Event
Date
by Professor Andrew Blakers, Director, Centre for Sustainable Energy Systems, Australian National University
Presented at the Manning Clark House forum Making Canberra Sustainable, 17-18 October 2005
Short Biography
Professor Andrew Blakers is the Foundation Director of the Centre for Sustainable Energy Systems at the Australian National University, a group of 35 people who undertake R&D in the area of solar energy. He has a physics degree from ANU and a PhD from the University of New South Wales. He was a Humboldt Fellow at the Max Planck Institute for Solid State Physics in Stuttgart and has held ARC QEII and Senior Research Fellowships. He joined ANU in 1991. His research interests are in the areas of photovoltaics and sustainable energy systems.
Abstract
The adoption of vigorous measures to reduce greenhouse gas emissions in Canberra will be of substantial benefit to the Canberra economy, through a reduction in the export of money to pay for imported energy and the creation of many new jobs in the Canberra energy efficiency industry.
Two thirds of greenhouse gas emissions in the ACT are due to residential and commercial buildings. The turnover of building stock (demolition followed by the construction of energy efficient buildings) is too low to deliver rapid reductions in ghg emissions. Mass retrofitting of energy saving measures can deliver large reductions in ghg emissions. The implementation of a long-term plan to shift most commuting away from cars to public transport will also deliver substantial greenhouse emission reductions.
Introduction
A strong scientific consensus has emerged that net emissions of greenhouse gases (ghg) from human activities will cause large climate change during this century. Climate change could have far-reaching consequences such as the extinction of more than half of all living species, major damage to ecosystems (such as rainforests, coral reefs and alpine/tundra communities), expensive disruptions to agriculture and industrial infrastructure, more extreme weather (droughts, floods, storms, bushfires), an expanded range for tropical diseases, weeds & pests and the creation of conditions conducive to increased warfare.
What can the individual do? In this paper I suggest a range of practical measures that a resident of Canberra can take to "do their bit". Of course, concerned people can become politically active and the Federal level or join national conservation groups. However, in this paper I focus on things that can be done in Canberra.
Greenhouse gas emissions in Canberra
Canberra’s population continues to grow. A reduction in the quantity of ghg emissions therefore requires reductions in per capita emissions. Electricity (58%) dominates ghg emissions in Canberra. Commercial and domestic uses of electricity each account for about half of the total. Motor transport (24%) is the next largest emitter. Gas (for space and water heating) accounts for about 8%, as does emissions associated with waste. Land clearing, which is a major source of greenhouse gas emissions in Australia, is not significant in the ACT.
Ghg emissions from buildings (electricity & gas) comprise two thirds of total ghg emissions. A reduction in CO2 emissions from buildings is the key to large reductions in total emissions. About 1,400 houses are built each year, but there are ~110,000 existing houses in Canberra. The turnover of the housing stock is simply too slow to yield quick reductions in greenhouse gas emissions if energy upgrades are only made to new houses and commercial buildings. Retrofitting is essential for really big reductions in greenhouse gas emissions.
Canberra’s "no-waste by 2010" target may reduce the associated greenhouse gas emissions (8%). However, it remains to be seen whether this target will be reached.
Significant reductions in transport ghg emissions can only come about by introducing effective mass transport, such as light rail, and by the cessation of road construction. There is no sign that the Government is willing to do this. The Gungahlin Drive extension will cost a great deal of money that could be better employed in investment in first-class public transport. The key to effective public transport is the separation of buses/trains from car traffic and the implementation of priority for buses/trains at intersections with roads, so that they are not caught up in traffic jams.
The conclusion is that the great majority of ghg reductions will need to be found in the building sector. This means retrofitting.
Green energy
Many people buy "green electricity". This is well and good, and shows commitment, but it usually provides a poor return in terms of tonnes of CO2 emissions avoided per dollar of investment. Other people buy "green petrol". This also is of doubtful efficacy if the money is used to plant trees. Two methods of investment that usually provide larger ghg savings per dollar are improvements to the energy efficiency of your home or business and the purchase of land for nature conservation that might otherwise be cleared or degraded.
