FINDINGS AND RECOMMENDATIONS OF THE SURVEY OF ENGINEERING ENTERPRISE LEADERS GROUP ENERGY EFFICIENCY AND GREENHOUSE GAS REDUCTIONS

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1 FINDINGS AND RECOMMENDATIONS OF THE SURVEY OF ENGINEERING ENTERPRISE LEADERS GROUP ENERGY EFFICIENCY AND GREENHOUSE GAS REDUCTIONS Contact: Lynne Reeder Senior Policy Analyst ph: November 1997

2 SURVEY OF ENGINEERING ENTERPRISE LEADERS GROUP ENERGY EFFICIENCY AND GREENHOUSE GAS REDUCTIONS INSTITUTION OF ENGINEERS Introduction Engineers play an important and vital role in protection of the environment. Design and production practices in industry can make the difference between increasing or diminishing the energy efficiency of companies. Regardless of the outcome of the Kyoto conference in Japan in December, the future challenges will be met by the ability of engineers and scientists to continually refine and develop new and existing energy sources and products which are capable of reducing, rather than adding to, detrimental environmental outcomes. It will equally rely on the lead given by Government on the value it places on the achievement of cleaner industries and the development of renewable energies. In order to understand the attitudes of industry to energy efficiency and Greenhouse Gas savings, the Institution of Engineers undertook a survey of some of its enterprise leaders. The survey of over 100 companies sought information on the improvements companies were making to their design and production activities, the barriers to implementation and alternatively, the incentives which assisted the process. The Engineering Enterprise Leaders Group is comprised of over 100 Institution members who are CEOs, company board directors, heads of government department and university enterprises. The Findings In gauging the level of changed practice in Australian industry in relation to achieving energy efficiencies and Greenhouse Gas reductions the survey found that the level of adoption of changed practice is high with 81% indicating that their companies had recently implemented actions to achieve energy efficiencies. A lesser but substantial number at 61% have implemented actions specifically to reduce GHG emissions. In discussing energy savings, the average energy efficiency gain achieved to date by respondees was 13%. In industries which could be classed as large energy users, the savings averaged 8.5%, but the total energy saving across 7 users represented 1500 Tera Joules per annum (1500x10 6 Mega Joules/annum). The steps taken to implement these savings were predominantly improved design (79% of respondees) but improved production practices (63%) and improved work practices (63%) also figured prominently. Supporting innovative renewable energy R&D was a less prominent measure (29%).

3 In terms of barriers to implementing energy efficient practices, 64% of responding enterprises indicated that substantial barriers had been encountered. By far the most common was the capital cost with 60% of respondents indicating that costs were a substantial barrier to improved practice. The next most common barrier was nonidentification of energy efficiency as a priority issue but the relatively low percentage (14%) of respondees suggests this issue, together with other choices of training costs, maintenance resources, inadequate knowledge, and government policy, each with less than 9%, support were relatively inconsequential. In considering useful measures to assist changed practices, Enterprise Leaders identified two dominant factors as commitment from management where (70%) classed this factor as substantially useful, and potential cost savings (65%). Further down the list were availability of advanced technologies and clear targets -both at 26%. Other much lower ranked substantially useful factors included corporate image benefits (17%), access to research (9%) and government policy (4%). Of the Enterprise Leaders who had achieved Greenhouse Gases reductions, most had achieved this through improved production practices (83%) and improved work practices (67%). Reductions achieved ranged from 5,000 to 3.5 million tonnes CO 2 equivalent per annum. Seventy percent of respondents have encountered barriers to change and again the major substantial barriers were the capital costs of measures (60%) and nonidentification of gas reductions as a priority issue (20%). Useful factors to assist were similar to those noted for energy efficiency; that is substantially useful were commitment from management (58%) and potential cost savings (42%). In this context 100% of respondents indicated that potential cost savings were either a substantial or moderate factor in assisting Greenhouse Gas reductions measures. The Policy Outcomes The survey of leaders of engineering enterprises indicates significant implementation of energy savings (81%) and Greenhouse reductions (61%). The average energy savings across respondees was 13% and the average Greenhouse reduction was 750,000 tonnes per annum. (Sample numbers are not suitable for extrapolation of these average figures.) The major barrier to improved practices in both cases was the capital cost of measures (60%) of respondees). The major factors which assisted implementation were clearly the commitment from management and the potential cost savings.

