Australia State of the Environment Report 2001 (Theme Report)
Lead Author: Professor Peter W. Newton, CSIRO Building, Construction and Engineering, Authors
Published by CSIRO on behalf of the Department of the Environment and Heritage, 2001
ISBN 0 643 06747 7
Urban stocks and processes (continued)
International surveys clearly indicate that Australia has very low electricity and petrol prices relative to most other countries for both industrial and residential sectors, and it is the only country where electricity prices have declined between 1997 and 1999 (Figures 27 and 28). Australian petrol prices are also among the lowest in the world, with only Canada and the USA being cheaper. Australian industrial natural gas prices, at around $4.50/gigajoule, are within 15% of the cheapest developed countries (except for Canada, where gas costs a third less than in Australia), and are cheaper than in many developed countries (IEAust 2000). While, in theory, these low prices enhance Australian industry's international competitiveness, this is a two-edged sword. The total cost of energy depends on the price per unit and the quantity of energy used to perform a given task. Indications are that Australian industry has improved its energy efficiency more slowly than many competitors because less attention is paid to this issue than in competing countries, so we are becoming increasingly dependent on cheap energy to maintain competitiveness (Cox et al. 1997). If Australia matched its competitors in energy efficiency as well as having cheap energy, this would provide a competitive edge.
Figure 27: Industrial electricity prices in Australia and selected countries, 1997 and 1999.A [HS Indicator 1.8]
AData for industry with annual maximum demand of 2500 kW and consumption of 10 000 MWh for lowest price observed.
Source: ESAA (2000) for 1997 data; ESAA (1999) for January 1999 data
Figure 28: Residential electricity prices in Australia and selected countries, January 1999. [HS Indicator 1.8]
Source: ESAA (1999)
As shown in Figure 29, Australia's consumption of conventional energy (i.e. fossil fuel, wood, bagasse, hydro-electricity) has grown steadily, with growing population and economic activity. Indeed, final energy consumption has doubled since the early 1970s. 'Business as usual' projections indicate that this growth is expected to continue unless significant policy and practice changes occur. Over the past 25 years, renewable energy consumption has increased by only 50%, much less than the growth in fossil fuel use. New programs, such as the '2% Renewables Target' (which requires electricity suppliers to produce an additional 9500 GWh (approximately 2%) of their electricity from renewable sources by 2010) and a range of initiatives including financial assistance schemes and industry development strategies, mean that renewable energy is expected to play an increasing role in energy supply in the coming decades. However, much remains to be done to ensure a shift towards renewable energy, in a context where recently created energy markets place no financial value on environmental benefits and many incentives exist to increase sales of energy.
Figure 29: Trends in total energy, final energy and renewable energy consumption in Australia, 1975-2010.A[HS Indicator 1.1], [HS Indicator 1.7]
A Total energy is the amount of primary energy (i.e. energy obtained in forms directly from the environment, such as coal or crude oil) used in Australia and to process fuels that are exported. Final energy (often also called end-use energy) is the total amount of energy consumed outside the energy conversion sector-effectively, the energy measured at the electricity meter, gas meter or petrol pump, or otherwise delivered to end users (e.g. fuelwood). In principle, renewable energy includes energy sources that are infinitely large, such as solar radiation, or renew themselves over a short timeframe, such as wood or water in dams. However, the usage of only a few renewable energy sources is documented and included in the data used for Figure 29. These include fuelwood, bagasse (sugarcane waste used as fuel), hydroelectricity, and solar hot water and pool heating. This understates the total contribution of solar energy for small-scale electricity generation, salt drying, laundry drying, passive building heating and crop growing (see text).
Source: BRE (1987), Bush et al. (1989, 1993, 1999), Jones et al. (1991)
Another perspective on energy use can be gained by considering energy use per capita; when compared with other countries, Australia rates among the highest in the world (Figure 30).
Figure 30: Energy use per capita in Australia and selected countries, 1995.
Source: WRI (1998)
Australia's high energy use per capita is not due merely to high levels of energy use by individuals. As can be seen in Figure 31, non-transport end-use energy consumption by households comprises less than 15% of Australia's overall end-use energy. Private transport comprises a similar proportion of total energy use. Energy use in other sectors is therefore a major issue, as discussed below. Of course, much of the energy used in these other sectors produces goods and services for use by private individuals, so the indirect energy use by households through the consumption of goods and services is also a significant issue.
Figure 31: Trends in total energy use per capita, end-use energy consumption per capita, and residential sector end-use energy consumption. [HS Indicator 1.4]
Source: BRE (1987); Bush et al. (1989, 1993, 1999); Jones et al. (1991); ABS (1994)
Figure 31 also shows that, while household energy use per capita is relatively stable, having risen only 15% over the past 25 years, growth in the rest of the economy's energy use per capita is quite strong. It will be a challenge to reverse this trend over the coming decade. The lack of growth in residential sector energy use per capita reflects the relative success of energy-efficiency programs, such as appliance energy labelling and improvement in the thermal performance of houses, as well as ongoing improvement in industrial technologies. This comes despite the increased ownership of appliances, improved levels of comfort, and declining household size. (Declining household size tends to increase energy use per capita because each home has many appliances and heats rooms, regardless of the number of people living there; although this can be offset with a growth in medium density dwellings.) On average, Australian households spend a very small proportion of their budgets on household energy - less than 3%. So it is not surprising that most homes are not particularly energy efficient. Low-income households spend a significantly higher proportion of their budget on energy; the lowest income quintile - the fifth of the population with the lowest incomes - spend 4% of household income on fuel and power, compared to 2% for the highest income quintile (ABS 1996d, 2000e).
