Introduction
One of the main issues facing Australia, Germany, New Zealand, and many other countries is the lack of clean, dependable, and economical energy. Another is climate change, which is worsened by uneconomical energy usage. Essentially, these are international issues that cut across national boundaries. All sectors of the economy are impacted by improper energy usage and climate challenges. They also cause social and cultural issues and have a larger impact on foreign and security policy. As a result, society as a whole, as well as governmental decision-makers and business representatives, must grasp them.
The resilience of Australian energy use has recently been put to the test by high energy costs, which have led to price increases for electricity and gas that have doubled and tripled, supply security issues, and more complicated energy markets. Energy efficiency appears to be the clear answer to these problems. Industrial energy users struggle to achieve energy efficiency due to the national policy’s inertia and the challenges of finding, evaluating, and putting efficiency solutions into place. The efficiency of the energy use could have been stronger in the Australian case if the government had been willing to adopt good practices from Germany. This can be manifested in different areas, from different building standards to energy pricing. Naturally, the adoption of similar approaches should be evaluated in terms of compatibility and long-term benefits.
Problem Statement
The market’s main flaw is that energy prices do not adequately represent the cost of usage. Energy users do not consider these costs when considering whether to invest in energy efficiency because there are unaccounted-for negative externalities related to energy consumption. Energy efficiency measures are frequently asserted to produce win-win outcomes in terms of lowering greenhouse gas emissions, as well as private advantages through savings on the bills that exceed the related capital expenditures, notwithstanding the market inefficiencies associated with energy pricing (Umbach and Wagner 2020). This implies that there are energy efficiency opportunities that could be used privately but are not.
Information failures, such as information asymmetries where the seller may know information about the building’s energy efficiency, but the buyer or tenant does not, are frequently mentioned market failures and behavioral anomalies or failures that contribute to the energy efficiency paradox about commercial buildings. The principal-agent problem, which can occur when incentives that affect builders making decisions that affect future buyers are not agreed upon with the final owner, is another frequent issue (The Centre for International Economics 2019). It happens when the party making energy efficiency investment decisions is not responsible for paying energy bills. The building constructor, the building’s owner, and the tenant may all share rewards. There are incentives for the building contractor to avoid taking these measures, especially if the benefits are not immediately visible to the owner or potential buyers because these energy-efficient alternatives often increase the cost of construction (The Centre for International Economics 2019). In the context of a building code, a regulation modification to minimum standards may be more effective than a voluntary choice that increases the availability of information or gives more information in overcoming heuristic decision-making.
It is critical to understand how homeowners’ lifestyle decisions in their houses affect energy consumption as well as their motivations for doing so. The results can point to approaches to increase the efficiency of green building techniques that will cut greenhouse gas emissions in residential structures. In these settings, their effective usage of energy can become the forefront of comprehensive reform.
Limitations of the Existing Framework
Therefore, when analyzing the root causes of the energy efficiency gap, it is crucial to look at the concrete evidence for these market and behavioral shortcomings. Since retail energy prices do not accurately reflect the whole social cost of supply, there are generally good philosophical arguments in support of establishing minimum energy efficiency standards for commercial buildings (Azari and Abbasabadi 2018). Without government action, the commercial building sector is compelled to underinvest in energy efficiency due to energy prices that do not fully reflect the societal cost of supply. For small office buildings, leased retail spaces, including shopping malls, and the sale of buildings of all types, information asymmetries and the issue of incentive splitting between landlord and developer are also likely to play a role in the energy efficiency paradox.
In theory, minimum energy efficiency requirements for commercial buildings are justified by market disruptions, but it’s also critical to be aware of the possibility of regulatory disruption. The expenses of meeting the minimum requirement, at least for some buildings, may be greater than the benefits when minimum energy efficiency criteria are set too high (The Centre for International Economics 2019). Due to a variety of circumstances, each building will have a different optimal level of energy efficiency. NCC considers variations in building types and climate zones (Umbach and Wagner 2020). The best level of energy efficiency is also influenced by variables like the microclimate and energy costs in a specific location, variations in the structure of employment within a given type of building, and the design preferences of the building owner (The Centre for International Economics 2019). However, this cannot account for all the variations between buildings. Setting the minimal requirement at the proper level is difficult, given these disparities. Furthermore, minimum criteria are ill-defined; it is challenging to determine minimum energy efficiency standards that will result in the expected gain in energy performance without raising costs unnecessarily.
