CarbonSignal

At a recent meeting of local government sustainability officers hosted by the WA Local Government Association, we presented an analysis comparing the environmental, economic and social benefits for a range of greenhouse abatement options available to the City of Cockburn.

While there is no shortage of positive actions a City can take – including GreenPower, local renewable energy projects, efficiency projects, plant and equipment upgrades and more – it has been difficult to compare these apples and oranges, especially in light of:

• the financial and operational impacts of various options, on Council and others;
• the different timing of when costs would be incurred and benefits experienced;
• the distinctive community and social impacts;
• the technical, financial and operational risk profiles;
• the wider benefits, to the State and nationally, of the various options; and
• the effects of national actions including renewable energy targets and incentives, energy efficiency programs, carbon pricing and higher future energy prices.

For the City of Cockburn, HAC used a multi-criteria analysis tool that provided decision-makers with a way to weight, score and visualise the greenhouse gas, economic and social/community aspects of the options being considered.

The analysis showed that there are indeed many actions that local government could take which provide more desirable environmental, economic and social outcomes than GreenPower, however the analysis also showed that careful strategic planning and well-timed investments will be required if these abatement options are to achieve an emissions reduction target within a given timeframe.

The City of Sydney, which achieved carbon-neutral status in 2008, also found that it may be preferrable to transfer funds from GreenPower to local projects.  A recent council recommendation stated that “… GreenPower has served the council well, but greater priority should be given to more transformative, local actions.”

HAC’s presentation to the Sustainability Officers Networking Group can be downloaded here.

Deepwater oil extraction is no easy task.  It pushes the limits of our technical capabilities.

If drilling a hole in deep water is very difficult, then fixing any problem that might occur down there is extremely difficult.  An industry which has just recently figured out how to conduct oil extraction operations in 5000 feet of water now has to figure how to stop a gushing leak down there.

The ‘top kill’ is the latest method which BP is using to attempt to stop the leak.  They began executing the top kill operation on Wednesday, and it is apparently working, although we won’t know for sure whether it has been a success for another day or two.

An excellent explanation of how the top kill works, including some flashy animations and graphics from BP, was published on The Oil Drum.

This is a serious disaster, “but that hasn’t stopped satirists and pranksters from dredging some dark humor out of the whole debacle.”  Click here for Tree Hugger’s article, “BP gets punked”.

We all know there are profoundly sound business reasons to conserve energy and invest in renewables, even without a CPRS or strong government policies.  But is this investment happening, and quickly-enough?

Few energy users – or their consultants – seem to be focussed on creating STEP-CHANGES in energy efficiency.  Glen from HAC observes: “In our experience it can be less risky and of much greater benefit to the client to ‘grab the bull by the horns’ and really chase those step-changes in efficiency.  It’s hard to get staff and bean-counters excited about saving 10% of energy costs, when energy is only a few percent of operating costs.  With energy efficiency, big is definitely better”.

Gains through energy efficiency can often be augmented by investment in on-site renewable energy.  Many clients are finding that larger investments actually deliver better returns on investment (ROI) and/or shorter paybacks.  And the ongoing energy savings from larger investments are substantive, often freeing-up cash than can be used for marketing or increased production.

So how are wine-drinkers saving the planet?  It turns out that wineries and other related businesses are the ‘low hanging fruit’ of the energy efficiency world.  Lessons learned here can be rolled-out across the economy, one sector at a time.  For wine businesses, firms like HAC are able to bundle efficiency measures with solar panels to create savings up to 30%, quickly equating to hundreds of thousands of dollars per site.  In many cases, the savings can be guaranteed and the investment costs fully financed, with new expenses being less than the energy savings.  There are even Government grants available to many businesses in this sector.

Kevin Rudd wants to reassure us that he still believes that Climate Change is the biggest challenge facing human-kind.  Indeed, his recent blog says: “Climate change is happening faster than we previously thought, creating a more serious threat to our economy, our environment and to future generations”.  But, is he putting his (well, our) money where his mouth is?

One way to judge the relative importance of climate change is to compare how much new money he will spend on climate change, with what he’s planning to spend on other things.  Let’s see how his $652 million Renewable Energy Future Fund stacks up against other items in the 2010 budget.

Things Kevin thinks are nearly as important as Climate Change:

• Fixing the insulation scheme debacle ($422 million)
• Subsidising a satellite service so regional and remote people can watch digital TV ($375 million)
• Planning for – but not yet constructing – a National Broadband Network ($233 million 2009-2011)
• “Enhancing Australia’s development partnership with Indonesia” ($323 million)
• “Investing in Australia’s Sporting Success” ($324 million)
• Support for art and artists through the Australia Council ($686 million)

And the kicker is that Big Kev is planning to spend more than $3,400 million on ROADS over the same period.  Can we assume from this that roads are over 5 times more important than Climate Change?  I leave you to draw your own conclusions…

Melbourne University is currently writing the Victorian Geothermal Assessment Report (VGAR) which aims to map the Victoria’s geothermal potential and demonstrate that generating power from the resource is technically feasible and cost-effective.  Leading the project at Melbourne University’s Energy Research Institute are Rachel Webster, professor of physics, and Edwin van Leeuwen, former head of BHP’s Global Technology Group.

The report will be publically released in September 2010 but initial results have been released through the ABCs Radio National Science Show and through the website Inside Story.

