The energy productivity roadmap Doubling energy productivity of the built environment by 2030 31 August 2015 Draft Version 1.0 Discussion Paper
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Thanks The Board and Staff of the Australian Alliance to Save Energy (A2SE) gratefully acknowledge our colleagues Anita Stadler, Mike Smith and Alison Atherton as the primary researchers and authors of this text. Contributing also: Adam Kelly-Mills and Tony Westmore We also acknowledge the considerable intellectual contributions of Nathan Rosaguti from Energetics. This work has been supported by financial contributions to various components of the Australian Energy Productivity Roadmap project made by the Commonwealth Department of Industry, The Commonwealth Department of the Environment, the New South Wales Office of Environment and Heritage, and the Clean Energy Finance Corporation. This work would not have been possible without the exceptionally generous support of the Institute for Sustainable Futures (ISF) at the University of Technology, Sydney, and Energetics. ISF hosts A2SE and the Roadmap project. Energetics provides significant in-kind support, notably through contributions to the project by Jon Jutsen and Anita Stadler. We acknowledge our project collaborators: ClimateWorks Australia at Monash University, the Low Carbon Living CRC at the University of New South Wales, the Energy Change Institute at the Australian National University, the Newcastle Institute for Energy & Resources at the University of Newcastle and the Energy Flagship program at CSIRO. The views expressed in this text are those of A2SE and are not necessarily those of our supporters and partners. We have taken all care to ensure that data is correct. All responsibility for the text rests with us.
© Australian Alliance to Save Energy 2015 Level 11, UTS Building 10 235 Jones Street, Ultimo, NSW 2007 email:
[email protected] phone: 02 9514 4948 web: www.a2se.org.au abn: 39 137 603 993
Please cite this document as: Stadler, A., Smith, M. and Atherton, A. (2015). The energy productivity roadmap - Doubling energy productivity of the built environment by 2030, Draft Version 1.0. Sydney: Australian Alliance to Save Energy
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Executive summary The Australian Alliance to Save Energy (A2SE) is coordinating the Australian Energy Productivity (2xEP) Roadmap initiative with the support of governments, businesses, industry associations and thought leaders from a range of institutions. “2xEP” (two times energy productivity) refers to the aim of the initiative, which is to double Australia’s energy productivity by 2030. Energy productivity is a stated policy priority for federal, state and territory governments. Improving energy productivity is about increasing the economic value created per physical, as well as monetary, unit of energy consumed. In a period of rapidly increasing electricity and gas prices in Australia, in addition to volatility in the global oil market, a holistic approach to energy productivity can make a major contribution to Australia’s overall productivity and hence competitiveness. Other major economies are well ahead of Australia in increasing their energy productivity. Not only is the mean economic value per unit of energy consumed by the Group of 20 (G20) countries higher than for Australia, so too is the G20 mean growth in energy productivity. Australia must act to keep pace so that it avoids entrenching competitive disadvantage whilst G20 peers accelerate away (A2SE, 2014a). Australia is coming from a relatively low productivity base, coupled with relatively high real energy prices, so the potential contribution of energy productivity improvement to Australia’s overall economic productivity is now at an historic high. This means that energy, as a production input, now has a more material impact on the profitability of businesses and Australia’s economic growth than ever before. This discussion paper provides an overview of issues that need to be addressed to substantially enhance energy productivity in the built environment, with a focus on the operational stage of the life 1 cycle . It also provides a starting point for discussions with stakeholders and development of a 2xEP Roadmap for the built environment. Why focus on energy productivity in built environment?
The built environment sector is a pillar of Australia’s economy, providing housing, employment, business spaces, and essential services to all areas of the country. The built environment directly supports employment through construction, design, and maintenance, and indirectly supports the commercial and services sectors and employment more generally. The built environment is financially – and socially – crucial to Australia’s wellbeing, but also consumes a very large share of the country’s end-use energy. Currently the built environment consumes well over 40% of all Australia’s final energy (excluding petroleum-based products, which are primarily used in transport). In 2012-13, this came to 667 PJ of final energy (Stadler, 2015). Unfortunately, the cost of energy in Australia has increased rapidly and steeply: in the six years from 2007 to 2013, retail prices increased 50% for gas, and 77% for electricity. In such an energy-intensive sector, this is an extraordinary increase in costs, placing a significant burden on the Australian
1
The construction industry is referenced in regards to the energy profile of buildings, but most of the construction sector remains beyond the scope of this report. Since the construction phase is generally excluded from the scope, we the report also does not consider embodied emissions of materials used during the construction process.
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economy. An energy productive built environment would underpin economic prosperity by optimising the energy performance of infrastructure at all scales. In practice, this would require collaboration from public and private owners of infrastructure to transform the urban landscape, and associated arrangements for energy use and supply. The 2xEP initiative
Against this background, the A2SE 2xEP initiative asserts that the built environment can make a major contribution to the general aim of doubling Australia’s energy productivity by 2030. An appropriate and practical 2030 energy productivity target could focus investment by the sector and individual operators on economically efficient opportunities. A2SE proposes to consult with a diverse range of stakeholders about what this target should be, the optimal pathways to follow for different sub-sectors to reach the agreed voluntary target, as well as how improvement in the energy productivity of the built environment could be tracked. Consultation will canvass collaborative action that the industry could take to support a significant improvement in energy productivity and recommend actions required by governments to reduce or remove barriers to achieving such a target.
Potential strategies for improving energy productivity
Energy productivity is typically expressed as the real economic output per unit of energy (usually primary energy). Consequently, the potential to achieve a voluntary energy productivity target could be influenced by adopting complementary strategies that could either increase economic output or reduce the relative energy consumption per dollar output. Energy productivity is not energy efficiency by a different name. Energy efficiency – which generally focuses on using less energy to deliver the same service – is, however, one of four key strategies, as illustrated below. Factors directly impacting energy input
Output dimensions ($ or other perceived value)
Energy Productivity Growth
e.g. • Energy market The key strategies to enhance energy productivity are summarised below: policy, incl price determinations e.g. Government • Regulation, incl Energy • Energy price Strategy area 1: ‘Traditional’ energy management – improving Policy energyminimum sensitivity Market & Planning standards through better management of energy use, including the • Renewable /efficiency Dynamics • Investment frameworks Fuel mix and implementation of innovative technologies, demand management incentives primary:final energy ratio strategies,
best practice data-management and benchmarking energy management tothe facilitate decision making. Structure of economyenergy-productivity and stage of economic development Geographic size and features, as well as climate (and weather variability) Demographics / Social Factors
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Opportunities to improve energy productivity in the built environment
Strategy area 2: Systems optimisation – focusing on precinct scale energy-related aspects of the built environment as a system, including integrated urban infrastructure planning and design to optimise asset utilisation. These changes may be implemented for reasons of broader productivity improvement such as urban regeneration, but greater value can be realised by adding a deliberate focus on energy productivity.
Strategy area 3: Business model transformation – focusing on the energy-related aspects of fundamental longer-term change in industry norms. This relates to, amongst other factors, the way space is utilised for buildings and infrastructure (e.g. energy supply), the approach to design and building material use, as well as the design and operation of equipment and infrastructure.
Strategy area 4: Value creation or preservation – a focus on quantitative, as well as qualitative aspects of the built environment from the perspective of individual property owners and society in general. Consequently, energy productivity is not just about reducing inputs: it is also about increasing the value of assets, as well as the amenity and liveability of the built environment. In some instances, this may lead to increased energy consumption at the same time as improved energy productivity.
There have been positive steps in the built environment sector over recent years with regard to energy productivity, particularly through significant investment in large public and private sector office occupants, mostly relating to the efficiency of heating and cooling. However, an energy productive built environment sits at the intersection of urban design, infrastructure investment, technological advances and socio-economic development trends. Isolated investments are therefore unlikely to deliver an energy productive built environment. Productivity improvement in such a complex system will require co-ordinated action. There are many opportunities across the strategic areas highlighted above:
Lighting-related energy usage makes up a significant percentage of operational energy usage in many buildings. Energy efficient lighting retrofits and behaviour change are relatively easy and quick to implement, but could cut lighting energy usage by more than half.
Heating, ventilation, and cooling (HVAC) systems can often be made dramatically more efficient through relatively simple measures. A joint study by Melbourne University and the City of Melbourne has found simply painting roofs white can make buildings up to four degrees cooler inside (Levinson, Akbaria, & Reilly, 2007).
Precinct-scale retrofits can alter the temperature landscape of the urban environment. As HVAC energy consumption is dependent upon temperature, moderating the urban heat-island effect can increase the resilience of urban residents to heat waves while reducing demand for energy (Hatvani-Kovacs & Boland, 2015).
Integrated urban design results in the co-location of employment opportunities, residences and services within a walkable distance or reach of efficient public transport. If executed with appropriate
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consideration to energy productivity, the benefits to individuals and the economy as a whole is likely to be significant – measured in dollars, health and the liveability of cities.
New technologies in building construction can deliver buildings faster and cheaper than traditional methods. The new modular building industry offers a construction speed 30-40% faster than conventional buildings, and at lower overall cost (Low Carbon Living CRC, 2015a).
Buildings that obtain high NABERS Energy ratings (and therefore have relatively high energy productivity) obtain stronger investment returns than buildings that are poorly rated. The “green premium” for green buildings is evident on several different environmental ratings systems, and reflects a consistently higher basic rent, net operating income, and occupancy rate (Investment Property Databank (IPD), 2014).
Exploiting the above opportunities requires a proactive and long-term perspective to yield the benefits on an economy wide basis. Measures are needed across the spectrum of policy, investment decision-making, technology, infrastructure and urban planning. Urgent action is required as the useful life of most built assets (e.g. buildings and equipment) is more than 20 years. Today’s design decisions could lock in unproductive energy options for decades. However, not all actions are capital intensive. This transition can be facilitated by a range of strategies, including:
Benefits from 2xEP for built environment
Differentiated property rates based on environmental ratings, e.g. NABERS/GreenStar Rating.
Differentiated stamp duty on property to incentivise energy smart upgrades.
Quicker building permit review and processing for projects that are designed to achieve high NABERS/GreenStar Ratings
Extended and more stringent minimum standards and efficiency labelling requirements.
Land use planning and spatial development practices that reduce the demand for energy and travel.
Removal of tax incentives and employee benefits that may be desirable in isolation, but can contribute to unintended, negative outcomes, when viewed within the context of an energy productive built environment system.
Incentivising more energy efficient construction and equipment through preferential stamp duty.
The benefits of a significant improvement in energy productivity in the built environment will depend on new regulations, and the voluntary target and actions agreed by the sector, but could include:
Energy efficiency improvements and cost savings for users through new technologies and practices in commercial and residential sub-sectors. This will reduce public and private costs, and could also reduce
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greenhouse gas emissions in a cost-effective manner.
Built environment program objectives
Avoided and reduced energy use through a careful analysis of preexisting energy consumption, and targeted removal of unnecessary components.
Optimisation of built environment systems (i.e. through capacity utilisation) and acquiring agglomeration impacts of increased opportunities for economic exchange. Using precinct-scale renewable power could provide many residents or commercial areas with a substantial amount of extra power, relatively subsidised by the economies of scale.
Multiple dividends in terms of increased employment, more affordable housing, reduced household and business costs, reduced health costs, and improved accessibility, amenity and equity.
A successful outcome from the A2SE 2xEP Roadmap process will be a realistic but challenging energy productivity target and a plan developed by the sector, supported by a broad range of industry constituents, to lead changes in the sector and their individual businesses to achieve the target. It is envisaged that outcomes of the A2SE 2xEP Roadmap may include:
A definition of pathways to significantly enhance energy productivity, with reference to sub-sectors and varying scales of operations.
Mechanisms to create greater awareness and uptake of emerging innovations that can help built environment sub-sectors achieve a step change in energy efficiency.
Strategies to overcome barriers to the adoption of new, more efficient technologies.
Strategies to overcome barriers to integrated urban planning.
Prioritisation of cost-effective measures to achieve 2xEP in the sector.
New programs, or the strengthening of existing programs, to support the built environment to achieve 2xEP.
Recommendations to federal, state, territory and local governments for policy changes to facilitate these activities and support 2xEP in built environment.
Such changes could be achieved through a collaborative process, involving built environment businesses and providers, researchers and industry associations, with government engagement to accelerate innovation, transformation and value-adding in the sector.
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Table of Contents Executive summary .............................................................................................................................. iv Table of Contents ................................................................................................................................. ix 1.
2.
Introduction ................................................................................................................................. 1 1.1.
Boundaries of this report ..................................................................................................... 1
1.2.
Structure of this report ......................................................................................................... 2
The case for 2xEP in the Australian built environment .......................................................... 3 2.1.
Australia’s international economic and energy competitiveness ......................................... 3
2.2.
Significance of the built environment ................................................................................... 5
2.3.
3.
2.2.1.
Residential.............................................................................................................. 6
2.2.2.
Commercial ............................................................................................................ 6
2.2.3.
Energy use by the built environment ...................................................................... 7
2.2.4.
Energy cost .......................................................................................................... 10
Potential for improvement in use of energy ....................................................................... 11 2.3.1.
Recent studies ..................................................................................................... 11
2.3.2.
Minimum energy performance standards for equipment ..................................... 12
2.3.3.
Performance of the building stock ........................................................................ 13
Energy productivity in the built environment ........................................................................ 16 3.1.
3.2.
Defining energy productivity .............................................................................................. 16 3.1.1.
Characteristics of an energy productive built environment .................................. 17
3.1.2.
Measuring built environment energy productivity improvement ........................... 18
What does a doubling of energy productivity mean for the built environment? ................ 19 3.2.1.
4.
Baseline energy productivity (2010) ..................................................................... 20
Opportunities to improve energy productivity ...................................................................... 21 4.1.
4.2.
Strategy area 1: Traditional energy management ............................................................. 22 4.1.1.
Energy efficient equipment and passive building design ..................................... 22
4.1.2.
Distributed generation and storage ...................................................................... 25
4.1.3.
Power factor correction ........................................................................................ 26
4.1.4.
Waste heat recovery ............................................................................................ 26
4.1.5.
Data and energy management ............................................................................ 26
4.1.6.
Advanced building management systems ........................................................... 27
Strategy area 2: System optimisation ................................................................................ 28 4.2.1.
Precinct scale retrofits to address heat-island effects ......................................... 28
4.2.2.
Shared infrastructure ............................................................................................ 29
4.2.3.
Transport-oriented precinct design ...................................................................... 30
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4.3.
4.4.
5.
6.
4.3.1.
New technologies and building design ................................................................. 31
4.3.2.
Eco districts and collaborative development models ........................................... 34
4.3.3.
Smart hubs, teleworking and video conferencing ................................................ 34
Strategy area 4: Preserve or increase value and/or quality of output ............................... 36 4.4.1.
Building energy performance and investment returns ......................................... 36
4.4.2.
Building energy performance and labour productivity .......................................... 37
Barriers to energy productivity ............................................................................................... 38 5.1.
Prevailing investment paradigms....................................................................................... 38
5.2.
Split incentives ................................................................................................................... 39
5.3.
Unsupportive regulatory environment ............................................................................... 39
5.4.
Lack of information and knowledge ................................................................................... 40
5.5.
Lack of skills ...................................................................................................................... 40
Overcoming the barriers .......................................................................................................... 41 6.1.
Government leadership ..................................................................................................... 41
6.2.
Change in investment paradigms ...................................................................................... 42
6.3.
Incentive programs ............................................................................................................ 43
6.4.
Preferential taxation, rates and planning concessions ...................................................... 44
6.5.
Financing ........................................................................................................................... 45
6.6.
Information and capacity building ...................................................................................... 45
6.7.
6.8. 7.
Strategy area 3: Business model transformation .............................................................. 31
6.6.1.
Innovation and collaboration ................................................................................ 46
6.6.2.
Consumer awareness .......................................................................................... 47
6.6.3.
Industry awareness .............................................................................................. 48
6.6.4.
Industry skills development .................................................................................. 48
Regulatory support and reform .......................................................................................... 49 6.7.1.
Data and decision making .................................................................................... 49
6.7.2.
Planning ............................................................................................................... 50
6.7.3.
Product MEPS and energy efficiency labelling .................................................... 50
6.7.4.
Building rating schemes and energy labelling...................................................... 50
Targets and strategy .......................................................................................................... 51
Next steps .................................................................................................................................. 53
References ........................................................................................................................................... 54 Appendix A.
Abbreviations and acronyms ................................................................................. 60
Appendix B.
Background information on building sector trends ............................................ 61
Appendix C.
Opportunity for improvement (Supplementary schedules) ............................... 63
Appendix D.
NABERS 2013/4 Program Statistics ...................................................................... 65
Appendix E.
Financing programs ................................................................................................ 66
Appendix F.
Building codes and energy assessment/rating frameworks and tools ............. 68
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List of Figures Figure 1: Boundary of this report ............................................................................................................. 1 Figure 2: Australia’s energy productivity, relative to other countries ....................................................... 4 Figure 3: Estimated 2015 share of non-residential building floor area by sub-sector ............................. 7 Figure 4: Primary electricity and natural gas consumption trend (PJ) .................................................... 8 Figure 5: Indicative end use break-up for an electricity-only household ................................................. 9 Figure 6: Energy consumption by non-residential building type (PJ, 2015 est) ...................................... 9 Figure 7: Indicative energy end use break-up for the non-residential built environment ...................... 10 Figure 8: Real electricity and gas price increases ................................................................................. 11 Figure 9: Key determinants of energy productivity ................................................................................ 17 Figure 10: Economic productivity of the built environment – commercial sector (private sector) ......... 20 Figure 11: Residential sector proxy measures for the residential sector .............................................. 20 Figure 12: Summary of opportunities per energy productivity strategy area ........................................ 21 Figure 13: Projected potential non-residential PV systems in Australia ................................................ 25 Figure 14: Typical breakdown of energy cost at a retail facility............................................................. 27 Figure 16: Veolia’s perspective on urban resource utilisation and management.................................. 30 Figure 16: Illustrated smart hub concept ............................................................................................... 35 Figure 17: Green Star vs all office market – selected metrics (% difference, December 2013) ........... 36 Figure 18: Operating cost, productivity and health benefits from LEED-certified building designs ...... 37 Figure 19: Buildings chain of influence (adapted from Pears A, 2015) ................................................. 42 Figure 20: Expanded cost benefit paradigm to unlock the potential deep retrofit value ....................... 43 Figure 21: Home Energy Score – the U.S. Department of Energy’s a national rating system ............. 51
List of Tables Table 1: 2013–14 contribution to the Australian economy ...................................................................... 5 Table 2: Energy spend by the built environment ($ million, 2011–12) .................................................. 10 Table 3: Comparison of products covered by standards and labelling in selected countries ............... 12 Table 4: Recent policy developments - nZEB standards ..................................................................... 13 Table 5: NABERS ratings profile ........................................................................................................... 15 Table 6: Benefits of smart hubs ............................................................................................................. 35 Table 7: Existing schemes supporting investment in energy productivity ............................................. 43 Table 8: International and past Australian programs ............................................................................ 44 Table 9: Mechanisms to increase industry awareness ........................................................................ 48 Table 10: Average floor area of new residential dwellings in Australia ................................................. 61 Table 11: Total floor area of non-residential buildings and projected growth ....................................... 61 Table 12: Australian average energy intensity by building type ............................................................ 62 Table 13: Potential for energy efficiency improvement in Australia for residential buildings ................ 63 o not delete this section break
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1.
