PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung

 
CONTINUE READING
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Regional Programme
                                             Australia and the Pacific

  PERISCOPE
  Occasional Analysis Paper Series, Vol 1.

  Challenges of Energy Security
    in Australia, Europe and the
       Asia-Pacific Region

January 2019
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Impressum

Periscope:
‘Periscope’ is the occasional analytical paper series of the Konrad Adenauer Foundation’s
Regional Programme Australia and the Pacific. Just like the real-world sighting instrument,
Periscope is meant to broaden our view – taking in perspectives from different angles. In this
instance, it seeks to bring together perspectives from Germany, Europe and the Australia/Pacific
region in order to augment our understanding of contemporary issues in the area of foreign and
security policy as well as energy, economic and social policy matters.

Copyright:
© Konrad Adenauer Stiftung (Australia) Limited, January 2019

Editors:
Dr Beatrice Gorawantschy, Simon Aleker

Publisher:
Konrad Adenauer Stiftung (Australia) Limited
Regional Programme Australia and the Pacific
11/3 Sydney Avenue
Barton, ACT 2600
Australia
Tel: +61 2 6154 9322
www.kas.de/australia

Disclaimer:
All rights reserved. No part of this publication may be reprinted or reproduced or utilised in
any form or by any electronic, mechanical or other means, now known or hereafter invented,
including photocopyng or recording, or in any information storage or retrieval system, without
permission from the publisher.

The opinions expressed in this publication rests exclusively with the authors and their
interpretations do not necessarily reflect the views or the policy of the Konrad Adenauer Stiftung.

Design, Layout and Typeset:
Konrad Adenauer Stiftung (Australia) Limited e.V./Corporte Design
implemented by MBE Manuka.
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Table of Contents

Foreword                                         3

Executive Summary                                4

Introduction                                     6

Climate Change and Energy Security               9

Digitalisation and Energy Security Strategies   13

Geopolitics and Energy Security                 17

Discussion: Energy Efficiency Initiatives       21

Special Contribution                            25

Prospects of Future Cooperation                 28

Authors		                                       31

Inaugural Energy Policy Dialogue                34

                                                     1
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
2
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Foreword

Foreword

Energy security in the modern world of digitalisation, industrialisation and globalisation is one of
the most critical prerequisites for growing economies. Every modern economy is dependent on a
reliable supply of energy in order to satisfy the high energy demands of emerging transportation,
communication, security, and health industries. Thus, energy security plays a fundamental role in
the wellbeing of the global population.

However, achieving energy security is                               The inaugural Dialogue brought together
accompanied by significant challenges, from                         leading international and regional experts from
rapid advancements in digitalisation to the                         government, industry and academia, to exchange
impact of climate change and shifting conditions                    comparative and contemporary perspectives on
in the geopolitical environment. Furthermore,                       the challenges for comprehensive energy security
existing energy infrastructure in industrial                        strategies. In particular, this new platform for
countries, such as Germany and Australia will                       energy policy debate provided the opportunity
have to undergo a substantial and expensive                         for those at the cutting edge of private and public
transition towards non-fossil energy systems in                     interests to discuss the effect of energy and
order to realise the greenhouse gas reductions                      resource security on international relations and
set out in The Paris Climate Agreement of 2015.                     geopolitics in Australia, Europe and the Asia-
                                                                    Pacific region.
Climate change and energy supply security are
of paramount concern for societies moving into                      Reflecting on the thought-provoking discussions
the coming decades. In response, the Konrad-                        of the inaugural Energy Security Policy Dialogue,
Adenauer-Stiftung (KAS) initiated the regional                      it is clear the debate will continue into 2019 and
project ‘Energy Security and Climate Change                         beyond. I hope that this paper will serve as a
Asia-Pacific’ in Hong Kong SAR in 2015, in order                    valuable contribution to highlight the manifold
to foster networks and discussions on climate                       benefits that strategic dialogue between like-
change mitigation and energy security in the                        minded countries can offer – in particular in an
region. In addition, in 2017 KAS established the                    area as important as the 21st century challenges
Regional Programme Australia and the Pacific                        in the energy sector.
located in Canberra, to enhance collaboration
between Australia and Germany in the fields of
foreign and security policy, economic and social
policy as well as energy policy.                                    Warm regards

In line with the Berlin-Canberra Declaration1,
the recommendations of the Australia-Germany
Advisory Group (AGAG), and the Framework
Agreement between the European Union and
Australia, the KAS Canberra office launched its
first Energy Security Policy Dialogue in 2018.
                                                                    Dr Beatrice Gorawantschy
This key event was organised in cooperation
                                                                    Director Regional Programme
with the European Centre for Energy and
                                                                    Australia and the Pacific
Resource Security (EUCERS) at King’s College
London, and Climate-KIC Australia.

1
    A declaration of “Intent on a Strategic Partnership between Australia and Germany”

                                                                                                                                3
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Executive Summary

          Executive Summary                                                               Dr Peter Hefele

          In recent years energy security has become a key component in national, regional, and global
          security strategies. Access to energy – and resources – is (again) seen as part of a ‘great game’,
          substantially shaping the tectonic power shifts between incumbent and rising powers. There
          is a global consensus that energy security nowadays comprises three main dimensions: energy
          security, energy equity, and environmental sustainability. These three goals constitute a ‘trilemma’
          for policymakers, private actors, and business leaders, as complex economic and social factors,
          national resources, environmental concerns, and the behaviour of individuals are interwoven.
          All this creates a formidable challenge, which no country has so solved so far in a satisfactory
          manner, even if, i.e. the European Union or Germany have developed comprehensive policy
          frameworks to integrate these dimensions into a coherent setting.

