Podcast transcript Episode 2
[0:00:00]
Music track starts
Guest (clip): If we recognise that decarbonisation is happening.
Guest (clip): You just have to start somewhere and see what’s practical and what’s feasible in terms of reductions.
Guest (clip): Directionally, we know that this is going to be a really big thing for businesses over the next ten years.
Guest (clip): It represents one of the fastest routes for us to decarbonise as a country.
Guest (clip): Potential cost benefit.
Guest (clip): It’s really powerful. It can mean we all move incrementally forward together before 2050.
[0:00:27]
Taylor: Welcome to The Net Zero Path for Business, a podcast delving into the process of transitioning to renewable energy and emissions reduction from the very beginning. It’s a show where we explore ways to not just survive but thrive as a business along the way.
I’m your host, Taylor Hawkins, and I’ll be bringing together industry advisors, experts, and businesses as we explore things like switching to EVs and the practicalities of going solar.
Join me as I ask our guests to share their stories of transition and the strategies that have helped them on their way. We’re presented by AGL, inviting you to join the change
Taylor: As we dive into talking about our future ambitions for net zero, I would first like to acknowledge the leadership, knowledge and resilience of the Aboriginal and Torres Strait Islander peoples who have safeguarded the sacred lands and waters of this country, that we know as Australia, for thousands of years. May we strive to honour, learn from, and meaningfully partner with leaders of such calibre.
[0:01:28]
Taylor: Welcome back for our second episode of the Net Zero Path for Business.
I’ve talked to a lot of businesses about this journey of decarbonisation, and something that comes up time and time again is that they don’t know where to start. There are so many solutions, and within each of those solutions are options and conflicting information. And can I just say, I get it.
So today I thought we should take a look at the very first step every business should take, which is understanding your impact.
Once you have a clear view of your footprint and the highest carbon cost areas, that’s when you really can make a plan and get going.
I’ll be talking to Grant Raja, an energy and carbon consultant, to find out what really is involved in getting an audit. Things like how much time and money will it take? What sort of things can you learn, and how much of those insights can save you in the long run?
Grant has been helping organisations decarbonise for 25 years, so he’s full of knowledge. Let’s get into it.
[0:02:31]
Taylor: Welcome, Grant. We’re thrilled to have you, someone who is so knowledgeable on this episode today. As we delve into this first step of decarbonisation. To start, can you tell me a bit more about Northmore Gordon and what you do there?
Grant: Yeah, so, Northmore Gordon is an independent energy and carbon consulting firm. We support predominantly manufacturing, industrial water sector clients.
Our real mission is to help organisations develop their energy and carbon strategy, develop programs that include energy audits and help them execute programs to achieve decarbonisation.
And the key element to that, that we’re relatively unique in it, not only the manufacturing processes, energy efficiency audits, but also how you can verify the energy savings you’ve achieved, creating value from the decarbonisation beyond energy savings with environmental certificates.
[0:03:25]
Taylor: From what I’m hearing you’re saying already, it sounds like it really needs to be a tailored approach for each organisation.
But today I’d love to start with the first step towards decarbonisation. So where do you suggest businesses take their first step?
Grant: Yeah, so there are many paths to the end. And I wanted to sort of put a perspective to this in that as any organisation looking to manage their energy better, that the key thing to understand is decarbonisation is happening.
And what that means is whether the macroeconomy, the world needs to address climate change. But you as a business have a real opportunity to take on what decarbonisation means for your business.
And from that perspective, an audit is a very critical part to develop a bottom-up analysis of where the opportunities are with your site.
It’s not the only instrument to do it. But I guess the first bit of this discussion is recognize that decarbonisation is happening and that it creates huge opportunities for business.
Taylor: And I think you’re making a really fantastic point there, almost to the point of the audit process as an educational tool for you and your teams.
Do you see that play that role?
[0:04:32]
Grant: Yeah, absolutely. So, if we discuss sort of how do you get started? And then, as I said, you’ve got sort of one lever which is identify opportunities with energy audits.
The other question is, where do you want to be by 2030? Businesses can use an energy audit just to improve their business as usual. Or they can say, we actually want to be net zero in our operations by 2030.
An audit can help them answer those questions.
But an audit is only going to give you opportunities. You need a strategy, as you said at the beginning, to define the path that you want to take for that program.
Taylor: I absolutely hear what you’re saying and I think that this audit process can feel overwhelming for so many people. But really, is that powerful learning journey.