Introduction
This report provides a preliminary compilation of information and analysis to support engagement with the built environment sector in the Alliance to Save Energy (A2SE) Doubling Energy Productivity (2xEP) Roadmap process. The report presents the rationale for action and summarises the key issues, opportunities and barriers, and lists potential industry-led energy productivity improvement initiatives in the built environment. With this report as a starting point, it is envisaged that the project will build on existing expertise and initiatives in the sector to develop a sector Roadmap guiding the in-depth analysis of opportunities and challenges as well as recommendations for policy reform. A2SE will canvass stakeholders for advice on appropriate metrics and energy productivity targets that are challenging, but realistic. Coordination and support will be provided by the A2SE project team.
1.1.
Boundaries of this report
At the level of individual buildings, energy productivity approaches and metrics differ significantly between sub-sectors, namely residential; government and not for profit; and the wide spectrum of commercial buildings – from standard office space to refrigerated retail and data centres. However, we will address the energy productivity opportunities of these diverse sectors in this report as much of the opportunity to transform the built environment is at precinct scale. At this level, all sub-sectors are typically co-located. Figure 1: Boundary of this report
At the precinct scale, transport, as well as water and energy supply infrastructure is a key determinant of the energy productivity of cities. Many of the challenges and opportunities relating to urban form, and transport is addressed in the 2xEP Passenger Transport Sector overview report and only briefly mentioned in this report. This report is focused on energy use during the operational stage of the life of buildings. Although embodied emissions in building materials are referenced briefly, the issue is beyond the scope of this report. Furthermore, the construction industry itself is not the focus of this report, but reference will be made to practices impacting on the quality of construction and energy profile of buildings. Where applicable, inclusion of the construction industry in data will be explicitly highlighted.
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Finally, it is envisaged that the 2xEP program will produce a number of discrete, but related reports , including one with a focus on renewable energy solutions and an overview of the Information and Communications Technology (ICT) sector. These areas are therefore not extensively covered in the scope of this report.
1.2.
Structure of this report
Section 2 provides the rationale for doubling energy productivity (2xEP) in Australia, with specific reference to the built environment. This section includes an overview of current trends in economic and energy productivity, the contribution of the built environment to the economy, as well as energy use and energy spend. We also touch briefly on the potential for improvement in the use of energy in the built environment Section 3 provides an introduction to how the A2SE 2xEP initiative proposes to define and measure energy productivity with reference to the built environment. Section 4 provides an outline of opportunities under four strategic areas that, if exploited by households, commercial property owners and governments, could positively impact on energy productivity in the sector. Section 5 highlights the key barriers to energy productivity in the built environment, followed by an overview of potential policy responses and actions by property owners and tenants that could address such barriers in Section 6. Potential next steps, for consideration by 2xEP stakeholders are presented in Section 7.
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2.
The case for 2xEP in the Australian built environment
Key economic and financial factors framing the energy productivity debate in the Australian built environment are introduced using the following structure:
Australia’s international economic and energy competitiveness
Significance of the built environment in the Australian economy and energy market
Potential for improvement in the use of energy in the built environment
This section provides the context for a discussion of the technical building blocks of energy productivity, discussed in Section 3, for consideration by stakeholders.
2.1.
Australia’s international economic and energy competitiveness
Productivity, in its most basic form, is the ratio of input used to output produced. Productivity is a key expression of the relative competitiveness of nations; competitive economies tend to grow faster over time and their populations tend to enjoy higher standards of living. The productivity level ... determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. (Schwab, Sala-i-Martin, & World Economic Forum, 2014)
Historically, increases in productivity have been the principal contributors to income growth in the Australian economy, with other sources of income growth being the terms of trade and labour utilisation. However, half the growth of Australia’s Gross National Income (GNI) over the period 2000– 2012 is attributable to ‘one-off boom-time factors’ such as the favourable terms of trade during the extended mining boom (Gruen, 2012). This masked Australia’s virtually stagnant national multi-factor productivity (MFP) index in the period 1995–2013 (Australian Bureau of Statistics, 2013c). The competitive challenge for trade-exposed sectors was increased by an exchange rate well above the historical average (Lydon, Dyer, & Bradley, 2014). The cycle is now turning, as prices for key Australian commodities are declining from recent highs and labour participation rates are likely to remain flat due to an ageing population (Gruen, 2012). Therefore, the most viable option for improving national income is to improve MFP, namely the productivity of capital, labour and intermediary inputs, such as energy. Total energy spend by end-use sectors of the Australian economy was $111 billion in 2011–12, equivalent to approximately 8% of Gross Domestic Product (GDP) (Australian Bureau of Statistics, 2013a, 2014b; Stadler, 2015). This is a significant cost to the Australian economy, but more significantly, electricity and gas prices have increased significantly since 2007, whilst stabilising or declining in real term in the EU and the USA (Stadler, Jutsen, Pears, & Smith, 2014). Energy productivity (see shaded Box 1 below) could therefore play a central role in a broad-based national strategy to lift GNI. Box 1: Measures of energy productivity Energy productivity, measured as real GDP per unit of primary energy input, is a complex measure that reflects efficiency gains as well as the effect of shifts in the structure of economic activity. The cost per unit of energy input adds a further ‘competitiveness’ dimensions to energy productivity, which reflects the relative cost competitiveness of countries in the use of their energy.
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Australia is lagging on both counts. Australia’s energy productivity, measured as the value of real GDP per unit of energy input, is 14% lower than the Group of 20 (G20) country average – the second lowest amongst the developed nations in the Group of 20. With an average 1.1% per annum improvement 2 over the last 18 years, Australia also lags behind all developed G20 and BRICS countries, except Italy and Brazil, as illustrated in Figure 2 (World Bank, n.d.). The latter period of this energy productivity performance comparison coincided in Australia with significant policy support for energy productivity investment, which resulted in the improved energy productivity of some sectors (Stadler, 2015). However, many of the federal government programs aimed at stimulating energy efficiency investments have now concluded, including the Clean Energy Technology Investment Program (CTIP) and the Energy Efficiency Opportunity (EEO) program. Figure 2: Australia’s energy productivity, relative to other countries
Not only is the mean economic value per unit of energy consumed by G20 countries higher than for Australia, so too is the G20 mean growth in energy productivity. The leading jurisdictions, such as the European Union and the US have also set aggressive improvement targets:
2
The European Union is targeting a 20% reduction in energy intensity by 2020 compared to 1990 levels and greater than 27% or greater by 2030 (European Commission, 2014).
The USA has adopted a target to double energy productivity by 2030 compared to 2010 levels (The White House, 2013).
China, although currently lagging behind Australia on energy productivity, improved its energy productivity by 153% between 1990 and 2009. China is targeting a further improvement in energy productivity of 16% between 2011 and 2015 (Institute of Industrial Productivity, 2011; World Bank, n.d.).
Brazil, Russia, India, China and South Africa
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In short, G20 peers are accelerating away from Australia. Although domestic electricity prices have now stabilised, they doubled over the last decade and gas prices seem set to rise steeply over coming years. In comparison, the inflation adjusted electricity and gas prices in Europe and the USA are largely static or declining (Haylen, 2014; Stadler et al., 2014). Consequently, the potential contribution of energy productivity improvement to Australia’s overall economic productivity is now at an historic high. The country is coming from a low productivity base, coupled with relatively high real energy prices. This means that the use of energy, as a production input, has a much more material impact on the profitability of businesses and on Australia’s economic growth than previously. A target to double energy productivity in the built environment sector could catalyse coordinated efforts to radically improve the efficiency, resilience and comfort of buildings (existing stock and new), whilst enhancing the liveability of communities. Measures might include more effective enforcement of existing and, where appropriate, higher standards for new buildings and precincts, as well as more stringent operating performance standards to lift the efficiency of existing buildings through retrofits and improved efficiency of appliances.
2.2.
Significance of the built environment
The contribution of the services and construction sectors to the Australian economy 2013–14 are summarised in Table 1 below (Australian Bureau of Statistics, 2015). Table 1: 2013–14 contribution to the Australian economy Sector
Industry Value Added (nominal $ billion) 3
Total Income (nominal $ billion)
Employment (‘000)
Services (Non-residential)
701
2023
8,374
Construction
108
360
1,073
76%
76%
87%
1,060
3,120
10,874
4
Share of Australian Industry (%) Total Australian Industry
5
The increased significance of the built environment in the economy is closely linked to the increase in population, employment in general and the growth in the services sector of the economy in particular. Over the seven year period between 2006–07 and 2013–14, services sector employment grew by 2.4% per annum compared to the industry average of 1.9% over the same period, resulting in a 2.5% increase in the service sector (excluding 6 government) share of industry employment. The construction sector share of industry employment 7 remained constant at 10%. Industry value added for both the services and construction sectors grew 3
Includes ANZSIC Divisions F, G, H, J, L, M, N, O, P, Q, R, S and the water supply, sewerage and drainage service industries, plus experimental estimates for the auxiliary finance and insurance services industry. Transport services and storage is also included. Although some of the sub-sectors fall outside the definition of ‘commercial sector’, their electricity and natural gas usage are primarily related to the use of building space (e.g. warehouses, etc.) 4
Excludes public sector and residential
5 As per ABS data definition, this includes government / public sector, private households as well as some sub-sectors of the financial services sector for which experimental estimates do not currently exist. 6
Note that mining recorded strong employment growth over the same period, but manufacturing contracted
7
Excluding the financial services sector
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marginally above the national nominal increase of 6% per annum. (Australian Bureau of Statistics, 2015). In the five year period to 2018, growth in services sector employment is projected to continue to outpace the mining and industrial sectors. The sub-sectors with the highest projected growth over this period are health care and social assistance (16.3%), education and training (13.3%), professional, scientific and technical services (9.9%), construction (8%) retail trade (7.8%) (Department of Employment, 2014). The sections following provide a high level overview of the floor area of buildings, as well as the direct energy use attributed to the built environment and the associated energy cost.
2.2.1. Residential At a personal level, houses are often the largest single investments that Australians will ever make. Therefore, efforts to improve the policy, regulatory and knowledge management frameworks that impact on building energy performance have the potential to create social, economic and environmental benefits that are lasting and cost effective. (Pitt & Sherry & Swinburne University of Technology, 2014)
The number of dwellings increased at an average rate of approximately 121,000 per annum over the 15 year period between 1998 and 2012. The average floor area for new residential dwellings increased rapidly in the decade to 2003-04. However, as illustrated in Table 10 growth in the average floor area has moderated over the decade since then although new houses are still increasing in size. Detail on the average floor area of new residential dwellings in Australia is presented in Appendix B (Australian Bureau of Statistics, 2013a). In 2012 there were an estimated 22.7 million people occupying 8.7 million private dwellings in Australia, an average of 2.5 occupants per dwelling (Australian Bureau of Statistics, 2012, 2013d). If fertility, net overseas migration and life expectancy rates were to continue in line with recent trends, the population would be 31.4 million in 2030 with a corresponding increased need for amenities such as housing and infrastructure (Australian Bureau of Statistics, 2013d, 2014a). Meeting the additional demand for housing between 2015 and 2030 would, based on a conservative estimate, require approximately 3 million additional dwellings, with a combined floor area of ≈600 2 8 million m if current trends prevail. This is in addition to the reported shortages in residential stock.
2.2.2. Commercial A Council of Australian Governments (COAG) study found that there is a lack of reliable and consistent data about the nature and extent of the physical stock of buildings in Australia and there is no single or authoritative source that can be referred to in order to answer key questions such as (Council of Australian Governments (COAG), 2012):
How many buildings are there in Australia?
How many square metres of buildings are there?
What is the break-down of the stock by function, size, age, location, ownership, tenancy or other key parameters?
How are these parameters changing over time?
8 Based on 2015 population of 24 million and assumed 2.5 occupants per dwelling of an average size of 200m 2 per dwelling. This could be conservative as the number of occupants per dwelling is projected to decrease over time
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Data limitations in this sector will continue to make monitoring of energy productivity improvements challenging. However, the 2012 study commissioned by COAG provides a useful starting point estimating that the floor area for non-residential buildings in Australia will increase from 208 million square meters in 2010 to 246 million square meters in 2020. This study predicts that the pace of growth in floor area in the period 2015–2020 will increase at 1.8% per annum, compared to 1.6% per annum in the preceding 5 years. Appendix B provides for a detailed projection of total floor area by non-residential building type (Council of Australian Governments (COAG), 2012).
Buildings constructed between 2012-13 and 2019-20 are projected to make up 23% of all commercial floor space by 2019-20 (ClimateWorks, 2013). As estimated, the current non-residential built environment floor space by sub-sector is illustrated below. Figure 3: Estimated 2015 share of non-residential building floor area by sub-sector Standalone offices Supermarkets TAFE / VET Correctional centre
Non-standalone offices Retail strips University
Hotels Hospitals Public buildings
Shopping centres Schools Law courts
18% 4%
6%
9%
35%
5%
19%
3%
11%
5% 1% 1% 0.5% 18%
2.2.3. Energy use by the built environment Much of the energy use by the built environment is determined during the initial design as inefficiencies are tied up in the built form – windows, insulation or poor orientation. Legacy thermally inefficient buildings are expensive to retrofit, but if left unchanged, are also relatively expensive to heat and cool. Such inefficiencies also put pressure on electricity and gas networks, particularly in peak periods, resulting in expensive latent network capacity that increases prices. Although there has been some progress on lifting energy productivity in the built environment in Australia, change has been slow. Continuing along the current trajectory will see consumers facing increasingly high energy costs if electricity and gas prices continue to rise above inflation (Department of Climate Change and Energy Efficiency, 2010).
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The residential and commercial sectors consumed 1,677 PJ primary energy / 1,587 PJ final energy in 2012–13, including liquid fuels. However, when excluding petroleum-based products which are primarily used in in transport, the residential and commercial sectors consumed 696 PJ primary energy / 667 PJ final energy (i.e. electricity and natural gas only). This is equivalent to 42% of 10 electricity and natural gas consumed by the end use sectors in the Australian economy. The construction industry consumed a further 199 PJ primary energy / 189 PJ final energy in 2012–13 of which 93% are oil based energy sources. This is a 16% increase since 2008–09, but constitutes less 11 than 5% of primary energy from all fuel sources consumed by end use sectors (Stadler, 2015) . The electricity and natural gas consumption by the residential and commercial building sectors over the five year period to 2012–13 is illustrated in Figure 4 below. Over this period, residential energy consumption increased by 6.4% compared to 6.1% for the commercial and construction sectors (Stadler, 2015). Figure 4: Primary electricity and natural gas consumption trend (PJ)
6.4%
PJ
6.1%
2008-9 2009-10 2010-11 2011-12 2012-13
Residential 364 383 380 378 387
Commercial (expanded scope) 290 304 307 302 307
Whilst electricity consumption declined in the residential sector by approximately 3% over this period, natural gas consumption increased by 22%. A similar trend was observed in the commercial sector. Consequently, natural gas consumption as a share of energy use in the building sector increased from 31% 2008–09 to 36% in 2012–13 (Stadler, 2015). Approximately 65% of residential energy use relates to space and water cooling/heating – see schematic in Figure 5 reproduced from (Choice, 2012), with reference to a household with an annual electricity bill of $2,254. This is not dissimilar to other estimates, which attribute 38% of the residential household sector consumption to space heating and cooling and a further 22% to hot water (ClimateWorks, 2014b). 9
ANZSIC Divisions F, G, H, J, K, L, M, N, O, P, Q, R, S and the water supply, sewerage and drainage service industries. Also included transport services and storage. Although some of the sub-sectors fall outside the definition of ‘commercial sector’, their electricity and natural gas usage are primarily related to the use of building space (e.g. warehouses, etc) 10
Excluding electricity and gas supply, as well as oil and gas extractive sectors
11
derived from BREE data, adjusted to align with boundaries of the economic dataset (ANZIC) in consultation with ABS
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Figure 5: Indicative end use break-up for an electricity-only household
The end-use energy break up in the non-residential built environment is driven by the composition of the building stock. A 2012 projection prepared for COAG of the energy consumption split across building types is presented in Figure 6 below(Council of Australian Governments (COAG), 2012). Figure 6: Energy consumption by non-residential building type (PJ, 2015 est)
As indicated in
Table 12 below, hotels, shopping centres, supermarkets and hospitals are the most energy intensive building types on a per square meter basis. A summary of the average energy intensity per building type is provided in Appendix B (Council of Australian Governments (COAG), 2012).
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In the non-residential building sector heating, ventilation and air conditioning (HVAC) is generally the largest end-use for electricity, with lighting and equipment following behind, while space heating is the dominant end-use for gas. This is illustrated Figure 7 below (ClimateWorks, 2014b). Figure 7: Indicative energy end use break-up for the non-residential built environment
Energy demand from ICT (information and communications technology) equipment in general and data centres in particular is included in the above dataset. It is envisaged that the ICT sector will be explored in more detail in a separate 2xEP report.
2.2.4. Energy cost Whilst the residential sector accounted for 42% of end use sector electricity and natural gas consumption, in 2011–12, it paid 70% of the energy bill as illustrated in Table 2 below (Stadler, 12 2015). Table 2: Energy spend by the built environment ($ million, 2011–12) Energy source
Residential Sector
Commercial (expanded scope)
End use sector
Built environment share of end use sector
Electricity
13,837
11,356
34,344
73%
Natural Gas
3,598
1,084
8,160
57%
17,435 (41%)
12,440 (29%)
42,503 (100%)
70%
Total
Energy cost has become an important driver for improving energy productivity in the built environment. As illustrated in Figure 8, after removing the impact of inflation, electricity prices paid by residential consumers increased by 77% and gas prices by 50% between 2007 and 2013.
