2 Conceptual foundations Energy productivity and theories of change in, and the analysis of, economic systems provide the conceptual foundation for this research. Improving energy productivity is the central goal of the project, therefore this chapter begins with a definition and how it is measured, followed by Australian trends and international comparisons of energy productivity. The second section introduces innovation theories, including disruption and socio-technical transformations, which provides insights into how interactions between technology and society result in changes to incumbent systems of production and consumption. The third section lays out the approach to production and consumption systems analysis, including value chains and end use services. The final section within this chapter brings together the three underlying concepts, to highlight how energy productivity, innovation and socio-technical changes, and systems of production interact, which informs the investigations into value chains.
2.1 Energy productivity Energy productivity is the primary metric used in this analysis. Energy productivity is a measure of economic output per unit of energy used, and as such value creation is included within the analyses in addition to cost reduction and energy efficiency. This section outlines the purpose of using energy productivity as the goal in this research project, its definition and national and international trends.
2.1.1 Approaches to energy use in industry The aim of this research is to identify ways that Australian businesses and industry can contribute to the reduction of energy use and carbon emissions in line with our current commitments under the Paris Agreement to reduce greenhouse gas emissions by 26–28% below 2005 levels by 2030 (DISER, 2021) and RACE for 2030’s goal of Accelerating the transition to Reliable, Affordable, Clean Energy for 2030. Therefore, we need to consider how make and provide goods and services, how energy use is factored into business decision making processes, and how to approach the relationship between energy use, profits and productivity. The problems are that energy efficiency is not a primary concern for many businesses and is not a major factor in the costs of production in many value chains, and that methods for a full accounting of the range of benefits are still in development (Ürge-Vorsatz et al., 2016). In many cases the lifecycle energy impact of production decisions occurs outside the boundaries of businesses making these decisions: referred to as Scope 3 emissions. Also, much of the discussion regarding industrial productivity focuses on labour and capital (e.g. Productivity Commission, 2020) and in some instances Australian industries have responded to international competition and globalisation by increasing capital intensity at the expense of labour (Productivity Commission, 2017), which is likely to result in higher energy use. However, relationships between energy use, capital intensity and productivity are not clear-cut (Elkomy et al. 2020), even if central to recent economic policy discussions in Australia (e.g. Morrison, 2020). It is also important to point out that capital investment is central to improving energy use and improvements in energy efficiency, for example new equipment is likely to be more efficient than what it is replacing. In essence, the problem is to connect the public or social good of reduced emissions and energy use and the private or commercial good of competitiveness and productivity. The concepts of bounded rationality and satisficing rather than optimal decision making are also important, indicating that there is room for improvement and that industry is making rational decisions limited by their understanding of what is possible and most beneficial (Visco & Zevi, 2020). Therefore, addressing energy use in industry needs to seek ways to 12
Transforming energy productivity through value chains
