Australia's Energy Productivity Potential

Energy is a fundamental input to any modern economy, and governments around the world are taking steps to ensure that energy - like labour, capital and other economic inputs - is used productively. ClimateWorks’ new report - Australia’s Energy Productivity Potential - shows that Australia could nearly double its energy productivity by 2030 by investing in the modernisation of our energy system and taking advantage of recent technological developments.

Explainer: What is energy productivity?

In Australia, energy costs have grown by 67 per cent over the past decade, and are now equivalent to 8.2 per cent of total GDP. Given the increase in energy costs, improving energy productivity can make a material contribution to increases in overall national productivity.

Improving energy productivity could also address issues related to energy supply chains, helping to reduce the risks and pollution associated with extraction of coal and gas, and the potential for supply interruptions for oil-based fuels. Importantly, improving energy productivity could contribute to achieving emissions reductions, which will be particularly important as countries move towards post-2020 emissions reduction targets at the international climate change meeting in Paris this year.

While Australia has made some progress in energy productivity, it currently lags behind other G20 countries, both developed and developing, and the lag will increase if nothing is done to accelerate improvement. ClimateWorks’ research shows that the potential exists to bridge this gap and ensure that Australia keeps pace with improvements being targeted in other countries.

This report shows that around 64 per cent of the potential improvements can be achieved by improving the way energy is used in the economy, through:

  • Energy efficiency: Adoption of more efficient technologies and processes.

  • Electrification: A shift to electricity for certain activities, such as electric vehicles, and conveyor belts rather than trucks on mining sites.

  • Optimisation and structural change: Optimisation of systems and continued structural shifts in the economy towards less energy intensive activities.

The remaining 36 per cent of the opportunity is in improving the way energy is supplied, through:

  • Energy conversion: Switch to more efficient forms of energy generation.

  • Energy distribution: Reduction in losses from distribution of energy to end users.

This analysis builds on comprehensive energy and emissions modelling of a potential pathway for Australia to transform its energy system and almost completely decarbonise its economy by 2050, while continuing strong economic growth of around 150 per cent by 2050. This scenario was developed as part of the international Deep Decarbonisation Pathways project. It involves a major transformation of the energy system, but relies on technologies that are already available or in development. Further innovations or technological breakthroughs could increase the potential even further. 

The development of a national Energy White Paper, including a proposed Energy Productivity Plan, presents the opportunity to establish a co-ordinated approach to improve Australia’s energy productivity.