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Embedding energy efficiency teaching into VET and Higher Education

Educators’ Interactive seminar

UTS Business School

27 October 2011

Leadership & Change for Energy Efficiency in Accounting & Management

Disclaimer

> This presentation presents the views of the authors, and not the views of UTS, or any other party.

> This presentation is for educational purposes only and does not contain specific or general advice.

> Please seek appropriate advice before making any financial decisions.

> Reference list is provided at the end of the presentation

Referencing this material

> This material has been developed by UTS Business School in a project funded by the NSW Office of Environment & Heritage (OEH) under the Energy Efficiency Training Program.

> If using these materials please acknowledge as follows:– Benn, S., Brown, D., Brown, P., Crittenden, P., and Krithinakis, A.,

2011. Leadership & Change for Energy Efficiency in Accounting & Management: Educators Interactive Seminar. 27 October 2011. Project funded by the Office of Environment & Heritage, Department of Prime Minister & Cabinet NSW.

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Welcome & introductions

Professor Suzanne Benn

UTS Business School

Interactive seminar - outline

> Energy efficiency – the business context> Outcomes from the project Training Needs Analysis> Embedding energy efficiency into university

accounting courses – examples> ‘Opportunities’ for embedding energy efficiency from

your perspective> What would help you and your colleagues? > Evaluation

Project funding

> Office of Environment and Heritage> Energy Efficiency Training Program

– ‘supports the development and delivery of higher education courses that enhance energy efficiency knowledge and practice’.

Key Project Partners

> UTS Business School> Ernst & Young> Chartered Institute of Management Accountants

(CIMA)> Westpac> TAFE NSW, Sydney Institute

Project Overview

Introductions

> Briefly (30 seconds!)– Your organisation– Your role– Why energy efficiency is relevant to you and your

work

Interactive Seminar - Outcomes

> In this seminar you will:– Learn from others about embedding energy

efficiency into teaching and learning for accountants & business managers

– Share your own experience – Provide input to the project– Identify additional actions that you might take

UTS Business School approach sustainability

> Content and teaching method must be relevant to the core aspects of the discipline

> For example:

Economics → Externalities

Accounting → Information needed for decision makers

and controlling operations

Interactive Seminar - Aim

> To promote and encourage the embedding of energy efficiency into teaching and learning in VET and Higher Education

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Energy Efficiency – the business context

Patrick Crittenden

Sustainable Business P/L

What is Energy Efficiency?

> Energy efficiency primarily refers to end-use efficiency.

> It involves delivering equal or greater levels of “energy services” with less energy supply.

> Energy services include cooling, heating, lighting, driving motors, operating equipment and appliances.

Dunstan et al. 2011, p.10

Electricity generation by fuel type in Australia

Source: Geoscience Australia 2010 p34

The boundary

The electricity supply chain

2 units of light energy delivered

100 units of energy input

The boundary

The electricity supply chain

62 units lost2 units lost

34 units lost

2 units of light energy delivered

100 units of energy input

The boundary

Energy efficiency example

80% saving in energy end use delivers

benefits across the electricity supply chain

Many cost-effective energy efficiency projects exist but are not

being taken up

ClimateWorks 2010 “Low Carbon Growth Plan for Australia”

International Energy Agency – 450 scenario

26

28

30

32

34

36

38

40

42

2007 2015 2020 2025 2030

Gt

2010

Efficiency 65 57

End-use 59 52

Power plants 6 5

Renewables 18 20

Biofuels 1 3

Nuclear 13 10

CCS 3 10

Share of abatement %

2020 2030

3.8 Gt13.8 Gt

Reference Scenario

450 Scenario

Source: IEA (2011) World Energy Outlook

Efficiency measures account for 59% of abatement in 2020

Four key business risks that energy efficiency can address

> Cost containment> Carbon pricing> Compliance with legislation> Licence to operate

Business risk: Cost containment

> Electricity prices are rising> Oil price highly variable

Energy efficiency is effective in reducing the business impact of rising and variable energy costs