In addition to that learning opportunity, why else is an audit important? What else can you draw from that experience?
[0:05:22]
Grant: Yes, if I share some examples of customers. So, you’ve got a diverse group of manufacturing clients, commercial buildings.
One of the things that an audit is extremely important for is not only, as I said, identifying opportunities, but helping the rest of the business understand it.
And so, what I mean by that is it can help you, to your question, align with different stakeholders, from finance to operations to sustainability.
Too often, when we’re making big strategic decisions for decarbonisation, it is left to one silo, the sustainability team, or the engineering team, or the finance team.
So, an audit puts it on the table, shows where the opportunities are, and each of the business units can see the relative merits and opportunities from their perspective.
Taylor: I can only imagine how invaluable that information is on this journey.
And so, with 25 year's experience, I know you’ve had so many leaders come to you. I’m curious, what are the most common worries that you hear businesses share with you when they approach you?
[0:06:22]
Grant: We’ve touched on one of them, which is, where do you start? It paralyses some organisations.
And then I guess the other challenge that I’ve seen is the reverse. We have too many opportunities to tackle. We have a finite amount of time and resources, so how do we prioritise?
And so, some of the things we’ve talked about today, of identifying your vision and strategy of where you want to be by 2030, having an audit to action, those opportunities. And the third one, which I’ve just gently touched on, which is engaging with your stakeholders, helps you address some of those concerns.
Taylor: And for someone like myself, who has not been through the audit process, can you explain it to me from go to whoa? What does the process look like beginning to end?
Grant: Yeah. And I’ll explain what an audit is to someone in general terms, and then talk about what you get from it.
So, an audit can be at various levels.
In the Australian standards, we have a level one, which is relatively simple, walkthrough. A level two has more detail, and a detailed feasibility study is a level three audit.
Within that process, what we’re doing is developing a strong understanding of the energy balance, how energy is brought in, sourced, processed to create the products or run the business on the site.
[0:07:40]
From that list of the energy balance, we’re identifying all of the areas where energy has a critical play.
What are the assets they’re using? How are they operating? What is the opportunity to achieve certain goals? And I’ll come back to the drivers for energy audits, because I think they’ve changed a bit.
But the process, as you asked, starts with understanding where energy is used. Identify the critical assets, look for the energy efficiency decarbonisation opportunities, cost savings. Then develop a matrix of opportunities.
And that can be everything from. If I give you a couple of examples, leakage, air wastage, opportunities for lighting, HVAC, demand management, solar, everything you could put in a spectrum that helps reduce energy costs, improve efficiency, can be identified.
And the challenge of an audit is to look at those opportunities within the lens of what’s technically and commercially feasible for that business.
[0:08:37]
So when you’re thinking about it from your own business, how long do you want to invest in this site? Do you have a window for five years? Is there ten-year horizon? If it’s even shorter than that? How do we help you as an organisation consider investing longer than three years?
And so the strategy of the energy audit is to find commercially viable projects that can come together to meet the drivers or goals of an energy audit.
Taylor: That makes a lot of sense. And just as a quick follow up, you mentioned the level one, two and three audits. If I’m a business leader, how do I work out which one of those I need?
Grant: Yeah, you could start with the walkthrough audit as an initial way to get engagement. The difference between one, two and three is the level of depth and accuracy.
So, if you have on the other end, certain projects that you know you want to do, or you’ve shortlisted down to five or ten, and you want to actually have them in as an investment grade, ready to go project, then you would do level three.
But if you’re like most businesses today, where you’re reassessing your opportunities, because one thing I’d add here is audits should be done relatively often.
[0:09:42]
The changes and the market signals are really encouraging more audits to be done more regularly than they used to be. So if you haven’t done an audit for a while, a level two makes the most sense.
If you want to do a quick scan of multiple sites, maybe representative of different types of businesses within your organisations, a level one would work.
Taylor: Perfect. And then when you get to the end of that process, what does an end report look like?
Grant: Yeah, so it has the elements that I touched on. An energy balance, how energy is used today. An opportunity matrix, it has that layered with your investment criteria or your decision-making criteria, and it has recommendations on next steps.
So, the things you’re getting from it is a list of doable projects for your site. The cost savings and benefits to your business, which may not just be energy savings. I think the drivers are significantly different today for most businesses.
But the last bit of the report in time is, what do you do now? What resources will you need in house and where can you start? So it gives you a real action plan to actually do the next stage of your energy journey.