12
Derived from ABS, Energy Account, Table 1 Hybrid Physical and Monetary Energy Use Table, Australia, 2011-12, adjusted by 2xEP in consultation with the ABS.
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Figure 8: Real electricity and gas price increases Australia experienced the highest price increases
The concerns of households about escalating electricity prices have also been confirmed in a 2013 survey. More than 80% of respondents indicated that they were concerned about electricity and transport cost. This was the highest ranking concerns, above food, mortgage and medical costs (Choice, Brotherhood of St Laurence, & Energy Efficiency Council, 2013).
2.3.
Potential for improvement in use of energy
Significant progress has been made in improving the energy performance of Australia’s building stock. This section will highlight some recent studies that report improvements and estimate the scope for further improvement. We will also reference the potential of more stringent minimum energy performance standards for equipment and the relative performance of the non-residential building stock with reference to NABERS and Green Star.
2.3.1. Recent studies ClimateWorks noted in their Tracking progress Towards a low carbon economy report that (ClimateWorks, 2013):
Energy intensity of commercial buildings have decreased by 0.3% per annum between 2002–03 and 2010–11
Energy efficiency standards have reduced the heating and cooling consumption of new homes by 17% since 2010
Energy use per household decreased by 0.3% per annum on average, driven largely by improved appliance, water heating and lighting efficiency.
However, much of the focus on efforts to save energy in the commercial buildings sector has been on large public and private sector office occupants. This is estimated to represent only 13% of the overall reduction opportunities, in the (ClimateWorks, 2014a). Estimates of the savings potential vary, but numerous Australian and global studies suggest that the potential for improving the energy performance of the built environment is significant, For example, in Australia:
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The Australian Sustainable Built Environment Council’s (ASBEC) identified the potential for energy efficiency policies to reduce energy use in the building sector in 2029-30 by over 15% below the baseline projected by the former ABARE in 2010 (Allen Consulting Group, 2010).
The Zero Carbon Australia Business Plan estimate that annual energy use in the residential sector can be reduced by 53% and in non-residential buildings by 44% through a range of strategies (Melbourne Energy Institute, 2013).
ClimateWorks estimates that by 2030 the residential and commercial building sectors could respectively reduce energy consumption by approximately 85PJ and 100 PJ (Bennett, 2015; ClimateWorks, 2014b). This is a 27% reduction compared to the 2012–13 electricity and gas consumption by the residential and commercial [as redefined] sectors. These estimates are based on already available technologies. Through innovation overtime, the potential energy 13 efficiency improvement could be even greater.
These savings estimates do not appear overly optimistic in light of other international studies. The World Business Council for Sustainable Development (WBCSD), for the [US] Alliance to Save Energy, estimates that a 30% reduction in energy consumption per square foot in 2030 relative to business-asusual levels is achievable. The WBCSD project drew on a dataset of 19 million commercial and residential buildings around the world (Rhodium Group, 2010). Other international publications of note, such as Factor Four (Weizsacker et al, 1997) and Factor Five (Weizsacker, 2010), have shown in detail how designers and engineers, for both new build and retrofit, have achieved in practice 50-80% energy efficiency improvements. Technological advances have a key role to play in transforming the energy profile of the building stock. For example, Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) estimate that the average office lighting intensity of the existing US could be 2 2 reduced by between 80% and 93% (5-15 kWh/m /year from existing level of 73 kWh/m /year) by installing state-of-the-art systems available today (Lucon O., et al., 2014). Excerpts from this latest IPPC report, indicating the savings potential achievable in buildings for various end uses is reproduced in the shaded box included in Appendix C.
2.3.2. Minimum energy performance standards for equipment The Greenhouse and Energy Minimum Standards (GEMS) Review conducted recently by the Commonwealth Department of Industry and Science for the E3 Committee highlighted the prospect for more stringent standards for products already covered by GEMS, as well as scope for broader coverage as illustrated in Table 3 reproduced from this report (Kenington & Clarkson, 2015). Table 3: Comparison of products covered by standards and labelling in selected countries
13
See Appendix BC, Table 13: Potential for energy efficiency improvement in Australia for residential buildings
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2.3.3. Performance of the building stock This section briefly touches on the as designed and operating performance of the built environment, whilst highlight recent policy trends in the other jurisdictions with reference to nearly Zero Energy Buildings (nZEB).
As designed -performance New residential buildings must be designed to a minimum six star standard, with some exceptions in some climate zones (Australian Buildings Codes Board (ABCB), 2014). This is estimated to be 59% more efficient than the current stock in the dominant climate zones (Alternative Technology Association, 2012; as cited in ClimateWorks, 2014b). Higher performance standards can be achieved at affordable rates as illustrated in the shaded box below. However, compliance with the existing National Construction Code (NCC) is generally deemed poor, particularly as the NCC relates to glazing and insulation (Pitt & Sherry & Swinburne University of Technology, 2014). The Green Building Council of Australia’s Green Star voluntary rating system has moved beyond Box 2: Affordable 7 Star homes Habitat 21 showcase models for affordable architecturally designed housing at their Dandenong site. These demonstration houses offer 7-star environmental efficiency, affordability (construction costs around $200,000) and adaptable designs accommodating different household types.
Source: http://architectureau.com/articles/habitat-21/
buildings to now also rate communities and precinct-wide projects. A total of 987 projects have been 2 certified, covering more than 10.5 million m (Green Building of Council Australia, 2015). The average Green Star building is 45% less emissions intensive than the standard new buildings being constructed today and 78% less emissions intensive than the average emissions intensity of the existing Australian building stock (Green Building Council of Australia, 2013, as sited in ClimateWorks, 2014b). There is evidently a significant retrofit opportunity. Australia does not yet have long-term energy efficiency, productivity or emissions targets for either the residential or commercial buildings sectors. However, there is a strong move globally towards regulating for nZEB buildings in many jurisdictions. Recent developments are summarised in Table 4 below (Sebi, 2014): Table 4: Recent policy developments - nZEB standards Country
Recent developments
European Union
Member States are required to draw up national plans for increasing the number of nearly Zero-Energy Buildings, plans shall include:
A definition of nZEB according to national/local conditions (in kWh/m²)
Intermediate targets for new buildings by 2015
Information, financial or other measures adopted to promote nZEB + details on the use of RE in new and existing building (major renovation)
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Country
Recent developments Denmark
Set-up national nZEB definition and roadmap to 2020. With minimum requirements increasing over time as illustrated below: 2
UK
kWh / m / yr
2015
2020
Residential
30 + 1000 / heated gross floor area
20
Non-residential
41 + 1000 / heated gross floor area
25
Targets: Zero Carbon Buildings by 2016 for new residential and by 2019 for all nonresidential buildings From 2016 the carbon compliance limits for the building performance should be :
10 kg CO2/m²/year for detached houses or ~46 kWh/m2/yr
11 kg CO2 /m²/year for attached houses or ~46 kWh/m2/yr
14 kg CO2 /m²/year for low rise apartment blocks or ~39 kWh/m2/yr
France
Minimum energy requirement is adjusted by climatic zone and altitude and hence varies between 40 and 65 kWh/m²/yr (Executive Order 13514).
USA
Federal agencies that shall in the beginning in 2020 and thereafter, ensuring that all new Federal buildings that enter the planning process are designed to achieve zero-net-energy by 2030 California Green Building Standards (CALGreen) targets nZEB for all new residential construction in NZEB by 2020 and by 2030 for commercial buildings.
Operating performance As previously mentioned, data on the performance of the building stock are not readily available. However, since the Building Energy Efficiency Disclosure (BEED) Act 2010 that established the 14 Commercial Building Disclosure (CBD) Program was passed by the Parliament of Australia in June 2010, NABERS Energy ratings for offices have more than tripled. In 2009-10 before the CBD program came into force, 379 office buildings obtained a certified NABERS Energy rating, reaching a record of 1260 buildings in 2013–14 (NABERS, 2014). The Commonwealth Government uses Green Lease Schedules (GLS) for government buildings in support of the Energy Efficiency in Government's Operations (EEGO) Policy and a reduction of energy consumption in Australian Government operations. This requires energy performance to be assessed using a NABERS Energy base building rating. Consequently a large proportion of office space, estimated at 57% of the national office market in terms of NLA, has a NABERS rating. Trends in the performance of NABERS rated buildings, although typically for larger buildings, are providing useful insights. Whilst it is generally recognised that clients of premium office space expect NABERS ratings of 4.5 as a minimum, there is significant scope for improvement as illustrated in Table 5 (NABERS, 2014). Also see Appendix D for more detail 2013–14 NABERS Building Performance Statistics. 14
The CBD Program requires most sellers and lessors of office space of 2000m2 or larger to obtain a Building Energy Efficiency Certificate (BEEC) before the building is offered for sale, lease or sublease.
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Table 5: NABERS ratings profile Average Star Rating
Certified ratings
Buildings >5*
Offices - base building
3.6
1260
265
Offices - tenancy
4.2
215
80
Shopping centres
3.1
25
3
Hotels
2.9
26
4
1
Data centres
Consultation note Stakeholders are invited to share authoritative research studies they deem relevant in comparing Australia’s relative performance in the built environment with reference to design and operating standards.
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3.
Energy productivity in the built environment
This section describes energy productivity in terms of the usual economy-wide definition, and canvasses options for appropriate metrics in the built environment. A 2010-performance baseline is presented alongside the most recent performance data for the built environment.
3.1.
Defining energy productivity
‘Energy productivity’ is the economic value created per unit of energy consumed (or energy dollar spend). It aims to capture the full economic benefit to society or total value created (typically through increased Gross Domestic Product), including the ‘other dividends’ of investing in improved energy efficiency as presented by the IEA in their report ‘Capturing the multiple benefits of energy efficiency’. 15 This may include benefits such as improved health , which flows through in economic benefits such as reduced absenteeism (International Energy Agency, 2014). Energy smart building designs has also been reported to improve labour productivity by between 3% and 23% depending on the specific measures adopted (World Green Building Council, 2013). Energy productivity is thus a broader concept than energy efficiency. The primary metric used at national level is $-real GDP per physical unit of energy deployed (typically primary energy) as presented in equation 1 below. At state level GSP can be used as the numerator, whilst at sector level sales and service income is proposed. Where data is not available, Gross Value Added (GVA) could be used, but there are limitations as discussed in the 2xEP Framing Paper. Equation 1: Basic energy productivity measure 𝐸𝑛𝑒𝑟𝑔𝑦 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 (𝑏𝑎𝑠𝑖𝑐) =
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 (2010𝐴𝑢𝑠$) 𝑃𝑟𝑖𝑚𝑎𝑟𝑦 𝐸𝑛𝑒𝑟𝑔𝑦 𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 (𝐺𝐽)
A secondary metric is proposed to track energy cost as a key dimension of competitiveness. Energy price competitiveness can be measured as $-nominal value of output per dollar $-energy consumed. The numerator, i.e. value created, can be expressed as GDP or GSP or sales and service income at 16 sector level or GVA as appropriate. Equation 2: Proposed price competitiveness measure 𝐸𝑛𝑒𝑟𝑔𝑦 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 (𝑝𝑟𝑖𝑐𝑒 𝑐𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠) =
𝑉𝑎𝑙𝑢𝑒 𝐶𝑟𝑒𝑎𝑡𝑒𝑑 ($) 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐸𝑛𝑒𝑟𝑔𝑦 𝐶𝑜𝑛𝑠𝑢𝑚𝑒𝑑 ($)
These measures capture the outcomes of a range of complex interactions, including developments in 17 energy market regulation, structural shifts in the economy and business cycles and government policy settings. The strategies available to influence the level of energy productivity at a national, state, sector and even company level are therefore more diverse than traditional energy management although it is one of the strategies to be considered as part of the 2xEP Roadmap, as illustrated below. Energy productivity strategies are not focused only on ways to reduce energy inputs. Complementary or 15
e.g. for homes - insulation and efficient heating / cooling or control of ventilation systems in workplaces
16
Please refer to the 2xEP Framing paper for a discussion on the limitations of using value added concepts
17
Downturns can result in underutilisation of capacity without a corresponding drop in energy demand in magnitude and timeframe, whilst commodity boom periods could , pending monetary policy settings, result in significant change in the exchange rate.
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alternative strategies to increase the quality and quantity of outputs (i.e. value created per unit of energy input) are regarded as appropriate ways to improve energy productivity. Figure 9: Key determinants of energy productivity Factors directly impacting energy input
Output dimensions ($ or other perceived value)
Energy Productivity Growth
Drivers
e.g. e.g. • Energy price • Energy market While itsensitivity is understood that 2xEP may not in all instances have a direct influence on some elements policy, incl price • Renewable / determinations included in the figure, it would nevertheless be valuable to bring a greater focus on the energy Government Fuel mix and • Regulation, incl Energy implications of initiatives targeting elements of both the input and output sides of the equation. The Policy primary:final minimum Market & Planning energyproductivity ratio standards four energy strategy areas are: Dynamics • Investment frameworks incentives
Context
Strategy area 1: ‘Traditional’ energy management – improving energy efficiency through better management of energy use, including the implementation of innovative technologies, Structure of thestrategies, economy and stage of economic development demand management best practice data-management and benchmarking energy Geographic size and features, as well as climate (and weather variability) management to facilitate energy-productivity decision making. Demographics / Social Factors
Strategy area 2: Systems optimisation – focusing on precinct scale energy-related aspects of the built environment system, including integrated urban infrastructure planning and design to optimise asset utilisation. These changes may be implemented for reasons of broader productivity improvement such as urban regeneration, but greater value can be realised by adding a deliberate focus on energy productivity.
Strategy area 3: Business model transformation – focusing on the energy-related aspects of fundamental longer-term change in industry norms. This relates to, amongst other factors, the way space is utilised for buildings and infrastructure (e.g. energy supply), the approach to design and building material use, as well as the design and operation of equipment and infrastructure.
Strategy area 4: Value creation or preservation – a focus on quantitative, as well as qualitative aspects of built environment from the perspective of individual property owners and society in general. Consequently, energy productivity is not just about reducing inputs: it is also about increasing the value of assets, as well as the amenity and liveability of the built environment. In some instances, this may lead to increased energy consumption at the same time as improved energy productivity.
3.1.1. Characteristics of an energy productive built environment An energy productive built environment would underpin economic prosperity by optimising the energy performance of infrastructure at all scales. In practice this would require public and private owners of infrastructure to collaborate to transform the urban landscape and the associated energy demand/consumption and arrangements for supply.
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Consultation note… Stakeholders are requested to share their views on a vision for an energy productive built environment.
3.1.2. Measuring built environment energy productivity improvement There is no standard definition of energy productivity specific to the built environment. It is common for the industry to express performance relative to floor area. It may be appropriate to express energy intensity relative to floor area at individual building and property portfolio level where floor area data is readily available. This is a useful metric for operational management, but it does not take into account the value generated by the asset. ‘Value’ may be understood differently by a property manager, a 18 supermarket chain, a government agency or not-for-profit. For a private homeowner, floor area may not be a meaningful factor. At a national level, a key consideration is the availability of reliable data. Floor area is not readily available at a national level. It is therefore proposed that, at the aggregate level, Equations 1 and 2 be used for the commercial (i.e. for-profit) built environment, with total income used as a substitute for GDP/Value Added. These data sets are available at aggregate level, with some limitations including significant delays in the public release of data. However, these metrics are likely not meaningful to government agencies, not-for-profits and households which define ‘value created’ in many different ways. Finding a true productivity measure for the residential sector is challenging since the value generated by energy used form a residential consumer’s perspective is not readily expressed in dollars, e.g. comfort due to use of a residential air conditioner or convenience of travelling by private vehicle on a rainy winter day. Alternative energy 2 efficiency type measures represented by GJ/m or coefficient of performance (COP) metrics also do not capture the true value of energy for the residential sector. House values, in the Australian market, do not reflect a green premium yet, as is the case with commercial buildings. More work needs to be done in this regard, but as a proxy, interim and national metric we propose the equations below. These could be separately calculated for electricity and natural gas (i.e. excluding liquid fuels). Equation 3 below could also be decomposed to account for features of the dwelling stock (i.e. occupants by dwelling type, such as houses, semi-detached, etc.). Equation 3: Interim primary energy productivity measure for the residential sector 𝑃𝑟𝑜𝑥𝑦 𝐸𝑛𝑒𝑟𝑔𝑦 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 (𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑠𝑒𝑟𝑣𝑒𝑑 𝑝𝑒𝑟 𝑇𝐽) 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 = 𝑃𝑟𝑖𝑚𝑎𝑟𝑦 𝑅𝑒𝑠𝑖𝑑𝑒𝑛𝑡𝑖𝑎𝑙 𝐸𝑛𝑒𝑟𝑔𝑦 𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 (𝑇𝐽) Equation 4: Interim price competitiveness measure for the residential sector 𝑃𝑟𝑜𝑥𝑦 𝑝𝑟𝑖𝑐𝑒 𝑐𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠 (𝑟𝑒𝑠𝑖𝑑𝑒𝑛𝑡𝑖𝑎𝑙 𝑒𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑐𝑎𝑝𝑖𝑡𝑎) 𝐶𝑜𝑠𝑡 𝑜𝑓 𝐸𝑛𝑒𝑟𝑔𝑦 𝑡𝑜 𝑡ℎ𝑒 𝑅𝑒𝑠𝑖𝑑𝑒𝑛𝑡𝑖𝑎𝑙 𝑠𝑒𝑐𝑡𝑜𝑟 ($) = 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 Revenue generated is clearly not an appropriate numerator for governments and not-for-profits. At an individual organisation level individual organisations are encouraged to identify indicators of the ‘value 18
2xEP is developing a flexible measurement framework. Encouraging businesses to use measures that are meaningful to them at a strategic and operational level. The use of indexation could, were deemed appropriate enable the integration of diverse metrics into a consolidated improvement trend.