Source: Geoscience Australia, 2010 p18

Source: Geoscience Australia, 2010 p28

Business Risk: Carbon pricing

> From July 2012 - carbon price of

$23 a tonne, 2.5% increase p.a> Fixed for 3 years then market-based> Direct liability = Direct costs> Increased costs in the supply chain

= flow through impact on your business

Energy efficiency is the most cost- effective way of reducing the impact of a price on carbon

Business Risk: Compliance with legislation

> Some relevant current legislation:– National Greenhouse and Energy Reporting Act 2007– Energy Efficiency Opportunities Act 2006– Renewable Energy (Electricity) Bill 2009– Building Energy Efficiency Disclosure Act 2010– Energy and Utilities Administration Act 1987 No 103– NSW Water and Energy Savings Action Plans – And other accounting, reporting, and auditing

standards

Business Risk: Compliance with legislation

> Exposure draft ISAE 3410 Assurance Engagements on Greenhouse Gas Statements

> Environmental Claims in Advertising and Marketing Code

> ISO and other quality assurance guidelines

Legislative compliance associated with energy efficiency and greenhouse related

issues is increasingly complex

Business Risk: Licence to Operate

Some stakeholder perspectives:>Investors – Can energy efficiency provide a proxy indicator of good management?>Community – Why isn’t this organisation acting on cost effective opportunities to reduce greenhouse gas emissions?>Regulators – Perceived market failures justify intervention

Organisational stakeholders are increasingly aware that energy efficiency has important

business, environmental and social benefits.

Other business drivers and opportunities

> Your competitors are doing it!

See public reports from companies in the Energy Efficiency Opportunities program to compare your performance www.energyefficiencyopportunities.gov.au

See the Carbon Disclosure Project

www.cdproject.net

Energy Efficiency Opportunities - results

> 207 corporations (end 2010 public reports)> identified opportunities with a better than 4 year

payback > have the potential to reduce their energy use by an

average of 9.8 per cent > Energy reduction of 141.9 PJ of energy per year =

2.5 per cent of Australia’s total energy use > financial benefit around $1.2 billion per year.

Ethical Reasons (Greenhouse Gas Emissions)

32Source: Garnaut Climate Change Review 2008, p 88

Case Study - The GPT Group

Source: Accessed 6/9/11 from www.gpt.com.au/content.aspx?urlkey=Energy

Example - The GPT Group

> Senior management support> Appropriate resourcing> Data measurement and reporting> Staff recruitment and training> Performance management system

The GPT Group have put the right systems in

place to deliver results.

Energy Efficiency is considered an opportunity to create a competitive advantage.

Example - Linfox Australia

Source: Linfox Energy Efficiency Opportunities Public Report 2010 p 17

Example - Linfox Australia

Source: Linfox Energy Efficiency Opportunities Public Report 2010 p 17

Many cost-effective energy efficiency projects exist but are not

being taken up

ClimateWorks 2010 “Low Carbon Growth Plan for Australia”

Barriers to energy efficiency improvement in business

Dunstan et al. 2011, p.10

Example – Split incentives in the real estate sector

Source: WBCSD, 2009 p12

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Training Needs Analysis

Dr. David Brown

UTS Business School

UTS Business School Accounting discipline groups approach to energy efficiency

> Collaborative approach which is part of a wider review of our programs.

> Using EE as an example of how general accounting techniques can be used.

> Slides, tutorial exercises, case studies.> For example:

– energy budgeting; – variance analysis using energy data; – capital budgeting for EE projects

Training Needs Analysis - Focus Groups

> NSW TAFE, Sydney Institute (6 participants)> CIMA members (11 participants)> Engineering, architectural design, legal (5 participants)> Westpac (6 participants)

Targeted interviews with:> Energetics (2 interviewees)> Senior Executive from ASX200 company> UTS Business School (4 interviewees)

Training Needs Analysis – Key Themes

> Organisational response to energy efficiency needs to be cross-disciplinary– Accountant as business partner

> There is demand for Energy Efficiency training and training materials for accountants and business managers

> Soft skills as well as analytical/ technical skills are important

Training Needs Analysis – Key Themes (cont.)

