An essay submitted to Gill Owen Essay Prize and also published on Renew Economy in 2018:
A place by the fire: energy efficiency and equitable access to energy services
The call for us to respond quickly to climate change is becoming more urgent. The recently released IPCC report [1] reiterated the urgency by which we should reduce greenhouse gas (GHG) emissions if we are to have a chance at avoiding runaway climate change. In the face of this crisis, we should employ all available methods to reduce emissions. Energy efficiency offers a cheap and effective way to reduce energy consumption and the emissions associated with electricity generation and other energy services. While not a solution in itself, efficiency is a complementary strategy that can be employed in conjunction with other approaches such as renewable energy and decreases in material consumption.
There is evidence to suggest there is a significant reserve of energy efficiency potential within the Australian economy. For example, the City of Sydney is aiming for a 31% energy saving by 2030 whilst saving over $200 million dollars [2]. A 13 to 22 percent reduction in GHG emissions was estimated to have been achieved as a result of a NSW government program to build more efficient residential buildings [3]. The federal government’s Energy Efficiency Opportunities program found large potential for savings among Australia’s largest industrial energy users [4]. A study by McKinsey & Co found large potential for both residential and industrial energy efficiency savings, at a negative abatement cost [5]. Energy efficiency in industry is as important as household efficiency, since industrial efficiency provides a large source of savings and also industrial energy costs are baked-in along supply chains of final products purchased by consumers.
Recently energy politics in Australia has focussed on rising electricity prices, however historically Australia enjoyed reasonably low electricity prices [6]. Low prices can work as a disincentive for energy efficiency as higher prices may encourage consumers to reduce their costs by using energy more frugally. However, higher energy prices can disadvantage low income households disproportionately as energy spending constitutes a larger fraction of their total income. These households cannot easily reduce essential energy services such as lighting, cooking and space heating/cooling in the face of higher prices. Furthermore, if climate change causes more severe and frequent heatwaves, access to air-conditioning may become a public health issue. The dilemma therefore is how to reduce our energy use while simultaneously ensuring equitable access to energy services.
Low income households are adversely affected by high energy prices and barriers which prevent them from accessing energy efficient technology that would help them avoid extra costs. The minimum energy performance standards scheme has been very successful at driving improvements in appliance efficiency [7]. However, there are a range of reasons why low-income households may not have access or be using the most efficient models. An example of this are tenants who are locked-in to whichever technology is installed in their rental property, e.g. hot water systems. In addition, they may not be able to afford a new efficient appliance and be stuck with old or broken appliances. One solution is to assist low-income households in purchasing new efficient appliances by providing access to credit [8]. We can also mandate the disclosure of rental property energy performance to encourage landlords to make efficiency investments.
If we consider access to energy services a necessity and a basic human right, then we should consider means to ensure equal access. Going further, we might see that once basic energy needs have been satisfied, further energy use is ‘luxury’ or discretionary. Thinking along these lines, others have considered a progressive consumption-based tax on energy, although this may be difficult to implement [9]. Alternatively, lower energy tariffs or rebates could be offered to low-income households (there are examples of this policy in California [10] and also NSW [11]). This ‘duty-of-care’ to provide essential services to the vulnerable, elderly and low-income earners was something Gill Owen advocated for in much of her work [12].
The provision of public transport is an excellent example of a policy that achieves both energy and social equity outcomes. Low income earners are exposed to rising fuel prices which can inhibit their ability to travel to their place of employment, particularly when living in areas without adequate public transport. In general, public transport has a lower energy intensity than private car transport and the emissions perspective improves further when electric trains, trams and buses are powered cleanly using renewable electricity. A shift away from private car transport would also reduce Australia’s reliance on liquid fossil fuel imports, which has the potential for disruption [13]. Public transport use also has positive effects on our urban spaces and communities, which can become more vibrant when more people are out and about using public transport. There may also be public health benefits as people engage in more incidental exercise associated with public transport use.
Part of the recent rise in electricity prices has been attributed to profit-maximising behaviour by the energy retailers and network operators [14]. A similar situation exists in the natural gas market, with households paying high prices as gas extractors prefer to sell to the profitable export market rather than satisfy domestic demand [15]. One solution to this is for communities to take control through community-owned not-for-profit renewable energy projects. There are numerous examples of successful community owned renewable energy generators in Australia [16]. These entities allow communities to reflect values they consider important, for example, ensuring equal access to energy and profits remaining in the community. This also provides communities autonomy over their clean energy future without requiring federal energy policy. Such networks also provide a way for low-income households to participate in renewable energy, as they are likely priced-out of the rooftop solar market. In remote and rural areas, these projects can be paired with new microgrid technology [17].
Providing energy services to everyone in our community, including the most vulnerable, is our societal responsibility. Equally, we must respond quickly and decisively to cut our GHG emissions to avoid dangerous climate change. Fortunately, there are number of strategies we can employ to achieve these dual outcomes. Energy efficiency and equity is an important topic in the context of rising inequality in developed countries, but it also requires us to consider more broader questions such as – who should bear the burden of climate change mitigation? Globally there are approximately 1 billion people who do not have access to electricity and our challenge is to meet their needs while dramatically reducing global emissions.
[1] Intergovernmental Panel on Climate Change, https://www.ipcc.ch/
[2] City of Sydney, 2015, Energy Efficiency Master Plan, https://www.cityofsydney.nsw.gov.au/__data/assets/pdf_file/0020/241436/Energy-Efficiency-Master-Plan-low-res.pdf
[3] Energy Australia, BASIX Monitoring Report: Electricity Consumption for 2007-08 and 2008-09, https://www.basix.nsw.gov.au/iframe/images/energyMonitoringReport2007-2009.pdf
[4] The Energy Efficiency Opportunities (EEO) program: https://www.eex.gov.au/large-energy-users/energy-management/energy-efficiency-opportunities
[5] McKinsey and Co, 2008, An Australian Cost Curve for Greenhouse Gas Reduction, https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/an-australian-cost-curve-for-greenhouse-gas-reduction
[6] https://www.abc.net.au/news/2018-07-18/electricity-price-rises-chart-of-the-day/9985300
[7] Energy Efficient Strategies, Whitegoods Efficiency Trends in Australia 1993-2014. 2016, Department of Innovation, Industry and Science
[8] http://goodshepherdmicrofinance.org.au/media/energy-efficiency-program-drive-financial-inclusion/
[9] Pikkety, T, 2015, About "Capital in the Twenty-First Century", The American Economic Review
[10] California Alternate Rates for Energy (CARE): http://www.cpuc.ca.gov/General.aspx?id=976
[11] Low Income Household Rebate: https://www.service.nsw.gov.au/transaction/apply-low-income-household-rebate-supply-customers
[12] Owen, G, 2005, Sustainable development duties: New roles for UK economic regulators, Utilities Policy
[15] http://ieefa.org/ieefa-australia-a-gas-cartel-run-amuck/
[16] For example: http://www.sydneyrenewable.com/, https://www.energy.vic.gov.au/renewable-energy/community-energy
[17] For example, Okra Solar: http://www.okrasolar.com/