New Perspectives on Institutional Change:
The Case of Changing Energy Management Practices in Australia
Chapter 3: The importance of energy management
This page provides an abridged version of the chapter.
The full chapter can be downloaded here
“Systematic energy management is one of the most effective approaches to improve energy efficiency in industries because it equips companies with practices and procedures to continuously make improvements and capture new opportunities."
”Energy Management Programmes for Industry: Gaining through saving
(Reinaud, Goldberg & Rozite 2012, p. 5)
Chapter 2 examined the need for a rapid transition to a low carbon energy system. It highlighted the critical role that energy efficiency improvement in organisations can play in reducing greenhouse gas emissions and delivering a wide range of economic, social and environmental benefits. The chapter also introduced the notion of the energy efficiency gap. This notion suggests that, despite the potential benefits that energy efficiency can deliver for organisations and society more widely, cost-effective opportunities to improve energy efficiency in organisations remain underexploited.
Chapter 3 presents a review of the existing academic literature on energy management practices and energy efficiency policy to establish key knowledge gaps in the literature that are associated with the adoption of energy management practices in organisations.
3.2 Key definitions
Definitional issues are discussed in this section. This discussion established the reasons for the use of the following definitions in the thesis:
Energy efficiency 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).
The judicious and effective use of energy to maximise profits and enhance competitive positions through organisational measures and optimisation of energy efficiency in the process (Kannan & Boie 2003, p. 946)
Energy management practices
Activities recognised by a community as the legitimate means of coordinating around energy use in accordance with the goals of an organisation.
Energy management systems (EnMS)
“A set of interrelated or interacting elements to establish an energy policy and energy objectives and processes and procedures to achieve those objectives … The purpose of an energy management system is to enable an organisation to follow a systematic approach in achieving continual improvement of energy performance, including energy efficiency, energy use and consumption.” (ISO 2011, p. 2)
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
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)
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