figure 28 Projected electricity savings by State and Territory 35

36 The greenhouse emissions avoided in each jurisdiction depend on the emissions intensity of the electricity supplied. Figure 29 illustrates the projected breakdown of national emissions avoided with no emissions cap, and Figure 30 illustrates the breakdown with a 10% emissions cap. (Total net emissions avoided are shown, including the impacts of increased or reduced gas use, if any, in each jurisdiction). In both cases, 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%. Figure 29 Projected emissions avoided by State and Territory no emissions cap Figure 30 Projected emissions avoided by State and Territory with emissions cap 36

37 Costs and Benefits The monetary benefit of each E3 measure is the Net Present Value (NPV) of the projected energy savings compared with the BAU case. The cost of each measure is the NPV of the sum of the following: 1. The cost of energy efficiency testing of the product by manufacturers and suppliers, for the purpose of registration for energy labelling and/ or demonstrating compliance with MEPS (unless such testing is already required, in which case the marginal cost is zero); 2. The cost to suppliers of physical labelling, where required; 3. The increase in average product price due to buyers preferring more energy efficient models (through labelling), or being forced to buy more efficient products (through MEPS); 4. The costs to government of program administration. Given there is already an established E3 administrative framework of Commonwealth and State officers, the marginal costs of incorporating new measures are low; and 5. The cost to government of checktesting and compliance enforcement. In almost every RIS, a third of the above cost components dominates the cost-benefit analysis. However, the relationship between product price and energy efficiency is rarely direct. Product pricing tends to be influenced far more by attributes such as build quality, features and finishes and the premium that prestige brand names command than by technical energy efficiency. Nevertheless, all RISs build in an assumption that product prices will increase (or that some other features will be foregone because suppliers will be forced to concentrate more design resources on energy efficiency). Therefore they err on the conservative side. The post-evaluation of the impact of E3 measures on refrigerators and freezers concluded that: prices for refrigerators and freezers are continuing to decline despite increases in average volume, larger share of frost free product on the market and massive reductions in energy consumption, particularly in the lead up to MEPS Evidence from the implementation of MEPS 1999 for refrigerators shows no impact on price. This was true even for MEPS 2005 which had a substantial energy impact on new products. However, this does not mean that efficiency levels can be increased indefinitely with no impact on industry or prices. However, it does demonstrate that new efficiency standards which are within the realms of current technological limits can be introduced at almost no marginal cost where industry has sufficient notice of the requirements and time to plan their transition in an orderly fashion (2006/14). It is consistent with the general conservatism of the E3 Program to assume that even though previous measures for a particular product had no apparent impact on average price, there should be some provision for future costs as efficiency levels are pushed higher. Also, it is possible that the lack of apparent price increase might mask hidden costs, such as reductions in quality or elimination of existing (or potential) features, even though there is no evidence of these occurring in response to past E3 measures. The costs, benefits and benefit/cost ratios of E3 measures are also influenced by the discount rates and time period for projection of costs and benefits. In the following section, four discount rates are used: 0% ( undiscounted ), 5% and 10%, which were also used in the 2005 Impact Study, and 7.5%, which has since been adopted as the headline rate for RISs. The 10% rate was formerly used as the headline rate (ie the highest discount rate at which cost-effectiveness had to be met), but it was lowered to indicate increasing confidence in the methods of analysis and growing evidence that measures were achieving higher benefits and lower costs than initially projected. A number of different time periods can be used to accumulate future cost and benefits: Full period : this picks up all cost and savings incurred in each of the 21 years. Logically, only undiscounted accumulation should be used, because some costs and benefits are already in the past; Forward-looking full service life period: this picks up all costs from products to be sold between 2009 and 2020, and the savings from the full service life of those products. This means some of the cohort of products purchased in 2020 will still be in use as late as 2040 (for 15 year average service life products, which progressively retire between 10 and 20 years from purchase). This is the usual mode of accumulation for RISs; Forward-looking : this picks up all costs from products to be sold between 2009 and 2020, and savings over the same period; 37