[0:10:52]
Taylor: And just because I’d hate to breadcrumb our listeners and not go back to it, those drivers you’ve mentioned that have changed, how has that evolved?
Grant: So this is the bit, from my experience that I think is the most interesting, is that if you recognise that decarbonisation is happening, then you look at, well, if we look back ten years or more, the predominant driver was cost savings. And there’s still huge opportunities for cost savings.
The number of audits we’ve done where the low hanging fruit is and low hanging fruit, I mean, simple payback projects of less than two to three years, some of them even in like 1.5 years, they’re there today.
And the things that have changed to make it more than just a cost saving initiative is twofold. One, businesses recognise the need to respond to climate change in a way that’s meaningful for their business. And so, they’ll have some form of net zero target. For most of the clients that’s operational sites where they’re trying to achieve a net zero position by 2030 or beyond.
And so that’s a key new driver, which means you don’t necessarily need to use less energy, but you need to find ways to reduce the fossil fuel component.
So, the drivers there are shifting to renewable electricity, which could be on site. It means using gas less, and there’s tremendous new opportunities.
[0:12:17]
So the second part of the driver is that we have a huge range of new technologies. So, for organisations that only need to heat water to 90 degrees or close to 90 degrees in hot water, there’s a huge range of heat pump opportunities, and demand management programs have been hugely successful.
So, these things are all being driven by a third aspect, which is our energy prices to customers, especially in that commercial industrial space has changed. So we used to have peak prices in the afternoon.
Today, at the same time, a customer, one of our clients, negotiated extremely low rates in the middle of the day. So, when they used to have an incentive to use more energy in off-peak periods, they’re now designing their commercial building to optimise the site to use more energy in the middle of the day.
So, it brings in the concept of load flexibility or shifting load rather than just using less. So, they’re some of the things that broaden the scope of an energy audit.
So, think of an audit as giving you the opportunity to find cost savings that may be low hanging fruit. It’ll help you define what’s achievable to achieve an emission reduction target with actions, but it might also open the door to making your site more flexible in operation.
[0:13:35]
Taylor: Those are really powerful insights to get from such a report. And then with that, and this is doubling down on what we were just speaking about.
But what’s the greatest impact you’ve seen come from an audit being completed?
Grant: A personal one that I saw that is not financial is a 50-year-old business that was able to chart their journey for the next seven years.
And with that, the staff within the organisation knew the business was being reinvented, modernised, and that in a pragmatic way, that they knew they had a future. So that was transformational for the people in the business. And it all came from saying that we have an opportunity to invest.
The business case from the audit was financially sound, but it meant everyone could double down their efforts to actually transform the business. And if you think about what we’ve just been through with COVID there is a big shift in Australia for more local manufacturing.
So, the success I’m seeing is the using of energy efficiency, electrification drivers to modernise our great manufacturing. And it’s not just manufacturing, it’s agriculture, the water sector.
[0:14:50]
All of these businesses are taking an opportunity to really transform.
So, they’re using less energy, they’re creating new jobs for the staff, and importantly, they’re improving the product or the quality or the production volume in Australia.
Taylor: Wow. There’s so many additional benefits to the business in undertaking this and that sort of mindset, cultural piece you mentioned is massive. Is there something you wish that more businesses knew about with the auditing process?
Grant: Yeah, and I think having good data in an audit is critical, especially when you take the challenge of moving beyond business as usual.
So, the two things that I’d highlight is the importance of metering.
So, any business that wants to do well in managing energy, and it’s becoming increasingly imperative that you can measure the results of what you’re doing. Whether you’re an investor stakeholder or a staff stakeholder or a consumer, businesses are expecting to see evidence of a result.
[0:15:51]
So the one thing as a general tip is it’s much better to have the metering now than after you try and do the project. So that’s a significant benefit to any business to drive their metering and not only will it help them monitor today as they invest in the energy efficiency project, they’ll be able to see the performance of the work, and if things change, they’ll be able to optimise the operations.
The second one that’s significant that most people don’t consider is that when you look at just the energy cost savings on your bottom line from your bill, that’s potentially only one fraction of the savings from an energy efficiency project.
And at Northmore Gordon, our focus is on capturing all the benefits, including the environmental certificate benefit.
So, what that means is if you’re doing an energy efficiency project in New South Wales or Victoria, you can measure the additional carbon benefit through energy efficiency certificates, through government programs, just like we measure renewable certificates for solar.