          Energy security can no longer be seen as a pure      Climate change has massively increased
          supply-side problem (as, i.e. in the oil crisis of   the vulnerability of national/regional energy
          the 1970s). Distribution and intelligent use of      infrastructures, which is multiplied by the ‘parallel
          energy have shifted the focus towards a more         revolutions’ of digitalisation, decentralisation and
          sophisticated demand-side management.                decarbonisation. Information and Communication
          Furthermore, energy is increasingly seen as          Technology (ICT) is changing the established
          part of a broader understanding of resource          energy sector and traditional energy business
          security, acknowledging that they are inherently     models by creating new consumption patterns,
          interconnected with issues like water or rare        providers and platforms, also from outside
          earth material and need to be dealt with using       the energy sector. Digitalisation opens new
          an overarching strategy. In addition, rapid and      opportunities for innovation and energy
          slow onset impacts of climate change –               efficiency but increases the leverage of
          unstoppable by current mitigation efforts – are      cyberattacks on critical infrastructure.
          shifting the attention and resources of nations
          towards adaptation.                                  The rapid deployment of renewable energies
                                                               calls into questions the incumbent fossil-based
                                                               power generation, as well as highly-centralised
                                                               distribution networks. As an evermore
                                                               rapid transformation towards a low-carbon
                                                               economy is needed to mitigate climate change,
                                                               decarbonisation leads to a dramatic revaluation
                                                               of assets and investment strategies. Negative
                                                               impacts on stable energy supply, energy justice,
                                                               and social acceptance have to be carefully
                                                               considered in order to ensure public support. On
                                                               the other side, these transformations provide
                                                               unique opportunities for innovation, new
                                                               business models and value creation – provided
                                                               that political and legal frameworks facilitate this
                                                               transition and markets remain functioning.

4
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Executive Summary

There are three major fields of future cooperation      As major middle powers and leaders in
between Australia and Germany in the areas of           their respective regions, they have to
energy and climate change policy:                       actively contribute to regional integration,
                                                        stability, and openness of markets. Energy
1. The ‘great transformation’ entails unequally         and resource security play a crucial role in
   distributed costs – socially as well as between      this respect.
   regions, i.e. in lignite mining region. Active
   engagement by politics is needed in creating      3. Australia and Germany are home to a vast
   social support and in enhancing capacities to        network of universities, research institutions,
   adopt and to adapt to structural economic            and think tanks in the field of energy and
   changes. Germany has a long experience in            climate change. The challenges and
   de- and re-industrialisation processes and can       complexity of the ‘Energiewende’ open a
   provide valuable insights into how to manage         vast field of systematic exchange between
   these transitions.                                   both nations in basic research as well as in
                                                        industrial application.
2. Both nations are very much interested in a
   stable political and economic framework on
   regional as well as global levels – not least
   due to their massive dependence on well-
   functioning trade relations.

                                                                                                               5
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Introduction

           Introduction                                            Simon Aleker and Marian Schoen

           In late 2016 Australia and Germany ratified the landmark Paris Agreement which came into force
           on the 4th November 2016. Complementary to the 2030 Agenda for Sustainable Development,
           with its 17 Sustainable Development Goals (SDG), the Paris Agreement under the UNFCC is a
           commitment of 184 countries to combat the threat of climate change and to reduce greenhouse-
           gas-emissions (GHG) as soon as possible. The Agreement’s aim is to keep the global temperature
           rise this century below 2 degrees Celsius above pre-industrial levels, while pursuing efforts to
           further limit the temperature increase to a maximum of 1.5 degrees Celsius.

           Key emitters of GHG are conventional energy             opportunity at a time of rapid change and
           sources like coal, oil and gas. Therefore a major       increasing uncertainty. The development of
           and global energy transition from conventional          effective and sustainable energy policies must
           to renewable or low GHG energy systems is               focus on the ‘trilemma’ of energy security,
           required in order to achieve the goals of the Paris     environmental compatibility and economic
           Agreement. As Australia and Germany are both            viability, to accelerate the actions and
           industrialised countries which still rely heavily on    investments needed for a sustainable low
           conventional energy sources, energy transition          carbon future.
           poses a major challenge to the energy security of
           both countries.                                         The decarbonisation of energy systems is a
                                                                   challenge which is equally shared by Australia
           Energy security in the 21st century is widely           and Germany. Although both countries are major
           understood as a challenge to balance the trifecta       trading nations and like-minded international
           of affordability, reliability and sustainability. The   and regional players, their situation in terms of
           combination is more commonly referred to as             energy security is very different. Australia, for
           the ‘energy trilemma’; a seemingly impossible           example, has an abundance of conventional
           target of simultaneously achieving all three            energy resources and is therefore a major
           objectives. Nevertheless, with the expected             energy exporter. Germany, on the other hand,
           future growth in energy demand, energy security         is a major conventional energy importer due
           will play a critical role in our environmental,         to limited natural resources. The energy policy
           social and economic development. The relevance          in both countries reflects the individual energy
           of energy security will be a significant and            security situation they face. In Australia, the
           determining factor of our wellbeing into the            long term energy vision and policy preferences
           future, but there are several challenges to             are set out in the Energy White Paper, released
           overcome in order to deliver the required energy        in 2015, and are framed around limiting
           security. Global trends and developments such as        government interventions in energy markets.
           digitalisation, globalisation and climate change,       Conversely, Germany’s energy policy is framed
           as well as geopolitical challenges, have a severe       around the ‘Energiewende’, aimed at guiding
           impact on the way countries can think about,            a profound energy transition towards a long-
           plan and provide energy security in the future. In      term and climate friendly energy system by
           most cases a sophisticated and profound energy          2050. This unprecedented transition to a more
           transition is required.                                 sustainable, secure and inclusive energy system
                                                                   that contributes to economic growth, societal
           In this context the energy policy challenge in          wellbeing and sustainability, is being driven by
           coming decades will be to improve access to             forces inside and outside of the energy sector,
           affordable and reliable energy, and strengthen          such as new technological opportunities, policy
           energy efficiency and security, while creating          shifts and changes in energy consumption.

6
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Introduction

Delegation of the Inaugural Energy Policy Dialogue, March 2018

As like-minded partners, Australia and Germany              Stiftung, in cooperation with the European Centre
established the Australia-Germany Advisory                  for Energy and Resource Security (EUCERS) at
Group (AGAG) in 2014 to develop a more                      King’s College London, and Climate-KIC Australia,
substantial bilateral relationship. Among other             launched its first Energy Security Policy Dialogue
topics, the AGAG made recommendations to                    in 2018.
strengthen the dialogue on energy, energy
security, and climate change related matters.               With topics ranging from the geopolitics of
In light of this, the Australia-Germany Energy              energy security, the intersection of climate
and Resources Working Group (ERWG) was                      change with national security and regional
established to foster and advance the energy                stability, to energy efficiency and the digital
transitions in both countries through the                   transformation of energy systems and
exchange of views, best practices and knowledge             cybersecurity, this 1.5-track dialogue provided a
on the development of a sustainable energy                  platform to exchange views and discuss future
system, with particular emphasis on energy                  avenues for collaboration between stakeholders
efficiency and renewable energy. The potential              leading the energy transition in their respective
for cooperation in global energy markets has                countries.
also been a focus, given Germany’s objective to
diversify its energy supply and Australia’s position        This paper summarises the key topics discussed
as a major energy exporter.                                 at the first Energy Security Policy Dialogue and
                                                            provides insights about the challenges Australia
Based on the positive momentum between                      and Germany are facing in the field of energy
Australia and Germany, the Regional Programme               security. It furthermore aims to highlight the
Australia and the Pacific of the Konrad-Adenauer-           positive effects a debate between like-minded