38 Forward-looking 16 year period : this picks up all costs from products to be sold between 2009 and 2024, and savings over the same period. A 16 year period was used in previous Impacts Studies, and has been retained for comparability. Table 4 to Table 8 illustrate the costs and benefits of E3 s impact on energy use in Australia. Table 5 summarises the cost and benefits over some of these accumulation periods, and the benefit/cost ratios for the full service life and 16 year periods. For Australian energy users as a whole, the entire E3 Program is projected to return net benefits of $22,437M (NPV in 2008, at discount rate of 7.5%) over the 16 years This will give an overall benefit/cost ratio of 2.9 (Table 7). On these criteria, all measures are cost-effective, with the exception of energy labelling for clothes washers, dishwashers and clothes dryers. This is because some of the energy benefits are shared with the WELS Program. However, if water and energy benefits are combined, the joint impact of E3 and WELS on those products will deliver a positive result. The total impact for gas measures also appears less than effective given the negative cost benefit result that can be attributed to the WH GEMS. However, preliminary estimates indicate that the WH GEMS program as a whole appears to be cost effective, even though average water heater prices will increase significantly as electric resistance water heaters are phased out. Table 4 summarises the overall benefit/cost ratios for the E3 Program estimated in the present Study and compares them with previous Impacts Studies. The estimated benefit/cost ratio has increased somewhat compared with the 2005 Study, partly because real energy prices are now projected to increase more rapidly due greenhouse gas emission permit costs, so increasing the value of energy savings. At the same time, increases in energy efficiency are now expected to have a more moderate impact on the price of products than previously thought. (It should be remembered that cost impacts in RISs are generally biased to the conservative, so the benefit/cost ratios are likely to be higher than those indicated in Table 4 rather than lower). Finally, Table 4 indicates the cost of each tonne of CO 2 -e projected to be saved by the E3 Program. Unlike previous studies, this value needs to be adjusted to account for the share of the savings that will be due to projected falls in the intensity of electricity supply to be brought about by the CPRS. Even with this adjustment, the E3 Program will save energy users about $56 per tonne avoided (at 7.5% discount rate), or $45 per tonne (at 7.5% discount rate) about twice the corresponding estimate in 2005, and back to the levels estimated in This indicates that the E3 Program is even further from exhausting cost-effective opportunities to increase energy efficiency that it was previously, now that the value of savings has been increase by the CPRS. Table 4 Summary of costs and benefits, and comparison with previous studies Benefit/cost ratio $ cost per tonne CO 2 -e saved 16-yr Periods 0% discount rate 5% discount rate 7.5% discount rate 10% discount rate 0% discount rate 5% discount rate 7.5% discount rate 10% discount rate NAEEEP 2000 (First Study) NA 2.4 -$135 -$62 NA -$31 NAEEEP 2003 (Second Study) NA 2.4 -$84 -$47 NA -$28 NAEEEP 2003 (Second Study) NA 2.9 -$109 -$62 NA -$37 NAEEEP 2005 (Third Study) NA 1.7 -$81 -$43 NA -$23 E (This Study) $170 -$104 -$84 -$68 E (adjusted for CPRS)(b) $113 -$69 -$56 -$45 Note: Negative values for costs indicate net benefits per tonne avoided. (b) It is estimated that about a third of the projected emissions reductions from E3 measures can be attributed to a reduction in the greenhouse gas intensity of electricity supplied due to the Carbon Pollution Reduction Scheme. 38