> The rationale for action/ importance of Energy Efficiency is a fundamental starting point

> Application/ approach will vary across:– Public and private sector– Type of industry sector– Firm strategy– Firm culture

Training Needs Analysis - Skills

Discussion

> What are your perceptions of industry needs in terms of embedding energy efficiency?

> Are there any additional themes or skills that you are aware of that we should take into account?

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Embedding energy efficiency into university accounting courses – some examples

Dr. Paul Brown

UTS Business School

Energy Efficiency Fundamentals- Establish your energy base case

> Not just the level of energy> It is the expected level of energy, for an expected

level of activity> Expected Energy = Fixed energy + Variable Energy * Activity

> How is this different from estimating ‘pre-determined overhead rates’?– Units are different ($ and kilowatt-hours or Giga

Joules)– Energy complies with the laws of thermodynamics

(unlike people)

Establish your energy base case

> Estimation methods are similar to cost accounting:– Regression Analysis– Modelling / simulation (like input /output analysis)– Short term metering– Long term metering

> Engineering models and equipment are used, so work with a specialist– E.g.. Consider the effect of weather on demand for energy

For example:

> A building in NT implemented a range of EE projectsTotal Annual Consumption for 04/05 in kWh: 1,605,138

Total Annual Consumption for 05/06 in kWh: 1,597,135

Naive Energy Saving in kWh: 8,003

> Linear regression was used to control for differences in weather (the base year had a cool summer)

Total Annual Consumption for 04/05 in kWh: 1,775,546

Total Annual Consumption for 05/06 in kWh: 1,597,135

Energy Saving in kWh: 178,411

Difference is a 10% saving, vs a 0.5% saving in energy

It is important to clearly identify organisational activities, and boundaries

> We are familiar with the value chain approach, and the benefits of linking resources consumption with activities

> Figure of Generic value chain (Porter, 1985) sourced from Cooremans (2011)

It is important to clearly identify organisational activities, and boundaries

> Information ‘should’ link with existing accounting structures

> Base line review is likely to reveal opportunities, which will justify further expenditure as opportunities become known Source: RET 2008

Energy Base case information

> Here are some examples of the type of information useful for identifying EE opportunities Source: RET 2008

Hints:

> Start simply, and do something: – Find out what is happening in your

organisation– Review electricity statements for different

facilities– Review energy supply contracts

Hints:

> Organise data to match current reporting systems– Eg. Batch vs process costing; KPIs

> Let people know what you are doing, and make data transparent

Hints:

> Conduct an energy information audit: – Ensures your organisation captures new

knowledge

> Find champions in each major facility and department and let them loose with some decision making rights

Developing the business case for an energy efficiency project

> Clear identification of the costs and benefit– Translated into NPV, IRR, Payback etc– Opportunity cost

> Identifying direct costs and cost savings may rely on engineering analysis, as well as cost analysis– E.g. A process change effect on your base case

and on demand for labour > All costs and benefits should be included

– Information value, strategic value

Information useful in preparing the business case

> Costs are easier to identify than benefits– Labour, equipment, consultants etc

> To assist in the identification of benefits, we have provided a checklist:– The 6 key drivers of EE discussed in the beginning

of the presentation– a list of benefits identified in reviews of the

literature (Worrell et al 2003; Cooremans, 2011)

Developing the business case for an energy efficiency project

> Reduced Cost> Improved

temperature control> Increased reliability

in production> Improved product

quality

> Reduced Risk> Greenhouse gas

reductions> Improved reputation> Safety

Include all business costs and benefits to increase the chance of

success

Some sources of competitive advantage from EE: REDUCED RISKS (from Worrell et al 2003 and Cooremans, 2011)

> Reduced hazardous waste> Reduced dust emissions> Reduced CO, CO2, NOx, Sox emissions> Increased facility reliability> Reduced wear and tear on equipment /machinery> Decreased liability> Legal risks> Carbon & energy price risks> Disruption of energy supply> Commercial risk

Some sources of competitive advantage from EE: REDUCED COSTS (from Worrell et al 2003 and Cooremans, 2011)