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created’ through their services or proxies of ‘value created’. This is a complex area with much more research required. However, proxies such as population served by a program or a local council (output 19 proxy) or input proxies such as service delivery budget could be considered are illustrated in equations 5 and 6 below: Equation 5: Interim primary energy productivity measure for the not-for profit sector 𝑃𝑟𝑜𝑥𝑦 𝐸𝑛𝑒𝑟𝑔𝑦 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =
𝑅𝑒𝑎𝑙 𝑆𝑒𝑟𝑣𝑖𝑐𝑒 𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝐵𝑢𝑑𝑔𝑒𝑡 (2010𝐴𝑢𝑠$) 𝑃𝑟𝑖𝑚𝑎𝑟𝑦 𝐸𝑛𝑒𝑟𝑔𝑦 𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 (𝐺𝐽) or
𝑃𝑟𝑜𝑥𝑦 𝐸𝑛𝑒𝑟𝑔𝑦 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 (𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑠𝑒𝑟𝑣𝑒𝑑 𝑝𝑒𝑟 𝑇𝐽) =
𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑃𝑟𝑖𝑚𝑎𝑟𝑦 𝐸𝑛𝑒𝑟𝑔𝑦 𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 (𝑇𝐽)
Equation 6: Interim price competitiveness measure for the residential sector 𝑃𝑟𝑜𝑥𝑦 𝑝𝑟𝑖𝑐𝑒 𝑐𝑜𝑚𝑝𝑒𝑡𝑖𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠 (𝑒𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑠𝑒𝑟𝑣𝑒𝑑) =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐸𝑛𝑒𝑟𝑔𝑦 ($) 𝑃𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑆𝑒𝑟𝑣𝑒𝑑
In other instances the number of building occupants or square meters occupied may be the only sensible operating metric. Evidently, no single measure will be suitable for the built environment. This will necessitate the development of a composite weighted index to track improvement trends relative to a voluntary target. This approach is briefly discussed in the 2xEP Framing Paper. However, this is an area that will require significant further stakeholder input. Consultation note… Stakeholders are requested to consider the appropriateness of the above measure as an indicator of the energy productivity of the Australian built environment. In particular, is this the measure that should be used when setting an improvement target? You are encouraged to propose alternative measures that may be most appropriate for their subsectors / building type. Furthermore, work needs to be done in developing a composite metric that can be readily used at precinctscale. Views in this regard are invited.
3.2.
What does a doubling of energy productivity mean for the built environment?
For Australia to remain globally competitive in its use of energy, a doubling of end use sector energy productivity, excluding the energy supply sector and Liquefied Natural Gas (LNG) production, is proposed. This is estimated to equate to an increase in GDP per unit of energy use from $222/GJ in 2010 to $444/GJ of final energy demand by 2030 in 2010 dollars (Stadler, 2015). Preliminary analysis carried out in the 2xEP Framing Paper suggests that this target appears achievable but challenging (Stadler et al., 2014). However, the potential for improvement in energy productivity varies across economic sectors.
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Thus, not the total budget as that could lead to the perverse outcome of a larger public sector being deemed more productive. A similar challenge may be faced if occupants per building is used at an organisation level energy productivity.
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The voluntary target suitable for the built environment is therefore an integral part of the proposed stakeholder engagement process towards the development of an energy productivity Roadmap for the built environment. This section will highlight some characteristics of an energy productive built environment, as well as establish a 2010 baseline for the primary energy productivity measure proposed in Equation 3 above.
3.2.1. Baseline energy productivity (2010) Using Equations 1 and 2, our preliminary estimate of the 2010 baseline energy productivity of the built environment, excluding the government and residential subsectors are illustrated in Figure 10 below (Stadler, 2015). The performance level is calculated on a 3-year rolling average basis to reduce the volatility typically associated with energy productivity measures. Nonetheless, performance against both metrics has been trending down wards. Figure 10: Economic productivity of the built environment – commercial sector (private sector)
Value of output ($2010) / GJ
$2,450
$90
$83
$2,451
$77 $2,404
$2,400
$80 $70
$2,350
$60
$2,300
$50
$2,250 $40
$2,200
$30
$2,150 $2,100
$20
$2,050
$10
$2,000
$Energy Productivity 2009-10 2010-11
2011-12
Value of Output ($) / Energy spend ($)
$2,500
Price competitiveness 2012-13
We have calculated a baseline for the residential sector on two measures – population served per TJ and annual energy cost per capita in Figure 11. The scope of these measures includes liquid fuel and stationary energy used by this segment, but could be calculated separately for each fuel type. The most recent performance level is calculated on a 3-year rolling average basis to reduce the volatility typically associated with energy productivity measures. Figure 11: Residential sector proxy measures for the residential sector
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4.
Opportunities to improve energy productivity
The energy productivity of the built environment is driven by, amongst other factors, the urban form and mix of building types, the design, construction and thermal efficiency of building envelopes, the efficiency of the appliances, central systems within buildings, as well as the behaviour of building occupants. Given that the useful life of assets typically extends beyond 20 years, the pace with which initiatives are adopted will have a significant impact on the contribution of the sector towards a goal of doubling Australia’s energy productivity by 2030. Poor planning decisions can lock in energy-intensive outcomes for decades. This section covers both established best-practice and emerging opportunities that, if more broadly adopted, could have a significant impact on energy productivity in the sector. These opportunities will be discussed within the four broad strategy areas supporting an energy productivity agenda introduced in the previous section, namely: traditional energy management, system optimisation, business-model transformation and value creation/preservation as illustrated below. Figure 12: Summary of opportunities per energy productivity strategy area
Energy efficient equipment and passive building design
Distributed generation and storage
Power factor correction
Waste heat recovery
Data and energy management
Advanced building management systems
Precinct scale designs for new developments projects incorporating, for example:
or urban renewal
transport centric urban design
shared infrastructure – e.g. district heating, cooling
Precinct scale retrofits to address heat-island effects
Break traditional relationship between capital, labour, energy and asset or amenity value of the built environment e.g.
Zero emissions buildings and advanced construction materials that reduce the cost / time of construction, whilst improving thermal efficiency
Collaborative development models to support the development of eco districts
Smart hubs / teleworking
Adoption of rating schemes (e.g. Green Star and NABERS) that secure rental / investor premiums
Use of sustainable building materials, rather than steel and concrete, and associated verification
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The strategic areas are complementary. Opportunities are discussed under the strategy area deemed most relevant, but most opportunities are not limited to one area. Consultation note... A2SE compiled a preliminary collection of practices that could provide a starting point for discussion with built environment stakeholders on potential pathways to improving energy productivity. This is by no means intended as a complete or comprehensive list of opportunities in a diverse and dynamic sector. Furthermore, it is envisaged that distributed renewable energy generation and the ICT sectors will be addressed in a separate report. Opportunities in these areas are therefore only briefly references.
4.1.
Strategy area 1: Traditional energy management
Traditional energy management strategies are a key part of any energy productivity agenda as reduced energy cost has a direct impact on the bottom line of commercial property managers, as well as household budgets. Opportunities in this category are wide-ranging with only a handful discussed below, namely:
Energy efficient equipment and passive building design
Distributed generation and storage
Power factor correction
Waste heat recovery
Data and energy management
Advanced building management systems
4.1.1.
Energy efficient equipment and passive building design
Technology improvement, as discussed in section 2.3.2, can make a significant contribution to improvement in the built environment. This applies to all categories from small appliances, to commercial ovens and refrigeration and central services infrastructure such as elevators and escalators. The Australian Greenhouse and Energy Minimum Standards (GEMS) legislation which came into effect in 2012, created a national framework for appliance and equipment energy efficiency in Australia. Policies are implemented through the Equipment Energy Efficiency Program (E3). An evaluation of the impact of minimum energy performance standards (MEPS) and Energy Rating labels 20 are underway. However, the E3 program is widely believed to have been effective in raising the performance of small appliances and phasing out inefficient alternatives such as incandescent lamps. However, rather than focus on the individual opportunities related to the wide spectrum of equipment in the built environment, best practice would suggest a whole-of-systems approach to energy performance be adopted. As stated by the IPCC AR4: Energy efficiency strategies focused on individual energy-using devices or design features are often limited to incremental improvements. Examining the entire building 20
The basis for the impact analysis has been altered, with the Department of Industry requesting that the results from the 2014 assessment of impact not be used.
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can lead to entirely different design solutions. This can result in new buildings that use much less energy but are no more expensive than traditional building design. The building performance is optimised through an iterative process that involves all members of the design team from the beginning of the building's planning. (cited in Smith, 2014)
A good starting point is to determine the maximum potential performance of the entire building, whilst recognising constraints to the building’s energy efficiency (Rocky Mountain Institute (RMI), 2014). Whilst not all owners will be able to undertake a deep retrofit of an asset in a single project, an integrated medium term plan to achieve set targets is essential. Furthermore, the same whole-ofsystems approach can be applied to individual projects or sub-systems of the building such as lighting and HVAC. This principle is discussed below with reference to lighting, HVAC, office equipment and whole of building design.
Lighting Commercial building lighting systems have been designed to provide a uniform task lighting level over the whole office space, resulting in as much as 85% excess illumination in some areas. Significantly more savings can be achieved when retrofitting lighting system when in addition to the lights and lighting controls, consideration is also given to:
improving natural light with due consideration for the unwanted impact on heating and cooling loads of the building, as well as
the colour tone of the surfaces the light will bounce around.
HVAC In addition to (or instead of) upgrading the components of a HVAC system with more energy efficient alternatives, superior building energy performance can be secured by considering the design, layout and operation of the building. For example:
improving maintenance of filters, coils, fans and air ducts;
reducing cooling requirements by reducing internal heat loads/losses;
ensure outside airflow is not blocked; and
increasing the passive design features of the building, such as cool roofs, insulation, glazing, utilising natural ventilation, as well as natural and artificial shading (Department of Industry and Science, 2015).
Any one or combination of these actions can result in significant improvement in HVAC system performance. Just considering cool roofs in isolation, a joint study by Melbourne University and the City of Melbourne has found painting roofs white can make buildings up to four degrees cooler inside and allow for 10 % more working hours within a comfortable temperature range i.e. a range within which active cooling is not required (Levinson et al., 2007). For example, Melbourne Airport reduced airconditioning saved more than 40,000 tonnes of CO2 over an 18 month period. It also found that 16 auxiliary air conditioning units were no longer required and the energy used by their major chilled water system was reduced by 30-40% (The University of Melbourne, 2012).
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Office equipment A holistic approach to energy efficiency can reduce office equipment energy costs by over 50%. For example, Sustainability Victoria reduced their IT/computer/server energy costs by 68% through:
using energy efficient computers;
implementing automatic overnight shut down of all office equipment;
reducing the number of servers needed from 20 to 13 through virtualisation; and
energy efficient server design (Smith, 2015).
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Whole of building design and retrofit
The Green Building Council of Australia’s 2013 report, The Value of Green Star - A Decade of Environmental Benefits finds that, on average, Green Star-certified building use 66% less electricity than average Australian buildings (Green Building Council of Australia, 2013).
In the residential sector there are many demonstration projects illustrating the commercial viability of designs above the minimum prescribed standard. For example, Lochiel Park Green Village in Adelaide is a suburb-scale development of 106 households. All the buildings in the development have been built to stringent Urban Design Guidelines that set minimum requirements such as 7.5 Stars energy rating, gas boosted solar hot water, a 2 1.0kW peak PV array for each 100m of habitable floor area, high energy and water rated appliances, as well as low energy lighting. Homes in Lochiel Park is using about a third of the energy used by than the average South Australian home (Berry, 2012). Also see Habitat 21 initiative discussed in box 2.
In new buildings, orientation of the building is also a key consideration in reducing both HVAC and lighting requirements. Orientation could also optimise the potential power generation from a rooftop solar PV system in both residential and commercial buildings. The below highlights factors in passive design recommended by thought leaders in this area, namely the German based Passive House Institute. Box 3: Passive design The five key factors for consideration are: An optimal level of thermal insulation
Thermally insulated window frames with high quality glazing
Thermal bridge free construction
An airtight building envelope
Ventilation with heat recovery (PassREg, 2015)
Note: Heat will travel from a heated space towards the cooler outside, following the path of least resistance. A thermal bridge is a weak point in a structure that allows more energy to pass through than might be expected.
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Information about saving energy in servers and data centres is available from ASHRAE Data Center Technical Guidebooks: (http://tc99.ashraetcs.org) US DOE Save Energy Now Tools and Resources: (www.eere.energy.gov/datacenters) \Lawrence Berkeley National Laboratory (LBNL): (http://hightech.lbl.gov/datacenters) Energy Star® Program: http://www.energystar.gov/index.cfm?c=prod_development.server_efficiency_benchmark
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4.1.2. Distributed generation and storage The widespread adoption of behind-the-meter solar PV (photovoltaic) systems, supported by attractive government incentives and the significant fall in the cost of solar PV modules, has assisted many households in reducing their electricity bills. However, this development is disrupting patterns of electricity consumption, leading to more pronounced afternoon and evening peak demand across the network (Higgins et al., 2014; Australian PV Institute, 2015). This could, arguably, have a negative productivity impact on the system as a whole. However, alternative tariff structures and the predicted fall in the price of batteries could reduce these effects (Higgins et al., 2014; Energetics, 2015; The Conversation, 2015). In spite of widespread excitement about the falling cost of storage systems, uptake of batteries by the residential sector will probably be slow and mass grid-defection in Australia is unlikely in the medium term. Batteries will remain an expensive proposition for most households. By 2025 only 3% to 5.4% of household are predicted to have connected their solar PV systems to storage, whilst 1% of households are predicted to disconnect from the grid (Higgins et al., 2014; Deutsche Bank, 2015, Weiss, 2015). The uptake of behind-the-meter solar PV systems by the commercial sector will continue to lag the residential sector for some time due to the much higher cost per unit of electricity paid by the residential sector compared to large commercial and industrial customers. However, as illustrated in Figure 13 below (reproduced from analysis by Energetics), there is significant potential for nonresidential solar PV in Australia. The potential is predicted to grow at an annual rate of 2.4%, reaching 10.5 GW by 2030 (Energetics, 2014). This compares to the total installed capacity in Australia, mostly residential at present, of 4.46GW in June 2015 (Australian PV Institute, 2015). Figure 13: Projected potential non-residential PV systems in Australia
The utilisation of solar PV without storage in the commercial sector is likely to be greater as coolingdriven demand in this sector typically coincides with the period of highest solar exposure. This reduces the need for batteries on a per-kW-installed basis, compared to the residential sector.
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4.1.3. Power factor correction Power factor correction (PFC) can be a simple way to reduce electricity cost for businesses which pay demand charges based on apparent power (kVA)instead of active or real power (kW), and that have large inductive loads (e.g. fluorescent lighting, pumps, fans and motors). These loads, under normal operating conditions, draw not only active power (kW) from the supply, but also reactive power (kVAr). This leads to more current (hence power) being required to perform the task. By correcting the power factor, electricity demand charges, which constitute a significant portion of the average electricity bill (See Figure 14) can be reduced. Sizing the PFC unit is based on the maximum load, the existing power factor and the target power factor (Australian Food and Grocery Council, 2015). Improved power factor at a site level also has upstream benefits. For example. there is a reduced (or deferred) requirement for investment in PFC at a zone substation level, and reduced resistive losses in the network. Thus, resulting in energy savings and emissions reduction in the network.
4.1.4. Waste heat recovery Waste heat recovery opportunities in the built environment are largely in three areas, namely:
HVAC systems (e.g. hybrid HVAC systems, air-to-air heat exchangers or air-to-water heat exchangers) in offices, data centres, galleries, museums, law courts and other large buildings with centralised systems;
steam applications in some building types, such as centralised sterilisation units in hospitals.
Tri-/co-generation plants used in precinct scale developments which also utilise the heat produced from the energy generation process.
There is a range of currently available and developmental low-grade waste heat recovery techniques. The suitability of these techniques in the built environment is dependent on the heat sources and operational characteristics (Ebrahimi, Jones, & Fleischer, 2014).
4.1.5. Data and energy management Energy management is as much about leadership and culture as it is about the systems that measure, monitor and control building systems and energy supply (Bryant, 2015). Leading organisations:
incorporate energy productivity as a design parameter in all capital projects;
adopt maintenance practices to optimise the performance of equipment and building systems over their useful life;
engage with their employees and create awareness of energy productivity as a key value driver for the company;
focus on eliminating waste in everything they do; and
ensure it is resilient, with redundancy levels and mitigation strategies in place to achieve reliable and cost effective service delivery at all times
Metering data is central to energy productivity decision making. This is not only about reduced consumption. Although energy is a controllable cost, as illustrated in Figure 14 reproduced from an internal Energetics document, about a quarter of the charges for a typical retail facility is not linked to consumption. The consumption profile of a building and the applicable tariff structures require close scrutiny as they can have a significant impact on investment decisions, participation in
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demand management programs, the configuration of system set points, as well as electricity and gas procurement strategies. Figure 14: Typical breakdown of energy cost at a retail facility
Furthermore, companies are using increasingly rich datasets available from modern BMSs to support fault detection and diagnosis, inform maintenance and capital acquisition practices, set improvement targets, as well as benchmark building and occupant energy performance to informing design approaches (Rocky Mountain Institute (RMI), 2014). Technology is also putting ‘big data’ at the fingertips of households, enabling them to make better decisions about their energy consumption in real time as highlighted in the shaded box. Box 4: CSIRO’s home energy app ‘Eddy’ is being trailed Reproduced from RenewEconomy (Vorrath, 2015)
Eddy uses cloud-based software and mini smart meters to monitor power usage, as well as switch on and off major appliances like air conditioners, pool pumps, hot water systems via users’ phones, tablets and/or computers For energy retailers like Ergon Energy – which is collaborating on trials of the CSIRO technology that are yet to happen in regional Queensland – the technology will also allow consumers to take part in demand management programs, reducing stress on the grid during peak periods in return for energy bill discounts, or other rewards.
4.1.6. Advanced building management systems Office buildings waste as much as 30% of their energy consumption, according to Schneider Electric. Much of this can be eliminated through monitoring and control strategies, such as networked integrated room controllers connected to sophisticated building management systems (BMS). Room
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controllers are smart thermostats with added control features for building performance drivers such as occupancy, doors / windows opening, lighting controls and, CO2 ventilation (Janjic, 2015). In some cases such strategies can reduce energy consumption of buildings with up to 50% (Kamali, Khakzar, & Abdali Hajiabadi, 2013). A BMS also has a wealth of data to aid decision makers in:
diagnosing and fixing problems
validating performance and verifying savings
justify investments
Large commercial building BMS models are very sophisticated, using actual weather and occupant activity data to provide dynamic benchmarks of performance against actual performance. At the small end of the market, the reduction in the cost and improvement in performance of sensors and monitoring systems are putting control systems with reach of most businesses and even households. However, an inappropriately configured BMS with control errors can easily raise the energy consumption of buildings in the region of 5% - 30% (Kamali et al., 2013).
