How large businesses can offset ETS costs with good energy management

On 1 July this year, the energy sector joined New Zealand’s Emissions Trading Scheme (ETS). This new phase of the ETS affects all New Zealand businesses that are either required to participate in the ETS, or are indirectly affected by energy and fuel price rises.

FOB was able to offset its GHG emissions by purchasing carbon credits from the Meridian Energy wind-power project

Although the initial price rises are likely to be reasonably small, many of our businesses have pretty sizeable energy bills, so it can add up. But the message from the Energy Efficiency and Conservation Authority (EECA) is that not only can businesses easily offset the increased costs, but they can go one further and make significant savings on their energy bills.

“This new phase is an excellent incentive for all businesses to actually cut their overall energy costs, while reducing their impact on the environment,” says Mike Underhill, chief executive of EECA. “Some large businesses will be directly participating in the ETS – and some will not yet be affected by price rises. Regardless, EECA’s advice is the same. Take this opportunity to really look at the options available to you to reduce the amount of energy you use, because it will save you money – and options do exist for virtually every single business.”

The Emissions Trading Scheme

Under the Kyoto Protocol, New Zealand agreed to reduce its greenhouse gas emissions to 1990 levels by 2012 – or pay for any excess. Greenhouse gas emissions contribute directly to climate change. The New Zealand government chose the ETS (first introduced in 2008) as the leastcost way of putting a price on greenhouse gas emissions. Putting a price on emissions creates an incentive for New Zealand businesses and consumers to reduce greenhouse gas emissions.

Some New Zealand business sectors are required to participate directly in the ETS – specifically the forestry, transport fuels, electricity production, industrial processes, synthetic gas, agriculture and waste sectors. These sectors are required to monitor and report on their emissions. Participating businesses will either pay the government for any emission units (NZUs) they require (due to the emissions they create), earn NZUs from the government (i.e. owners of forests that absorb greenhouse gases) or are given NZUs by the government (i.e. because they face significant increases in energy costs). These businesses can then trade NZUs with each other.

Other businesses are indirectly affected by the ETS due to energy and fuel price rises. Prices for energy and transport fuel in general are expected to rise due to the ETS – by about 3 cents per litre for fuel and 1 cent per kilowatt hour (kWh) for electricity.

How businesses can offset rising costs.

Most businesses can save at least 20 percent of their energy costs – 10 percent through simple low and no-cost actions (with a payback of 12 months or less) and a further 10 percent with some investment (payback of one to five years).

EECA, a Crown entity set up by the government to help New Zealand improve energy efficiency and increase supply of renewable energy, has a variety of services and some funding to assist businesses in managing their energy use.

Energy Leader is EECA’s new online tool to help businesses learn what can be done to reduce energy costs. After answering a set of questions, the tool delivers a tailored energy saving action plan. The plan includes typical savings from each action, the type of investment needed – either capital expenditure, repairs and maintenance or operational – and the likely payback period for the investment.

For businesses that spend $250,000 a year or more on energy, and fall within EECA’s priority sectors (tourism, food production and heavy industry), EECA offers funding and services, including grants for energy audits and new technologies, facilitated workshops and one-on-one account management.

EECA also has information and resources to help businesses switch to renewable energy – such as wood instead of coal in commercial boilers or using biofuels.

Businesses in action – reducing energy use

Many New Zealand businesses have already used EECA to help them reduce their energy use – with great success. They have saved dramatically on energy costs and become more competitive in the process. For example:

• Downer EDi reduced its fuel bill by up to 15 percent by training its truck drivers to drive more efficiently. This is delivering savings of $2 million each year.
• An energy review of the Crowne Plaza Christchurch highlighted changes such as installing more efficient lamps, water fittings and ventilation systems that resulted in the hotel’s annual electricity bill reducing by 14 percent – $100,000 less than in 2006.
• Clive Scouring in Napier reduced its energy costs by $100,000 per year (and the company’s annual CO2 emissions by 516 tonnes) by installing a heat recovery system.
• Auckland Meat Processors’ Otahuhu factory implemented a new automated cleaning method to clean some of the plant’s moving processing tables. It saved over $200,000 in the first financial year – and it is anticipated that it will return over $4.5 million in savings over a 10-year lifecycle.

Mr Underhill reiterates that there are many ways businesses can save energy and costs. “When you look at these examples, and the hundreds more we have on our website, you get a real feel for the the breadth of the opportunities New Zealand businesses have to reduce their energy use.

“Our research has shown that many businesses want to improve their energy use – it’s a no-brainer really because it saves money, and these savings go straight to the bottom line. But often they don’t know where to start. What we offer is the information, and in some cases a bit of a financial incentive, to help kick-start a business’s energy-saving programme. And as these examples show, the results are often impressive.”

For further information, visit www.climatechange.govt.nz (on climate change and the ETS) and www.eecabusiness.govt.nz (to reduce your energy costs)