                                                                                                                          7
PERISCOPE Challenges of Energy Security in Australia, Europe and the Asia-Pacific Region - Konrad-Adenauer-Stiftung
Introduction

           partner-countries can offer. The challenges                  markets are ways to share experience and
           of energy security, particularly digitalisation,             lessons learned to meet the strategic challenges
           climate change and geopolitical aspects, will be             of the energy transition. Australia’s regional
           summarised by Dr Graham Palmer. Dr Palmer                    expertise and the opportunities for low carbon
           also provides a discussion on the benefits energy            exports, and Germany’s expertise in developing
           efficiency initiatives in Australia and Germany              innovative technology solutions provide
           can provide. A special contribution to this paper            opportunities for collaboration and thought
           has been provided by Prof Dr Friedbert Pflüger,              leadership.
           who discusses the aspects of sustainability and
           affordability of energy security in the EU. Dr               Other initiatives such as the Australian-German
           Llewellyn Hughes presents an overview on the                 Energy Transitions Hub, the establishment of a
           prospects of future cooperation in the energy                Climate Knowledge Innovation Community in
           nexus between Australia and Germany, with Dr                 Australia with links to EIT Climate KIC in Europe,
           Peter Hefele providing the executive summary                 and the support by the European Commission
           for this paper.                                              for an EU-Australian business network on
                                                                        sustainability and trade are further avenues for
           As this analysis demonstrates, bilateral                     deepening engagement and cooperation on
           exchanges on best practices and technological                global energy issues.
           and policy/regulatory solutions which promote
           open, transparent and competitive energy

           Panel of keynote speakers at the Inaugural Energy Policy Conference with Prof Friedbert
           Pflüger, MP Carsten Müller, Dr Joachim Lang and Dr Kerry Schott AO

8
Climate Change and Energy Security

Climate Change and
   Energy Security                                                         Dr Graham Palmer

The long-term effects of climate change are projected to be pervasive. Rising sea levels, storm
inundation, the loss of low-lying critical infrastructure and arable land, will all contribute to global
insecurity and increase the number of displaced people.

Some of the countries most vulnerable to               The highly contested and politicised Australian
extreme weather events are the developing              climate debate has made it difficult to establish
countries in the Asia Pacific, especially Myanmar,     effective climate policy. Perhaps the most
Philippines, and Bangladesh. Geopolitical              durable policy has been the Renewable Energy
instability is exacerbated by growing populations,     Target (RET), which was implemented in 2001 and
resource insecurity and natural and humanitarian       previously known as the Mandatory Renewable
disasters. Rising sea level is causing problems for    Energy Target (MRET). It has enjoyed broad
megacities, such as Jakarta, and Pacific Islands.      public support and survived attempts to dilute
                                                       the policy, and is the only enduring element of
Energy security lies at the intersection of climate    Australian climate policy. By itself, the RET is
change, national security, and global stability. The   not the most efficient decarbonisation policy,
Paris Agreement established national emission          but it has succeeded in driving investments
targets. However, the challenge for governments        in low-emission generation. The so-called
and institutions is to develop coordinated             ‘energy trilemma’ – reliability, affordability and
strategies that can effectively address these          decarbonised electricity supply – has tended to
complex challenges. Historically, national energy      be seen as a suite of competing factors that must
security was at the centre of national security        be traded off against each other. The NEG has
considerations, most notably with respect to           been framed as a response to the ‘trilemma’.
oil supply. However the challenges of climate
change provide an opportunity to reset and             The Australian southern states have traditionally
rethink the traditional challenges. In particular,     enjoyed low cost reticulated natural gas.
the emergence of low cost renewables and               The development of unconventional gas in
storage provide the opportunity to increase            Queensland has led to major export terminals
electrification of heating and transport. This         and exposed the local market to world pricing.
opens the possibility to address climate and           There has been discussion in Australia of the
energy security as a part of a holistic policy         potential to largely dispense with natural gas for
framework.                                             space heating, however the availability of locally
                                                       sourced primary energy for heating and power
Australia ratified the Paris Agreement in 2016,        hasn’t incentivised an energy security shift away
however there is debate as to whether Australia’s      from gas.
current policies are sufficient to achieve its Paris
target. The main policies include the Emissions        As a major coal consumer and exporter, the
Reduction Fund and the Safeguard Mechanism.            future role of Australian coal remains contested.
Other policies include the National Energy             Carbon capture and sequestration (CCS) has
Productivity Plan, Ozone and HFC measures, and         remained a policy option since the late 1990s.
Renewable Energy Target. The current public            Some international climate mitigation models,
focus is on the National Energy Guarantee (NEG),       such as some of the integrated assessment
which includes a low emissions obligation and a        models adopted as part of the IPCC scenario
reliability obligation.                                modelling process, show that CCS may be
                                                       important for meeting climate targets.

                                                                                                                9
Climate Change and Energy Security

           There has been substantial public funding of           Unlike Australia, which is a net-energy exporter,
           CCS in Australia and CCS is considered to be           the EU is highly dependent on imported fuels.
           a live policy option to meet climate targets.          Although Russia has historically been a reliable
           However, successful commercialisation is yet           supplier of natural gas, the reliance on Russian
           to be demonstrated at scale and there remains          gas, and the transit of gas through Ukraine
           a significant public and private funding gap           pipelines, has been viewed as a key vulnerability.
           to establish whether CCS will be an important          The prevailing EU view is that there is a need to
           climate mitigation technology.                         diversify gas supply and increase the number of
                                                                  LNG import terminals. Germany is also a natural
           The idea of European Union integration was             gas transit country, with 45% of the piped gas
           based, in part, on energy security challenges.         transiting to other EU states. However, although
           Coal and nuclear power were originally tied            the EU is dependent on imported oil and gas, it
           to national sovereignty, but energy policy has         remains a major coal producer. In Germany, the
           evolved over the several years as the European         prioritization of an exit from nuclear has had the
           electricity system has become integrated, and gas      unintended consequence of increasing reliance
           pipeline infrastructure has expanded. In contrast      on coal. Over time, coal will be progressively
           to the Australian ‘energy trilemma’, a lot of          substituted for renewables and gas. But energy
           European research has shown that the trilemma          transitions are also ‘protracted affairs’, and
           can be thought of as a so-called ‘energy trifecta’.    natural gas and LNG will have an important role
           In Germany, the three factors have been framed         in facilitating the transition to renewables.
           as different parts of an overall strategy, which are
           self-reinforcing rather than competing. In part,       While energy efficiency has been adopted in
           this is due to a near universal commitment to          Australia as one part of a multi-faceted energy
           climate mitigation, and the European Union (EU)        policy, in Germany, demand-side efficiency has
           need to diversify energy resources.                    had a central role. It has an equivalent status
                                                                  to supply-side energy strategies – a megajoule