> Use of waste fuels> Reduced product waste> Reduced waste water> Materials reduction> Increased product yield> Improved equipment performance> Shorter process cycle time> Reduced dust emissions> Reduced CO, CO2, NOx, SOx emissions> Reduced wear and tear on equipment machinery

Some sources of competitive advantage from EE: REDUCED COSTS (from Worrell et al 2003 and Cooremans, 2011)

> Decreased liability> Reduced need for personal protective equipment> Improved lighting> Reduced turnover, absenteeism and health costs

(improved worker morale, reduced noise, improved air quality and temperature control)

> Reduced needs for engineering controls> Lowered cooling requirements> Reductions for labor requirements> Delaying or Reducing capital expenditures> Additional space

Soft Skills

Soft skills– Communication– Influencing others– Partnering– Change management– Team building– Problem solving

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Small group discussions

Questions

1. In what topic areas do you see opportunities to embed teaching and learning on energy efficiency?

2. What teaching strategies and approaches would be appropriate?

3. What type of teaching and learning materials would best support you with embedding energy efficiency into your teaching/ curriculum?

4. What further training/ professional development would be useful?

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Summary and next steps

Professor Suzanne Benn

UTS Business School

Thank you

> Thankyou for sharing your insights> Please complete the evaluation form. Consider:

– Are there any ‘energy efficiency’ related actions you plan to take following this seminar?

– Can we follow up with you next year as part of our evaluation?

– Please discuss with us any further ideas about embedding energy efficiency into your teaching and learning activities

Contact Details

Professor Suzanne Benn

Professor of Sustainable Enterprise

UTS Business School

Suzanne.Benn@uts.edu.au 

Ph +61 2 9514 3621

For further information and updates on the Leadership & Change for Energy Efficiency in Accounting & Management project go to:

http://www.business.uts.edu.au/energyefficiency

 

This presentation was prepared by:

> Professor Suzanne Benn> Dr Paul Brown> Patrick Crittenden> Associate Professor David Brown

References

> Bureau of Meteorology & CSIRO. 2010. "State of the Climate ".> Cooremans, C, 2011, Make it strategic! Financial investment logic is not enough, Energy Efficiency.> Dunstan, Chris, Katie Ross, and Nicole Ghiotto. 2011. "Barriers to Demand Management: A Survey of Stakeholder

Perceptions." Prepared for the Australian Alliance to Save Energy by the Institute for Sustainable Futures, University of Technology, Sydney.

> Geoscience Australia. 2010. "Australian Energy Resource Assessment." Commonwealth of Australia.> International Energy Agency. 2011. "World Energy Outlook ”.> Linfox Energy Efficiency Opportunities Public Report 2010. Accessed from

www.linfox.com/~/media/Documents/PDF/Linfox_EEO%20Act%20PR%202010%20Appendix%20small.ashx> Porter, M. E., 1985, Competitive advantage. New York: Free.> Department of Resources, Energy and Tourism (RET). 2011. "Continuing opportunities. Energy Efficiency Opportunities

program - 2010 report. A look at results for the EEO program 2006 - 2010." Australian Government Department of Resources, Energy & Tourism (RET).

> Department of Resources, Energy and Tourism (RET). 2008. Energy Savings Measurement Guide.> Sustainability Victoria. 2010. "Energy Efficiency Best Practice Guide Lighting.”> The GPT Group Sustainability Report. Accessed 6/9/11 www.gpt.com.au/content.aspx?urlkey=Energy> Total Environment Centre. 2010. "Demand management and energy policy development: A case study of New South Wales. ”> World Business Council for Sustainable Development (WBCSD). 2004. "Facts and trends to 2050.”> World Business Council for Sustainable Development (WBCSD). 2009. “Transforming the Market: Energy Efficiency in

Buildings.”> World Economic Forum. 2010. "Energy Vision Update 2010. Towards a more energy efficiency world.".> Worrell, E., Laitner, J., Ruth, M., & Finman, H., 2003, Productivity benefits of industrial energy efficiency measures, Energy,

28(11), 1081–1098.