So, the second point to be aware of is, as an end user, you should ask the question beyond cost savings, beyond production or staff improvements, are there any environmental certificates available? How can I maximise that value?
One of our clients was able to, and this is quite common, is to offset 20% to 30% of their capital cost through that additional environmental certificate benefit. And the thing I love about it is it’s a carbon certificate that shows to your staff, shows to your investor, that you’ve actually created something of value.
[0:17:25]
Taylor: And now, as we zoom out a bit more, obviously we’re seeing that audits have so many purposes and value adds that they can offer.
How do they play a role in larger projects?
Grant: Yeah, no, thank you. So, one key part that we’ve seen from the energy audits is we’re coming up with a list of very different projects, some of them efficiency, some of them electrification, some of them are replacing gas requirements or switching to renewable sources.
And so, the observation there for a business is you’re not just doing one project on its own. It’s not just a solar project, it’s not just a metering project or energy efficiency project. But the businesses are saying, how do we bring this all together?
And the reason they’re doing that is twofold. One, to make a transformational change, which is possible today with technology, but also to make all the investment decisions integrate together.
And it actually improves the return on investment, it improves the overall modernisation, reduces the interruption to production, but it creates a much more significant impact.
So, to help organisations do larger projects, we really aim to find the integrated strategy. And from that, how do you bring the right size of each of the solutions together to be the least cost but the most effective?
[0:18:46]
Taylor: Wow, you’re just uncovering so many benefits as well as conditions for success on this journey. That I’m sure so many business owners, business leaders just aren’t aware of.
I’m curious what you’ve found to make the biggest difference between a business successfully implementing a program or not?
Grant: Yeah, and I’ll repeat the comment. Data is important because if you’re the finance manager in an organisation, you want to be confident that the investment decisions are sound.
I’ll come back to the other comment that we’re all on this journey. Within an organisation, there’s many different aspects to success.
So, if your goal as a business is to be more energy efficient, to invest in your plants, and to create a measurable decarbonisation impact, then the other factor for success really is engagement with the whole team.
The most successful businesses have said, here is our vision, here is our action plan from an audit and have all of the people in place to support.
[0:19:47]
Taylor: It sounds like those are certainly key elements to set everyone up for success on this journey.
As we round out our conversation, do you have any last tips for businesses just starting the journey?
Grant: Yeah, it’s a good question in terms of you may not have done an energy audit for a couple of years, and to that point I made before of new price signals, new technology, new stakeholder drivers.
We didn’t really talk about supply chain, but there’s a number of other drivers that might initiate you to do regular audits, and that can be a really strong way to establish a call to action within the business.
And as I said at the beginning, I think if we recognize that decarbonisation is happening, then the opportunities to capture for your business are there through an audit and there through developing a strategy.
[0:20:39]
Taylor: You are absolutely right. And like many of our guests over these episodes, you’ve really highlighted not only how many opportunities there are in this space, but also the benefits beyond the immediate that you can see by engaging in this process.
Change is certainly coming, whether we’re ready for it or not. So we may as well try to be prepared and make a difference in the meantime.
Thank you so much for joining us, Grant. I feel that I have certainly learned so much in the process, and I’m sure our listeners have too. And some of those numbers and insights that you shared are truly exciting.
So, thank you so much for your time.
Grant: Thank you.
[0:21:13]
Taylor: Next up, let’s take a look at a business who found themselves on the other side of an audit.
I was very keen to talk to a business who has been through the process to hear how it went for them and what they learned.
Here is the team from Hunter Water.
[0:21:29]
Cyril: Cyril Murtagh is my name. I’m the Manager of the Energy and SCADA Team here at Hunter Water. Hunter Water was set up in the late 18 hundreds to look after the sanitation in Newcastle.
We currently service the greater area of the lower Hunter Valley. So, we’re a vertically integrated utility. So, we operate and retailer catchment to tap.
We also provide stormwater, trade waste, recycled water and some raw water services.
So, you’re talking about an area of operations that’s just over 5000 km² across the traditional country of Awabakal, Darkinjung, Wonaruah, Worimi and Geawegal peoples. So, in that is six local government areas and a population of about 630,000.
In the energy space, our primary role is procurement of electricity. Naturally then, that comes with paying the bills and then organising, delivering energy efficiency programs.
We work alongside various other departments inside of Hunter Water to reduce our electricity consumption.