4.2.
Strategy area 2: System optimisation
Strategies and policies to improve the energy performance of the built environment are typically focused on equipment scale and at best building scale improvements in energy performance. However, optimising individual buildings is only part of the solution as economic productivity is intrinsically tied to the transformation of Australian cities. Precincts lend themselves to transform the energy profile in urban environments as it is small enough to innovate, but large enough to have a meaningful impact due to their size (EcoDistricts, 2014). precincts are key to the dense, diverse, varied cities we need. They house the labour force needed for cities and provide the type of amenity people want. If planned properly they provide the opportunity to export energy and recycled water and remove some of the burden from existing centralise water and energy networks. Monica Barone, chief executive officer at the City of Sydney (The Fifth Estate, 2015)
This is a very diverse and dynamic are. We will, by way of example, highlight three areas to illustrate how connected precinct retrofits and developments can contribute to Australia’s energy productivity. The three areas are:
Precinct scale retrofits to address heat island effects
Shared infrastructure, enabled by economies of scale, that contributes to improved energy productivity of precinct
Transport-oriented precinct design
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4.2.1. Precinct scale retrofits to address heat-island effects Whilst precinct scale developments are frequently associated with large scale urban renewal such as Barangaroo and Central Park in Sydney, significant benefits can also be achieved through more
22
The connection between transport systems and the urban form has been discussed in the 2xEP Passenger Transport Sector Overview, but will be briefly referenced briefly.
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targeted retrofits, such as counteracting the urban heat island effect at precinct scale (Hatvani-Kovacs & Boland, 2015). o
o
Temperatures in Australian cities are predicted to increase by 1.2 C by 2030, up to 2.2 C by 2050 and o 3.4 C or more by 2070 (Bureau of Meteorology, n.d.). Melbourne-based studies looking at the relationship between the heat of a city and the health of occupants show a major impact of sustained heat on rates of death in our community (The Fifth Estate, 2014a). Inadequate adaptation will therefore come at a high social cost. HVAC energy consumption will also accelerate, unless individual households and precincts are implementing passive design features to mitigate the projected increase in temperature. The most effective solution is urban design that incorporates reflective cool roofs, natural and artificial shading, increasing the amount of water in an environment to create a cooling effect and using soft rather than hard surfaces (The Fifth Estate, 2014a). Expanding the tree canopy will not only increase the resilience of urban residents to heat waves whilst reducing demand on energy, but could also enhance the aesthetic value of precincts with potential positive flow through effects on property values and rental yields (Hatvani-Kovacs & Boland, 2015).
4.2.2. Shared infrastructure The economies of scale associated with precincts enables the development of cost effective shared infrastructure such as decentralised energy and recycled water, whilst also saving on space and redundancy requirements for essential services like energy, water, mobility and telecommunications infrastructure (Flow Systems, n.d.; The Fifth Estate, 2014a). This scale also supports the pooling of resources to increase the utility purchasing power of owners and could enable access to alternative funding streams for infrastructure (The Fifth Estate, 2014a). Individual precincts should, however, not be developed as islands. By linking precincts, the risk of over-investing in each community to create the required redundancy level for each could be mitigated (The Fifth Estate, 2014). Box 5: Space saving The central thermal plant at Central Park in Chippendale, Sydney reduces the space required for hot water, air conditioning and energy supply by 60%. For example, instead of 13 individual back up energy systems, only two are required. Space savings translate to an improved rate of return for developers and a smaller carbon footprint. This self-sufficient neighbourhood meets regulatory requirements for operational redundancy (Flow Systems, n.d.)
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Precincts also provide synergistic benefits at the energy-water-waste nexus. Traditional thinking separates the management of each of these resources. However, large distributed energy solutions are more cost effective when coupled with recycled water, driving down costs. For example, a trigeneration system would typically increase the local demand for water, whilst local water production would increases the demand for energy. Doing both creates synergies (The Fifth Estate, 2014a). Also, in the case of solar PV as is the case with the design of Barangaroo South, if there is excess power generated in the middle of the day, but the sewage peaks in the morning and late afternoon, water production can be managed to take advantage of the excess solar power when it is available. These principals pertaining to the energy-water-waste nexus are illustrated in Figure 15 below, reproduced from a presentation by Veolia (Risk, 2014; The Fifth Estate, 2014a). Figure 15: Veolia’s perspective on urban resource utilisation and management
4.2.3. Transport-oriented precinct design
Well-planned precincts are connected to each other and supported by a well-planned transport system, which is essential to unlocking the agglomeration benefits to influence behaviour change.
In order to maximise the agglomeration benefits associated with large cities, an integrated approach to urban design is required with due regard for the interdependence of zoning, concentration of economic activity, densification of residential areas and the capacity of transport networks. Different transport modes come together in a single (albeit often fragmented) transport system, which in turn combines with land uses to influence the accessibility of the system. This combined system of land use and transport influences the safety, affordability, speed, frequency and reliability of transport. It also impacts the spread of jobs and services across cities through concentrated ‘clusters’ of residential dwellings and essential service provision, linked by high capacity public transport, such as heavy rail and a more walkable urban form (Glazebrook, 2014). 30
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As such, it has the potential to impact both sides of the productivity equation because it influences a city’s ability to support economic activity, as well as determine the demand for travel and the available options (i.e. energy intensity of economic activity in cities). It also determines how resource-intensive (i.e. capital, energy and labour) the transport options are. The optimal mix of transport options will be dependent on a range of factors including population densities and available transport corridors. However, cities with well-designed public built environments have significantly lower total transport costs than those that rely heavily on roads and cars (Kenworthy, 2003). The reduced need for parking space associated with systems not dominated by private vehicle travel also allows land to be used for more productive purposes. However, for people to use active transport modes – they need a destination. Somewhere they want to be. The design of precincts with well executed place-making strategies can make this happen. Finally, it is essential that the all transport modes, including light rail, heavy rail, metro and busways, cycling tracks and walkways be fully integrated. This requires end-of-trip facilities for people who ride bicycles, car share and car pooling at trip generators like business parks, airports, hospitals, universities, schools, single workplaces, residential precincts and new developments. Special consideration to improve access for people with disabilities at these points is also required. As highlighted in the shaded box below, the economic benefit to property owners of a well-planned transport system can be significant. Box 6: Access to integrated transport options drive increase in property values A study prepared for the US Department of Transportation Federal Transit Administration found that in a majority of studies of cities where there was investment in rail, light rail, or rapid transit systems, property values nearby increased significantly (Center for Transit Oriented Development, 2008). In Australia, a gain in value of up to 20% was found for properties located near the Brisbane South East Busway (Currie, 2006). Such gains have obvious economic benefits for property owners and contribute to increased government revenue from duties, rates and taxes.
4.3.
Strategy area 3: Business model transformation
New business models that alter the traditional relationship between businesses, their suppliers and customers, and / or the prevailing industry relationship between capital, labour and intermediary inputs (such as energy and building materials) drive industry transformation. This section will focus on some of the emerging business models in the built environment that could impact the energy productivity of built environment, namely:
New technologies and building design
Collaborative development models for eco-districts
Smart hubs and teleworking
4.3.1. New technologies and building design According to research by McKinsey, the construction industry has a weak track record of completing megaprojects on time, on budget, and to specifications, with 98% of megaprojects suffering cost overruns of more than 30%; 77% are at least 40% late. Amongst a wide range of recommendations, 31
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including better project management and the use of technological innovation, McKinsey also recommends that the sector apply ‘lean’ principles, similar to the manufacturing industry (Changali, Mohammad, & Van Nieuwland, 2015). Some industry players, however, are breaking with industry convention and adopting new technologies and approaches. In Australia, Lend Lease started to use cross laminated timber (CLT) to construct apartment buildings (see shaded box below). However, as evident from the quote below, Australia risks falling behind in key innovations in the construction sector, whilst risking opportunities to create jobs in the manufacturing sector: The modular building industry is growing at a great pace. The key reason for this is that buildings can be erected 30-40% faster than conventional buildings, meaning less cost and more affordable housing. However, only 3% of Australia’s building industry is currently modular and there is a huge opportunity to develop this industry, transfer skills from our dying auto industry and provide jobs, and compete with a growing level of manufactured building imports from the region Professor Peter Newman, Leader for the CRC for Low Carbon Living (Low Carbon Living CRC, 2015a)
Box 7: Developments in the built environment Lend Lease’s Forté in Melbourne’s Victoria Harbour (pictured below) is the first cross laminated timber (CLT) building in Australia and the tallest timber apartment building in the world. This nine-storey structure is built using CLT, an innovative new building material which has a structural strength akin to the traditionally used concrete and steel. Timbers used are also sourced from certified sustainably managed forests.
Reproduced from: http://www.lendlease.com
Outcomes: Improved safety standards, including the elimination of manual handling Reduced embodied energy and carbon emissions Reduced truck movements during construction (i.e. fuel used / cost) Higher precision, design flexibility and customisation Reduced impact of construction on local communities Shortened construction time.
Modular buildings are growing in sophistication. In China, the Broad Sustainable Building Company recently completed a six-story building, Broad Pavilion, at the Shanghai Expo in one day, the 15-story Ark Hotel in less than one week and the 30-story T30 tower and hotel in 15 days. Their latest project is a 202-story steel skyscraper, known as Sky City, which they expect to be magnitude-9 earthquake resistant and energy efficient. The plan is to have 90% of the structure built at a factory and just 10 % assembled on site (Xu, 2014). In a March 2014 interview with McKinsey, the company considered its approach to be a step toward redefining urbanisation and addressing the energy and pollution problems that have accompanied industrialisation in China. He described their approach as follows: Our construction process places special importance on air quality, energy conservation, and sustainable materials. By using 20-centimeter insulation layers, quadruple-paned windows, power-generating elevators, light-emitting-diode lights, and Broad’s coolingheating-power and air-filtration technology, Sky City will be five times more energy efficient than a conventional building. In China, most builders use concrete because it is
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standard and they are familiar with it. Sky City will be made mostly of steel, all of which can be reused, if the building is ever decommissioned. Zhang Yue, chairman and CEO of Broad Group (Xu, 2014)
Conventional approaches to building design are also challenged by the growing global trend toward zero and near zero emissions buildings (ZEB and nZEB). This global trend has been highlighted in Table 4 that summarises developments in nZEB standards in various countries. In Australia CSIRO is working with industry and government partners, through the Australian Zero Emission House (AusZEH) project, to assess how significant cuts in greenhouse gas emissions can be achieved in residential housing. The first AusZEH demonstration house has been built in Victoria, Australia, to an eight-star energy efficiency rated building specification (CSIRO, 2010). Beyond Zero Emissions has presented a comprehensive and nationwide plan to retrofit Australia’s buildings (residential and non-residential) that demonstrates how all existing buildings can reach zero emissions (and radically improve energy productivity) within ten years. They make the case for reducing energy use to make the transition to renewables cheaper and easier. The Beyond Zero Emissions plan advocates use of proven, existing, commercial off-the-shelf building and appliance technologies including:
Insulation and draft proofing
Window glazing, better shading and cool roof paint
LED lighting replacement for all lighting types
Energy efficient appliances
New chilled water cooling systems; and
Improvements to air handling in commercial buildings.
They propose that homes can eliminate the need for natural gas supply through electric heat pump heating for space heating, heat pump hot water and cooking with induction cooktops (Melbourne Energy Institute, 2013). Finally, innovation in the equipment sector is also challenging convention as illustrated in the shaded box below with reference to printers. Box 8: Printing services delivered in new ways Studies show that it is possible to achieve large energy efficiency savings through providing the same service in totally new ways. For example, delivering printing services in new ways: Ricoh printing solutions, as implemented at RMIT, require people to go to a printer to print 'on demand' instead of from their computer. This has dramatically reduced the amount of printing that is not collected (Personal communication with Alan Pears). Office printers that allow recycling and reuse of paper up to five times. In 2013 Toshiba launched a new printer that cleans and re-prints on paper up to five times. This has effectively moved paper recycling from the paper mill into the office. It achieves significant energy productivity gains over the lifecycle of printer and paper (Smith, 2014a).
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4.3.2. Eco districts and collaborative development models An estimated 80% of the value of economic activity in Australia can be attributed to cities (Kelly, Donegan, Chrisholm, & Oberklaid, 2014). However, much of the essential infrastructure in our cities is ageing and costly to maintain. The demands of population growth, climate change and community expectations for more liveable, green connected cities will put strain on the existing infrastructure (Flow Systems, n.d.). Whilst state and local governments have a role in providing the public infrastructure that will make precincts work, budgetary constraints are necessitating a more collaborative approach to precinctscale developments as highlighted in the box below with reference to the New York Garment District. Box 9: New York Garment District (Design Trust for Public Space, 2012) Challenge: New York is recognised as a global fashion capital, but zoning regulations established in 1987 were neither enforced nor supportive or of the garment industry. Designers and their suppliers were being squeezed out as manufacturing premises typically fetched less rent for property owners than office space. Response: Stakeholders came together to develop a shared vision for the district as a mixed-use creative hub, shifting City Hall’s plans for the district. Voluntary, market based incentives for dedicated manufacturing space were introduced. Furthermore, manufacturing space was consolidated on the lower floors of buildings, with the higher yield top floors zoned as residential. In support of the efficiency of the industry suppliers’ road access was regulated and dual lifts were installed – for suppliers to industry and residents. So most traffic was to lower floors – minimising the energy use of lifts. The night time vibrancy of the mixed use precinct was enhanced with street lighting that referenced elements of runway shows. Result: Through a program of zoning, branding and community engagement the district is being transformed. This initiative has not had an explicit energy productivity goal, but the model offers useful lessons: (1) maintain agglomeration benefits (for the garment industry) to increase sector revenue, jobs, rental yields and property values; (2) engagement of residents and tenants (e.g. fashion designers), property owners and government – pooling resources and working towards a common goal (3) increasing economic productivity of a precinct may increase energy consumption, whilst improving the energy productivity of individual buildings and the district as a whole. Imagine what more could have been achieved if it did have an energy productivity goal?
4.3.3. Smart hubs, teleworking and video conferencing These models virtualise the agglomeration benefits of cities by altering the traditional relationship between passenger kilometres travel (transport task) and economic output. It is a strategy that assists in overcoming the limitations associated with legacy cities, not build based on transport orientated principles. However, it also reduces demand for increased office space, whilst delivering the same 23 economic output for businesses. Teleworking has been growing in popularity for some time. However, less than 50% of Australia’s high definition video conferencing market potential and less than 40% of the potential for decentralised 23
Note that, whilst this may result in a decrease in revenue for property owner as tenants demand less space in prime areas.
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working in Australia has been realised to date (ClimateRisk, 2014). The rapid advances in communications technologies, coupled with growth in knowledge-intensive industries, is lending renewed support to innovative business models that could accelerate the virtualisation of offices. Building on the global trend to CBD-fringe co-working spaces for freelancers, digital entrepreneurs and start-ups, smart work spaces are now popping up in locations close to where people live, but targeted more towards part time usage by commuting professionals, managers and administrative workers. Service providers are emerging to meet this growing demand by providing fully serviced office environment with a community atmosphere, but allowing subscribers to rent desk space by the hour or part thereof. A recent report by the Institute for Sustainable Futures (ISF) explored the potential for a connected workspace concept or smart hub, Figure 16: Illustrated smart hub concept 24 illustrated in Figure 16, in three western Sydney local government areas. The concept recognises the limitations of ‘home working’ and is a shift towards ‘anywhere working’ – balancing convenience and time saving with visibility in the office. The study found that if the full estimated demand for smart centres in the three areas was realised, it could result in combined public savings of over $20 million annually and private financial benefits averaging over $30/worker/day (Wilmot, K., Boyle, T., Rickwood, P., and Sharpe, 2014). The potential benefits of such centres, as identified by this study are summarised in Table 6. Table 6: Benefits of smart hubs Benefits to employers
Benefits to employees
Reduced office accommodation costs
Reduced commuting time
Risk management of the work setting (compared to home working)
Reduced private vehicle costs.
Business resilience from dispersed locations
Public benefits
Improved recruitment and retention of employees
Reduced pollution
Access to a greater pool of potential employees
Reduced noise
Reduced absenteeism and potentially improved labour productivity.
Fewer accidents
24
Reproduced from Wilmot et al. 2014
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4.4.
Strategy area 4: Preserve or increase value and/or quality of output
The value of investments in energy productivity is often not fully quantified. Even direct financial benefits such as higher rental returns based on the market premium many tenants are prepared to pay are not always considered in investment decisions. Furthermore, many studies – from heat island effects to sustainable design as previously discussed in this report – provide evidence of the benefit of thinking beyond the direct financial benefits of building communities. This section will briefly highlight only two of those potential benefits: value creation i.e. investment returns and labour productivity.
4.4.1. Building energy performance and investment returns The most recent Property Council of Australia / IPD Green Property Index for the period ending December 2014 points to stronger investment returns from high (4-6 stars) NABERS rated CBD office buildings (10.1%) than buildings with low NABERS Energy ratings approximately 8%. This “green premium” for high NABERS rated buildings is attributed to 1.81% stronger capital growth than low rated NABERS buildings (Investment Property Databank (IPD), 2015). High NABERS Energy rated offices also outperformed low NABERS Energy rated offices on a range of other metrics, including higher basic rent, higher net operating income, lower capital expenditure to maintain the building, lower vacancy rate, and longer Weighted Average Lease Expiries (WALE) (Investment Property Databank (IPD), 2014). A similar trend is also evident with reference to Green Starr rated offices, which delivered an annualised total return of 10.3% to December 2013, outperforming the broader office market by 0.6%. The capital growth component for Green Star rated offices outperformed the broader office market by 0.9%, with capital values increasing by 3.3%. As illustrated in Figure 17, Green Star rated offices also reflected stronger income returns, on average higher basic and net operating income (NOI) over the year to December 2013. On average Green Star rated offices’ market vacancy rate for was lower at 3.2% compared to 5.5% for the broader office market. The WALE for Green Star rated offices was also longer at approximately seven years compared to five years for the broader office market (Investment Property Databank (IPD), 2014). Figure 17: Green Star vs all office market – selected metrics (% difference, December 2013) -40%
-30%
-20%
-10%
0%
Basic rent
Vacancy WALE
20%
30%
40%
7%
NOI Capex
10%
19% -29% -2% 39%
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4.4.2. Building energy performance and labour productivity Numerous studies have linked ‘green buildings’ and labour productivity. Improvements in labour productivity can have a significant impact on economic growth given that salaries and wages constitute an estimated 18% of total business operating costs (ABS, 2014a), and as much as 85% in some service sectors (Smith, 2015). These improvements manifest in a number of ways, including reduced absenteeism and improved retention of key staff (Loftness, Kartkopf, Gurtekin, Hansen, & Hitchcock, 2003 cited in Smith, 2015). In order to optimise the impact of natural light on energy use (and employee performance), consideration is often required at the design stage. For example, the impact of energy- and waterefficient building designs, with reference to Leadership in Energy and Environmental Design (LEED) certified buildings in the USA, is illustrated in Figure 18 (reproduced from sources). Nonetheless, retrofit solutions can also have a significant impact, with an increase of up to 11% in labour productivity attributed to improved ventilation and 23% productivity gains due to improved lighting (World Green Building Council, 2013). Figure 18: Operating cost, productivity and health benefits from LEED-certified building designs
Source: World Green Building Council, 2013
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5.