10
Climate Change and Energy Security

saved is one less megajoule that needs to be          practice, the concept of policy efficiency is seen
produced. Although the concept of ‘energy             as important to achieving long-term goals at
efficiency first’ emerged out of the Green            least cost. Keeping technological choices open,
Movement, it eventually came to be seen as a          especially coal with carbon capture, is considered
common sense approach that reconciled industry        essential to maintaining policy efficiency. An
policy with environmental conservation.               approach of ‘picking winners’ is sometimes
                                                      criticized for locking in sub-optimal future
The approach of Germany has been to make              pathways.
technological choices regarding energy supply,
most notably choices around renewable energy,         In Germany, the challenges of intermittent
efficiency, and a decision to exit from nuclear       renewable energy are framed as ‘technological
power. There is an acknowledgment that policy         challenges’, and the goal has been to increase
needs to be ambitious to be effective.                renewables penetration. Australian community
                                                      support for wind and solar, has been strong,
Regardless of policy, technological progress and      but arguments persist over the most efficient
the economics of energy are heading in the right      policy instruments and energy security. Although
direction. Few expected the magnitude of the          the Australian Renewable Energy Target (RET),
cost declines of wind and solar. The German           introduced in 2001, has been maintained and
Feed-in Tariff (EEG) was largely responsible for      strengthened, support for renewables at a
the rapid price decline in photovoltaics, and         federal level has been more restrained, with
the entire world now has access to low cost           an emphasis on establishing a resolution to
solar power.                                          renewables integration. Instead, there has been
                                                      more support from the states.
In Germany, technology choices have been
embedded in transition scenarios, and mapped          Synthetic fuels, produced from renewable
onto transition pathways. These low-emission          energy, are one of the long-term options for
technologies will require new rules, especially for   energy storage and transport. Synthetic fuels
heat and power ‘sector coupling’. Sector coupling     could take the form of compressed hydrogen,
will offer increased flexibility for integration of   methane, or ammonia. Methane can be used
natural gas and power with heating and electrical     for heating or power generation, and ammonia
loads. Heating loads are higher in Germany than       can be combusted directly or cracked back to
Australia. Sector coupling also faces several         hydrogen for use in fuel cells. Japan is currently
technical and economic challenges, particularly in    pursuing hydrogen for demonstrating hydrogen
relation to high capital cost.                        technology at the 2020 Tokyo Olympic Games.
                                                      Synfuels are not currently economic but may
The benefit of adopting explicit transition           emerge in combination with curtailed renewable
pathways is that they permit industry and             energy as renewable penetration increases. For
investors to confidently invest in research           example, during summer, surplus solar power
and technology deployment on the basis                could be diverted for synfuel production. In
of predictable policy. Even though German             time, Australia’s natural endowment of surplus
climate targets are sometimes missed, there is        wind and solar energy may facilitate the export
nonetheless broad political and social agreement      of renewably produced hydrogen or other
as to the goals of the ‘Energiewende’ (energy         synfuels. Many firms have ongoing investments
transition).                                          in synfuels, such as Siemens, BMW, Honda and
                                                      Toyota. Steel-making is currently dependent on
In contrast to the directed approach of Germany,
                                                      coal as a reducing agent, but could be supplanted
the Australian approach has been to focus on
                                                      by hydrogen in the future, alleviating one of the
the concept of ‘technology neutrality’, and the
                                                      most intractable challenges of decarbonization.
promotion of carbon pricing as a key tool in
                                                      European nations have interconnected electricity
climate mitigation. Although rarely achieved in
                                                      and gas networks, permitting diversification

                                                                                                            11
Climate Change and Energy Security

           of national energy supplies, but electricity and      The concept of ‘resilience building’ is one
           pipeline infrastructure is far less advanced in       strategy that offers opportunities for nations
           Asia. Challenges include the high capital cost of     and institutions to address these challenges.
           synthetic fuel production, transport, storage, and    Resilience building requires coordination and
           use, and the relatively low round trip efficiency.    engagement across all parts of governments,
                                                                 as well as industry, the community and other
           Many countries, especially those in Asia, face the    stakeholders.
           twin challenges of reducing the carbon intensity
           of energy; and reducing the water intensity of        National security, climate change, and global
           energy. Both of the baseload low-emissions            stability are interwoven issues that require an
           options – coal with carbon capture, and nuclear       integrated response. The lessons of climate
           power – are water intensive. Other low emission       policy are that ‘first best’ policies may not be
           options also require cooling water, especially        achievable. Nonetheless, building national
           geothermal and solar CSP. But wind requires           consensus and driving overarching goals will
           no water and photovoltaics only require water         support investor certainty. Policy support
           to clean the panels. In water scarce regions,         for sustainable energy technologies, energy
           energy and water are intertwined. The energy-         diversification strategies and energy efficiency,
           water nexus requires a multifaceted approach          can support multiple goals simultaneously, and
           to sustainable development, of which climate          enable national security and climate goals to
           change is but one part. At this stage, water is not   head in the right direction.
           embedded in the IPCC Conference of the Parties
           (COP) process.

           References

           IPCC, 2013: Summary for Policymakers. In:             A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)].
           Climate Change 2013: The Physical Science Basis.      Cambridge University Press, Cambridge, United
           Contribution of Working Group I to the Fifth          Kingdom and New York, NY, USA. http://www.
           Assessment Report of the Intergovernmental            ipcc.ch/pdf/assessment-report/ar5/wg1/
           Panel on Climate Change [Stocker, T.F., D. Qin,       WG1AR5_SPM_FINAL.pdf
           G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung,

12
Digitalisation and Energy Security Strategies

Digitalisation and Energy
   Security Strategies                                                       Dr Graham Palmer

Energy systems are part of a nation’s essential infrastructure. They are also undergoing a digital
transformation and represent key vulnerability points for cyberattacks. The primary drivers of
the transformation are the digitalisation of energy; the emergence of smaller, distributed and
modularised generation; and the integration of energy systems into the internet.

