New Perspectives on Institutional Change:

The Case of Changing Energy Management Practices in Australia

 

Chapter 2: Improving energy efficiency in organisations

 

 
This page provides a modified excerpt of the chapter.
The full chapter can be downloaded here

 

This chapter establishes the important contribution that energy efficiency improvement in organisations can make towards reducing greenhouse gas emissions in the short-term and delivering a range of other environmental, social and economic benefits to organisations and society.

 

2.1 Introduction

 

The aim of this chapter is to evaluate the importance of energy efficiency improvement in organisations and to introduce the notion of the ‘energy efficiency gap’ (i.e. the gap between actual and optimal energy use in organisations). This chapter will begin by describing the urgent energy supply transition that is currently underway. This transition, driven by the rising concentration of greenhouse gas emissions in the atmosphere, involves a shift away from society’s reliance on fossil fuels and a shift towards the development of low carbon energy systems. The multiple benefits that accrue from improved energy efficiency (i.e. using less energy to deliver more goods and services) are then examined. This highlights the significant potential that improved energy efficiency performance in organisations can deliver to organisations and society more broadly. Finally, the notion of the energy efficiency gap (defined above) is introduced. The chapter establishes the wider environmental, social and economic context within which this thesis research is conducted.

 

2.2 The transition to a low carbon energy system

 

 

 

 

 

 

 

 

 

 

 

Energy is vital to advance living standards and create wealth. The ability of societies to meet the energy needs of growing populations and economies plays a central role in contributing towards human wellbeing. (Allen 2009; Fouquet 2011, p. 906; Rühl et al. 2012). Currently a significant energy transition is underway. This involves a movement away from a reliance on greenhouse intensive fossil fuels (e.g. coal, oil and gas) to cleaner, renewable sources of energy. As Figure 2.1 highlights, this transition began relatively recently. In 2010, fossil fuels still accounted for 86% of global primary energy use (IEA 2011).

 

Figure 2.1: Global energy consumption and transitions 1800–2010 (Source: Fouquet 2009, p. 49)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to the costs and lead time required to modify energy supply, demand side measures (i.e. measures that focus on the way energy is used rather than supplied) provide an important solution that can deliver cost-effective greenhouse gas reductions and deliver other significant environmental, social and economic benefits in the short-term. Energy efficiency is one of the most important of the demand management options available to organisations (Dunstan, Ross & Ghiotto 2011).

 

 
2.3 The benefits of energy efficiency improvement in organisations
 

Energy efficiency, the focus of this thesis, refers to using less energy to produce the same amount of energy service or useful output (Jollands et al. 2010; Lovins 2004; Patterson 1996; World Energy Council 2008).

 

 

Numerous studies have attempted to quantify the size and financial potential of improving energy efficiency in organisations. For example, the consulting firm McKinsey & Company found that the implementation of cost-effective energy efficiency projects led to estimates that organisations in the United States could reduce energy demand by 23% to 2020 at a net saving of USD680 billion (Brennan 2013; Enkvist, Naucler & Rosander 2007). Participants in the Australian Energy Efficiency Opportunities program have implemented energy savings of 88.8 Petajoules (PJs) between the years 2006–2011. These energy savings represent around 1.5% of Australia’s energy use. Businesses will obtain a collective benefit of an estimated AUD800m a year (van Moort et al. 2013).

 

Energy efficiency improvements are also typically associated with improving productivity in firms by increasing output per unit of energy – both through reducing the energy intensity of the operation and improving the productivity of other input factors as well (Aguirre et al. 2011; Boyd & Pang 2000; Kounetas, Mourtos & Tsekouras 2012; Porter & van der Linde 1995). A number of other benefits include other operations and maintenance savings (Larsen et al. 2012), indoor air quality (Vine 2003) and worker productivity (Miller et al. 2009).

 

Modelling undertaken by the International Energy Agency (IEA) suggests that energy efficiency has a key role to play in the transition towards a low carbon energy system (see Figure 2.4). The top line on the graph is the expected trajectory of greenhouse gas emissions under a ‘New Policies Scenario’ (i.e. a situation in which countries implement all existing policies and declared policy intentions). This has been projected to lead to an increase in average temperature of more than 3.5 degrees Celsius. In order to meet the goal of maintaining carbon dioxide (CO2) concentration in the atmosphere below 450 parts per million, it estimates that energy efficiency has the potential to deliver over 65% of global reductions in energy-related CO2 emissions in 2020 and 57% by 2035 (IEA 2011). The reason for this is that the technology is already available and much of it is cost-effective.

 

Figure 2.4: Projected abatement contributions under the 450 parts per million scenario(Source: IEA 2011, p. 214)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.4 The challenge of resolving the energy efficiency gap in organisations
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5 Conclusion
 

This chapter has established the environmental, social and economic context within which the research has been undertaken. It highlights the significant role that organisations can play in reducing greenhouse gas emissions and delivering broad societal benefits through the improvement of their energy efficiency performance. However, despite the potential benefits, there is a gap between the availability of cost-effective energy efficiency projects and the extent to which they are implemented by organisations. Building on this important background context, Chapter 3 examines the role that effective energy management practices can play in resolving the energy efficiency gap.

 

“Climate change is a defining challenge of our time … The energy sector is by far the largest source of greenhouse-gas emissions, accounting for more than two-thirds of the [global] total in 2010 … Energy has a crucial role to play in tackling climate change. Yet global energy consumption continues to increase, led by fossil fuels, which account for over 80% of global energy consumed, a share that has been increasing gradually since the mid-1990s.

 

'Redrawing the Energy-Climate Map' 

The International Energy Agency (2013, p. 16)

“Climate change is a defining challenge of our time … The energy sector is by far the largest source of greenhouse-gas emissions, accounting for more than two-thirds of the [global] total in 2010 … Energy has a crucial role to play in tackling climate change. Yet global energy consumption continues to increase, led by fossil fuels, which account for over 80% of global energy consumed, a share that has been increasing gradually since the mid-1990s.

 

'Redrawing the Energy-Climate Map' 

The International Energy Agency (2013, p. 16)

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