39 Table 5 Projected costs and benefits, Australia, E3 measures impacting electricity use (7.5% discount rate) Product Undisc saving Undisc saving Total saving Disc saving Disc cost Net benefit Benefit/ Cost Mt CO 2 -e saved Disc In 2020 saving Refrigerators & freezers $2,096 $16,436 $18,532 $7,217 $668 $6, $6,101 $764 $5, CW, DW, CD $266 $702 $968 $319 $348 -$ $274 $424 -$ WH MEPS $472 $5,127 $5,599 $2,434 $191 $2, $2,161 $225 $1, Air conditioners $327 $5,415 $5,742 $2,238 $628 $1, $1,839 $760 $1, TVs & STBs $- $9,811 $9,811 $3,757 $2,095 $1, $3,013 $2,565 $ External Power Supplies $- $985 $985 $482 $129 $ $462 $161 $ PCs, monitors $- $635 $635 $290 $193 $ $275 $236 $ Lighting $3 $3,795 $3,797 $2,086 $209 $1, $2,086 $257 $1, Standby $- $2,444 $2,444 $1,125 $109 $1, $1,072 $117 $ Swimming pools & spas $- $752 $752 $286 $109 $ $225 $131 $ WELS savings (WH) $14 $1,898 $1,912 $732 $- $732 NA $578 $0 $578 NA WH GEMS $- $15,349 $15,349 $6,201 $3,001 $3, $5,143 $3,647 $1, Total Residential Savings $3,177 $63,350 $66,528 $27,167 $7,678 $19, $23,230 $9,286 $13, Air conditioners $445 $5,706 $6,151 $2,424 $137 $2, $2,018 $167 $1, Chillers $- $1,497 $1,497 $569 $140 $ $446 $171 $ Close control Acs $- $807 $807 $323 $32 $ $262 $37 $ External Power Supplies $- $696 $696 $340 $91 $ $326 $115 $ PCs, monitors $- $2,003 $2,003 $919 $585 $ $872 $742 $ Icemakers $- $95 $95 $44 $10 $ $38 $12 $ Vending machines $1 $53 $55 $21 $3 $ $17 $3 $ Commercial refrigeration $40 $843 $883 $358 $77 $ $297 $91 $ Incand lamps $- $3,778 $3,778 $2,119 $67 $2, $2,119 $83 $2, Ballasts & linear fluoros $133 $2,932 $3,066 $1,532 $93 $1, $1,482 $115 $1, WELS (WH) $2 $155 $157 $62 $- $62 NA $49 $0 $49 NA WELS (pumping) $4 $866 $870 $326 $- $326 NA $253 $0 $253 NA Motors $243 $2,801 $3,044 $1,399 $233 $1, $1,267 $285 $ Transformers $171 $4,468 $4,639 $1,804 $275 $1, $1,460 $332 $1, Total Business Savings $1,039 $26,700 $27,739 $12,239 $1,744 $10, $10,908 $2,155 $8, Disc cost Net benefit Benefit/ Cost All $ values are millions of 2008 dollars 39

40 Table 6 Projected costs and benefits, Australia, E3 measures impacting residential natural gas use (7.5% discount rate) Undisc saving Undisc saving Total saving Disc saving Disc cost Net benefit Benefit/ Cost Mt CO 2 -e saved Disc In 2020 saving Disc cost Net benefit Benefit/ Cost Water heater MEPS $1 $782 $783 $326 $88 $ $275 $104 $ Space Heater MEPS $- $1,319 $1,319 $510 $75 $ $413 $92 $ WELS (WH) $4 $523 $527 $220 $- $220 NA $185 $0 $185 NA Extra gas use - WH GEMS $- -$2,820 -$2,820 -$1,160 $- -$1,160 NA $972 $0 -$972 NA Total Gas Savings $5 -$197 -$192 -$104 $162 -$ $99 $196 -$ All $ values are millions of 2008 dollars Table 7 Projected costs and benefits, Australia, E3 Program as a whole (7.5% discount rate) Undisc saving Undisc saving Total saving Disc saving Disc cost Net benefit Benefit/ Cost Mt CO 2 -e saved Disc In 2020 save Disc cost Net benefit Benefit/ Cost All Measures $4,221 $89,854 $94,075 $39,303 $9,585 $29, $34,039 $11,636 $22, Ex WELS $4,212 $88,310 $92,522 $38,696 $9,585 $29, $33,551 $11,636 $21, GEMS (Net) $- $12,529 $12,529 $5,041 $3,001 $2, $4,171 $3,647 $ All $ values are millions of 2008 dollars 40