The digitalisation of electricity has been enabled      The digitalisation of industrial systems is
by the availability and dramatic cost reduction         captured within the expression Industry
of power electronics over the past 15 years.            4.0, a term which originated from a German
Once embedded in electrical systems, power              government strategy to promote the
electronics permits the generation, control and         computerization of manufacturing. It has come
monitoring of electricity at a highly granular level.   to refer to intelligent systems that incorporate
Networking capability allows energy systems to          constant learning and improvement, adaptability,
be integrated into the internet. This has opened        resource efficiency, and smart integration of
up possibilities for markets, business models,          humans and technology. In the context of energy
demand management, fault control, and system            systems, it refers to the integration of distributed
integration.                                            energy into electricity systems; the ‘internet of
                                                        things’, including smart appliances; demand
However, network capability is a two-edged              management; markets; system balancing of
sword. On the one hand, networking opens up             variable renewable energy; and energy storage
opportunities for system integration in a way that      management.
was impossible twenty years ago. However, it
also makes systems vulnerable to systemic faults        Energy is one element of critical infrastructure
and cyberattacks.                                       (CI), and together with telecommunications,
                                                        underpins all CI. In the near future, many
The European blackout of 2006 was a two hour            smart appliances, smart grids, and other
blackout that affected 15 million customers             networked enabled energy equipment will sit
across 12 nations. Millions of customers were           above the 5G network. Maintaining reliable
cut-off, there were long delays in rail transport,      telecommunications will be essential to obtain
subways had to be evacuated, and the cost to            real-time feedback of energy systems. Of concern
restaurants and bars in spoiled products and            is that the energy sector has been identified as a
lost sales was estimated at USD139 million. The         key target for malicious cyberattacks.
blackout began with a routine disconnection
in northern Germany, but caused cascading               In the past, dedicated SCADA (Supervisory
trips throughout Europe, reaching to Portugal           control and data acquisition) communications
and Morocco in the south-west, and Greece               systems used proprietary technologies and were
and the Balkans in the south-east. One of the           physically isolated from the Internet. A shift
important benefits of interconnection is usually        towards fourth generation SCADA increases
the increased reliability of supply; however            interoperability, but requires robust security.
the blackout also highlighted the risks when a          The risk of cyberattacks can be reduced, but will
systemic failure occurs. In the 2006 blackout, the      require the implementation of security measures,
source was a routine disconnection. However, a          such as industrial firewall and VPN solutions.
cyberattack that targets a point of vulnerability
could potentially propagate outwards and affect
an entire continent.

                                                                                                                 13
Digitalisation and Energy Security Strategies

            The first reported attack of a SCADA system was         With the digital transformation of energy systems
            the Stuxnet worm, which exploited Siemens PLC           and changing energy mixes, business models will
            software to take control of an industrial control       need to evolve, and regulatory strategies devised
            system. It was introduced into the host system          to reduce the vulnerability of energy systems
            by an infected USB drive and propagated via the         to cyberattacks. Entire structures may need to
            host network. Stuxnet highlighted the risks of          be changed to cope with changes, but no-one
            vulnerabilities in a highly connected world.            has a suite of perfect solutions. There is a need
                                                                    to stay ‘ahead of the curve’, but the adoption
            ‘Today, an individual equipped with just a laptop       of prospective solutions too rapidly carries the
            can bring about greater destruction than a              risk of choosing the wrong strategy. Maintaining
            conventional weapon.’                                   co-operation, monitoring developments, and
                                                                    information sharing is key to a risk management
            The Australian Protective Security Policy               approach. There is a need for an Australian-EU-
            Framework (PSPF) provides policy and guidance           Asia-Pacific dialogue to share information.
            for all types of security, including ICT. It is a
            mandatory requirement that government                   Security relies, in part, on trusted brands and
            agencies adopt the PSPF. The overarching                relationships. But there are issues around supply
            body for developing cybersecurity policy in             chains, and second and third tier suppliers.
            Australia is the Australian Cyber Security Centre       Major brands usually have a global presence.
            (ACSC). Cyber security has only been elevated           For example, Siemens has a large presence in
            as a key strategic priority in relation to energy       China and conducts research and development
            infrastructure in the past three years. The             globally. From a security perspective, it is difficult
            Australian Energy Market Operator (AEMO)                to create a sharp demarcation between allies and
            and the Energy Networks Australia have                  potential adversaries.
            commissioned work to assess cyber security risks
            associated with electricity systems.                    The asymmetric and pervasive nature of cyber
                                                                    threats means that traditional distinctions can
            In Europe, responsibility for critical infrastructure   become blurred. These include the distinction
            and cyber security lies across several EU bodies        between: physical and cybersecurity threats;
            and member states. The protection of critical           official and non-official threats; national and
            infrastructure was first put on the EU agenda in        international; traditional and non-traditional;
            2004, and the European Commission adopted               defensive and offensive cyberattacks.
            a green paper on the European Programme
            for Critical Infrastructure Protection (EPCIP),          The role of microgrids as a distributed energy
            which sets the overall legislative framework.           source demonstrates a dual role in building
            The 2013 EU Cyber security Strategy outlined            resilience. On the one hand, distributed
            overarching principles for cyber Security. Recent       energy can potentially provide ongoing power
            policies include the EU Cybersecurity Act and the       during system outages, and it can be easier
            introduction of an EU-wide certification scheme         to isolate specific parts of the system in the
            for ICT products and services. The Computer             event of cyberattacks. But the integration of
            Emergency Response Team (CERT-EU) is a                  microgrids into a networked system introduces
            co-ordination body that responds to security            systematic and cyber vulnerabilities. The 2006
            incidents and cyberthreats.                             European blackout is an example of the benefit-
                                                                    vulnerability trade-off. Addressing these technical
            In 2014, the Australian and German Governments          challenges will require coherent regulatory
            formed an advisory group to broaden                     frameworks that systematically address specific
            collaboration on digital transformation, STEM           and general vulnerabilities.
            and ICT education, and progress development of
            global Industry 4.0 standards.

