The carbon price is here and so too are many reports of how business costs will increase as a direct result. ALAN DAVIS, an associate director and Sydney team leader of WSP Built Ecology, investigates tangible ways of reducing a building owner’s exposure to increasing energy costs driven by the carbon price and increasing electricity network charges.
The cost of electricity will increase, not just because of the introduction of the carbon price, but also through an increase in electricity network changes. Figure 1, the Energy Price Projection developed by the Institute for Sustainable Futures, University of Technology, Sydney for the NSW Office of Environment and Heritage in December 2011 over the period 2011 to 2020 anticipates that the impact of the carbon price on New South Wales business electricity prices from 1 July 2012 will be 2.39c/kWh, representing approximately 13 percent of the total electricity supply tariff. This is expected to rise to 15 to 27 percent by 2020 based on projected low or high carbon price trends.
Rapidly increasing electricity network charges will soon make up 60 percent of the electricity price due to the infrastructure investment required to meet an ever increasing peak electricity demand. This is expected to continue to rise at a similar level over each infrastructure investment cycle (every five years). Building owners will be exposed to both the cost impacts of the carbon price and the increasing electricity network charges. They can choose to simply pass the cost through to tenants or strategically mitigate their exposure to remain competitive. It’s survival of the fittest or, in this case, the leanest.
Figure 1 – Energy Price Projection
BE LEAN, CLEAN AND GREEN – THE ENERGY HIERARCHY
For a building owner, the strategy of implementing an ‘energy hierarchy’ (Figure 2) across their business represents a best practice approach to mitigating exposure to both the carbon price and the ever-increasing electricity network charges. This ‘lean, clean and green’ concept firmly supports bodies of research conducted around the greenhouse gas (GHG) abatement potential and cost of delivery of various technology measures.
- Be lean – use less energy
- Be clean – supply energy efficiently
- Be green – use renewable resources
Figure 2 – The energy hierarchy
1. BE LEAN – USE LESS ENERGY
Ranking as the most effective measure in negative cost of delivery and high GHG abatement potential per year, the cost curve of New South Wales GHG abatement (Figure 3) identifies commercial energy efficiency as the most effective option for mitigating a building owner’s exposure.
Figure 3 – New South Wales GHG abatement cost curve to 2014
2. BE CLEAN – SUPPLY ENERGY EFFICIENTLY
A building owner can further mitigate their exposure by determining how to efficiently supply the remaining energy demands of the building and delivering maximum GHG abatement at least cost. The Cost Curve of NSW Greenhouse Gas Abatement illustrates that large industrial cogeneration technology (or tri-generation) has a high GHG abatement potential per year and a negative cost of delivery; indicating a net financial benefit to the economy over the life cycle of the technology measure.
A shift from the use of dirty, coal-fired generation to clean, natural gas-fired generation has an immediate and obvious GHG abatement potential. Interestingly, the application of tri-generation technology on a precinct scale appears to present a more commercially viable solution than the shift from coal-fired to natural gas-fired generation through utilisation of combined cycle gas turbine (CCGT) technology ($20/tonne CO2-e for CCGT technology vs. $0/tonne CO2-e for co- or tri-generation technology).
To go this next step in the energy hierarchy, a building owner should be looking to facilitate the installation of (building scale) or connection to (precinct scale) tri-generation systems.
In Australia, tri-generation technology has been realised for its ability to deliver real GHG abatement and its commercial viability based on scale and application. Australian capital cities are already looking to roll out tri-generation precincts. An example of this is the City of Sydney’s master plan for the roll out of tri-generation precincts and the intent to connect over 360MW of building electricity demand.
Installation or connection of a tri- generation system could see building owner’s save up to 50 percent of their electricity bills. Using the waste heat from operation of the tri-generation system reduces a building’s reliance on the electricity grid through a technology shift from electric chiller to absorption chiller plant. This supports building owners to potentially avoid up to 50 percent of the carbon price and electricity network charges – meaning about a 25 to 30 percent reduction in their total electricity bill.
If the building also uses the electricity generated by a tri-generation system, in other words, hosts a tri-generation energy centre, the building owner could see an overall 50 percent reduction in their total electricity bill. Not to mention the environmental benefits, such as uplift in an NABERS Energy rating, the associated green building plaudits and tenant retention aspects.
Precinct tri-generation systems will reduce overall electricity prices through reduction in peak demand and therefore electricity infrastructure investment. If precinct tri-generation systems are implemented and widely taken up by building owners, an overall reduction in electricity prices will be seen because the peak demands will be reduced; reducing the infrastructure investment necessary to meet the peak demand.
If a building owner is able to host a tri-generation energy centre or local satellite thermal station (or local chilling station) that forms part of a precinct tri-generation system, significant financial contributions are available. The procurement and installation cost of the new plant will mostly disappear on the basis of providing a no/low cost lease to house the plant within the building.
Environmental upgrade agreements are also available to allow access to low interest loans through council support. This provides another means of overcoming the capital expenditure hurdles.
3. BE GREEN – USE RENEWABLE RESOURCES
In a world where renewable energy technologies continue to resonate with the public ideal, the right renewable energy technology application that responds to the right demand and is installed at the right capacity will present a commercially viable solution. Developing and implementing the energy hierarchy offers building owners a tool to deliver this technology in an effective way.
Operating in a volatile energy market means that those building owners who mitigate their exposure to such challenges as the carbon price and increasing electricity network changes can remain competitive. Following the energy hierarchy offers a tool for building owners to do just that.