The NCC’s primary responsibility is to address any market disruptions and to provide a minimum standard that does not preclude the introduction of new technology that goes above and beyond the minimum criteria. Therefore, it must balance technological advancements with commercial viability and market access. The potential for stricter minimum criteria, which restrict choice and hence constitute a greater restriction of competition, is another drawback of the existing policy vehicle to promote future advancements in energy efficiency (Umbach and Wagner 2020). In this instance, it is crucial to evaluate the current policy and legal landscape and contrast it with Germany, a nation that has had some success in assuring the stability of energy use. Australia might take both positive and negative lessons from the German experience to help it navigate this change.
Germany Energy Usage
Rising energy prices, carbon emissions, and guaranteeing the security of energy usage are problems in both countries that call for cooperative, long-term solutions. In this regard, it is critical to investigate novel solutions to the energy and climate problems that produce long-term benefits. The Renewable Energy Act was the initial focus of Energiewende (EEG). This regulation, which was passed in 2000, grants grid access to renewable energy sources and offers operators a fixed charge for 20 years (Narayanan et al. 2018). All energy consumers pay fees that fund additional payments. The annual fee for new power plants is initially decreased by 5% (Semple and Jenkins 2020). The preference placed for renewable energy over conventional electricity is another crucial aspect.
Politicians in Germany have created a second pillar, called enhancing energy efficiency in all industries, to solve the issue of high electricity bills. The German federal government created the National Energy Efficiency Action Plan (NAPE) at the end of 2014 to promote energy development efficient goods and services and to level the playing field for energy efficiency initiatives (Semple and Jenkins 2020). A set of cost-effective initiatives was produced during a protracted discourse process in which parties, including the German Energy Efficiency Business Initiative (DENEFF), put forth numerous alternatives (Narayanan et al. 2018). The German government’s program on energy efficiency was built on this plan. The plan calls for several actions and initiatives to boost energy efficiency in Germany, particularly in the commercial and industrial sectors, and the beginning of contracting for energy efficiency services (Semple and Jenkins 2020). By 2030, public spending on energy efficiency will rise from 40 billion euros to 60 billion euros, according to the most recent update of the national energy efficiency strategy (Narayanan et al. 2018). This ensured the backbone of the German strategy of optimizing energy usage in buildings.
The Energiewende, or energy transition, in Germany, has caused a shift in the nation’s energy usage from a system based on fossil fuels to renewable energy. The National Energy Efficiency Action Plan (NAPE) was a part of the government’s 2020 Climate Change Action Program, which was adopted in December 2014 (Narayanan et al. 2018). The three pillars of Germany’s NAPE are enhancing building energy efficiency, establishing energy efficiency as an investment and business model, and promoting personal accountability for energy efficiency (Semple and Jenkins 2020). Due to improved energy efficiency, demand-side management, and increasing renewable energy generation, the overall primary energy intensity reduced by 25% between 2000 and 2017 (Narayanan et al. 2018). This proved to be beneficial in stabilizing the country’s resources and reducing the impact of climate change.
Although Germany’s energy policy has made significant progress in raising energy productivity, over the same period, some gains in efficiency have been offset by higher energy consumption in the transport and construction industries. In some periods, Germany faced difficult hurdles in combating climate change, overseeing the implementation of its energy policy while phasing out nuclear energy, and boosting the generation of renewable energy. Germany’s 2030 climate change package, which went into effect in November 2019, seeks to achieve this goal by cutting greenhouse gas levels by 55% from 1990 levels by 2030 (Narayanan et al. 2018). A variety of actions will be taken, including setting energy usage metrics for commercial buildings and renovating some types of office constructions so that they can be tax-free by 2024 (Narayanan et al. 2018). In this sense, it shows the commitment of Germany to continue development despite the obstacles encountered.
Australian Framework
In Australia, the Commonwealth government has largely ignored central support for the energy transition. Given the current low energy productivity in Australia, this is particularly regrettable. Given that Australia generates less value per unit of energy used than Germany, there is an economic necessity to increase energy productivity (Ren and Chen 2018). Despite this, Australia now has a competitive advantage in terms of energy costs due to the recent sharp increase in energy prices. However, like Germany, Australia should create an encompassing national energy efficiency innovation program to hasten the creation, use, and transfer of the technologies required to meet its objectives. This type of strategy is also required to ensure that Australia’s economy has a chance to gain from leadership in at least some specialized elements of the transition (Umbach and Wagner 2020). This will show that Australia is not only a supplier of imported technology and business solutions as the shift develops.