Investment in a solar water heater, the upgrade of the house to five-star energy rating, conversion of space & water heating from electricity to gas and the purchase of energy-efficient electrical appliances generally yields economic returns that match any other investment (eg shares) that the house owner could make. This is particularly true if a house owner has a mortgage or a high marginal tax rate, because the returns (avoided costs) are not taxed. These investments add to the house value, but are free of capital gains tax.
Carbon storage in the form of vegetation (both above and below the ground) is an effective way of reducing greenhouse gas emissions. It is far cheaper to achieve large amounts of carbon storage per hectare by avoiding the clearing of land than by planting trees. Donations to conservation organisations that buy and preserve large tracts of land (eg Australian Bush Heritage Fund, http://www1.bushheritage.asn.au/) are tax-deductible. In essence, the Federal government contributes 30-50% (depending on your marginal tax rate) of the cost of your actions (and a good thing too!). In contrast, purchase of "green electricity" or "green petrol" is with after-tax dollars.
Greenhouse politics
Over 90% of greenhouse gas emissions in the ACT are from energy, all of which is imported; gas & electricity (used in buildings) and oil (motor transport). Therefore a reduction in greenhouse gas emissions will reduce the annual export of funds from the ACT from both public and private sources to pay for imported energy. This reduction in the annual export of funds will be permanent. Therefore, reductions in Canberra’s greenhouse gas emissions will lead to improved economic outcomes.
It will usually be necessary to expend capital (government and/or private) in order to reduce greenhouse gas emissions. Greenhouse reduction measures will encourage the insulation, solar water heater and other energy efficiency industries in the ACT, as well as public transport. These industries are all local labour intensive. Therefore reductions in greenhouse gas emissions in Canberra are very likely to be associated with increased employment in Canberra. In effect, jobs are moved from the Latrobe Valley to Canberra.
The coal miners in the Latrobe Valley may have less secure employment. However, they don't vote in Canberra. Greenhouse action is good local politics.
Some discussion papers on the costs and benefits of strong greenhouse targets for Canberra focus on the costs. They do not consider WHERE the jobs created by the installation of greenhouse gas control technology will be. Most of these jobs will, in fact, be created in Canberra, and the major economic benefits of reduced export of money and increased local employment are not quantified. A reader of such papers might gain the impression that reducing greenhouse gas emissions will, regrettably, hurt the ACT economy. In fact, the reverse is likely to be true.
In order to quantify the benefits that will accrue to the ACT from reducing greenhouse gas emissions, the following items need to be quantified:
- What net financial & social value does each additional job in Canberra have? This value includes payroll tax, revenue from stamp duty and other taxes and charges levied by the government on the new employee and his/her family, reduced unemployment and increased economic activity, minus costs to Government.
- Over what timescale are financial savings in reduced energy imports to be evaluated? For example, the cost of reducing greenhouse gas emissions by insulating houses is one-off, but the benefits of reduced purchase of electricity & gas accrue annually for the life of the house (~50 years). This is equivalent to determining the discount rate and the expected lifetime of the energy-saving equipment.
- How many new jobs will be created in Canberra for each one percent reduction in greenhouse gas emissions from Business as Usual?
A discussion and estimation of the points outlined above is essential for a proper evaluation of the desirability or otherwise of adopting strong greenhouse reduction measures, in addition to the environmental benefits. Thousands of jobs in Canberra will be created in any serious program to reduce greenhouse gas emission.
The degree of adoption by Government of measures to reduce greenhouse gas emissions in the ACT will depend strongly upon the perceived financial cost of the measures, both to the ACT Government and to Canberra citizens. However, there are likely to be substantial economic benefits, through the creation of many new jobs in Canberra.
Solarisation
Mass retrofitting of buildings is the only way in which rapid reductions in greenhouse gas emissions can be achieved in the building sector in Canberra. This is because the turnover of building stock (demolition followed by new construction) is low (and requires expenditure of more energy to replace the embodied energy in the existing stock). Even if all new buildings have excellent energy ratings, there is only a slow reduction in average greenhouse intensity.