14
Digitalisation and Energy Security Strategies

One of the emerging technologies in peer-to-         to be embedded within the product or process
peer energy trading and distributed energy is        rather than layered on top of existing products.
distributed ledgers and blockchain. To date,
the financial sector has progressed the furthest     There is a need to accede to a ‘higher level’,
with blockchain. Blockchain is one example of        reflecting a need to produce an overarching
cryptographic security, providing data integrity,    top-down framework that can be applied across
authentication, and non–repudiation. Although        multiple technology implementations. The
there is significant interest in blockchain          exponential increase in internet of things (IoT)
applications for energy, there are few practical     connected devices means that there is a need to
implementations to date. Blockchain-enabled          embrace the internet of things.
solutions may eventually support cyber security
by providing a security layer, and there are many    Energy systems have already embraced several
examples of startup ventures. At this early stage,   elements of Industry 4.0. Furthermore, there is
blockchain should not be assumed to be a silver      an inexorable shift away from centralised and
bullet, but the application of cryptography to       ‘lumpy’ generation assets towards modular and
energy markets holds promise for enhancing the       decentralised assets. However, electricity systems
security of energy systems.                          are yet to fully embed the physical architecture
                                                     of microgrids and distributed generation, and the
A weakness of the current international              market and control architecture of peer-to-peer
framework is that there are no adequate              trading and blockchain-enabled solutions. These
international standards in cybersecurity. A recent   technologies offer the prospect of capturing the
German pact noted that international standards       security benefits of distributed architectures
‘need to be more than an airbag or seat belt         while reducing the risks of cyberattacks.
solution’ – in other words, the solutions need

                                                                                                             15
Digitalisation and Energy Security Strategies

            References

            Australian Signals Directorate, 2016, Australian
            Government Information Security Manual
            Principles, http://www.dpmc.gov.au/guidelines/
            index.cfm

            Australian Department of Foreign Affairs
            and Trade, 2015, Collaboration, Innovation &
            Opportunity - Report of the Australia-Germany
            Advisory Group, https://dfat.gov.au/about-
            us/publications/international-relations/
            Documents/australia-germany-advisory-group.
            pdf

            Australian Department of Resources Energy
            and Tourism, 2011, National Energy Security
            Assessment 2011, https://www.energy.gov.au/
            sites/g/files/net3411/f/national-energy-security
            assessment-2011_0.pdf

            Bruch M, Münch V, Aichinger M, Kuhn
            M, Weymann M, Schmid G, 2011, Power
            Blackout Risks Risk Management Options
            Emerging Risk Initiative-Position Paper, CRO
            Forum, http://fpn.advisen.com/articles/
            article140935191888258975.html

            Healey D, Meckler S, Antia U, Cottle E, 2016, Cyber
            Security Strategy for the Energy Sector, http://
            www.europarl.europa.eu/RegData/etudes/
            STUD/2016/587333/IPOL_STU(2016)587333_
            EN.pdf

16
Geopolitics and Energy Security

Geopolitics and
   Energy Security 			                                                    Dr Graham Palmer

Globally, energy demand is projected to grow by 30% by 2035. Much of the growth is being driven
by the burgeoning Asian middle class. Total energy demand in Asia is projected to increase
around 70% to 330 exajoules per annum by around 2035, while liquefied natural gas (LNG)
demand is projected to double to 20 exajoules per annum (BP 2017). Asia currently has the
highest share of coal consumption, comprising around 50% of primary energy demand. Of the
fossil fuels, coal has lowest resource security risk and cost, but fails climate goals

The projected growth of Asian economic, cultural      Membership of the International Energy Agency
and political power is encapsulated in the            (IEA) requires oil importing countries hold a
concept of the ‘Asian Century’. China’s economic      strategic oil reserve. Australia almost achieved
rise is being accompanied by a challenge to the       oil self-sufficiency in the 1990s, but the trend
geopolitical status-quo. But many Asian nations       dramatically reversed around 2000. The gap
are highly dependent on imported fuels. Japan         between production and consumption has been
depends on imports for around 90% of its              steadily widening – Australia is now 38% self-
primary energy needs, and South Korea depends         sufficient in petroleum. Australia’s petroleum
on 80%. The reliance on imported fuels increases      reserves are limited to commercial fuel held
vulnerability to supply shocks, which could be        in supply chains. The vulnerability of liquid
driven by geopolitical disputes, natural disasters,   fuels has not been fully grasped in Australia
or economic shocks.                                   and has tended to be framed within a narrow
                                                      economics framework. The additional cost of
Around 61% of global petroleum production             oil or petroleum holdings, and maintaining
is moved by shipping, and nearly one-third            refining capacity, has been considered too high.
currently transits the Strait of Malacca, the         Furthermore, the Australian petroleum industry
second-largest oil transit chokepoint in the world,   has not advocated for increased government
after the Strait of Hormuz. The South China Sea       oversight of the petroleum industry. In the 2015
is a significant transit route for both crude oil     Energy White Paper, the Australian Government
entering refineries in China, Japan and South         was sanguine about Australia’s liquid fuel
Korea, and refined products being shipped             security, arguing that supply is not vulnerable to
eastwards and southwards. The Strait of Malacca       external supply shocks due to the depth, liquidity
is also an important transit route for LNG from       and diversity of international crude and fuel
the Persian Gulf and Africa. The largest importers    markets.
of LNG in Asia are Japan and South Korea, and
increasingly, China.                                   As a resource-rich country, Australia has
                                                      not traditionally emphasized the role of
As a major exporter of metallurgical and              energy efficiency in economic production and
thermal coal, and LNG, Australia is self-sufficient   consumer end-use. Since Australians have been
in stationary energy. However, in relation to         accustomed to low electricity and gas prices,
coal, there is the risk of stranded resources         there has been less incentive to invest in energy
and energy assets, as carbon risk is built into       efficiency. Higher efficiency would have mitigated
investment decisions by financial institutions and    the impact of the significant rises in the cost of
investment funds.                                     electricity and natural gas in recent years.

                                                                                                              17
Geopolitics and Energy Security

            The responses to energy security concerns are        accident forced a significant revision of the role
            multi-faceted. These include diversification of      of nuclear. Furthermore, many other countries
            energy sources and suppliers; improving the          also reviewed their nuclear planning, most
            functioning of markets; rethinking production        notably Germany. China’s strategy of expanding a
            and transport infrastructure; improving the          suite of power sources includes an expansion of
            energy efficiency of production; implementing        nuclear, and will be the world’s largest producer
            risk management systems; and intelligent             of nuclear power – by 2030, nuclear capacity is
            demand side management.                              planned to be 120 to 150 GW.