Barriers to energy productivity Consultation note...
This section is intended to provide background information for stakeholders in considering what action the sector could take to address barriers and where action or support may be required from governments to remove or reduce such barriers.
It is imperative that barriers to the adoption of energy productive technologies and practices are overcome to optimise the investment in energy productivity, thus increasing the return on investment in the built environment. Numerous reports and studies have identified the major barriers to implementing energy efficiency initiatives in the buildings sector, such as the Report of the Prime Minister’s Task Group on Energy Efficiency, the ClimateWorks report on Commercial Buildings Emissions Reduction Opportunities, the Green Value report, and the ASBEC Net Zero Emissions Homes report. Consequently, the classic barriers to energy efficiency in this sector are well understood. The key barriers will be discussed under the following headings:
Prevailing investment paradigms
Split incentives
Unsupportive regulatory environment
Lack of information and knowledge
Lack of skills
5.1.
Prevailing investment paradigms
Lack of investment in productive assets is not only an energy productivity issue with a slowdown in business investment in general a concern, with the Reserve Bank of Australia (RBA) also weighing in on the issue in the June 2015 Bulletin. Contrary to economic theory, the current historically low interest rates have not stimulated business investment (Lane & Rosewall, 2015). Surveys by the RBA and Deloitte, suggest that the cost of debt does not influence the investment decision making of most firms. Although more than 90% of businesses use discounted cash flow as the basis for making investment decisions, evidently nearly 70% of firms update the hurdle rate used in selecting project to investment infrequently or rarely. Consequently, at a time when the RBA cash rate is below 3%, nearly 90% of companies have a hurdle rate of more than 10%, about 50% has a hurdle rates above 13% and some use a rate as high as 30%. Meeting and exceeding high internal hurdle rates is not sufficient to secure ‘financial’ project approval. Approximately 90% of businesses also use simple payback time as an additional measure – signifying:
the premium placed on recouping cash to avoid a negative impact on credit ratings.
distrust in cash flow projections as decision-makers typically know less about a project than the specialist who modelled the business case. Using simple payback is perceived as a way of adding an additional risk margin to account for this uncertainty.
The investment-designing making framework used by 90% of Australian firms would therefore appear to ignore cash flows beyond 5-years which penalises long term transformational projects. This short term orientation is placing Australia’s future growth and prosperity at risk (Delloite, 2014; Lane & Rosewall, 2015).
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With specific reference to the built environment, conventional assessment of the value of building retrofits frequently leads to tactical changes due to the above short term paradigm. However, the evaluation paradigm is also narrow with individual projects being analysed on a standalone basis, considering only the direct retrofit cost and associated energy savings. Evaluations of retrofit opportunities typically do not take account of a range of other benefits such as development cost reductions, tenant based revenue increases, increased value of the asset and operating cost savings (Rocky Mountain Institute (RMI), 2014). A further challenge is the valuation methodologies used by the financing sector, which typically would not consider many of these additional benefits in their evaluations. Finally, with specific reference to households, upfront cost can be prohibitive, especially when coupled with the desire for short payback periods. For example, research on the Australian Zero Emission House found that the prospective zero-emissions home-owner must provide for an additional upfront cost of 15% and a payback period of around 11 years, which most consumers would find too long (Riedy, Lederwasch, & Harris, 2012). However, a full conversion to zero emissions is not always necessary. There are many measures – ones that are faster, simpler, and more cost-effective – that are simply overlooked by consumers and companies.
5.2.
Split incentives
Developers and builders have different costs and interests to building occupiers, and building owners have different incentives to tenants. The Green Value (The Royal Institution of Chartered Surveyors, 2005) report notes that split incentives and disincentives in lease structures encourage wasteful construction, ownership and operation. For example, gross leases, where the landlord pays electricity bills, can result in tenants being discouraged from saving energy. However, in net leases, where the tenant pays the bills, an initial investment in energy efficiency can be deterred because lower energy costs will not benefit the landlord (International Energy Society, 2007). Any arrangement that frees a part of the buildings sector (including residents) from paying the costs of low energy productivity will encourage wasteful and unproductive behaviour (Kenington & Clakson, 2015).
5.3.
Unsupportive regulatory environment
This is a very broad area and the issues experienced by different subsectors are diverse. Only a few key areas are highlighted below.
Enforcement of standards: There is a general consensus among industry professionals that compliance with Australia’s National Construction Code (NCC) is poor. This engenders higher overall costs and emissions for building owners and occupants (Pitt & Sherry & Swinburne University of Technology, 2014).
Water and electricity networks: With specific reference to precincts, industry participants belief in a precinct’s ability to create its own energy and water networks are hampered by existing regulation which favours incumbent energy and water providers (The Fifth Estate, 2014a).
Price Structures: In response to significant energy price increases, consumers and businesses have reduced demand for electricity through various strategies. But as consumption has fallen, the fixed network costs are recouped from a lower volume of sales, driving up the unit cost and fixed charges associated with energy (Wood, Carter, & Harrison, 2014). This increasingly acts as a disincentive for some end users to reduce their consumption further.
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5.4.
Lack of information and knowledge
Building managers and owners frequently hold on to old paradigms/habits/behaviours which are not conducive to optimising energy productivity. This makes them less receptive to new information. However, there is also a genuine lack of information and knowledge across all sub-sectors in the built environment. For example:
Lack of performance and stock data limits regulatory efforts as previously highlighted. This also has an impact on performance benchmarking, as much of the commercial building stock are not covered by NABERs and an operating energy rating or labelling scheme does not exist in the residential sector.
In the residential sector, there is a general lack of understanding and awareness of the benefits of energy efficient buildings, with energy efficiency features readily traded off in the development stage for aesthetic features and other amenities. Demand for energy-efficient homes is therefore low.
5.5.
Lack of skills
Skills gaps in the building sector have been noted as one of the key barriers to lifting energy productivity (The Department of Resources Energy and Tourism, 2010). Developing industry capacity is crucial. A 2011 report by Skills Australia identified upcoming skills shortages in assessors for Residential Building Mandatory Disclosure, building scientists, energy auditors, vocational Educational and Training (VET) teachers, and mechanics for refrigeration and air conditioning (Skills Australia, 2011). The Institute for Sustainable Futures at the University of Technology, Sydney has identified the need to develop and deliver skills education and training initiatives that meet the needs of the building industry, including specific training on energy efficiency and zero carbon homes such as innovative onsite training (Riedy et al., 2012).
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6.
Overcoming the barriers Consultation note
This section is intended to provide some ideas for stakeholders to address in developing the 2xEP Roadmap over the next few months. This section is not intended to prescribe solutions. It provides an initial list of potential program concepts for stakeholder discussion and a co-ordinated industry-wide program.
There are many possible methods to radically improve energy productivity in the building sector in Australia. These methods include governance and regulation, standards, codes, capacity building, information-provision and awareness-raising, research, technology development, financing and investment in on-the-ground initiatives. Both internationally, and within Australia, leaders are testing and demonstrating what is possible. There is no single, perfect solution – planning and interventions are needed across all systems. What is needed now is the commitment to get behind a comprehensive sector plan, and an economy-wide effort to make it happen. The areas of opportunity are discussed under the headings of:
Government leadership
Change in investment paradigms
Regulatory reform
Incentives and pricing measures
Information and capacity development
6.1.
Government leadership
As a large owner and occupier of property, governments can lead by example. The incorporation of Green Leases in tenancy agreements is supported. However, increased participation as a tenant in the NSW and Victorian EUA schemes could provide these schemes with the critical mass required to gain widespread acceptance in the Australian market. The Commonwealth’s EEGO commitment, Commonwealth, state and territory governments could also participate in programs such as the envisaged 2xEP Challenge program. A voluntary commitment to a target above the official 40% improvement in energy productivity of its own public building stock would send a powerful message to industry. Furthermore, through its policies, programs and regulations highlighted in later sections, government has a key co-ordinating role to play in aligning the activities of a diverse group of stakeholders towards a common energy productivity target. As illustrated in Figure 19 (adapted from Pears, A. 2015) there is a myriad of decision makers and influencing factors that will determine whether or not the built environment will make a significant improvement in doubling energy productivity.
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Figure 19: Buildings chain of influence (adapted from Pears A, 2015)
Everyone - from designers, to construction companies to property managers to tenants, to owner builders, to investors, banks and insurance companies as well as urban planners, local government planning boards, building code boards, and government policymakers - influence energy productivity performance of the built environment sector. Government therefore has a key role to set appropriate policy frameworks, incentives and facilitate investment in capacity building and skills as discussed in more detail below.
6.2.
Change in investment paradigms
As illustrated in Figure 20 reproduced from Rocky Mountain Institute’s deep retrofit series (cited in Stewart, 2015), deep retrofit opportunities deliver considerably more value than conventional energy efficiency cost benefit analysis would indicate. However, it would require industry to consider:
the value at risk of not investing in the asset
additional future revenue streams – beyond the short 3- to 5-year timeframe
appreciation in the asset value.
The evidence base to support an estimation of these additional value drivers is becoming increasingly robust.
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Figure 20: Expanded cost benefit paradigm to unlock the potential deep retrofit value
6.3.
Incentive programs
Well-directed incentives and support programs are required to overcome the barriers associated with high upfront cost, long payback periods, as well as lack of knowledge and skills. There is a number of existing programs that could support investment by industry, with the largest initiatives listed in Table 7 below. Table 7: Existing schemes supporting investment in energy productivity Name
Target sectors
Scope
Large entities
National
Business, NGOs and households
NSW
Energy saver
Business
NSW
Victoria Energy Efficiency Target Scheme (VEET)
Business, NGOs and households
Victoria
Industry Skills Fund
All business
National
Efficient Government Building Program
Public buildings
Victoria and NSW
Commonwealth’s Emissions Reduction Fund
25
NSW Energy Savings Scheme (ESS) 26
The above programs are important instruments to advance energy productivity. However, energy productivity could also be incorporated in other programs such as the NSW Community Building Partnership Program which provides grant funding of up to $200,000 for every NSW State Electorate for the improvement of community infrastructure, and creates more vibrant and inclusive communities, Funding is provided to Councils and not-for profit organisations (NSW Government, 2015). 25
offers financial incentives in the form of payments per tonne of carbon abated
26
Help businesses reduce their energy use through subsidised technical investigations to identify energy efficiency opportunities, tailored financial business cases to support energy efficiency projects, the provision of measurement and verification for implemented projects, assistance with accessing NSW ESS, and technical support for projects (NSW Office of the Environment and Heritage, 2015a)
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There is also scope to revisit a national white certificate scheme to replace existing state-based schemes as previously contemplated (i.e. National Energy Savings Initiative). Standardisation of schemes will simplify and reduce the cost of participation in these schemes by end users (Australian Sustainable Built Environment Council, 2014). Past or current Australian and overseas programs suggested by others as worth considering in designing new or enhancing existing Australian programs are listed Table 8 below. Table 8: International and past Australian programs Program
Country
Type
Description
Low Income Energy Efficiency Program (LIEEP)
Australia
Government
The LIEEP was an Australian Government competitive, meritbased program, which provided grants to consortia of government, business, and community organisations to trial energy efficiency approaches for low-income households, enabling them to better manage their energy use. It is now closed to funding applications (Department of Resources Energy and Tourism, 2013).
Australian Business Energy Savings Program (ABESP)
Australia
Public private partnership
Assists Australian businesses to lower their energy use and GHG emissions. In this program, local councils recruit small businesses to participate, and the organisation Global Sustainability Initiatives assists with assessment, sourcing of finance, and implementation. The ABESP targets standard electric equipment, which reduces uncertainty, speeds up assessment, and helps to achieve high returns (ClimateWorks Australia, 2010).
Weatherisation assistance program (WAP)
US
Government
The WAP helps low-income households improve the energy use and thermal efficiency of their homes, and provides small subsidies for energy bills (U.S. Department of Energy, n.d.). Since 1976, WAP has helped more than 6.2 million families reduce their energy consumption and energy cost burden (National Research Council, 2014).
Consultation note Stakeholders are requested to share other international, as well as existing and past Australian programs they think should be considered. Furthermore, should special consideration be given to groups such as first time home buyers, Low income households, retired persons, or people with disabilities /heat sensitive medical conditions?
6.4.
Preferential taxation, rates and planning concessions
The Commonwealth Budget 2015 announced a temporary increase in instant asset write-off for small 27 businesses to claim back purchases of up to $20,000. After June 2017 the threshold will refer to the current level of $1,000 (Australian Government, 2015). Businesses could use this for energy productivity initiatives in the built environment, but a more targeted program of accelerated 27
Defined as businesses with an annual turnover of less than $2 mil
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depreciation applicable to all businesses could be considered. Accelerated depreciation allowances could be tied to energy efficiency measures or linked to improvement in the overall energy performance of the building to a predetermined standard. Accelerated depreciation would allow investors to defer tax payments in exchange for bringing forward energy efficiency investments (The Property Council of Australia, 2009). Upfront cost to the government will be offset over the life of the assets for energy productivity projects with positive net present value. This, unlike grant programs, act retrospectively. Thus ensuring the project is implemented and that funding targets financially sound companies who could fund the investment in the first place. The availability of accelerated depreciation allowanced for energy productivity projects could also support the development of the leasing market. The practice of differential rates for energy efficient vehicles already adopted by the ACT 28 Government could be extended to residential and commercial property. Consideration could also be given to differential stamp duty on property to incentive investment in energy and water efficient homes and commercial buildings. This will require appropriate rating and labelling schemes for all building types and sizes covered by such a scheme. This could extent to the residential sector with labelling of energy efficient houses. International experience suggest that to be effective, complexity of such schemes should be lowered and it should be possible to readily assess the relative advantage of a grade (Mlecnik, Visscher, & van Hal, 2010). Planning regimes could be adjusted to allow for concession being granted to developments with superior energy productivity outcomes, for example measures could include:
fast track planning processes for low carbon houses
providing spatial concessions (e.g. increased height restriction) for nZEB buildings.
6.5.
Financing
Innovative financing mechanisms are required to overcome the barriers associated with high upfront cost, long payback periods as previously discussed and the issues associated with split incentives. 29 Existing programs and financial products such as Environmental Upgrade Agreements (EUA), Green Bonds and various ‘pay as you go schemes’ can be enhanced and further extended to the energy productivity domain, whilst new products such as Energy efficiency mortgages could be considered. A more detailed description of the products and possible enhancements are provided in Appendix E.
6.6.
Information and capacity building
Human behaviour affects energy productivity through occupant actions and decisions about energyusing equipment and building characteristics. In fact, a range of non-technical measures has been found to have an impact equivalent to between 0.4 to 1.3 NABERS stars on building performance, with each additional star representing a 15% reduction in the energy use of a building. These non-technical measures range from energy productivity incentives/penalties to maintenance contractors (0.4 stars) to management’s knowledge of energy productivity (1.3 stars) (Bannister et. al., 2009). Information and capacity building is therefore not a ‘soft area’. This is recognised by the commercial building and precinct scale mixed use sectors. There is strong evidence of a significant improvement in energy productivity of new builds, driven to a large extent by the introduction of energy assessment, benchmarking and rating tools summarised in Appendix F. However, at the moment, consumer 28
See 2xEP Passenger Transport report / ACT Government’s Green Vehicles Duty Scheme
29
Similar to the US Property Assessed Clean Energy (PACE) finance
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demand for advanced energy productivity homes in Australia is low and the mainstream mass housing market is still delivering to minimum energy performance standards. Nonetheless, information is not only an issue to residential or smaller developers. Many barriers to achieving truly sustainable precincts are not technical. A key to the development process is in having information early, and using predictive analytics to anticipate issue, according to Bruce Taper, Director at Kinesis (The Fifth Estate, 2014a). Capacity building at developer, designer/architect/engineer and government policy level is also required. Targeted support programs are required to overcome the barriers associated with lack of knowledge and skills, as well as to recognise and incentivise corporate innovation or leadership. A selection of support requirements are discussed below ranging from collaborative research, awareness campaigns and tools, to skills development.
6.6.1. Innovation and collaboration Government has an important role in funding research and development to reduce the risk to business of adopting cutting edge energy productivity technologies and design practices. The Australian Government / Low Carbon Living CRC (CRC LCL) impact pathway initiative aimed at transforming the built environment is aligned with the 2xEP goal of significantly improving energy productivity. A research program has been formulated that with industry engagement could make a significant contribution to transforming the energy profile of the built environment. Amongst other projects, impact pathways are envisaged for the development of an evidence base for low carbon living policy, as well as:
Designing integrated low carbon precincts, estimated to contribute 4.2 MTCO2e per annum reduction in emissions by 2020, equivalent to an 80% reduction in new low carbon precinct development projects.