41 Table 8 Projected costs and benefits by State and Territory (16 year accumulation period, ) Mt CO 2 -e avoided $M (0% discount rate) $M (5% discount rate) $M (7.5% discount rate) $ (10% discount rate) Region In 2020 Saving Cost Benefit B/C Saving Cost Benefit B/C Saving Cost Benefit B/C Saving Cost Benefit B/C NSW Res $17,298 $6,508 $10, $10,790 $4,301 $6, $8,712 $3,580 $5, $ 7,131 $ 3,021 $ 4, Other $5,907 $1,129 $4, $3,810 $ 738 $3, $3,128 $ 612 $2, $ 2,603 $514 $ 2, Total $23,205 $7,637 $15, $14,600 $5,040 $9, $11,840 $4,191 $7, $ 9,734 $ 3,535 $ 6, Vic Res $9,381 $3,337 $6, $5,834 $2,200 $3, $4,703 $1,829 $2, $ 3,843 $ 1,542 $ 2, Other $4,915 $ 930 $3, $3,161 $ 608 $2, $2,591 $ 503 $2, $ 2,153 $423 $ 1, Total $14,295 $4,267 $10, $8,994 $2,808 $6, $7,294 $2,333 $4, $ 5,996 $ 1,965 $ 4, Qld Res $9,540 $3,929 $5, $5,949 $2,587 $3, $4,803 $2,149 $2, $ 3,931 $ 1,811 $ 2, Other $4,826 $ 950 $3, $3,084 $ 616 $2, $2,520 $ 508 $2, $ 2,087 $425 $ 1, Total $14,367 $4,879 $9, $9,033 $3,202 $5, $7,323 $2,657 $4, $ 6,018 $ 2,236 $ 3, SA Res $3,941 $1,181 $2, $2,470 $ 777 $1, $1,999 $ 645 $1, $ 1,641 $543 $ 1, Other $1,347 $ 243 $1, $ 872 $ 159 $ $ 717 $ 132 $ $598 $111 $ Total $5,288 $1,424 $3, $3,341 $ 936 $2, $2,716 $ 777 $1, $ 2,239 $654 $ 1, WA Res $3,418 $1,356 $2, $2,135 $ 892 $1, $1,725 $ 741 $ $ 1,413 $624 $ Other $2,097 $ 439 $1, $1,340 $ 285 $1, $1,095 $ 235 $ $907 $197 $ Total $5,516 $1,795 $3, $3,475 $1,177 $2, $2,820 $ 976 $1, $ 2,321 $821 $ 1, Tas Res $1,321 $ 555 $ $ 822 $ 366 $ $ 662 $ 304 $ $541 $257 $ Other $ 622 $ 133 $ $ 405 $88 $ $ 334 $73 $ $280 $62 $ Total $1,943 $ 688 $1, $1,227 $ 454 $ $ 997 $ 378 $ $821 $319 $ NT Res $ 416 $ 162 $ $ 261 $ 107 $ $ 211 $89 $ $173 $76 $ Other $ 437 $76 $ $ 281 $50 $ $ 231 $41 $ $192 $35 $ Total $ 852 $ 238 $ $ 542 $ 157 $ $ 442 $ 131 $ $366 $110 $ ACT Res $ 631 $ 261 $ $ 392 $ 172 $ $ 316 $ 144 $ $258 $121 $ Other $ 552 $93 $ $ 356 $60 $ $ 292 $50 $ $242 $42 $ Total $1,183 $ 354 $ $ 747 $ 233 $ $ 607 $ 194 $ $500 $163 $ Aust Res $45,946 $17,289 $28, $28,651 $11,404 $17, $23,131 $9,481 $13, $ 18,933 $ 7,994 $ 10, Other $20,703 $3,992 $16, $13,309 $2,604 $10, $10,908 $2,155 $8, $ 9,062 $ 1,810 $ 7, Total $66,649 $21,281 $45, $41,960 $14,007 $27, $34,039 $11,636 $22, $ 27,994 $9,804 $ 18, All $ values are millions of 2008 dollars 41

