People have various motivations for their actions. Ultimately though, the main incentive revolves around the expected benefit.
The same reasoning holds true for EE. The main motivation for being Energy Smart can be encapsulated in one word: Sustainability – of the business, its market, labour source and environment. An integrated and balanced approach in general seems to support sustainability. The Triple Bottom-line (Planet, People and Profit) is now an accepted measure to evaluate sustainable business performance. It would, therefore, make sense to apply it in defining energy efficiency goals and measuring outcomes.
Today, global warming and the impact of human consumption of fossil fuels and emission of harmful gases enjoy enormous focus. The Kyoto Protocol is an international framework designed to facilitate global reduction of human carbon footprint.
The basic truth remains that, similar to your household budget, one can’t sustain ones lifestyle by consuming more than what can be replaced. It also makes no sense to pollute the resources we need to sustain our lives. Recently, I saw vehicle tracks left in the Namib Desert more than thirty years ago – still clearly visible. It is crucial for us to be aware of the footprint we leave on the environment.
This is a good benchmark measure to indicate the overall amount of non-renewable fossil fuel resources we consume and the negative side effects of our consumption of energy (e.g. CO2, waste) and water. It is ideal to use this measure per person or product to enable fair comparison between companies.
People (social bottom-line)
Everything we do on earth is about people or the impact thereof on people. Sustainability inherently implies that the impact of our actions on people needs to be considered. In his book The Goal, the strategy guru Eli Goldratt, states that to ensure a sustainable business, one continuously needs to keep three stakeholders happy – the shareholders, clients, and personnel. Today, the community should be included as an additional stakeholder.
Fair trade is one way of evaluating your business relationships with stakeholders – be that countries, business to business or business to consumer. We even have the GRI (Global Reporting Initiative) whereby listed companies report on their business activities and their sustainability.
Profit (economic bottom-line)
In the end, money talks. Although there are numerous financial reasons for being Energy Smart, this needs to be seen in perspective.
All of us are aware of the limited electricity generation capacity at Eskom. We experienced rolling blackouts as a result of Eskom load shedding in the recent past. In all production systems one continually needs to ensure reserve capacity for maintenance, peaks and growth, while ensuring timeous upgrading or replacement of equipment. This can only be financed by selling your product at a commercially viable price to your clients.
For ten years, Eskom has received below inflation increases from NERSA and we enjoyed cheap electricity. The current effect is that Eskom now lacks in maintenance, capacity, replacement and price. Every one of these aspects needs to be resolved simultaneously; at best an uphill battle. Electricity Tariff increase for Cape Town.
In 2008, we had to absorb a 47% increase from 1 July for 9 months (effectively 35.9% over 12 Months). It was then indicated that these tariffs needed to double for Eskom to be sustainable.
As off 1 July 2009, NERSA approved a 31.3% increase for Eskom over nine months. It might sound steep, but if it is calculated back to 12 months, subtract inflation and 2 cents renewable tax, the real increase to Eskom is only some 9.7%. We can expect that Eskom will require even more of these drastic increases in the future to achieve a viable commercial tariff.
The City of Cape Town in May 2009 approved a 36% increase in electricity tariffs to business. This will effectively take the tariffs for Large Power Users (Medium Voltage) to 30.38c/kWh energy cost and R90.44/kVa demand charge (compared to 16.19c/kWh and R48.19/kVA in May 2008). Penalties and DME quotas. In the previous issue we referred to the PCP (Power Conservation Programme) Government plans to implement as an incentive for companies to reduce electricity consumption. Varying reduction targets (up to 25%) are envisaged for different sectors against a baseline of Oct 06 to Sept 07. Strict fines will be imposed; starting at 2.80 c/kWh (the cost of diesel generation). The final implementation of the PCP is still under review. Cost of alternatives.
In March 2009, NERSA approved the renewable-energy feed-in-tariff (Refit) for wind power (R1,25/kWh), small hydro (R0,94/kWh), landfill gas (R0,90/kWh) and Concentrated Solar Power (R2,10/kWh). These are the tariffs Eskom has to pay to suppliers for electricity supplied TO the Eskom grid. Part of the tariff increase is to fund the procurement of renewable energy by Eskom. Even companies considering launching on-site renewable energy projects must realise their total cost of energy (per kWh) from these initiatives will be significantly more than their current tariff from Eskom or the City Council. EE as productivity indicator (Energy Intensity): One of the most important benefits of becoming Energy Smart is the impact on the overall productivity of the company. As businesses start to measure their throughput against energy consumption, EE becomes a benchmark figure to improve energy efficiency and overall operational effectiveness.
Sustainability requires an integrated approach
Being Energy Smart can clearly improve the company bottom-line. To ensure sustainability, one needs to set targets for the Triple Bottom-line. In the next Green Times, the focus will be on a holistic Energy Smart approach to ensure that the envisaged bottom-line improvements are achieved on a sustained basis.
By Carel Venter
Carel is a business strategy and enterprise development adviser at the Centre for Synergy Development (CSD).