Mainstreaming low carbon buildings, which is estimated to achieve 1.5 MTCO2e per annum reduction in emissions by 2020 through residential and government energy efficiency renovations, as well as the adoption of transportable buildings (Low Carbon Living CRC, 2015b)
Practically, innovation could be supported through energy hubs such as near zero emission urban hubs and central business district hubs. Ideally, energy hubs would test and demonstrate savings, plug information gaps, accelerate increases in standards, and improve decision support tools (Low Carbon Living CRC, 2015c). Useful lesson could be drawn from approaches adopted globally to aid innovation and collaborative 30 31 urban precincts development, such as Eco Districts and the Design Trust as previously highlighted, as well as breakthroughs in engineering and design. For example the ‘3 for 2’ concept developed by the Future Cities Laboratory of the Singapore-ETH Centre, in partnership with Siemens Building Technologies. This concept allows the construction of three floors within the standard space of two floors, without an impact on the perceived floor-to-ceiling height. It is in the test phase, but researchers estimate that it could reduce energy consumption in offices by 40% (McGar, 2015).
30
See: http://ecodistricts.org/
31
See: http://designtrust.org/
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6.6.2. Consumer awareness The US Alliance Commission on National Energy Efficiency Policy found that behaviour based energy efficiency products and programs that achieve verified savings by altering the energy usage patterns of consumers are a reliable, scalable and affordable method of providing demand-side resources. The estimated extent of the gains to be achieved through behaviour based programs range from 2-3% savings realised (through actual results of programs occurring in the US today), to an estimate of a 25% efficiency gain that could occur above normal productivity improvements in the economy (Ehrhardt-Martinez & Laitner, 2010). Specific mechanisms influencing human behaviour include customer tips and assistance, social norms and marketing, timely or real-time building energy-use feedback and benchmarking, as well as financial incentives. A number of online resources is already available, providing consumers with advice on energy efficient homes during design and operation stages, for example:
Your Energy Savings, which provides easy-to-read, practical information in fact sheets and 32 how-to guides to help households improve energy efficiency
Your Home, which provides detailed information on sustainable design, construction and 33 renovation
The Built Environment Sustainability Scorecard (BESS), which assists builders and 34 developers to show how a proposed development demonstrates sustainable design
However, marketing and more active forms of engagement will be crucial to raising awareness of the financial benefits, comfort and lifestyle benefits of the most energy efficient homes. Adoption is also influenced by the prevailing social norms, which makes it important to reach critical mass in adoption. Research into ways to influence, or ‘nudge’ consumers to alter their behaviour and decisions could assists with successful program design. Feedback is one way of achieving more active engagement. For example energy bill benchmarking, real-time consumption information, energy management systems, or advances in technologies that increase available data on customer energy usage (see box 4). Web portals, home energy reports, inhome displays and information access protocols enable utilities and third party providers to offer their customers more insight into how to save energy. With this information available and ability to respond 35 in real time, time of use and capacity based tariffs could be an effective incentive for demand shifting and driving household investment in energy efficiency. In addition to tariffs, simple financial incentives such as rebates can also alter consumer behaviour. Financing based on improved projection of savings (i.e. energy efficiency mortgages as discussed in Error! Reference source not found.) could influence decisions to buy energy efficient buildings. Guarantees that savings will exceeding cost on a ‘pay as you save basis’ (e.g. on-bill financing or
32
http://www.yourenergysavings.gov.au/
33
http://www.yourhome.gov.au/
34
http://bess.net.au/site/about/
35
the Grattan Institute has proposed capacity-based tariffs whereby consumers pay for the maximum load they put on the network, better reflecting the costs of building and running the network. They have also proposed that consumers be charged more for use during times when the network is under most strain, in summer and winter ‘peaks’ (Wood et al., 2014)
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EUA’s Error! Reference source not found.), if products are understood and trusted by consumers, could also unlock investment in energy efficient alternatives.
6.6.3. Industry awareness The benchmarking of GreenStar and NABERS rated building by the Investment Property Databank and the Australian Property Council on tracking the investment performance of green commercial buildings is a powerful communication tool (IPD, 2015). However, much could be done to enhance the quality of information available to assessors and buyers of energy efficient commercial buildings, with reference to:
Energy performance of green buildings
Gathering and sharing of financial performance data on green buildings
Evidence base for benefits such as improved staff productivity or reduced absenteeism attributable to green buildings
In order to support a shift towards value based valuation of green building (as discussed in Section 6.2) rather than cost based approach will require developing consistent measures to communicating the benefits.
Other mechanisms that could increase awareness of the improvement opportunity, associated solutions and the approaches to realise intended benefits are highlighted below. Scope exists to promote existing initiatives or expand the scope of the mechanisms. Table 9: Mechanisms to increase industry awareness Mechanisms
Example
Benchmarking of performance
At an individual system level, the development of benchmarking tools such as Calculating Cool for HVAC systems is useful in not only communicating the extent of improvement possible, but also for directing building managers to where the opportunities lie to make improvements. Calculating Cool is currently free for use by users wishing to benchmark the performance of HVAC systems in Australian office buildings with a NLA of 2,000m2 or more (Sustainability Victoria, 2015). The scope for other similar tools and how it can be best promoted could be considered.
Certification of service providers
The promotion of the Energy Efficiency Certification Scheme, focused on Integrated Building Energy Retrofits (IBERS) in commercial buildings, including EPCs, which was launched in December 2013 (Bertoldi et al., 2014) could also assist in ensuring better understanding of performance guarantee offerings, increased trust in the outcome and unlock more investment in deep retrofits.
Credible and easy to use templates / tools
The Better Buildings Partnership, in association with Spark Helmore Lawyers, has released a suite of downloadable model lease clauses aimed at establishing a easy to use frameworks for sustainable operations and collaboration throughout the life of commercial leases right from the on-set (Better Buildings Partnership, 2015b). Also see Appendix F for rating tools.
Peer recognition schemes
Competitions and annual awards program to recognise leading projects or organisations can also be powerful communication tools.
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6.6.4.
Industry skills development
The Federal Government committed, in July 2011 as part of the Clean Energy and Other Skills Package, $32 million 4 years to enable tradespeople and professionals in relevant industries to deliver clean energy services, products and advice (Department of Education Employment and Workplace Relations, 2011). As of 2011-12, the Government had invested more than $8.5 million in 19 clean energy and energy efficiency skills and workforce development projects under the package (Combet, MP, 2012). However, in August 2013, the Australian Government announced that it would discontinue the Clean Energy Skills Package (The Liberal Party of Australia, 2013). Nonetheless, there is a range of capacity building initiatives and free online peer reviewed resources already available that could be built upon, including: 36
Environmental Design Guide
– managed by the Council of Building Professionals.
Energy Transformed – online training package by The Natural Edge Project
Whole of System Design Manual – online textbook by The Natural Edge Project
COAG Energy Efficiency Exchange web portal
37 38
39
However, much more can be done to increase the efficiency with which capacity building initiatives are developed and delivered. In its submission to the Energy White paper, ASBEC proposed a two pronged approach to deal with the skills gaps experienced in the industry, namely:
6.7.
Better co-ordination between government, professional associations, education providers and industry to deliver existing programs. Actions to facilitate this is highlighted in the ASBEC ‘Skills Collaboration Framework’
Develop new programs targeting critical skills gaps applicable to each sub-sector (Australian Sustainable Built Environment Council, 2014).
Regulatory support and reform
In general, achieving a significant shift in the energy productivity of the built environment will require a partnership between government, business and consumer groups. A co-ordinated approach between the different tiers of government will also be necessary. Furthermore, the alignment of voluntary, incentive based and regulatory levers to drive and reward innovation in energy productivity is crucial. Some specific areas for consideration by stakeholders are discussed under the headings of:
Data and decision making
Planning
Product MEPS and energy labelling
Building rating schemes and energy labelling
36
http://www.environmentdesignguide.com.au/
37
http://www.naturaledgeproject.net/Sustainable_Energy_Solutions_Portfolio.aspx
38
http://www.naturaledgeproject.net/Whole_System_Design.aspx
39
www.eex.gov.au
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6.7.1. Data and decision making Australia’s building energy assessor capacity and associated decision support software tools have long been recognised as an area that need to be improved upon (Department of Climate Change and Energy Efficiency, 2010). More recently, Brookfield Multiplex, the GBCA, ASBEC and the CRC LCL have also recommended the development of a practical framework that can link government and businesses strategic goals to development and building strategies that create a more positive impact, with reference to economic, environmental and the social value in the built environment (Low Carbon Living CRC, 2015d). Realising the intent of decision making tools and frameworks will require investment by industry and Governments in closing the substantial gaps in the data required. Some of these gaps could be closed through research, but consideration could also be given to providing incentives for owners and occupiers to monitor and report post-occupancy performance. Incentives could include subsidies for the installation of sub-metering systems, in exchange for supplying data to develop representative database of building performance data.
6.7.2. Planning Whilst densification is inevitable to stem urban sprawl, Professor Peter Newton, research professor in sustainable urbanism and research leader, CRC for Low Carbon Living at the Swinburne Institute for Social Research believes that there are neglected opportunities for medium density developments or ‘greyfields’. He estimates that there are perhaps 350,000 dwellings in Melbourne where 80 % or more of the property value is in the land, rather than the dwelling (The Fifth Estate, 2014b). Replacing single dwellings with medium density residential developments in these areas could deliver significant energy productivity gains if approached on a precinct scale, incorporating an explicit focus on energy. There are encouraging initiatives under way to optimise the urban form for both livability and energy productivity. For example the NSW Government’s Green Grid initiative which provides a spatial framework for regional planning supports key principles underpinning an energy productive built environment and the competitiveness of cities more generally. More specifically, one of its explicit goals is to improve sustainable travel connections (Government Architect’s Office, n.d.). The CRC SI is also developing tools to apply spatial information to urban planning decision-making, for improved economic, social and environmental outcomes.
6.7.3. Product MEPS and energy efficiency labelling The scope of MEPS and energy labelling can be expanded as envisaged under the E3 program. The stringency of MEPS standards could also be increased to ensure energy efficient alternatives are installed as part of the business-as-usual replacement cycle (Australian Sustainable Built Environment Council, 2014). Consideration could also be given to the phasing out of further inefficient alternatives (e.g. halogen lamps) where alternatives (e.g. LED lamps and fittings) become commercially viable.
6.7.4. Building rating schemes and energy labelling The National Construction Code (NCC) can be enhanced. Opportunities include higher baseline standards for energy efficiency in new buildings, strengthened requirements relating to building sealing (in order to reduce air infiltration and leakage), lot layout and solar access rules to support good passive solar house design and a single rating system within the NCC for home sustainability. However, education of the property owner and enforcement of the as designed standards upon
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commissioning is a prerequisite to the NCC reform to boost energy productivity (Pitt & Sherry & Swinburne University of Technology, 2014). Voluntary certification schemes are useful mechanisms for ‘aggregating’ a wide range of technical water, energy and environmental factors to be considered by prospective tenants and purchasers. It is also useful ‘energy efficiency education tools’ for architects, specifiers and designers. The TM enviroDevelopment , commonly adopted by Economic Development Queensland in residential development design specifications also applies to commercial and industrial sites (EnviroDevelopment, 2011) The development of an operating household rating scheme that can be used by developers and real estate agents to market energy efficient developments is essential to bridge the information gap (Low Carbon Living CRC, 2015b). Figure 21 below, reproduced from the US Department of Energy web site illustrate its Home Energy Score system. The Score reflects the energy efficiency of a home based on the home's structure and heating, cooling, and hot water systems. The Home Facts tab provides details about the current structure and systems, whilst recommendations show ways in which the energy efficiency of the home can be improved to achieve a higher score and save money (U.S. Department of Energy, 2015a). Figure 21: Home Energy Score – the U.S. Department of Energy’s a national rating system
Work had previously been commissioned by the Commonwealth Government to consider how best zero and low emission energy (ZLEG) generation systems can be incorporated in the Building Code of Australia (Energetics, 2012). Progressing the recommendations from this report is an integral step towards the development of a consistent framework to support the uptake of nZEn or ZEB in Australia. Finally, there is also scope to expand mandatory disclosure of energy performance of smaller buildings across all sectors (including retail, education, and health) and mandatory efficiency upgrades on refurbishment.
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6.8.
Targets and strategy
While there are already many initiatives underway, there is a need for better coordination and more comprehensive approach. Overarching strategies should be constructed that focus on ‘the ceiling’ (encouraging innovative step-change improvements) rather than ‘the floor’ (minimum standards and base measures) (Department of Climate Change and Energy Efficiency, 2010). The effectiveness of setting clear long term targets are well illustrated by the Better Buildings Partnership as highlighted in the shaded box below.
Box 10: Better Buildings Partnership Leading property owners representing 51% of the commercial office space in Sydney set a voluntary target of reducing their emissions by 70% between 2006 and 2030. At the end of FY2014, they were halfway towards achieving their target having reduced their emissions by 35% from 2006. The partnership is now saving more than $30million per annum in electricity cost due to upgrade works performed since 2006 (Better Buildings Partnership, 2015a).
A priority for the buildings sector is thus to develop a comprehensive long-term vision and strategy for energy productivity, supported by a clear measurement framework with long-term targets. Such a strategy would need to include regular review points to take into account new circumstances.
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7.
Next steps
This report was prepared to provide a starting point for discussion to address the opportunities, barriers, policy recommendations and proposed implementation plan for 2xEP in the passenger sector. Key issues for consultation include:
Defining a data collection strategy to inform the establishment of achievable and sustainable future goals for energy productivity.
Agreeing on the metrics for measuring energy productivity improvement in the sector (and determining whether different metrics are needed for sub-sectors)
Defining the scale of opportunities in the sector and agreeing on an energy productivity improvement target for 2030 for the sector
Setting milestones for achievement year by year and a process for tracking progress. This will be important regardless of what target is set.
Defining the key barriers (and they may be somewhat different across each sub-sector of built environment) and developing a detailed and integrated sector-led program to overcome these barriers and support the sector to make substantial energy productivity gains
Implementing initial programs during the 2xEP Roadmap development activity if possible. Particular consideration could be given to: -
Continuation of currently funded information and education programs
-
Pricing or regulatory reform that would help drive 2xEP in the sector
Developing recommendations for government policy measures to facilitate 2xEP achievement in the sector
Modelling the costs and benefits of recommended measures for the sector and developing a priority ranking of least cost measures to achieve the targets
Communicating the outcomes of the sector Roadmap and marketing the benefits of implementing the program
Defining and agreeing on the best means to engage the sectoral stakeholders on the journey
Delivering and measuring the outcomes.
A2SE is looking forward to working with stakeholders to scope opportunities, consider options and drive change for the better.
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Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, Ed.). Cambridge, United Kingdom and New York, NY, USA: Cambridge University Press. Lydon, J., Dyer, D., & Bradley, C. (2014). Competing to prosper: Improving Australia’s global competitiveness, McKinsey Australia. McGar, J. (2015). The 3for2 Concept: Efficient Office Building Design. Sourceable Industry News Analysis. Retrieved from https://sourceable.net/3for2-concept-efficient-office-building-design/# Melbourne Energy Institute. (2013). Buildings plan - Beyond Zero Emissions Program. Retrieved from http://media.bze.org.au/bp/bze_buildings_plan.pdf Mlecnik, E., Visscher, H., & van Hal, A. (2010). Barriers and opportunities for labels for highly energy-efficient houses. Energy Policy, 38(8), 4592–4603. doi:10.1016/j.enpol.2010.04.015 NABERS. (2014). NABERS Program Statistics 2013/14 (Database). Retrieved from http://www.nabers.gov.au/AnnualReport/201314-program-statistics.html National Research Council. (2014). Real Prospects for Energy Efficiency in the United States. The National Academies Press. Newton, P. in Smith, M. Newton, P. Pears, A et al (2016) Buildings and Precincts Sector Chapter in Smith, M et al (2016) Low Carbon, Resilient and Prosperous Economies. Cambridge University Press (Forthcoming) NSW Government. (2015). Community Building Partnership. Sydney : Author Retrieved from http://www.communitybuildingpartnership.nsw.gov.au/home NSW Office of the Environment and Heritage. (2014). Energy Efficiency and Renewables Finance guide. Sydney: NSW Government. doi:10.1260/0958305043026636 NSW Office of the Environment and Heritage. (2015a). Energy Saver program. Sydney: NSW Government. http://www.environment.nsw.gov.au/business/energy-saver.htm NSW Office of the Environment and Heritage. (2015b). Environmental Upgrade Agreements. Sydney: NSW Government. Retrieved from http://www.environment.nsw.gov.au/business/upgrade-agreements.htm PassREg. (2015). Defining the Nearly Zero Energy Building - Passive House + renewables. Darmstadt, Germany. Retrieved from https://ec.europa.eu/easme/sites/easme-site/files/Defining the Nearly Zero Energy Building.pdf Pears, A (2014) The Energy Efficient All Electric Australian Home. Conference Presentation at the Forum on rd Doubling Energy Productivity. April 3 2014 Sydney: Australian Alliance to Save Energy. Pears, A (2015) Stationary energy efficiency and government policy. RMIT Course Lecture – Course Code MIET 2125 Pitt & Sherry, & Swinburne University of Technology. (2014). National Energy Efficient Building Project. Retrieved from http://www.pittsh.com.au/assets/files/Projects/NEEBP-final-report-November-2014.pdf Rhodium Group. (2010). American energy productivity – The economic, environmental and security benefits of unlocking energy efficiency. NY. Riedy, C., Lederwasch, A., & Harris, S. (2012). Zero carbon homes: A review of leading practice. Risk, K. (2014). Unlocking district energy. In Energy Efficiency Council Conference (p. 20). Sydney : Veolia. Rocky Mountain Institute (RMI). (2014). How to calculate and present deep retrofit value - A guide for owneroccupants. Boulder, Colorado USA : Author Schwab, K., Sala-i-Martin, X., & World Economic Forum. (2014). The Global Competitiveness Report 2013-2014 (Full Data Edition). Sebi, C. (2014). Building energy efficiency standards : towards nearly Zero Energy Buildings (nZEB). In WEC kick off meeting – London, May 20th. Enerdata. Retrieved from www.worldenergy.org/wp-content/.../nZEBcurrent-policy-process.pptx Skills Australia. (2011). Energy Efficiency in Commercial and Residential Buildings: Jobs and Skills Implications. Smith, M. (2015). Doubling Energy and Resource Productivity by 2030 – A Series of Reports, ANU Discussion Papers available at the Alliance to Save Energy 2XEP web portal at http://www.2xep.org.au/doublingenergy-and-resource-productivity-by-2030
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Stadler, A. (2015a). Energy productivity – A review of available data to establish baselines (Part 1: Australia and NSW), Sydney: Australian Alliance to Save Energy. Stadler, A., Jutsen, J., Pears, A., & Smith, M. (2014). 2xEP: Australia’s energy productivity opportunity. Sydney: Australian Alliance to Save Energy. Stewart, M. (2015). Overcoming investment decision making inertia: Driving decisions through productivity. In World Resources Forum Asia Pacific, A2SE 2xEP Panel on Investment decision making for an energy productive Australia. Sydney: Australian Alliance to Save Energy. Sustainability Victoria. (2015). Calculating Cool. Retrieved from http://www.sustainability.vic.gov.au/services-andadvice/business/resource-efficient-buildings/calculating-cool Sustainable Melbourne Fund. (2015). Environmental Upgrade Agreements. Retrieved from http://sustainablemelbournefund.com.au/services/environmental-upgrade-agreements/ The Fifth Estate. (2014a). Creating Sustainable Precincts. Sydney. Retrieved from http://www.thefifthestate.com.au/innovation/planning/ebook-creating-sustainable-precincts/70570 The Fifth Estate. (2014c). The challenges of tall building sustainability. Retrieved from http://www.thefifthestate.com.au/innovation/planning/the-challenges-of-tall-building-sustainability/63225 The Liberal Party of Australia. (2013). Media Release, August 28. Retrieved from http://www.liberal.org.au/latestnews/2013/08/28/update-coalitions-responsible-savings The Property Council of Australia. (2009). The Second Plank: Green Depreciation. Sydney : Author. Retrieved from https://www.propertyoz.com.au/library/Green%20Depreciation.pdf The Royal Institution of Chartered Surveyors. (2005). Green Value: Green Buildings, Growing Assets Report. The University of Melbourne. (2012). Cool Roofs: City of Melbourne Research Report. Retrieved from http://www.melbourne.vic.gov.au/Sustainability/CouncilActions/Documents/Cool_Roofs_Report.pdf U.S. Department of Energy. (n.d.). Weatherization Assistance Program. Retrieved from http://energy.gov/eere/wipo/weatherization-assistance-program U.S. Department of Energy. (2015a). Energy-Efficient Home Design. Retrieved from http://energy.gov/energysaver/articles/energy-efficient-home-design U.S. Department of Energy. (2015b). Financing Energy-Efficient Homes. Retrieved from http://energy.gov/energysaver/articles/financing-energy-efficient-homes Vorrath, S. (2015). CSIRO rolls out remote energy monitoring technology. RenewEconomy. Retrieved from http://reneweconomy.com.au/2015/csiro-rolls-out-remote-energy-monitoring-technology-20772 Weiss, G. (2015). Despite the Tesla hype, going off grid is not that simple. One Step Off the Grid (5 August 2015). Retrieved from http://onestepoffthegrid.com.au/despite-the-tesla-hype-going-off-grid-is-not-that-simple/ von Weizsäcker, E., Lovins, A., Lovins, H. (2009) Factor 4: Doubling Wealth and Halving Resource Usage, Earthscan, UK. von Weizsäcker, E., Hargroves, K., Smith, M., Desha, C. and Stasinopoulos, P. (2009) Factor 5: Transforming the Global Economy through 80% Increase in Resource Productivity, Earthscan, UK. Wilmot, K., Boyle, T., Rickwood, P., and Sharpe, S. (2014). The Potential for Smart Work Centres in Blacktown, Liverpool and Penrith: report prepared by the Institute for Sustainable Futures, University of Technology, Sydney, for Regional Development Australia Sydney, the Western Sydney Regional Organisation of Co. Wood, T., Carter, L., & Harrison, C. (2014). Fair pricing for power. Melbourne : The Grattan Institute Xu, D. (2014). How to build a sky scraper in two weeks. McKinsey& Company. Retrieved from http://www.mckinsey.com/insights/engineering_construction/how_to_build_a_skyscraper_in_two_weeks
59
Appendix A.