            The Asia Pacific region recently overtook            In the longer term, a shift towards alternative
            Europe and Eurasia as the largest producing          fuels and electric will reduce petroleum
            region of renewable power. China is now the          vulnerability. These include synthetic fuels
            largest producer of renewable energy, with           produced from renewable or nuclear power,
            150 GW of wind power and 120 GW of solar             biofuels, or liquification from fossil fuels. Aviation
            photovoltaics. Growth of these technologies is       and shipping are likely to remain dependent
            currently exponential, with a global doubling        on petroleum-based fuels for the foreseeable
            time of installed capacity of around 3 years. An     future. Liquid fuels permit high energy density
            expansion of renewable energy is a strategy          storage and transportation, but other storage
            with resource security and climate mitigation        choices potentially enable alternative means of
            co-benefits. The main security risk is the           storing and transporting energy. For example,
            intermittency of wind and solar. Strategies to       the German gas network typically holds
            reduce risk include energy market design that        the equivalent of several weeks natural gas
            sufficiently incentivises dispatchable supply and    consumption, and renewably sourced methane,
            storage while supporting growth of renewable         via the methanation process, could be used to
            capacity.                                            support renewables and buffer intermittency.

            Through the 1970s and 80s, Japan adopted             Most IEA oil importing countries hold a strategic
            nuclear, in part, as a hedge against oil supply      oil reserve. For example, Germany holds
            constraints. An operating nuclear reactor will       substantial petroleum reserves in caverns in
            typically contain a year’s worth of supply in        the north of Germany. But there also needs to
            the reactor core, contributing to medium term        be flexibility in addressing the challenge of oil
            energy security. In Japan, an expansion was          security, and increasing fuel holdings is only one
            planned to facilitate energy security and emission   strategy. Other options include: maintaining or
            abatement strategies, but the 2011 Fukushima         expanding local refining capacity; broadening

18
Geopolitics and Energy Security

supply chains; arranging stock cover through         includes economic aspects. For example, the
leasing agreements, referred to as ‘tickets’;        EU is dependent on Russian gas, but Russia is
and entering into oil-sharing agreements – for       equally dependent on EU gas revenues.
example, Germany has oil stockholding share
agreements with Belgium, France, Italy and           At a global level, population growth, growing
Netherlands.                                         energy demand, and growing resource
                                                     competition increase geopolitical risks and
The global natural gas market is liquid and          energy security vulnerabilities. Of the three
there is currently surplus gas available.            main fossil fuels, only natural gas has projected
Strategies for improving natural gas resilience      significant growth.
include diversifying supply, expanding pipeline
infrastructure, and building LNG import              Coal consumption has traditionally been
terminals. By 2021, Australia is expected to be      geographically close, or within the country of
the largest LNG exporter. But despite a surplus      origin. Imported coal is considered to have low
of natural gas, the opening of export terminals      supply risk. Both Australia and Germany possess
has exposed the local market to the international    substantial coal resources and have historically
market and there is now a challenge of bringing      embedded coal as an integral part of the energy
affordable gas to the domestic market.               resource base. Although the future role of coal in
                                                     Australian remains active in public policy debate,
A response to maritime vulnerabilities includes      Australia is yet to adopt explicit goals for reduced
the construction of pipeline infrastructure. For     consumption and export. On the other hand,
example, the Myanmar-China oil and natural           Germany has a stated policy of coal reduction,
gas pipeline project stretches from Myanmar’s        including the recent ‘Commission on Growth,
ports in the Bay of Bengal to the Yunnan             Structural Change and Employment’, which will
province of China. The oil portion of the pipeline   propose a plan for a coal phase-out.
was completed in August 2014, and it is now
operational at full capacity.                        Internationally traded LNG is expanding, with
                                                     the US and Australia leading the expansion.
In addition to energy security, the challenge of     Oil remains the most geopolitically vulnerable
mineral ore production is part of the broader        energy resource, and liquid fuels for transport
challenge of energy security. One class of ores,     have been the most difficult to substitute.
classified as the rare earths, has attracted
attention because of the concentration of rare       There are several strategies that reduce the
earth mining in China. Although China currently      geopolitical risks of energy supply. In most
produces 90% of the global supply of rare earths,    nations, there is a slow but steady long-run
there are several international sources that could   trend towards increased electrification of total
be developed given a higher commodity price.         energy demand. The multiple methods of
Nonetheless, alternative sources would require       generating electricity increase the potential for
investment and time to develop. Many energy          diversity of energy supply, with countries able to
supply and use technologies, including renewable     adopt the technologies most suited to meeting
energy systems, rely on rare earths.                 national energy goals. A shift towards electrified
                                                     transport, including rail and electric cars, will
The mineral ore challenge highlights the co-         reduce liquid fuel reliance. In the longer term,
dependence between mineral ores, rare earths,        hydrogen- or ammonia-based transport fuels,
machinery, and suppliers. For example, although      produced from multiple supply pathways, could
China is the world’s major producer of rare          substantially supplant petroleum-based fuels.
earths, it requires imported machinery and           From a fuel substitution perspective, heavy
components to extract and process the materials,     transport, shipping, and air travel are considered
reflecting the interconnectedness of global          the most challenging.
supply chains. Furthermore, co-dependence

                                                                                                               19
Geopolitics and Energy Security

            Another strategy is the adoption of strong            Upscaling of local renewable energy reduces
            national energy efficiency policies. These provide    demand for conventional fuels, both locally
            two geopolitical benefits. Firstly, they reduce the   produced and imported. On the other hand,
            energy intensity of national economies, enabling      intermittency presents a form of short-term
            higher economic output for a given energy             resource security risk, increasing the need
            supply. Secondly, they improve the feasibility        for electricity interconnection and gas fired
            of higher cost energy supply options that meet        generation for capacity firming. Technology
            other national goals, especially those that are       diversity and geographic dispersion of variable
            lower emissions and less reliant on imported          renewables are two strategies to improve short-
            fuels. Germany is an exemplar of this approach.       term security of supply. Energy storage, such as
                                                                  pumped hydro, provide additional smoothing of
                                                                  variable supply.

