How to lift energy productivity in Freight Transport

A Roadmap to double energy productivity in Freight Transport by 2030” is now released for comment, and yours will be most welcome.

Urgent action is needed to generate more economic value from the energy used to move freight in Australia, as congested cities increasingly constrain productivity across the economy. Decisions made today can lock-in energy-intensive freight transport activities for decades.

Published by the Australian Alliance for Energy Productivity using extensive consultation with leading transport businesses, industry associations and government stakeholders, the roadmap aims to agree actions and priorities for both industry and government under the National Energy Productivity Plan (NEPP).

Transport is now Australia’s largest energy user, and with the freight task to grow 25% over the next decade, it will have ever-greater influence on congestion, climate change, air pollution and economic productivity across all sectors. The transport sector has some of the most cost-effective opportunities for energy and emissions savings, yet as the NEPP 2016 annual report notes, raising energy productivity in freight and commercial transport relies largely on voluntary action, and little progress is being made.

The Roadmap considers trends that will shape future energy use in the sector, including increasing urbanisation, a shift to renewable energy, vehicle electrification, connectivity and intelligent transport systems, automation and business model transformation. It gauges the extent of improvements possible via known technologies; it highlights the uncertainty expected from various levels of disruption that is coming; and it identifies measures to help the transition to a much more energy-productive freight sector.

Key suggestions will be incorporated into its final version, so please check it out and contribute your ideas.

 

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Transport Energy Audit Standard : seeking your views

Implementing energy audit recommendations usually achieves significant cost savings. However the current Australian Standard for energy audits is based on auditing commercial buildings and is not practical for transport.

Transport operations have characteristics that produce variability in energy performance and make fleet energy use difficult to model:

–          Very high variation in routes, loading and traffic conditions;

–          Vehicle operators strongly influence energy performance;

–          Regulations, such as noise or load limits, provide constraints.

A new transport-specific standard, AS/NZS 3598.3 Energy Audits-Transport Sector, will be the first of its kind internationally. It is intended to help transport operators find the approach best suited to their business for assessing energy efficiency and reducing costs .

To develop a standard of practical value, the consultation process seeks additional expertise to address the specific data measurement and analysis needs of the road, rail, aviation and maritime industries.

You can contribute at the Standards Hub Website as referenced in the inside cover of the draft standard, available here.

Comments close on 10 April 2014.

Carbon Neutral Transport webinar

The “Carbon Neutral Transport” webinar I ran recently for the Chartered Institute of Logistics & Transport Australia was well received and the discussion afterwards generated some ideas for the future.

For those who missed it, here’s a link to the recording, based on the following brief:

 

What advantages does going Carbon Neutral offer the Transport industry?

To be Carbon Neutral a transport operator must save fuel relentlessly, use clean fuels and offset their residual emissions.

Saving fuel means saving money, and our customers increasingly demand energy-efficient and low carbon transport.

So why isn’t every transport firm going Carbon Neutral?

In this webinar, you will:

–          Learn what Carbon Neutral means in the transport sector;

–          See what’s being done to break down the barriers; and

–          Find out how the Business Case for Carbon Neutral Transport really stacks up!

Shell’s Geelong Refinery – Can we turn Doom & Gloom into a Clean Fuel Boom?

With Shell seeking buyers for its 59-year old refinery, deemed uncompetitive in the traditional hydrocarbons market due to its small scale and old technology relative to Asian competitors, what innovative options can Shell and the Geelong community explore to develop a sustainable asset for long term community wealth?

California provides a guide. A petroleum refinery there is being revamped as an advanced biofuel refinery, with United Airlines underwriting the investment through commercial commitment to buy its renewable jet fuel.

The lesson for Geelong is that partnerships between large fuel users, refiners and biofuel technologists offer the opportunity to use waste and non-food organics to produce low-carbon “drop-in” fuels. Feedstocks would be sourced locally. Ready-made pipeline and terminal infrastructure will efficiently get product to market. Victoria positions itself as renewable fuel hub for international and domestic airlines, land and sea transport operators, miners, farmers and industrial customers.

Sounds like win-win-win, but who can pull it together?

Clean Transport Fuels – What are the Real Options?

Australia’s carbon price is here, so how can transport operators gain from cleaner fuels?

As a retailer, manufacturer, miner or farmer, where in your supply chain can clean fuels bring real benefits, now?

Biofuels win under Carbon Pricing

Biodiesel and ethanol now have a carbon price advantage over other transport fuels. While gaseous fuels (LNG, LPG and CNG) have lower greenhouse gas emissions than diesel and petrol, on July 1st they copped a tax “double whammy”:

  • Gas excise duty now rises each year while biofuels don’t pay excise until 2021.
  • Gaseous fuels attract a carbon price; biofuels don’t.

But costs continue to rise

Biodiesel and ethanol are made from agricultural commodities and organic waste materials. Rising demand in many industrial uses is pushing up prices of these feedstocks, and some are caught in the “Food versus Fuel” debate. The promise of offsetting society’s dependence on oil is now staged against our ability to feed growing populations. As food prices rise around the globe, economic, environmental and social trade-offs are made in a complex arena. Government support for biofuels in Europe is weakening as new laws narrow the choice of feedstocks.

