Energy efficiency and decarbonisation: what’s the difference?
Energy efficiency and decarbonisation are often used interchangeably but they are not the same. Understanding the difference is important, particularly when building a strategy that delivers both cost savings and emissions reduction.
What is energy efficiency?
Energy efficiency focuses on reducing the amount of energy required to deliver the same outputs.
Examples of energy efficiency measures include:
- improving building performance;
- optimising equipment, processes and systems;
- planning asset replacements in advance, in relation to performance and efficiency; and
- reducing waste and unnecessary consumption.
Implementing energy efficiency measures can lower energy use, costs and emissions. It often delivers the largest short-term gains.
For example, our brewery clients have saved well over $1million by focusing on quick-win demand reduction opportunities.
What is decarbonisation?
Decarbonisation focuses on reducing the carbon intensity of an organisation’s energy and operations. It is broader than energy efficiency, and might include:
- transitioning to renewable energy;
- electrifying heating, processes or vehicle fleets;
- replacing gas-fired systems with lower-carbon alternatives;
- installing heat pumps or low-carbon heat networks;
- generating renewable energy on site;
- using power purchase agreements;
- redesigning processes to reduce carbon impact;
- addressing embodied carbon in major projects; and
- creating a long-term pathway to net zero.
Decarbonisation takes place over a longer period than energy efficiency projects. It impacts the wider business strategy and can build greater cost stability over time.
Energy efficiency and decarbonisation are most effective when combined
Energy efficiency reduces demand. Decarbonisation reduces the emissions from the remaining demand.
We recommend starting with energy efficiency measures, because without them, organisations risk over-investing in systems, missing easy savings and locking in inefficiencies.
Projects such as optimising equipment, streamlining replacement processes and eliminating unnecessary consumption reduce energy demand, improve payback periods, lower the scale of investment required, and deliver immediate savings. This means that:
- your business ends up needing less energy overall; and
- you can demonstrate the impact of energy-saving measures on the bottom line.
Building on this strong foundation, decarbonisation initiatives can then be implemented to reduce the impact of the energy you still need to use. Efficiency reduces the scale of the challenge, then decarbonisation solves what remains.
It pays to build a joined-up strategy
Here’s an example of an effective approach:
- Reduce demand first: Identify where energy is being wasted and reduce unnecessary consumption.
- Optimise performance:Use data, controls, maintenance and operational improvements to make assets and systems run more efficiently.
- Plan replacements strategically: Align asset replacement with efficiency improvements and carbon reduction.
- Decarbonise the remaining demand: Transition to low-carbon energy sources, electrify systems where appropriate and reduce reliance on fossil fuels.
- Measure and verify performance: Track whether projects are delivering the expected savings and emissions reductions
This ensures lower cost, lower risk and stronger long-term performance for a business, and helps them meet net zero targets, too.
For advice on what works (and what doesn't) according to sustainability professionals, read our report: Is the business case for climate action broken?
The report outlines five practical ways to strengthen your next sustainability investment proposal.
The takeaway
Energy efficiency and decarbonisation are not alternatives. They are complementary. Together, they provide the most effective route to reducing both cost and carbon.
Speak to our team
Our sustainability experts are experienced in helping businesses win board approval for sustainability projects. We help many of our clients identify and leverage financial and incentive mechanisms to maximise support for project design and implementation.
If you'd like to discuss this topic further, please don't hesitate to get in touch.
Services you might be interested in:
Free resource: Decarbonisation Readiness Checklist
Our interactive Decarbonisation Readiness Checklist sets out 57 steps on the path from ambition to action. Check the relevant boxes to identify your strengths and the areas you should focus on in order to improve.
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