Figure 6. The energy efficiency market

4.3.5 Definition of energy efficiency

The most challenging boundary definition issues arise in relation to energy efficiency and demand management. The International Energy Agency (IEA) has defined energy efficiency in the following terms:

“In its most basic form, investments are made in energy efficiency that lead to avoided energy consumption (for demand-side interventions such as improved vehicle efficiency) or avoided energy losses (for supply-side interventions such as improvements to the efficiency of electricity distribution). Delivering the same level of energy service (lighting, heating, transport etc.) while using less energy has a value related to the cost of the energy saved.”

International Energy Agency (2013), p.28.

Although there is an energy management sector, many energy efficiency activities are diffused throughout the economy and businesses, and workers may spend some of their time on energy efficiency activities and some of their time on other activities. For example, an electrician may work on energy efficiency projects and non-energy efficiency projects. Construction workers may be involved in energy efficient projects with high-star ratings and other projects which do not even meet the requirements for star ratings. There is no universal definition of the energy efficiency market due to its complexity. In 2013, the International Energy Agency aimed ‘for the first time’ to define and measure the energy efficiency market. The IEA noted the challenge of defining an energy efficiency market:

“The market for energy efficiency is as diffuse as energy consumption patterns themselves. It is composed of many market actors who demand more efficient provision of energy services, and those that supply the necessary goods and know-how to deliver this greater efficiency... The supply of energy efficiency cannot be considered as a distinct sector of the economy. Its magnitude is intimately linked to economic structure and the sectors in which the potential for energy savings lie.”

International Energy Agency (2013), p.17 & 36.

The IEA defined the energy efficiency market as a collection of energy-saving technologies, products and services related to end-uses within appliances and lighting, buildings and the industrial sector. Adapting and extending the IEA definition for characterising the NSW energy efficiency market, Common Capital (2014) defined the energy efficiency market as a subsector within energy services for a range of products within each of the three segments identified by the IEA and crosscutting services (see Figure 6).

Figure 6. The energy efficiency market

From Common Capital, 2014

ENERGY SERVICES MARKETS

Domestic hot water Domestic appliances and peripherals Pool supplies Computer equipment Energy information Lighting HVAC Insulation Automation and controls Window systems Process heating Motor systems Compressed air Refrigeration ENERGY EFFICIENCY MARKET

CROSS-SEGMENT ENERGY EFFICIENCY SERVICES (Audits, finance, design, maintenance, M&V, etc)

RELATIVE ENERGY EFFICIENCY PERFORMANCE APPLIANCES AND LIGHTING

BUILDINGS IEA SEGMENTS

INDUSTRIAL

4.3.5.1 What is the definition of energy efficiency within market segments?

The next design question is how to define energy efficiency within these market segments. How, for example, do you determine if a building construction project or a consumer product is defined as energy efficient? There are a range of options:

• Star ratings: the use of energy efficiency star ratings as a regulatory and industry benchmark is a common method to define energy efficiency. In an Australia context, star ratings exist for many classes of buildings (e.g. all new build residential buildings, commercial buildings, common areas in apartments) and a wide range of consumer goods (e.g. fridges, televisions, etc.). However, the coverage of star-ratings is not universal. For example, star-ratings do not cover all commercial buildings , and there are also significant industrial energy uses which are not covered by a star rating (e.g. boilers). A star-rating is generally the preferred method for defining energy efficiency but there are gaps in coverage that require alternative approaches. • All-technology: in some cases, a valid approach is to simply define all economic activity and work associated with a technology as energy efficiency, where that is intrinsic to its purpose. We propose to use this approach for insulation, advanced glazing (i.e. low-e glass, double and triple glazing and associated window products) and highefficiency lighting (e.g. LEDs). • Regulatory standards: for some construction activities there are regulatory standards that can be used as a benchmark for defining energy efficiency. To qualify as energy efficient, a building construction would need to either be above the regulated industry standard (for new build), or to meet regulatory compliance (for retrofitting). • Energy intensity: it could be possible to use an energyintensity benchmark for some classes of technology.

However, this would be too complex for use in a survey if that is the selected methodology. • Survey respondent evaluation of ‘high-efficiency’: in practice, for some activities where a star-rating, technology or regulatory standard is not readily available, the survey instrument will need to ask respondents to estimate the value of an activity and the size of a workforce based on their own definition of ‘high-efficiency’. In the pilot survey, we are using the last option (respondent evaluation of ‘high-efficiency’). Our recommended approach is to use a mix depending on the availability of benchmarks and the specific characteristics of the activity or technology, and to consult further on this topic prior to roll out of a full survey. Table 9 shows the sectors we consider need defining, and either our proposal or a note that it requires further consultation.

FINDING 1.9

Energy efficiency and demand management definitions for the survey need to be determined in consultation with industry, government and other stakeholders

The U.S. Energy and Employment Report survey uses precise definitions of what are energy efficiency activities, generally referring to a Leadership in Energy and Environmental Design (LEED) or an Energy Star standard. We have examined the options to do this within Australia and have found the boundaries less well defined. For the pilot survey we have asked respondents to use their own definition of high efficiency as an interim measure. We recommend:

• All products and services for insulation, high efficiency glazing and LED lighting should be defined as energy efficiency; • Additional consultation on other energy efficiency products and technologies – to establish where the boundary should lie between efficient and nonefficient products – should be undertaken; and • Consultation on which definitions, if any, should be relative to regulatory standards, that is, once a current energy efficient product becomes the regulated minimum, should it cease to be included?