These preliminary results show that one of the most promising sites in Victoria is in the Latrobe Valley, primarily because of the insulating affect of the thick layer of brown coal.  Brown coal it turns out has very good thermal insulating properties, far better than black coal and its insulating affect raises the subterranean temperatures to some of the highest in of Australia.  Test wells indicate that the target temperature of 200 degrees Celsius will be found at a depth of 4km to 5km .   Leeuwen believes that a “sweet spot” exists at about 7km where heat could be extracted indefinitely.

The Latrobe valley offers several advantages of over the hot rocks sites being investigated in places like South Australia’s Cooper Basin.  It is located to close to substantial electricity transmission infrastructure, water and a skilled labour force with expertise in mining and drilling.  It is also located over a sedimentary basin rather than granite so the drilling is an easier task.

Leeuwen’s team are also proposing investigating the use of super critical carbon dioxide as the heat transfer medium within the subterranean reservoir.   Again the Latrobe Valley offers a unique advantage here producing 22% of Australia’s greenhouse gases.  There are also sources offshore in the Gippsland Basin that could be tapped into.

Leeuwen states that “Once you take carbon dioxide into its super-critical form, some really nice things start to happen. First of all, it just flows down the well. You don’t need pumps. With water, for instance, you need to pump the fluid down, you need electric pumps in the hole and also to extract it. So one-third of your costs related to using water is in the pump. So the energy you produce, one-third directly goes into pumping water down and out of the hole. That’s not the case with CO2. So what we really need to do is develop a laboratory at five kilometres and really study CO2 as a reservoir working fluid, understand more some of the issues related to pumping water through the reservoirs as well. So there’s a lot of work here that needs to be done.”

The next step is to drill test wells and establish a pilot plant.  Leeuwen and Webster are proposing a staged expenditure of up to $100M over several years to prove up the concept.  Given that this could lead to a clean and sustainable source of several gigawatts of generating capacity and avoid the continued burning of Victoria’s brown coal it seems to be a good investment.  As Robyn Williams of the Science Show says “its about the cost of four cruise missiles”.

So brown coal can be a source of sustainable large scale renewable energy provided we avoid the temptation of burning it.

The Prime Minister’s Task Group on Energy Efficiency is seeking “options for delivering a step change improvement in Australia’s energy efficiency by 2020”.

The opportunities and barriers regarding energy efficiency are well-studied and well-known.

Of the many known barriers to energy efficiency improvements, we believe the key barrier is access to capital.  The companies that control efficiency opportunities are not necessarily lacking in capital resources, however the available capital is often allocated to other projects.  The problem is not so much the absolute availability of capital, but the competing priorities for capital expenditure that exist within each organisation.

We do not suggest that the government should necessarily make capital freely available for energy efficiency projects.  Grants and loan guarantees should be allocated to projects which carry a high degree of risk, thus helping overcome the investment barrier that exists for innovations which require further research and development before widespread uptake can occur.

For the majority of efficiency projects, the upgrades do not require further R&D – they involve technologies and changes which are relatively well proven and ready for deployment.  Amory Lovins of the Rocky Mountain Institute often states that “efficiency is arguably the highest return/lowest risk investment in the whole economy.”  Further, in his work in over 29 industrial sectors, which includes a large amount of work in Australia, Lovins has found that large-scale energy efficiency projects which achieve substantial energy savings provide better returns than small-scale projects.  “So we get expanding, not diminishing, returns on investments in advanced energy efficiency.”

For many companies, capital is allocated to growth projects before efficiency projects.  Energy efficiency may be recognised as a high-return/low-risk investment, hurdle rates and other investment triggers may be exceeded, however efficiency projects are still deferred because growth projects which expand operations and increase throughput are seen to be more profitable and more progressive.  For some organisations, energy is only a few percent of the cost of doing business.  There are bigger issues demanding attention and energy efficiency ends up at the bottom of the priority list.

One way to overcome this challenge is to create a centrally-managed investment fund which is dedicated to energy efficiency projects.  If we accept Lovins’ statement that “saving energy is among the highest-return investments anywhere” , then this investment fund should be a sustainable and profitable enterprise.  The investment fund could be a public/private partnership which aggregates funding from government funds and private financiers, and sets out a structured framework to evaluate investment opportunities and share the returns with the companies hosting the changes.  Previous work in efficiency investment finance, and measurement and verification, such as the Energy Efficiency Council Best Practice Guides , can be referenced to define the terms under which this fund would operate.

This fund should be a sound investment.

We suggest that the PM’s Task Group could recommend this as a possible solution requiring further development, and could further incentivise companies to undertake energy efficiency projects through tax savings and other financial benefits.  The government could allow companies to depreciate energy efficient equipment on an accelerated schedule, and pile on other incentives so that energy efficiency investments are seen as a tax sanctuary.

HAC has significant experience with the opportunities, issues and barriers surrounding energy efficiency.  We will continue to expand on these ideas, and assist in the design and implementation of effective solutions.

If a step change in energy efficiency is the goal, then energy efficiency needs to become an easy decision and a high priority for business.  We believe a step change can occur if the government creates an array of resources and incentives which, in the words of Thomas Friedman , make energy efficiency a “no-brainer good deal” for businesses leaders.

Click here to download HAC’s submission to the PM’s Task Group on Energy Efficiency.