Overall trends in final or end-use energy consumption by major sectors are shown in Figure 32. Final energy consumption is dominated by industry and transport, where growth is projected to increase. The dramatic growth in commercial sector energy use is evident. This sector's rapid growth is partly due to its increasing share in economic activity, but also reflects poor performance in the take-up of energy-efficient technologies and systems. The trend in residential sector energy growth reflects the combined effects of population growth and the modest growth in energy use per capita shown in Figure 31. However, it should be noted that most energy used in the commercial sector, and almost half of residential sector energy, is electricity. Each unit of electricity consumed involves consumption of around three units of total energy, mostly from coal, for the generation of that electricity.
Figure 32: Trends in end-use energy consumption for major sectors relative to 1975 consumption, Australia.A[HS Indicator 1.2, 1.3, 1.4 and 1.5]
AA value of 2 on the vertical scale indicates energy use is double the 1975 level.
The structure of Australia's economy influences its energy intensity. Each industry has its own unique energy use characteristics, and these influence its energy intensity (measured as energy used per unit of economic output). If a larger proportion of economic activity is generated by energy-intensive industries, the overall energy intensity of the economy will tend to be higher. There have been complex changes in the structure of the Australian economy over time, with growth in some energy-intensive sectors such as transport and electricity balanced by growth in low energy-intensity industries such as the services sector. There have also been significant changes in the energy intensity of some sectors. For example, the energy intensity of the transport and storage industry declined by 40% between 1975 and 1995, while that of the mining industry increased by around 75% in the same period (Cox et al. 1997).
The services sector is much less energy intensive than other sectors. In 1994-1995 it consumed less than 800 GJ per million dollars of economic output, compared to almost 12 000 GJ/$m for mining, 19 000 GJ/$m for manufacturing, 23 000 GJ/$m for transport and storage, and 88 000 GJ/$m for electricity, gas and water (Cox et al. 1997). However, energy intensity can vary markedly within sectors because of the variety of activities undertaken. For example, energy intensities within manufacturing industries vary by a factor of as much as 20, with metal processing at the high end and machinery and equipment manufacture and some food processing at the low end.
Comparisons of energy intensity can overstate the differences between sectors, for two reasons. Firstly, each sector (and subsector) uses energy in many indirect ways, such as for transport and for the production of goods and equipment used within that sector. For example, the tourism industry relies on a significant consumption of transport energy, but much of this is identified as private travel. Secondly, comparison on the basis of final energy use can underestimate the primary or total energy intensity of industries that consume a large amount of electricity, because for each unit of electricity use, around three units of total energy are consumed. But even after these factors are taken into account, most services and light manufacturing activities have an overall low energy intensity.
From a global perspective, it may be argued that Australia consumes large quantities of energy to produce energy-intensive materials and products for use by the rest of the world. The Department of Foreign Affairs and Trade has pointed out that 20% of Australia's GDP is generated by exports which are dominated by energy-intensive products (DFAT 1997). However, a study of the energy embodied in Australia's imports (Lenzen 1998) found that the energy embodied in our imports almost equalled that in our exports - 1222 PJ in imports compared with 1379 PJ in exports. This discussion will therefore simply consider energy at the national level.
In looking to the future, two ways in which Australia's energy (and greenhouse) intensity can be reduced are through reducing the energy intensity of each industry sector, and by directing growth towards activities that have low energy intensities. Energy intensity within an industry can be reduced by improving energy efficiency, switching fuels (under some circumstances), using materials more efficiently, recycling and value-adding. Structural change is influenced by broad social trends, as well as government policies.
Clearly, the projected trends of ongoing growth in energy use from fossil fuels are inconsistent with the achievement of Australia's environmental goals.
While there is scope to reduce energy losses in the energy supply system, and to switch to energy sources with lower environmental impacts, more efficient use of energy at the point of consumption is often the most cost-effective means of reducing environmental impacts of energy. For example, buying a more energy-efficient refrigerator can cut energy use for food storage by 30% or more. This not only cuts the household's energy bill, but also allows savings to be made throughout the energy supply chain, by reducing the energy supply system capacity required and the amount of coal burned to generate electricity.
Information on the activities for which energy is used helps in developing policies and programs for reducing energy use or greenhouse gas emissions. For example, lighting comprises around a fifth of emissions attributable to the commercial building sector, so strategies that lead to a more rapid adoption of energy-efficient lighting, which can cost-effectively save up to 70% on existing lighting energy use (EMET and Solarch, 1999), are obviously worthwhile. Figure 32 gives some insight into the relative significance of different activities within each sector.