4 The implications of the survey would indicate that any policy measures should address the benefits of cutting energy outputs in terms of costs savings. Policy measures should also address the issue of raising the priority allocated by industry managers to minimising environmental harm. In addressing these issues and those of reducing Greenhouse Gases and energy efficiency more broadly, the Institution recommends that: 1. Given that industry respondees in this survey responded in a manner which would indicate that they need to see economic or marketing benefits in changing their behaviour before they will commit to such changes, it is vital that the Government should lead by example in both procurement policies and in standards setting: i) Government procurement policies should require that a focus on energy efficiency and a commitment to practices that minimise reduction in GHGs from companies to whom they contract business. This should be complimented with the provision of procurement training to officers with purchasing authority to improve decision-making on energy and Greenhouse Gas implications. ii) Standards settings could encompass energy requirements for commercial buildings through the reinstatement of the Building Energy Code of Australia. The objective of such a Code is to improve energy efficiency in the commercial buildings sector, with a view to abating greenhouse gas emissions from the sector, through identifying and implementing cost-effective measures with the support of industry and other key stakeholders. An example of how this may be achieved is via the development of voluntary building rating schemes, either focusing on energy efficiency or broader performance characteristics. Ratings schemes have the potential to offer a mechanism for creating a market premium on more efficient buildings. 2. Cogeneration has a potentially significant contribution to make in lowering GHG emissions. If new cogeneration plants were to replace conventional coal powered generation, which operates at considerably lower levels of thermal efficiency, considerable savings could be gained. The government has recently released a report which presents case studies highlighting the gains to be made. The Institution welcomes this initiative and further recommends that incentives be provided through NIES and other sources to encourage companies to develop long term energy supply plans, incorporating cogeneration where it appears cost effective. These initiatives would need to be integrated with airshed air quality management strategies. 3. The Government commission a study identifying the cost savings of options which can be undertaken by industry to cut energy outputs and GHGs. It should address the opportunities for making and saving money from improved energy practices. It should also attend to the barriers faced by medium sized enterprises. 4. In order to assist industry to make these savings, the energy auditing program should be reinstated to assist in identifying market opportunities for companies willing to be innovative in their marketing and development of energy-efficiency

5 technologies, products and services for a variety of markets, including industrial, domestic and commercial. 5. Commitment from management is obviously a central requirement to ensure industries long term participation in energy efficiency programs. IEAust in conjunction with the Government should undertake a study to further explore the barriers to senior management being committed to energy efficiency. From this survey, one would assume the barrier to management is the financial cost, however it would be useful to first confirm and then investigate, the exact barriers faced by managers when determining priorities in this area. 6. Tradeable emission rights within Australia should be considered as part of the government s overall strategy. 7. It is vital that research on renewable energy sources continues to foster the transition to efficient energy sources. A research funding body should be established to coordinate and fund renewable energy and energy efficiency. 8. In keeping with this, the Government should continue to support the Australian CRC for Renewable Energy and Related GHG Abatement Technologies, particularly continuing to focus on commercial opportunities for technology transfer. 9. The Institution supports the voluntary Greenhouse Challenge program, and believes that it is an important program capable of producing substantial results. Organisations participating in the Greenhouse Challenge enter into a cooperative agreement with the Commonwealth Government to reduce, or at least slow down the rate of increase in greenhouse gas emissions. 10. The review of engineering education completed last year affirmed the necessity for engineering education to develop a real understanding of the principles of sustainability in development. The Institution will continue to work with universities to ensure that sustainable development is an inherent part of engineering education.