Introduction to Energy EfficiencyModule 1

Disclaimer

This material has been developed as part of the UTS Business School and Ernst & Young ‘Leadership & Change for Energy Efficiency in Accounting & Management’ project. The project is supported by the NSW Office of Environment & Heritage as part of the Energy Efficiency Training Program. For more information on the project, please go to: http://www.business.uts.edu.au/energyefficiency/.

This presentation is for educational purposes only, and does not contain specific or general advice. Please seek appropriate advice before making any financial decisions.

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► Introduction

► What is Energy Efficiency?

► Importance of Energy Efficiency

► Clean Energy Carbon Pricing Policy

► Role of the Accountant and Manager

► Introduction to Change Management

► Fundamentals of Change Management► Identify the Change/Business Outcomes► Change Planning

Agenda

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Outline

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Energy Efficiency

1.0 Define energy baseline

2.0 Measure energy data

3.0 Analyse efficiency

opportunities

4.0 Implement Opportunities

5.0 Control and monitor

energy

Learning objectives for this session:

►Describe the importance of energy efficiency and sustainability practises in today’s business environment

► Identify the key risks and opportunities associated with energy efficiency programs

► Identify the barriers to implementing energy efficiency and sustainability practises within the organisation

►Describe the role of the accountant and business advisor in integrating sustainability practises across an organisation

► Introduce the importance of communication skills, teamwork skills, problem-solving skills in the role of the accountant in driving energy efficiency and sustainability measures

►Discuss the fundamentals of change management and how one can be a successful agent for change within an organisation

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Over to you

► How would you define energy efficiency?► What are the main sources of global energy and their

contribution to overall energy usage percentages?► What does energy efficiency mean to your organisation?

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Energy Efficiency

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.

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The boundary

The electricity supply chain

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The boundary

End-use energy efficiency delivers benefits across the

electricity supply chain

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Energy efficiency example

Why is this important?

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Business risks

► Managing rising costs► Carbon pricing► Compliance with legislation► License to operate

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Rising electricity costs

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Managing rising costs

► Think about impacts to future electricity costs:► Carbon scheme► Uncertain fuel prices supplying electricity generators► Minerals Rent Resources Tax► Extension of the Petroleum Resource Rent Tax

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► Carbon price from 1 July 2012 fixed at $23► Growing at 2.5% real terms in 2013 and 2014 ($24.15 and $25.40)

► From 2015 a flexible price determined by market (cap and trade)► Price floor established - $15 (growing)► Price ceiling established - $20 above the International carbon

price

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Clean Energy carbon pricing systemCore design elements

► Carbon price from 1 July 2012 fixed at $23► Growing at 2.5% real terms in 2013 and 2014 ($24.15 and $25.40)

► From 2015 a flexible price determined by market (cap and trade)► Price floor established - $15 (growing)► Price ceiling established - $20 above the International carbon

price

► 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

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Clean Energy carbon pricing systemCore design elements

Compliance

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► Competition and Consumer Act 2010 (formerly Trade

Practices Act 1974)► And other accounting, reporting, and auditing standards

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Compliance

► Exposure draft ISAE 3410 Assurance Engagements on Greenhouse Gas Statements

► Environmental Claims in Advertising and Marketing Code► ISO and other quality assurance guidelines

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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

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How are leading organisations responding?

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Industry Case Studies

► NAB – achieved carbon neutrality in Sept 2010, this has driven their energy efficiency & GHG reduction programs

► Rio Tinto Iron Ore – At Yandicoogina the business case for metering was developed over a 6 month period by the site electrical engineer

► Foster’s – energy efficiency projects have been driven by a 10% target to reduce energy consumption per unit of production by 2011 compared to a 2007 baseline

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The role of the accountant and business manager

Your role:

You are key to effecting and supporting any change within an organisation towards becoming more energy efficient.

► What energy efficiency initiatives exist within your organisation?

► What do you see as the barriers to implementing more energy efficiency measures?

► How can your role support your organisation adopting a more sustainable business strategy and implementing more energy efficiency projects?

► What additional skills do you believe you need to effect such measures?

What does it mean to be a ‘change agent’?

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What is change management?