In Australia, the politicization of energy usage and climate change policy over the past ten years has resulted in political paralysis at a time when questions of energy cost and security are putting the sustainability and competitiveness of Australian enterprises to the test. Australia is working on cutting its emissions through the Climate Action Fund, the Renewable Energy Target Program, and the National Energy Efficiency Plan, but stationary industries like manufacturing, mining, and transportation are contributing to an increase (The Centre for International Economics 2019). In comparison with Germany, the poor use of energy in buildings and rising electricity prices highlight this even more. Even with high energy prices, there are still obstacles to putting energy efficiency measures into place, such as a lack of funding, inadequate systems for collecting and managing energy data, and a lack of internal expertise and capacity for spotting and evaluating opportunities (The Centre for International Economics 2019). As the Australian government examines the NEPP, there is a chance to incorporate the knowledge of other nations that have experienced the same energy usage issues, like Germany, and either modernize the NEPP to increase energy efficiency or introduce a program to assist businesses in overcoming the obstacles they encounter. Energy efficiency offers a road to the reduction that should garner bipartisan political support as Australia’s greenhouse gas emissions rise, helping to overcome the impasse that has existed in Australian energy and climate policy for more than ten years (Ren and Chen 2018). This is particularly evident in building energy usage, which still seems inadequate despite the existing situation.
Increasing Efficient Energy Usage
An important objective should be to increase energy efficiency, particularly in the building sectors where emissions are rising. Compared to Germany, due to a lack of policies and focused initiatives, Australia’s rate of energy efficiency advancements continues to lag behind that of other advanced nations on a national scale (Umbach and Wagner 2020). In reality, the nation’s top scientific organization, CSIRO, has discovered that to achieve emission reduction goals, the economy would need to reduce its potential for renewable energy by 50% if energy efficiency measures were implemented (Umbach and Wagner 2020). This shows the need for improvement in the political and legislative frameworks.
Both the quantity and kind of energy consumed in residences have an impact on the concentration of greenhouse gases produced. Homeowners could lessen their carbon footprint by using energy from clean, renewable sources in addition to consuming less energy overall in their dwellings (Ren and Chen 2018). In Australia, fossil fuels, including coal, oil, and gas, are primarily used to generate energy for industry and homes (The Centre for International Economics 2019). Household power use per person is rising despite efforts to lower energy consumption in homes. This increase was caused by an increase in dwelling size, a decrease in average household size, an increase in the number of appliances and IT devices per home, as well as a growth in the use of space heaters and coolers (Ren and Chen 2018). In these settings, the Australian government has started programs to increase the energy efficiency of existing homes. However, some of these projects had major issues that resulted in fatalities, particularly because of faulty insulation installation. As a result, some of these programs were either abandoned or replaced. The Isolation Program, for instance, has been discontinued, and the Green Loans and Green Start Programs were shut down in February 2011 (Umbach and Wagner 2020). This shows inconsistency in the existing approach to moderate energy efficiency.
It is important to mention that many Australians are not likely to be energy efficient. The most frequent behaviors observed in homes were not using natural light when available, leaving the lights when leaving a room and overusing appliances like the dishwasher or washing machine (Ren and Chen 2018). The most frequent excuses given by respondents for not acting were inconvenience, forgetting, or being too lazy, given that many of these activities will help cut energy and water consumption in homes (Ren and Chen 2018). Potentially, customers who are better informed on how to modify their consumption habits more effectively adapt to market prices and reduce their energy costs when they can see where, how, and when they use energy.
Urban Development Strategy
The principal urban development strategy used in the majority of Australian state capitals under the present metro policy is an increase in building density. Such developments are sometimes known as urban settlements in an urban setting or developments focused on activity or growth hubs like Sydney or Melbourne (The Centre for International Economics 2019). However, there is disagreement over whether different building standards will lead to a substantial reduction in emissions and energy consumption. This debate is partly responsible for the inconsistency of legislation on the issue, due to complications of building planning standards in big cities like Sydney. On the one side, the cost implications of such adoptions are overwhelming from a short-term perspective due to the need to restructure building facilities. However, the long-term prospects are favorable in terms of energy savings of more than 20% (Ren and Chen 2018). Given the current economic hardships and impact of the pandemic, it is still unclear, whether the necessary changes will be implemented in the coming years.
