Investing in energy efficiency is not just about reducing carbon emissions, managing risk and lowering costs for businesses, according to Holly Taylor, Head of Projects at Australia’s Energy Efficiency Council - although it can do all of those things. It’s also about managing future costs in an era of uncertainty and price shocks.
Speaking to Tsen Wong, ANZ’s Head of Energy Transition, REI, as part of ANZ Institutional’s On Air podcast series, Taylor said energy efficiency is about getting more service out of less input, in order to help both businesses and households lower their energy costs while reducing emissions.
“From a risk-management perspective, the best thing a business can do to minimise future price shocks is to reduce that consumption now,” she said. “And the sooner you do those energy upgrades, the sooner you realise those savings and indeed in many situations the cheaper those upgrades can be.”
This can take the form of undertaking energy audits, electrification, and installing more-modern insulation, heating and cooling systems, among other approaches, the two experts said. Done effectively, this can lower costs – by “a little bit of money if you're a household, and a bucketload of money if you’re a business”, Taylor said.
Taylor and Wong were speaking on the release of Putting Energy Efficiency to Work, a report from ANZ and the EEC that finds energy efficiency in Australia has not reached its potential as a method for addressing energy concerns. They welcomed government moves to support greater energy efficiency among businesses in the May Federal Budget.
You can listen to part one of the conversation below. You can also read Putting Energy Efficiency to Work here.
Wong said taking such risk-management steps was a smart move given contemporary energy-market uncertainty related to geopolitics and the transition to a low-carbon world.
“If you were a business and you were trying to manage the risks in your business, energy price squeeze is one of those that can be addressed through energy efficiency,” he said.
“I think this is important because as we move forward through this transition, you'd still want to make sure that your businesses remain resilient to potential future shocks.”
Embracing energy-efficient technology was an option for many businesses facing pressure to decarbonise their entire supply chain, Wong said.
In this way, “you're not just shielding yourself from operational price risk, you're also positioning your business for a more sustainable future”, as well as making yourself a more attractive business partner.
“If you are a supplier to a large business, I think that's going to be important you can demonstrate the ability to deliver products or services that have a low environmental footprint," he said.
“That will increase your competitiveness in the eyes of the broader business community as well as consumers.”
Ultimately any such moves are a cost saver. Taylor said energy efficiency “can be very anti-inflationary in the sense it reduces the overall amount of money that needs to be spent".
“It's really critical to think about… how investing upfront will pay for itself and then pay dividends to the business and indeed the household,” she said.
Wong said businesses “shouldn't shy away from the fact that we are in a difficult environment at the moment from a cost-inflation perspective”.
“Anything that we can do to optimise capital expenditure… to move our energy system into one that's reliable yet sustainable, low carbon and meets the needs of a growing population, is going to be very, very important,” he said.
As well as helping combat inflation, the benefits can extend to productivity, Taylor said – including the health and wellbeing of staff.
At a people level, energy efficiency can help create workplaces that are “more comfortable, through a mixture of thermal performance from things like draft-proofing, insulation [and] double-glazed windows,” she said.
“But also really hitting those productivity gains from being in a more comfortable temperature, whether that's in the depths of winter or the highs of summer.”
Taylor said Putting Energy Efficiency to Work explored the idea of how energy efficiency, through ultimately reducing the amount of energy consumed and therefore generated, could help Australia achieve it’s 43 per cent emissions reduction targets by 2030.
“The biggest finding from the report is the much greater role energy efficiency could and should play in Australia's energy transition and net zero transformation,” she said.
“And it is a cheap way for us to reduce our emissions.”
A key finding of the report is energy efficiency can help reduce demand on future supply-side infrastructure, as Australia moves to a renewable future.
“If we reduce that demand to begin with, we’ll need to build less new generation and indeed less networks,” she said.
Taylor insists this does not mean Australia needs to stop building all those things, just “it will be much cheaper if we reduce the demand because we'll need less than what we would otherwise need”, she said.
For large, publicly-listed companies, incoming requirements mean climate-related financial risks will need to be disclosed publicly. This makes energy efficiency attractive right down the supply chain.
“When that moves to include Scope 3 risks - which is what the International Sustainability Standards Board is currently working on - it’s going to be really critical [for businesses] to say ‘Our suppliers are reducing their emissions by doing X, Y and Z’,” she said.
“And what's the cheapest and easiest thing for them to do? Most of the time it's energy efficiency.”
Taylor said all businesses will face critical decisions around energy efficiency in the future, but the pace of that change is up to individual companies.
“Nobody is saying, hey, every business out there, you need to electrify everything right now and get it done so you can get rid of all of your emissions,” she said. “We want your businesses to thrive.”
“But there are pieces of kit that will be coming up to end of life and we want you to efficiently electrify them, where possible, so [you save] money.
“And you want to do an energy audit so you've got a pipeline of opportunities and you've got a business plan for when you're implementing those opportunities.”
The experts also touched on government measures to financially reward those investing in energy efficiency upgrades in the May federal budget, and why ANZ and the EEC have partnered on energy efficiency. Listen to part one of the discussion on podcast above to find out more.
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