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Change management is a structured approach to shifting / transitioning individuals, teams, and organizations from a current state to a desired future state.

It is an organisational process aimed at helping employees to accept and embrace changes in their current business environment.

Not to be confused with:

In project management, change management refers to a project management process where changes to a project are formally introduced and approved (e.g. change requests to project scope or funding).

Hiatt, Jeff. "The definition and history of change management". http://www.change-management.com/tutorial-definition-history.htm.  Filicetti, John (August 20, 2007). "Project Management Dictionary". PM Hut. http://www.pmhut.com/pmo-and-project-management-dictionary. 

Why is change management needed?

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1. Simple change....

The Group Property function in an organisation changes all light-bulbs to energy efficient light-bulbs.

2. More complex change....

Individuals are asked to reduce their stand-by consumption from appliances at work and business units are asked to purchase energy efficient equipment (which is more expensive than other choices)?

What is changing for individuals and how much assistance is needed to help them embrace / embed this change?

Many theoretical approaches

Kotter (2006) eight stage process

Stage 1: establishing a sense of urgency

Stage 8: anchoring new approaches in the culture

Stage 7: consolidating gains and producing more change

Stage 2: creating the guiding coalition

Stage 3: developing a vision and strategy

Stage 6: generating short-term wins

Stage 5: empowering broad-based action

Stage 4: communicating the change vision

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Galpin (2006) the change management process model

Many theoretical approaches

Stage 9: measure, reinforce and refine changes

Stage 1: establish the need for change

Stage 8: roll out changes

Stage 7: prepare recommendations for rollout

Stage 2: develop and disseminate a vision of the change

Stage 3: diagnose / analyse the current situation

Stage 6: pilot test recommendations

Stage 5: detail recommendations

Stage 4: generate recommendations

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A simple approach to Change Management

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Who is impacted and

what is the plan for change?

What are the outcomes that

are sought from the change?

Are business leaders and sponsors engaged?

Change Execution Communications

Business Outcomes Planning

Stakeholder Engagement

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Starting Point:

Deployment comms

Stakeholder comms

► Communications Plan

► Stakeholder Engagement Plan

► Change Strategy► Impact

Assessment► Change Plan

Starting Point: Identify the desired business outcomes?

Starting point for your Change Management activities:

► Identify the business outcomes desired from the project or the change.

Current StateDesired Future

State

Describe in terms of:► Business KPIs► Operational KPIs► Behaviours

Discussion: how would you describe the future state if you are asking individuals to switch off their appliances instead of

using stand-by?

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Business outcomes versus benefits realisation?

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Organisation-wide benefits:

► Lower emissions► Lower energy

consumption

Operational business outcomes / changes in business practices:

► Lower energy technology is adopted

► Fuel efficient practices are adopted

► Computers are turned off at night

Changes in individual’s behaviour:

► Individual chooses to turn off computer at night

► Individual chooses to drive company vehicle more efficiently

Focusing only on the financial business case will not deliver

change

Business outcomes also help promote the changes

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Business outcomes should be the starting point for your change planning.

Additionally, they…► Promote the case for change► Turn cynics into supporters► Build momentum► Can pay for the investment in any change► Create a unified cause – brings people together under a common objective► Maintain focus and help guide away from disruptive interventions

Change Planning

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Change Planning typically involves three steps and three formal outcomes:

Change Strategy

Change Impact

Assessment (IA)

Change Plan

► Typically required for large change projects where cost estimates for change activities are required as a part of project funding request

► Critical document► Describes for all

impacted processes what the change will be for that process

► Defines all the activities to help each impacted process transition from the current to the desired future state

Discussion....

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(i) Individuals are asked to reduce their stand-by consumption from appliances at work; and

(ii) Business Units are asked to purchase energy efficient equipment (which is more expensive than other choices)?

What should be considered in the Change Impact Assessment?► What behaviours need to change? How do you make the change

sustainable?► What enforces / encourages these changes in behaviours?► What benefit is there for individuals / the Business Units?

Who needs to take action to make this change happen?► Who is best to drive / lead this change, and why?► Who would be the most appropriate Change Sponsor and why?

Thank youModule 1