[0:22:38]
There’s two types of audits. Audits that we did in the early days, we have a road to reduce our carbon, but we’re also at the same time reducing our energy consumption, because one leads to the other. If you don’t use any, that’s simpler solution.
So, the audits that we undertook in the early days focused on where we’re using energy that we could be more thrifty about and being more energy efficient and putting in smarter ways of doing our business to get that overall grid supplies electricity down.
And then on top of that, we’ve put in place measures to go further, which be like the installation of solar, for example, that not only reduces our carbon intake, but also reduces our grid supplied electricity intake.
[0:23:30]
James: My name’s James Willing. I’m the Team Leader of Climate Change and Sustainability at Hunter Water.
My team is responsible for responding to climate change and sustainability issues, and this includes things like our climate change mitigation and adaptation roadmap. So, a big part of what we do is support the business to plan for net zero.
Hunter Water’s had a long history of being mindful of our carbon footprint. So as early as 2008, we became a National Greenhouse and Energy Reporting Act entity. So, we’ve been getting our carbon footprint data, our greenhouse gas emissions footprint data, since 2008, we’ve been collecting carbon greenhouse gas emissions data.
And around that time, we had our first energy efficiency and management focus, and that resulted in Hunter Water establishing an energy and greenhouse gas policy.
[0:24:29]
And the first couple of steps that we took around that time was to install solar on our rooftop at our head office in Honeysuckle in Newcastle, as well as install biogas generation at Cessnock Wastewater Treatment Works.
So, a long history there. But fast forward about a decade. In 2020, our board set an ambitious target to reduce our scope one and scope two carbon footprint by 10% on a 2019 baseline in 2024 as a part of a strategic planning process.
And in the last 18 months, our board has set an absolute emissions reduction target for our scope one and scope two emissions for 2035 and an interim target of an 80% emissions reduction by 2030.
[0:25:20]
All of those are subject to our customers’ willingness to pay and support our investment in achieving our carbon emissions reduction target as a state-owned corporation regulated by the Independent Pricing Tribunal IPART in New South Wales.
We have some interesting governance arrangements to navigate, and a part of that is getting our customers to support us on our decarbonisation journey as well.
So, in doing the greenhouse gas emissions reporting, Hunter Water’s got a solid understanding of what our emissions footprint is. And we know that the vast majority of our scope one and two emissions are in our electricity consumption.
So, providing water and wastewater services is a reasonably energy intensive endeavour. There’s a lot of pumping, there’s a lot of treatment of wastewater before it’s returned to the environment. So our scope two emissions outweigh our scope one emissions by 4 or 5:1, our scope one emissions.
As you can imagine with a water utility, it’s putting trucks on the road to get pipes repaired and to do all the proactive maintenance, as you would expect.
[0:26:37]
And the other sort of big source of our scope one emissions, relate to fugitive emissions from wastewater treatment. So, we essentially aerate the stuff to get all the nasties out of it before it goes into the environment.
So, we spend a lot of time and a lot of effort doing that. The trouble with those emissions for us is that they’re really hard to mitigate, which puts the emphasis for Hunter Water on addressing our biggest source of emissions scope two.
And we’ve been doing that through our own investment in behind the meter renewables, as well as investing in a renewable PPA.
Hunter Water being a state-owned corporation, we’ve got some sort of governance and regulatory drivers to do the audit. But what we do this auditing process for, we found quite a lot of usefulness in doing it in that it really helped us with what we’re sitting on and where some of the improvements can be made.
And ultimately that comes back to delivering value for our customers, which are the 630,000 people that we serve in our region.
[0:27:42]
So, on the back of some of these audits, and, you know, auditing can be a scary, daunting word, but we really got a lot of value in that it helped us understand our footprint and our drivers to deliver some of the value that we’ve delivered in our renewables program, behind the meter, for example.
[0:28:05]
Cyril: Our area of operations, it’s growing. There’s more and more houses in all the time. That’s more and more customers wanting water and more and more customers giving us wastewater to treat.
So, it’s a chase for us, if you like. As we help the region expand, we naturally have to expand what we’re doing in reducing carbon as it grows.
[0:28:29]
Taylor: It’s interesting how key that ongoing audit process seems to be in how Hunter Water prioritises what to tackle and how to continue their progress.
Reflecting on my chat with Grant, it’s clear just how important it is to get that overview into your footprint and really dig into where your emissions are coming from.
It can be simple to get rolling, engage an experienced consultant, and go from there. Who knows what you might learn?
Starting to reduce your impact might be easier than you thought.
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