Over $46 billion in spending for electricity network infrastructure is planned across Australia for the next five years, and as much as $7.6 billion of this is to manage growing peak demand in NSW. Pursuing energy efficiency in buildings can lead to lower operational expenditure, reduced greenhouse gas emissions and new research shows it has the potential to reduce the requirement for some network expansion.

Electricity generation and distribution networks are built with spare capacity to accommodate peaks in power usage – generally times when the demand for heating and/or cooling is most acute. Typically these peaks last for only a few hours on a few occasions each year. And while networks have always had to deal with peaks, in Eastern Australia in recent years, electricity usage during summer afternoon peak periods has been going up dramatically.

As a consequence network operators are building ever more poles and wires to keep up. Over $46 billion in spending for electricity network infrastructure is planned across Australia for the next five years [1], and as much as $7.6 billion of this is to manage growing peak demand in NSW [2]. These costs are being passed to consumers via their energy bills which, in the case of NSW, last year increased by up to 13%, and are expected to increase much more in the next few years. So if energy efficiency and smart energy management can reduce energy demand at these key times, it can mean that the utilities don't have to spend as much to expand the network.

New research [3] on 2008 electricity data from 25 Sydney CBD buildings managed by GPT, Investa, Stockland and Colonial, found that as the buildings' energy efficiency increases (represented by an improvement in the NABERS Energy rating), the building's peak demand inherently falls.

Figure 1. Building peak demand versus raw NABERS Energy ratings for 25 Sydney office buildings

The analysis shows that if a typical building were to be upgraded from the Sydney average of 2.5 stars to 5 stars, a 57% reduction in electricity consumption would be achieved with a corresponding reduction in peak demand of 26%. This study implies that for every 10% reduction in buildings' yearly electricity consumption they make a 4.5% reduction in their peak demand.

If the entire Sydney CBD's average NABERS Office rating were to improve from 2.5 to 3 stars it would produce a peak saving of 18.4MVA, the equivalent peak energy demand of approximately 13 large (25,000m2) office buildings. And that's actually not so hard – there are plenty of buildings that have achieved much more. So clearly there is a significant opportunity to capture the duel benefits from improved performance; reduced energy consumption in buildings (i.e. greenhouse gas emissions) and reduced peak demand, therefore cutting the need for network expansion.

The next question is: how do we get there? We reckon a more holistic approach to energy supply and energy management offers significant advantages. Sector-wide action, requiring both energy efficiency improvements and demand management initiatives, is necessary. Specific actions could include: raising building and equipment standards, rewarding energy and peak demand performance more generously in Green Star ratings, increasing financial incentives for energy and peak management, promoting renewable and lower emissions distributed generation and introducing innovative new schemes such as mandatory power factor correction and perhaps even a new peak load rating scheme.

Such initiatives would do more than just help the network operators. We've found that large electricity customers pay about 13% of their bills to cover peak capacity charges each year, and a further 32% to cover network energy charges. That's around $150,000 per year in peak demand charges and $350,000 in network energy charges for the largest of CBD buildings. So any peak demand reduction also means lower energy expenditure.

There is huge potential for technological solutions involving air conditioning and lighting, as well as behaviour changes for occupant thermal comfort. Energy efficiency strategies provide a huge pool of low cost (or negative cost) opportunities for office buildings, highlighted nicely in the 2010 carbon abatement cost curve produced by McKinsey and Company (page 14).

As this peak demand study indicates, pursuing energy efficiency in buildings' can lead to lower operational expenditure, reduced network expansion and ultimately reduced greenhouse gas emissions.

It sounds like a win-win solution to me.

[1] Langham, E., C. Dunstan, G. Walgenwitz, P. Denvir, A. Lederwasch, J. Landler, (2010). Reduced Infrastructure Costs from Improving Building Energy Efficiency. Prepared for the Department of Climate Change and Energy Efficiency by the Institute for Sustainable Futures, University of Technology Sydney and Energetics

[2] Dunstan, C., E. Langham, (2010). Close to Home: Potential Benefits of Decentralised Energy for NSW Electricity Consumers, Prepared by the Institute for Sustainable Futures, University of Technology, Sydney for the City of Sydney

[3] Steinfeld, J., A. Bruce, M. Watt, (2011). Peak load characteristics of Sydney office buildings and policy recommendations for peak load reduction, Energy and Buildings, doi:10.1016/j.enbuild.2011.04.022