Abbreviations and acronyms
ABS
Australian Bureau of Statistics
AEMC
Australian Energy Market Operator
AEMO
Australian Energy Market Operator
AER
Australian Energy Regulator
ANZSIC
Australian and New Zealand Standard Industrial Classification
BREE
Bureau of Resources and Energy Economics
CBD
Central Business District
CEFC
Clean Energy Finance Corporation
DSR
Demand Side Response
E3
Equipment Energy Efficiency (Program)
ESCO
Energy Service Company
EUA
Environmental Upgrade Agreement
EUC
environmental upgrade charge
FTE
Full-time equivalent (in reference to an employee)
GBCA
Green Building Council Australia
GDP
Gross Domestic Product
HVAC
Heating Ventilation Air conditioning
HVAC
Heating Ventilation and Air-conditioning
IPMVP
International Performance Measurement and Verification Protocol
KPA
Key performance area
LEED
Leadership in Energy and Environmental Design
MEPS
Minimum Energy Performance Standards
NABERS
National Australian Built Environment Rating System
NEM
National Electricity Market
NOI
Net Operating Income
NPV
Net Present Value
OECD
Organisation for Economic Co-operation and Development
OEH
Office of Environment and Heritage
PACE
property assessed clean energy (finance)
PV
Photovoltaic
RET
Renewable Energy Target
ROI
return on investment
WALE
Weighted Average Lease Expiries
60
Appendix B.
Background information on building sector trends
Table 10: Average floor area of new residential dwellings in Australia 2
Unit size (m ) per dwelling type
New Houses
New other residential
All new residential
1984/85
162.4
99.2
149.7
2003/04
235.1
142.5
211.0
2012/13
241.1
133.9
207.6
Annual change: 1984/85 – 2003/04
4.2%
4.1%
3.9%
Annual change: 2003/04 – 2012/13
0.3%
-0.7%
-0.2%
Table 11: Total floor area of non-residential buildings and projected growth Unit
2010
2015
2020
2
'000 m Stand Alone Offices
Annual Growth 2010–15
2015–20
NLA
37,844
40,911
45,736
1.6%
2.3%
NLA
22,359
23,925
26,988
1.4%
2.4%
Hotels
NLA
10,761
11,424
12,345
1.2%
1.6%
Shopping Centres
GFA
18,659
21,451
24,763
2.8%
2.9%
Supermarkets
NLA
7,657
8,354
9,138
1.8%
1.8%
38,316
40,489
42,746
1.1%
1.1%
12,459
13,747
14,451
2.0%
1.0%
40,024
42,763
46,033
1.3%
1.5%
TAFE / VET
6,917
7,142
7,537
0.6%
1.1%
University
9,312
10,721
12,047
2.9%
2.4%
Non-Standalone offices
40
Retail Strips Hospitals
'000 m
Schools
NLA
2
Public buildings
NLA
1,780
1,800
1,800
0.2%
0.0%
Law Courts
NLA
1,053
1,177
1,259
2.3%
1.4%
Correctional Centre
NLA
1,148
1,254
1,322
1.8%
1.1%
208,289
225,158
246,165
1.6%
1.8%
Total
40
Non-standalone offices are office spaces within buildings whose primary purpose is other than as an office e.g. office areas within industrial buildings, home offices, or office buildings of less than 1,000 m 2 NLA
61
Table 12: Australian average energy intensity by building type 2
MJ/ m
2009
Office - Tenancies
385
Office - Base Buildings
532
Office – Whole Buildings
917
Hotels
1420
Shopping Centres - Base Buildings
403
Shopping Centres – Retail Tenancies
1202
Shopping Centres - Base +Tenancy
1605
Supermarkets (Whole)
3375
Hospitals
1542
Schools
178
VET buildings
367
Universities
868
Museums, galleries and libraries
947
Law Courts
550
62
Appendix C.
Opportunity for improvement (Supplementary schedules)
The table below is reproduced from a presentation by Prof Alan Pear (Pears.A, 2014) Table 13: Potential for energy efficiency improvement in Australia for residential buildings Activity / service
Typical stock (kWh pa)
Best practice now (kWh pa)
Technical Potential (kWh pa)
Heating + Cooling
Potential for improvement exists through the following strategies
2000-8000 + 800
350 + 100
250
Better buildings than 7 star, heat recovery ventilation, solar warming; COP>5, smart controls, 2-stage a/c, desiccant or evaporative pre-cool a/c inlet air.
Refrigeration (family fridge)
Approx 600
320/250
150
Improved insulation, multi-stage compressor, variable speed compressor.
Hot water (3300 kWhCOP=1.67)
2000 (HP)
700
450
Low loss pipes and storage, shower water efficiency>3*, pre-heat inlet air of heat pump?
Lighting
850
150
80
Advanced daylighting further improve LED efficiency to 150 Lumen/watt LED, smart lighting, reduce light levels
TV/AV/IT
TV 400
100
60
OLED TV. Desktop computer ~100 watts, tablet 4 watts, new laptops 10 watts
Cooking
525
350
200
Insulated cookware, induction or resistance in insulated cooking appliance, smart controls, micro electricity storage, induction, more use of microwave, insulated oven with heat recovery from exhaust air.
Clothes washing (312 loads/y)
Approx 235
60+ext hot water/150
80
HW from heat pump. Best EU 8kg 0.43 kWh for 40C half load, 0.62 kWh for 60C full load, better low temp detergents
Clothes drying (60 loads/y)
Approx 300
100/60
40
COP>3, better water removal before drying, weather protected drying, especially for apartments. Best EU 7 kg 0.95 kWh for mix of full and half loads.
Dishwashing (175 loads/y)
Approx 200
130/125
75
Improved low temp detergents, heat recovery, insulation, smart water eff, maybe even real time water cleaning during program. Use external hot water? Lightweight dishes and pots
Pool (if present)
2000
400
200
PV floating copper electrolysis reduces pumping, low pressure filters, low loss pipes, low flow rate (longer pumping period)
63
Box 9: Views of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change Reproduced from: (Lucon O., D. Ürge-Vorsatz, A. Zain Ahmed, H. Akbari, P. Bertoldi, L. F. Cabeza, N. Eyre, A. Gadgil, L. D. D. Harvey, Y. Jiang & Liphoto, S. Mirasgedis, S. Murakami, J. Parikh, C. Pyke, 2014) Savings potential achievable in buildings for various end uses through four strategies – distributed generation, device efficiency, systems efficiency and behaviour change.
Table 9.4 in the above footnote refers to estimates for extra investment cost required for selected very low- / zero-energy buildings. 2
Best case specific energy consumption (kWh/m /yr) for building loads directly related to floor areas.
64
Appendix D.
NABERS 2013/4 Program Statistics
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DRAFT VERSION 1
Appendix E.
Financing programs
Program
Country
Type
Environmental Upgrade Agreements 41 (EUA)
Australia
Public private partnership
“Pay as you Save” schemes
41
Description An EUA is a tripartite agreement, between a building owner, financier and Local Council. It is available in NSW and Victoria. The products vary slightly, but are designed to make it easier for building owners to access finance for environmental improvements. In NSW this includes energy efficiency, renewable energy, water efficiency, waste reduction and other environmental upgrade projects, such as asbestos removal. The loan is repaid by an environmental upgrade charge (EUC), which is a charge against the land component of a property and collected by Local Councils ad part of the quarterly levy payment. Tenants are not a party to the EUA, but where they benefit from a reduction in utility cost and improved amenities. In NSW, building owners can recover costs from tenants. However, legislation limits the cost levied on tenants to a reasonable estimate of the savings a tenant will receive from the environmental upgrade works (i.e. “the no worse off test”) (NSW Office of the Environment and Heritage, 2015b; Sustainable Melbourne Fund, 2015).
Australia
Private
On-bill financing, which is essentially a loans repaid from energy bill savings. These products are facilitated by utilities but have not had great support in Australia to date (NSW Office of the Environment and Heritage, 2014). An exception is large, but simple efficiency programs such as lighting upgrades.
Australia
Private
Energy performance contracts (EPCs) guarantees savings for an
Possible enhancement Uptake has been relatively low. Consideration could be given to ways in which the uptake could be expanded. For example:
National scheme with coverage with a national collection mechanisms (e.g. Australian tax office) so that coverage is not subject to individual Councils’ participation and administration cost could be reduced
simplification of provisions governing tenant contributions
expand coverage to include multi-residential properties or precinct scale developments with a mix of property types?
The issue limiting the uptake of this product may need further exploration from the perspective of both the utility and the end user so that effective solutions can be sought. Mechanism to expand the uptake of EPCs, could be considered. Increased penetration in the commercial
Similar to the US Property Assessed Clean Energy (PACE) finance
66
DRAFT VERSION 1
Program
Country
Type
Description
Possible enhancement
agreed upon period of time in exchange for set fees that are typically less than the borrower’s utility bills. Generally, no up-front costs are required for the building owner. They are effective in dealing with the spit incentive.
market will require:
better understanding of the product and the development of trust in ESCO offers.
EPCs to the value of $72.5 million were concluded in FY2014. This was a significant increase on the $39.1 million of the previous year. However, the number of Energy Service Companies (ESCOs) in Australia has remained fairly constant FY2009. Furthermore, EPC projects have thus far been mostly implemented in public buildings, focused on a limited number of technologies and fields of application, namely lighting and HVAC solution. Some co-generation and trigeneration plants have been implemented in the commercial and in the industry sectors (Bertoldi, Boza-Kiss, Panev, & Labanca, 2014)
expanding the scope of technology coverage; and
making this product available to smaller clients / viable on smaller projects.
Model contracts and implementation guidelines to be used in the public sector has supported the growth of EPC, with some Governments stipulating EPCs for the retrofitting of their departments and agencies buildings (Bertoldi et al., 2014).
In the US the latter is achieved through energy efficiency insurance as is commonly used in PACE programs. This enable smaller service providers to offer the same type of performance guarantees as the large ESCOs, without the need for a large balance sheet to back the claims. Such a product is not available on the Australian market yet.
Energy Efficiency Mortgages (EEM)
US
Private
Homes certified under an accredited home energy rating system (HERS) can access energy-efficient financing whether you're buying, selling, refinancing, or remodelling a home (U.S. Department of Energy, 2015b).
To be discussed with the mortgage providers.
Green Bonds
Australia
Private
ANZ and NAB have issued green bonds in Australia.
This could be considered as vehicle to increase financing for energy productivity initiatives. However, institutional investors will want access to comparable data on energy efficiency performance.
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DRAFT VERSION 1
Appendix F.
Building codes and energy assessment/rating frameworks and tools
Adapted from Newton, P, 2016 Name
Description
Developer Organisation
URL/ Key Reference
Provides a reliable and consistent way to estimate and rank the potential thermal performance of residential buildings in Australia. NatHERS uses a star rating system from zero to 10. It helps to demonstrate compliance with the NCC requirements and helps to optimise the energy efficiency of house designs.
Commonwealth Department of Industry and Science, CSIRO
http://www.nathers.gov.au/
NSW Department of Planning & Environment
https://www.basix.nsw.gov.au/basi xcms/
As designed Nationwide House Energy Rating Scheme (NatHERS) Building Sustainability Index (BASIX)
BASIX aims to deliver equitable, effective water and greenhouse gas reductions across NSW. BASIX applies to all residential dwelling types and is part of the development application process in NSW. It is BASIX is assessed online using the BASIX assessment tool. The tool checks elements of a proposed design against sustainability targets.
The Built Environment Sustainability Scorecard (BESS)
BESS is an assessment tool created by local governments in Victoria. It assists builders and developers to show how a proposed development demonstrates sustainable design, at the planning permit stage.
CASBE (Council Alliance for a Sustainable Built Environment, Victoria)
http://bess.net.au/
National Construction Code (NCC)
Energy efficiency requirements have been progressively included since 2003. Under the code, performance requirements for multi-residential, commercial and public buildings are specified for:
Australian Buildings Code Board
http://www.abcb.gov.au/about-thenational-construction-code.aspx
performance of the building fabric e.g. walls, floors and roofs; glazing and shading;
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DRAFT VERSION 1
Name
Description
Developer Organisation
URL/ Key Reference
The Green Building Council of Australia’s Green Star environmental rating program for buildings was introduced in 2003 to help the property industry to reduce the environmental impact of buildings, improve occupant health and productivity and achieve cost savings.
Green Building Council of Australia
https://www.gbca.org.au/greenstar/green-star-design-as-built/
The intention of the BVC is to enable the residential building industry to respond to increasingly demanding technical standards from consumers, by demonstrating building performance through verification, assurance and testing, instead of just prediction and modelling alone.
Building Verification Forum
http://www.bvc.org.au/
A tool for property owners/operators to measure the energy efficiency, water usage, waste management and indoor environment quality of a building or tenancy and its impact on the environment. NABERS was designed as a voluntary rating tool but in some cases is now effectively compulsory:
NSW Office of Environment & Heritage
http://www.nabers.gov.au/public/
sealing of the building; performance of the heating, ventilation and air-conditioning systems; artificial lighting; heating and pumping of swimming pools and spas; ability to access services that rely on maintenance to continue to perform; and facility to monitor energy use.
As designed & constructed Green Star Design and As Built
As constructed As Built Verification
As operated National Australian Built Environment Rating System (NABERS)
WebPages/Home.aspx
Mandatory disclosure of a NABERS Energy for Offices rating on 2 buildings at the time of lease or sale for 2,000m or larger commercial buildings. Minimum NABERS benchmarks for buildings occupied or procured by
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DRAFT VERSION 1
Name
Description
Developer Organisation
URL/ Key Reference
the Australian Government, as well as some state government departments and other semi-private government agencies The Property Council of Australia has made NABERS benchmarks compulsory for several property grades. Point of sale Liveability Property Features Appraisal Form
The Centre for Liveability Real Estate was founded to provide specialist Liveability real estate training, research, strategy and communication services to the whole residential real estate industry.
The Centre for Liveability Real Estate
http://www.liveability.com.au/about/
ACT Planning & Land Authority
http://www.planning.act.gov.au/
The 17 Things™ appraisal form contains benchmarks for each feature. These benchmarks aims to ensure every appraisal is working to a standard for buyer and sellers, and ensures that consistency across new and existing homes. Benchmarks established to date in association with industry organisations which require proof beyond the agents walk thoughare: AWA: WERS rating certificate, ICANZ: newly develop 5 point inspection checklist and certificate, Clean Energy Council; Solar PV and state or federal government mandatory compliance regimes (natHERS, BASIX or EER rating certificate). ACT Mandatory Disclosure
ACT has its own ACT House Energy Rating Scheme (ACTHERS) which conforms to the national benchmark, NatHERS. Furthermore, ACT has also mandated the disclosure of the house rating when the residence is offered for sale.
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