Modelled Energy Savings in Buildings
Regulation, transportation, urban planning, and pricing are examples of policy responses to the variety of factors influencing household energy usage. The provision of more energy-efficient homes is regulated widely in terms of building control and planning, however, this is currently up for discussion. They are primarily intended for single or collective living areas. Although pricing undoubtedly has an impact on the consumption of low-income households, tariffs have not typically been utilized to restrict energy consumption (Umbach and Wagner 2020). The need for increased control and direction over energy use at home and while traveling, as well as the consequent greenhouse gas emissions, is evident.
Energy Pricing
However, a fair and effective pricing structure is difficult to create. This would also have to account for variations in energy usage brought on by various climatic circumstances. Currently, the existing legislation does not permit this, but it might in the future if adequate data and information are made available. A step-by-step tariff with unit price rises over the base threshold should comfortably meet the fundamental needs of all households.
Due to the constant methodology changes, there is no flexibility to maintain the current approaches. This would necessitate duplication of provisions and processes, which would be challenging and impractical, especially for pricing solutions or mixed-use buildings (Umbach and Wagner 2020). The rigor updates underlying normal construction timelines and performance measurement would be incompatible with current practices, undermine aims, and create market confusion in terms of approaches to increase productivity (The Centre for International Economics 2019). Increasing the minimum requirements could potentially reduce competition or restrict material or design options. Due to the proposed adjustments to the existing regulations, some vendors or products may suffer as a result of the altered eligibility requirements. NCC, on the other hand, is performance-based and employs test procedures and other techniques that permit the performance of individual pieces to be altered to fulfill overall performance criteria (The Centre for International Economics 2019). This, in turn, will allow gaining flexibility in the decisions to reach goal values.
Potential Approaches
Australia requires a thorough energy transition plan based on the different crucial tools. This should include improved energy efficiency of buildings, processes, and equipment, distributed generation, and demand control in response to unstable energy supply. Moreover, the use of storage – hot or cold water, storage of materials or batteries, using energy to provide more value, and replacing fossil fuel heating with electrical technologies or renewable fuels are all important aspects of energy performance in energy-consuming buildings (Ren and Chen 2018). Increased energy productivity can lower annual greenhouse gas emissions by lowering gross energy demand. Additionally, it can be used to increase consumption at times of extremely low electricity prices and decrease peak energy demand, which helps to increase the reliability of the power system and lower energy usage. Even if they comply with the criteria, Australia has not yet properly implemented energy efficiency improvements. End-user demand management should come first as it lowers costs and commercial risks (Ren and Chen 2018). Large-scale renewable electricity generation employing solar or wind, as well as investments to reduce supply volatility such as batteries, pumped hydro, or rapid gas generation.
Conclusions
Different strategies can be used to significantly increase energy efficiency in various types of buildings. Even if the predicted energy savings are not entirely realized in fact, these adjustments could have substantial net advantages across all jurisdictions. The absence of information is a major impediment to buildings using cost-effective energy efficiency potential voluntarily. Additionally, it appears that one of the major challenges is the inability to use the information at hand to make specific best decisions. A detailed examination of the German experience aims to produce more precise energy consumption regulations and effective statutory restrictions. As a result, it aids in formulating strategies for enhancing the usage of environmentally friendly components and energy efficiency in homes.
It is doubtful that the choice that is not considered normative will offer notable advantages. The number of options for voluntary energy efficiency use is unlikely to be greatly increased by condensing the work done by different think tanks to make revisions to the NCC into guidance. While the information on specific projects is commercially available, general information on the advantages of energy efficiency is freely accessible from a variety of sources. The availability of information does not, therefore, seem to be a barrier to taking advantage of chances for cost-effective energy efficiency. Instead, the primary barrier appears to be the inability to use the information that is accessible as a result of behavioral errors such as restricted rationality and/or heuristic decision-making. Little would be done by management to remove these obstacles. In these settings, it is crucial to investigate the approaches of other countries, such as Germany, which attempts to be at the forefront of efficient energy usage and reducing the impact of climate change.
References
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The Centre for International Economics. 2019. “Decision Regulation Impact Statement Energy Efficiency of Commercial Buildings.” The Centre for International Economics
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