42 General References GWA (2000) National Appliance and Equipment Energy Efficiency Program: Combined Impacts, George Wilkenfeld & Associates, for Australian Greenhouse Office, March library/pubs/combined-2000.pdf 2003/02 National Appliance and Equipment Energy Efficiency Program: Projected Impacts (When you can measure it, you know something about it!), June pubs/ projectimpacts.pdf 2005/05 National Appliance and Equipment Energy Efficiency Program: Projected Impacts (When you keep measuring it, you know even more about it!), April library/pubs/ projectimpacts-agosummary.pdf 2005/19 Guide to preparing Regulation Impact Statements for the National Appliance and Equipment Energy Efficiency Program (NAEEEP), May preparing-risguide.pdf 2008/03 Equipment Energy Efficiency Program: Achievements 2007, September achievements.pdf DCC (2008) Carbon Pollution Reduction Scheme Green Paper, Department of Climate Change, July 2008 EES (2008) Energy use in the Australian Residential Sector, , Energy Efficient Strategies for DEWHA, June energy-use-aust-res-sector-full.pdf ESAA (2008) The impact of an ETS on the energy supply industry: Modelling the impacts of an emissions trading scheme on the NEM and SWIS, ACIL Tasman for Energy Supply Association of Australia, July 2008 GCCR (2008) Targets and Trajectories: Supplementary Draft Report, Garnaut Climate Change Review, September

43 Product and Program Specific References Refrigerators and Freezers GWA (2001b) Draft for Public Comment: Regulatory Impact Statement: Revised minimum energy performance standards for household refrigerators and freezers, George Wilkenfeld and Associates with Energy Efficient Strategies, for Australian Greenhouse Office, October pdf 2006/14 Retrospective Analysis of the Impacts of Energy Labelling and MEPS: Refrigerators and Freezers, EnergyConsult Pty Ltd, for Australian Greenhouse Office Equipment Energy Efficiency Program, October meps-rf-fz.pdf 2008/04 Proposed revisions to the method of test and energy labelling algorithms for household refrigerators and freezers, June ris-rf-fz-label.pdf Other large appliances 2006/05 Proposal to include standby power in the energy ratings of clothes washers & dishwashers: Regulatory Impact Statement, May ris-standby-cw-dw.pdf Air Conditioning equipment 2007/16 Consultation RIS: Minimum energy performance standards and alternative strategies for chillers, December ris-chillers.pdf EnergyConsult (2008) Draft Consultation RIS: Minimum energy performance standards and alternative strategies for chillers, June /09 RIS consultation draft: Revision to the Energy Labelling Algorithms and Revised MEPS levels and Other Requirements for Air Conditioners, September ris-ac.pdf Lighting 2008/08 RIS Consultation draft: Proposal to phase-out inefficient incandescent light bulbs, September ris-phaseout.pdf Electricity Distribution Transformers 2007/17 Distribution Transformers: Proposal to Increase MEPS Levels Final Report, October meps-transformers.pdf Commercial Refrigeration, Icemakers & Storage bins 2004/01 Regulatory Impact Statement: Minimum Energy Performance Standards and Alternative Strategies for Commercial Refrigeration Cabinets, February riscommrefrig.pdf 2004/10 Minimum Energy Performance Standards: Ice makers & storage bins, October mepsicemakers.pdf 2008/10 Minimum Energy Performance Standards and Alternative Strategies for Refrigerated Beverage Vending Machines, September ris-vending.pdf Electric Motors 2003/11 Minimum Energy Performance Standards for Electric Motors: Regulatory Impact Statement, December rismotors.pdf Electric water heaters 2003/09 Revised Regulatory Impact Statement: Revised Minimum Energy Performance Standards and Alternative Strategies for Small Electric Storage Water Heaters, August riswaterheaters.pdf 43