Mass retrofitting of roof, wall & floor insulation, draught proofing and solar water heaters to existing buildings ("solarization") will yield large greenhouse gas reductions. In a typical brick veneer house the cost of thorough solarization is about $7-10,000. The reduction in energy bills pays for solarization well within the lifetime of the solar water heater and insulation. The barriers to mass solarization are the need for up-front capital and the lack of information on the part of building owners. Here I suggest a practical and commercially attractive method of removing these obstacles.
Australians move houses frequently. An investment in solarization is often not recognised in the sale price of the house. There is no incentive for a landlord to invest in solarization because they do not pay the energy bills. There is no incentive for a tenant to invest in solarization because they do not own the house. How to pay for solarization, up front? The key to an effective solarization funding model is that the debt belongs to the house, not the homeowner.
A mechanism for funding solarization is proposed. Consortia would be established (e.g. "Solarization Pty Ltd") comprising a solar water heater company, a house insulation installer, a billing agency and a financier. Solarization P/L would contract its members to retrofit solar water heaters, insulation and draught proofing in houses and commercial buildings. The company could also install double-glazing, gas heaters and photovoltaic systems. The house owner would not be required to put up the cash. Instead, Solarization P/L would recover its investment (at normal commercial rates of return) over 8-12 years through quarterly bills to the house owner. This is equivalent to the way in which electricity companies recover their investment in a new power station.
House owners (and tenants) would enjoy reduced overall energy costs (comprising gas, electricity and the solarization quarterly repayments) and improved thermal comfort and noise insulation. A much better greenhouse outcome per dollar would be obtained than from "green electricity". The uptake will be high if Solarization P/L provides a fast efficient turnkey service for a range of energy technologies & services — a single visit by an assessor skilled in all of the energy technologies, followed by a well-managed and rapid implementation including easy financing. A low cost financing option is to draw additional funds from a mortgage.
Solarization P/L would construct alliances with insulation and solar suppliers that includes the supply of equipment & services at a substantial discount to reflect reduced advertising costs and increased sales volume. It would be very helpful if the ACT Government were to pass legislation to allow the debt for solarization to be easily attached to the house (without incurring a second mortgage) rather than the house owner. The debt would need to be disclosed each time a house is sold; its like disclosing rates or electricity bills or the House Energy Rating. This legislation is not essential, but would be helpful because the risk of default would be almost eliminated, allowing Solarization P/L to charge a low interest rate on the debt.
Companies involved in solarization will benefit from a low risk investment, because the equipment to be installed has a long guarantee period and the debt is against the house rather than house owner. Gas and electricity companies will experience reduced sales of energy. However, solarization will provide replacement revenue and profit. They will have the opportunity to "lock-in" customers for long periods (an important consideration in the era of contestability) and will acquire a large supply of Renewable Energy Certificates from the solar water heaters. Solarization of 100,000 homes in Canberra over a decade would be worth around $80 million/year and would lead to the creation of about 800 new jobs. Electricity utilities will benefit from mass solarization through a reduction in peak loads, because better insulation will reduce the space heating peak-load in winter and the air conditioning peak-load in summer while solar water heaters will have gas or off-peak electric boosting. Solarization also helps energy companies cope with any government requirements that the greenhouse intensity of their products must decline each year.
As in Canberra, a large majority of local government districts in Australia have no oil, gas, coal or electricity production. In these districts there are few economic losers from tough greenhouse targets. On the contrary, there are many winners. Solarization reduces the export of money from a town to pay for imported gas and electricity. Solarization is more labour intensive than electricity or gas production, and most of the jobs are local.
Tenants living in uninsulated homes will be big winners, since it gets around the problem that the landlord has no incentive to invest in energy efficiency because the landlord does not pay the energy bills. Solarization is one of the rare occasions when employment, social, economic and environmental objectives are aligned, and is therefore politically attractive, particularly at a local level.
Government moral support would be valuable, in order to give credibility to this new idea. A modest initial Government subsidy could also accelerate uptake. In return for a modest subsidy Solarization P/L would promise to solarize a specified number of buildings to a specified standard (eg 4 stars). The Government might also include a tender provision that rewards local manufacturing. Alternatively, Government could offer modest revenue-neutral rate relief that is linked to the star rating of a building.
