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If energy were a production line, how much waste would you tolerate?

Energy cost control = Strategic advantage

The Carbon Tax

Facing a New Reality

The carbon debate has generated a lot of heat over the last few years. The two major political parties have polarised views and policies and it is very hard to know how to interpret the information thrown at us in the media. At Application Solutions, we take the view that it doesn’t really matter what philosophical point of view you have as there are some basic truths that business leaders and the property industryshould face. These are the rising cost of energy, the regulatory environment and the strategic opportunity. Let’s consider these in more detail.

Rising cost of Energy

By now, we all know that energy prices are rising. Prices have been rising steadily for the last few years. The first round of price rises resulted from re-investment in the transmission system. The second round of price rises is a result of overdue re-investment in the power generation sector. We are now catching up and paying the price of past neglect. Price rises from these two causes is resulting in around a 200% increase over a 10 year period. We are half way through this process.

The cost of energy is also under pressure because the basic sources of fuel are in big demand around the world. Emerging economies such as China and India have an increasing need for energy that didn’t exist in the past.

The carbon tax is a relatively proportion of this increased cost and gets lost in the bigger picture.

Regulations

All levels of government have energy efficiency programs that impact on us. In many cases this is in the form of regulations. At the Federal level they include the Building Code (Section J), The Commercial Building Disclosure Scheme, Energy Efficiency Opportunities, and the Carbon Tax. Once governments introduce laws and regulations it becomes part of the business environment that we all work with regardless of our personal views.

The Strategic Opportunity

The strategic opportunity involves recognising the new reality of rising energy costs and responding accordingly. Companies that take on-going action to reduce energy consumption will have an advantage over those that don’t. We are now seeing that in our work. For example, if we work with a company and identify energy savings of (say) 30%, that is an immediate cost advantage over their competitor. If the energy saving program is on-going there is a point where it is very hard for the competitor to catch up. The term sustainability has become trendy and is often difficult to explain. We like to think of it as “Survivability”; The ability to keep doing what you are doing into the future. That will be true for the company taking action to ensure the sustainability of its activities. Another company that does not take action; well it won’t survive.

Our associate Matthew Parnell attended the Opportunity Green Summit 2012 recently and he quoted Alison Rowe the Global Executive Director Sustainability for Fujitsu, who spoke at the conference, saying “Companies that don’t have a sustainability plan should invest in a funeral plan”. That is a blunt observation but it is very true.

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