44 Standby standby.pdf Australia s Standby Power Strategy standby-current-status.pdf Televisions factsheet-tv.pdf Water dispensers Previous data source: mepswaterdisp.pdf (MEA Oct 2004) Swimming Pool Equipment mepspools.pdf Gas Products 2008/07 RIS Consultation Draft: Proposal to introducer a Minimum Energy Performance Standards for Gas Water Heaters, August ris-gwh.pdf External Power Supplies Latest data source: ris-eps.pdf (Punchline Energy Feb 2007) revised-ris-eps.pdf (Punchline Energy Dec 2007) factsheet-eps.pdf Set Top Boxes Latest data source: cost-benefit-analysis-stb.pdf (EnergyConsult April 2007) ris-stbs.pdf (EnergyConsult October 2007) Computers & Monitors 2007/12 Analysis of the Potential for Minimum Energy Performance Standards for Computers and Monitors, September computers-monitors.pdf Computers and Monitors: the case for Minimum Energy Performance Standards; E3 Fact Sheet October factsheet-computer-monitor.pdf 44

45 Table 9 Work Plan : Summary of equipment types and program elements covered, compared with 2005 Impacts Study Program number Products covered 1 Refrigerators, freezers, dishwashers, single phase air conditioners, clothes washers, clothes dryers Refrigerators, freezers, electric storage water heaters Measure Mandatory appliance labelling and revised labelling Original target dates for implementation (revised label) Initial MEPS 1999 Changes in Work Plan Refs regrading 2009 ACs regrading 2009 Changes in 2020 savings Small increase 2 Refrigerators, freezers Revision of MEPS levels 2005; Unchanged 3 Single phase air conditioners Initial MEPS; 2004, 2006, 2007 Delayed to 2009 Reduced Accelerated & Enhanced MEPS 4 Packaged (3 phase) air conditioners Initial MEPS 2001 Unchanged 5 Packaged (3 phase) air conditioners Revision of MEPS levels Reduced 6 Fluorescent Lamp Ballasts Initial MEPS 2003 Unchanged 7 Linear fluorescent lamps Initial MEPS (efficacy 2007 Unchanged standards) 8 Electricity Distribution Transformers Initial MEPS 2004, 2010 Unchanged 9 Commercial refrigeration, icemakers Initial MEPS 2004, 2006 Delayed to 2010 Small increase and storage bins 10 Small electric storage water heaters Revision of MEPS levels, 2005 Unchanged with LE/HE labelling 11 Electric motors Initial MEPS 2001 Unchanged 12 Electric motors Revision of MEPS levels 2006 Unchanged 13 Large electric storage water heaters Revision of MEPS levels 2005 Abandoned Reduced to 0 14 Miscellaneous electric water heaters Initial MEPS 2005 Unchanged 15 Standby One Watt program for Unchanged standby consumption 16 All lamps, lighting transformers, Greenlights measures 2005 Unchanged fittings 17 Televisions On-mode MEPS and labelling 2006 Delayed to 2009 Increased 18 Water dispensers HE labelling 2007 Delayed to 2010 Reduced 19 Chillers MEPS 2007 Delayed to July 2009 Reduced 20 Close Control Air Conditioners MEPS 2007 Delayed to July 2009 Reduced 21 Heating mode of ACs - household Information and MEPS 2006 Reduced? 22 Heating mode of PACs - business Information and MEPS 2006 Reduced? 23 Swimming pool equipment Information and MEPS 2006 Delayed to 2009 Reduced 24 Gas Water Heaters (GAEEEP) MEPS and labelling 2005 Delayed to 2009 Reduced 25 Gas Space Heaters (GAEEEP) MEPS and labelling 2005 Delayed to 2009 Reduced 26 Gas savings from water efficiency labelling Energy impact of water efficiency labelling 2005 Additional savings Small increase 45

46 Program number Products covered 27 Electricity savings from water efficiency labelling Measure Energy impact of water efficiency labelling Original target dates for implementation Changes in Work Plan Changes in 2020 savings 2005 Additional savings Small increase 28 External power supplier MEPS and labelling December 2008 Additional 29 Set Top Boxes MEPS and labelling December 2008 Additional 30 Computers & monitors MEPS and labelling 2010 October 2010 Additional 31 Additional GAEEEP coverage MEPS and labelling 2010 Additional 32 Greenhouse Standards for Water Heaters MEPS 2010 Additional 46

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