Initial solarizations could focus on the items with the most clear-cut financial benefit. This would increase the probability that the scheme is commercially successful. In approximate order this would be ceiling insulation, draught proofing, house zoning and low-flow shower heads followed by solar water heaters and wall & floor insulation followed by photovoltaic systems and double glazing.
Solarization will create a substantial number of new jobs in the local community. The scheme fits very well with the building energy rating scheme in several states. Early solarization companies will be well placed to dominate the national solarization market that is likely to develop in a few years time. The risk is low because the debt is secured against the building and is repayable within the guarantee period of the equipment. Large reductions in greenhouse gas emissions are likely.
Solarization can be tested on a small scale in a few suburbs or in a regional centre. Early adopters could be the 2-3% of customers who purchase "greenpower". Housing trusts for low-income tenants and upper-income, busy professionals are two other groups of potential early adopters.
Ad-hoc delivery of energy services, whereby the homeowner has to deal with three or four separate companies to fully solarise, is unlikely to result in widespread take-up. In contrast, successful solarization will be a service that is provided by companies offering smooth, no-fuss, comprehensive service — eg, one phone call, one house-assessment visit, one contract, rapid & trouble-free installation of insulation & equipment and good after-sales service.
In the longer term
Reductions in greenhouse gas emissions through the use of high-quality building designs, insulation, weather proofing and efficient appliances can deliver large reductions in greenhouse gas emissions - typically 50% for an average house. The use of solar water heaters with gas boosting can reduce greenhouse gas emissions from water heating by about 80%. The cost of these reductions is modest compared with their financial and greenhouse benefits. These investments make sense from a purely economic point of view.
In the longer term new renewable energy technology must complement energy efficiency in order to achieve the reductions in greenhouse gas emissions of 70% or more that climate scientists advise are necessary by 2050.
Two technologies that may eliminate net greenhouse emissions from houses are solar air heaters with integrated thermal storage and photovoltaics. Solar air heaters collect thermal energy during the day and can store it in advanced materials ("Phase change" materials) that are capable of soaking up much more heat per cubic metre than water or masonry. These materials can also soak up "coolth" during the night to keep houses cool during the day.
Photovoltaics is an exciting technology. The average growth rate of the industry over the last 15 years is 25% per year. Last year the industry grew by 65%. As the scale of the industry expands the cost of the product declines. Extrapolations based upon trends of the last 15 years suggest that the worldwide photovoltaic industry will reach sales of $100 billion per year in the next decade and that the cost of photovoltaic electricity will fall below the retail cost of electricity in many cities. At this point it will be very attractive for house owners to install photovoltaic panels on their roofs, and explosive growth in the industry may ensue.
Governments in Europe and Japan recognise the enormous strategic potential of the PV industry. They are heavily investing in their PV industries in order to reap commercial rewards in the future. Australia has two world-class PV research groups, at the Australian National University (http://solar.anu.edu.au) and at the University of NSW (http://www.pv.unsw.edu.au/).
Australia has a relatively strong, but declining, position in the global PV industry. BP Solar (http://www.bp.com.au/solar/default.asp) produces about 4% of the world’s solar cells in Sydney. Origin Energy has constructed a factory in Adelaide to commercialise the breakthrough Sliver solar cell technology invented at the Australian National University (http://www.originenergy.com.au/environment/environment_subnav.php?pageid=1233). Solar Heat & Power (www.solarheatpower.com) and Solar Systems (http://www.solarsystems.com.au) and are commercialising concentrating systems.
Conclusion
Australia has much to lose from severe climate change and much to gain economically from effective and concerted action. I hope that the policies of Federal and State governments over the next decade place Australia in the forefront of the energy conservation and solar energy revolution. Unfortunately this is not the case at present.
There appears to be a gradual emergence of a consensus that climate change is real and must be addressed. The ranks of climate change sceptics grow ever smaller, and they can now be accommodated outside the door in raincoats with those who purport to believe that smoking does not cause lung cancer.
Canberra has a strong financial self-interest in reducing its greenhouse gas emissions, over and above concerns for long-term climate change. If we reduce the export of money from Canberra to pay for greenhouse-intensive imported energy by employing local people to modify buildings and drive trains then that's a good thing.