Retrofit All the Buildings and Savings Will Come


The most cost-effective abatement opportunity of all, according to ClimateWorks, is retrofitting to reduce energy waste in existing non-residential buildings – not just office blocks but shopping centres, warehouses, hotels, restaurants and public buildings like schools and hospitals. The Low Carbon Growth Plan concludes that emissions could be cut by 25% by 2020, from 2000 levels, at the relatively small cost of $185 per head a year.

Paddy Manning for Fairfax Media (27 March 2010):

Newsflash: bright idea fades in Canberra. Put differently, it seems likely that the best way to make the most cost-effective cuts to Australia’s greenhouse gas emissions has absolutely no political support here … outside the Greens.

A maddening thought. The truth is probably a bit more complicated.

Improving energy efficiency in non-residential buildings consistently tops the famous McKinsey cost curve, which ranks carbon abatement opportunities from lowest to highest cost per tonne of carbon dioxide or its equivalent (CO2e) avoided, assuming use of commercially available technology.

Last week ClimateWorks, a think tank, published its Low Carbon Growth Plan, which concluded we could cut emissions by 25 per cent by 2020, from 2000 levels, at the relatively small cost of $185 per head a year.

The most cost-effective abatement opportunity of all, according to ClimateWorks, is retrofitting to reduce energy waste in existing non-residential buildings – not just office blocks but shopping centres, warehouses, hotels, restaurants and public buildings like schools and hospitals (manufacturing and industrial facilities are separate).

That means rationalising – downsizing, turning off, getting rid of – unnecessary equipment. For example, Anna Skarbek of ClimateWorks says shops often have too much lighting and energy audits show the same brightness could be achieved with fewer lights, oriented differently. The retail sector could save 10 per cent of its lighting costs, according to the study. Another example: small businesses often have bigger hot water heaters than they need.

”A lot of equipment is under-utilised in non-residential buildings,” says Skarbek.

”We simply need to adjust energy usage to match the energy need.”

Other strategies for non-residential buildings follow in the latest McKinsey rankings. In order, they are: retrofit the heating, ventilation and cooling system; lighting; elevators and appliances; insulation; and water heating. There are some doubters, but according to McKinsey all of these strategies have negative cost: whatever you spend, you get back and more – without any grant, subsidy or carbon price.

Skarbek says the study turned up some surprises. One, the so-called ”split incentive” problem – landlords have no reason to invest in energy efficiency because the savings usually go to the tenant – may not be as tough as we thought. Almost half the retrofitting opportunities relate to appliances usually paid for by the tenant such as computers or photocopiers. Instead of replacing like with like, tenants should pick the most efficient appliance on the market. Two, there is too much focus on office buildings. Four-fifths of the opportunities are in other non-residential sectors.

All together, ClimateWorks calculates strategies for retrofitting existing non-residential buildings would allow us to avoid 16 megatonnes (Mt) of CO2e each year by 2020. That is against the background of fast-rising emissions now: the sector accounted for about 60 Mt of CO2e of emissions in 2006, up from 32 Mt of CO2e in 1990. Saving 16 Mt of CO2e would cut Australia’s national emissions by 1-2 per cent, or get us a third of the way towards our (paltry) 5 per cent commitment under the Copenhagen Accord.

The cuts would come at an estimated saving to the economy of $99 a tonne or $1.6 billion a year. Deducting for the cost of capital and other real-world considerations, the potential profits for investors in these same strategies add up to $1.5 billion a year by 2020, says ClimateWorks .

Nothing to sneeze at, combined, but the opportunity is fragmented – a million tiny profits spread across the economy. Permanent gains are elusive. The efficiency dividend gets soaked up. Emissions often bounce back.

How to drive permanent change? ClimateWorks canvasses a few proposals but its study was not meant to pick policy winners.

The government is not doing nothing. The Prime Minister’s new taskforce on energy efficiency will report within weeks. Mandatory disclosure of energy-efficiency ratings for office buildings more than 2000 square metres, at time of sale or lease, starts from July. The Climate Change Action Fund and Australian Carbon Trust will both fund energy efficiency programs.

One idea is right off the agenda. For the past three years Australian green building pioneers Che Wall (from engineering firm WSP Lincolne Scott) and Maria Atkinson (from developer Lend Lease) have been working on an Efficient Building Scheme based broadly on the same ”cap and trade” principles as the government’s carbon pollution reduction scheme.

None in the sector have better credentials than Wall or Atkinson: they helped found the Green Building Council of Australia and its Green Star ratings system, which ranks the environmental performance of new or significantly refurbished buildings that are volunteered for an audit. They are now trying to apply the same philosophy – create a financial incentive, reward the early movers – to force non-residential landlords to upgrade existing buildings.

International experience, Wall argues, shows neither a carbon price imposed on major polluters, nor voluntary abatement schemes, will do the trick.

Wall and Atkinson proposed – and last year the Greens backed, through a private members bill – a scheme to issue greenhouse gas permits free to non-residential building owners, based on emissions intensity, then allow them to be traded.

”We build 2 per cent new stock, maximum, each year,” says Wall. ”Why impose all the carbon responsibility on new stock when you could provide some relief by bringing equity to the treatment of existing stock?”

The government, struggling to get its carbon pollution reduction scheme through Parliament (or past the electorate), is wary of piling one cap and trade scheme on top of another. ”Implementation load” and ”tough sell” are two phrases I heard. The Senate inquiry into the efficient building scheme bill was dismissive.

The peak industry body, the Property Council of Australia, is pushing a different idea – an accelerated green depreciation regime for investment in retrofitting existing buildings. As the sustainable development website the Fifth Estate reported this week, the council opposes a separate cap and trade scheme for commercial buildings and its chief, Peter Verwer, taking a leaf out of Tony Abbott’s book, has described the scheme as a ”huge churning tax and transfer system”.

Wall and Atkinson – and their many industry supporters, and the Greens – are almost certainly right. Some scheme will be needed to improve energy efficiency in non-residential buildings. But for now, they’re pushing it uphill … even though improving energy efficiency to tackle climate change is one thing almost everybody agrees on.


Leave a Reply