            References

            BP, 2017, BP Energy Outlook – 2017, https://
            www.bp.com/en/global/corporate/energy-
            economics/energy-outlook.html

            BMU, 2018, Commission on Growth, Structural
            Change and Employment takes up work, https://
            www.bmu.de/en/report/7918/

20
Discussion: Energy Efficiency Initiatives

Discussion: Energy
   Efficiency Initiatives                                                    Dr Graham Palmer

Discussions of energy security usually focus on energy supply. But the provision of energy
services comprises both supply and demand factors. The metric that provides an international
comparative measure is the energy intensity of economic activity.

At a national level, energy intensity is the ratio of   Most commonly, energy efficiency refers
energy consumption to economic output. Taking           specifically to the last factor. However, these
energy consumption in tonnes-oil-equivalent             factors can interact in different, and sometimes
and GDP as purchasing power parity (PPP), in            unintended ways. For example, the rebound
2015, Australia and Germany’s energy intensity          effect refers to the increasing use of an efficient
was 0.12 and 0.09 respectively, with an OECD            product or service because an efficient product
and World average of 0.11 and 0.13 respectively         is cheaper to use than a less efficient one. One
(IEA 2017). Hence Australia uses comparatively          of the common examples is building heating –
more energy per unit of economic output, and            heaters will tend to be operated for longer and at
Germany less, than OECD nations.                        a higher temperature when the heating system
                                                        is efficient, because it is cheaper to run. On the
Energy efficiency is one, but not the only factor,      other hand, rising fuel prices incentivise reduced
that defines energy demand. Changes in energy           heater use, or energy conservation.
demand are often decomposed to three factors:
                                                        Energy efficiency is often promoted as a ‘win-
•   The growth effect, which relates to the growth      win’ policy because it addresses multiple policy
    of primary drivers, such as economic activity       objectives, including a positive economic cost-
    or wealth; population; or other direct factors      benefit. Furthermore, with respect to greenhouse
    such as tonne-kilometres shifted by freight.        emissions, energy policy measures may drive
                                                        actions that exhibit a negative cost-of-abatement
•   The structure effect, which relates to changes      – the action saves both money, and reduces
    in the underlying structure of energy               emissions. An example of such an action is
    consuming activities. Examples include              building insulation, which typically delivers fuel
    changes in the share of industry sub-sectors,       savings greater than installation costs when it is
    such as a shift from manufacturing to service       installed at the time of construction.
    sectors; a change in ownership rates of
    appliances; and a shift in the share of modes       However, despite the widespread availability and
    of transport, such as from private vehicles to      popularity of energy efficiency, there are many
    urban transit.                                      reasons that the full benefits may be unrealised.

•   The efficiency effect, which is a measure of        Insufficient access to capital, budget constraints,
    the energy consumption per unit of activity.        or a lack of awareness of efficiency options, are
    For transport, one measure is the diesel use        prime examples. Furthermore, there are many
    per tonne-kilometre of freight; for heating or      other reasons that optimal efficiency outcomes
    cooling, it is the energy use per square metre      may not be achieved.
    of housing area.

                                                                                                                   21
Discussion: Energy Efficiency Initiatives

             The notion of ‘split incentives’ is the case in which   Australia
             the energy efficiency investor does not obtain
             the full benefit of the investment. One example         Since 1992, Australia has adopted 55 national
             is the landlord-tenant relationship – an efficiency     energy efficiency policies and measures, many
             investment by the landlord accrues to the tenant,       of which were limited in scope, wound up, or
             unless the landlord can recoup some of the              superseded. In addition, there are also many
             investment through higher rental. Conversely,           state-based policies. The longest running national
             the tenant may be unwilling to make the                 program is the Equipment Energy Efficiency
             efficiency investment themselves because they           Program (E3), which covers a range of residential
             may move out before realising the benefits.             appliances, commercial equipment, and lighting.
                                                                     It incorporates the Minimum Energy Performance
             Appliance, building or equipment purchasers             Standards (MEPS), High Efficiency Performance
             often have imperfect information, or do not             Standards (HEPS) and Greenhouse and Minimum
             have ready access to sufficient information. This       Standards (GEMS) legislation.
             can sometimes lead to the so-called ‘bounded
             rationality’ problem, which is the idea that agents     The most recent and significant policy is the
             make choices that are ‘satisficing’ rather than         National Energy Productivity Plan (NEPP). The
             optimising. It is based on the principal, that in       Australian Government set a target to improve
             everyday life, people make decisions that are           energy productivity by 40 per cent by 2030. The
             ‘good enough’ rather than optimal.                      COAG Energy Council signed a new NEPP in 2015,
                                                                     which covers all energy use and incorporates
             Given that consumers and businesses frequently          energy market reforms and energy efficiency
             make choices that are sub-optimal from an               measures in buildings, equipment and vehicles.
             efficiency perspective, policy makers can
             constrain the available options by adopting             In relation to buildings, the three main policies
             regulations or market-based instruments.                include: the Commercial Building Disclosure
             Policies can be directed at maximising the public       Program; 6 Star NatHERS Rating for Buildings,
             good characteristics of energy efficiency. For          which is part of the National Construction
             example, one of the earliest successful initiatives     Code; and NABERS (the National Australian
             was the Japanese Top-Runner program, which              Built Environment Rating System). Vehicles
             set a minimum efficiency requirement for each           are covered by the fuel consumption labelling
             appliance class. The minimum was set according          standard (ADR81/02) and fuel consumption label.
             to the weighted average value for all products
             in that product category, thereby truncating            The Australian Energy Efficiency Council (EEC) is
             the worst performers and gradually lifting the          Australia’s peak body for energy efficiency, and
             weighted average. The adoption of national              publisher of the Australian Energy Efficiency
             standards enabled economies of scale that would         Policy Handbook. The EEC identified a suite of
             have been difficult in the absence of the policy.       actions that require high-level support, and
                                                                     which would improve productivity and global
             Energy efficiency measures may be targeted              competitiveness. These include supporting
             towards a product or process within an industry         strategies that recalibrate investment between
             or sub-sector. Other policies may have a broader        supply-side and demand-side strategies;
             scope, with an overarching national performance         strengthening standards for appliances, buildings
             target. Policies may be funded within a defined         and vehicles; and encouraging a globally
             budgetary period, comprise special purpose              competitive energy efficiency industry.
             funding, or have ongoing funding. As part of the
             ordinary political cycle, policies are regularly        As a resource-rich country, with population
             reprioritised, wound up, or superseded.                 centres in temperate regions, Australian Federal
                                                                     governments have not historically placed a
                                                                     high priority on energy efficiency policies.

22
You can also read