Our small demand in global terms competes for inputs with big biofuel producers overseas. Australia has only a handful of biodiesel and ethanol plants, and none are world scale. Soaring Asian demand  consumes feedstocks and raises prices, challenging the viability of Aussie producers.

On a positive note, one Queensland company already produces an ultra clean synthetic diesel  and says they can do it for only 20 cents per litre.  20 cents! Is that a typo?

Biofuel blends

In practice, biofuels gain only a small carbon price advantage over other transport fuels. That’s because biodiesel and ethanol need blending with regular diesel and petrol to comply with fuel quality standards and excise rules. This reduces their carbon price advantage by 80% in the case of a B20 blend (20% biodiesel and 80% mineral diesel) down to 1.2 cents per litre. Then the logistical challenges in getting blended products to end users can pretty quickly gobble that up!

Market Reality

Market entry remains the biggest challenge of all:

  • it’s hard to supply biofuels at a competitive price due to the infrastructure and volumes needed
  • business models face rising production costs and can’t rely on government support
  • many people just don’t trust biofuels
  • lack of demand means local plants can’t expand to world-scale
  • fuel retailers need to invest in storage tanks to offer alternative fuels at the bowser

Playing with the Big Boys

Despite volatile prices, oil-based transport fuels dominate the market. Major oil companies have supply networks, production technologies and retail models they have refined for more than 100 years. While a few officially support alternative fuels, their practical steps have been tentative at best.

Getting traction

There’s no silver bullet for introducing cleaner transport fuels – a portfolio of fuels is needed. Today, both biofuels and gaseous fuels are used successfully in various light and heavy vehicle applications. Depending on a vehicle’s work task – it’s payload capacity, speed, stop-start intensity, distance range and fuel efficiency to name a few variables – each fuel has its’ “pro’s and cons”. Thorough due diligence is needed, and the clean fuels industry could better educate and communicate the sweet-spots to end users.

Meanwhile, trials of cleaner jet fuels show that biofuels can be safe, reliable and are ready for use, but would not meet immediate demand if large airlines make the switch. Yet such trials are vitally important, especially with the support of engine makers who remain critical to clean fuels take-up. Truck manufacturers like Scania run ethanol trials in their own operations to prove new clean fuel technologies.

Test & Invest

Yet even with government support, some avid users and a few keen oil companies, all clean fuels have their own market entry challenges. Carbon pricing may help some clean fuels, but it will fall short of what’s needed.

To make real progress, all supply chain partners must work together to understand which clean fuels can help their particular situation. Only through collaborative testing can the right clean fuels be chosen for each supply chain. Then clean fuel producers must make their fuels available at retail and industrial points of use – reliably and cost-effectively.

So if you want to win from cleaner fuels, you’ve got to make it happen. Get with your supply chain partners to test and invest in clean fuels now.

How can Freight Buyers minimise carbon tax in their supply chains?

Moving freight around Australia will soon attract carbon tax.  You can reduce this new cost in 2 ways:

  1. Use less fuel
  2. Use cleaner fuel

While they control fuel use, transporters need their customers’ help to manage carbon liability. Moving the discussion past who carries the carbon tax burden, the question now becomes: How can Freight Buyers minimise carbon tax in their supply chains?

Carbon Tax = More Fuel Tax

Carbon tax on Transport will be applied through the fuel tax system. Fuel tax is a consumption tax, and fuel tax credits are needed to ensure that fuel tax is not burdened on transport businesses, but rather the final consumer. This is consistent with Australia’s tax system more broadly, where consumption taxes are intended to apply to final consumption rather than business inputs.

If transporters pass on carbon tax (that is, reduced fuel tax credits), Freight Buyers wear the cost; and if carbon tax is not passed on, their transport partners may become unviable. So, as a consumption tax based on Freight Buyers’ demand for transport services, carbon pricing gives Australian shippers a clear incentive to make their supply chain buddies improve fuel efficiency and switch to cleaner fuels.

How Transporters improve Fuel Efficiency & Switch Fuels

Using Less Fuel requires efficient equipment and efficient operations. The Australian government’s Energy Efficiency Exchange reviews a wide range of fuel saving measures for rail, road and air transport. If you total the high side of the energy savings estimates, you’d think that 50% fuel savings or more are there for the taking. But it’s never that simple. The success of each measure depends on its operational setting and many only deliver long term results if adopted systematically. For instance, vehicle eco-driving improvements which promise 10% fuel savings need all drivers to have specific training in expected behaviours, backed up by regular refresher training and constant performance management to always maximise fuel savings.

When it comes to Cleaner Fuels, so-called ‘drop-in’ fuels such as ethanol, biodiesel and renewable diesel are the easiest to introduce because they can use existing fuel delivery infrastructure (with some adaptations). And these Biofuels offer great opportunities for immediate reductions in carbon tax due to their zero rating for carbon emissions under the Clean Energy Future laws. Gaseous fuels like LNG and CNG, however, need capital investment in new engine technologies as well as dispensing equipment and infrastructure to create a reliable and extensive supply network.

Ultimately, Transport firms who thrive under carbon pricing will be those using a myriad of actions that lead to lower carbon and energy use.

How Freight Buyers can help

Freight Buyers across the retail, resources, construction, manufacturing, energy and agriculture sectors increasingly insist on low carbon transport. The next step is to think of carbon tax as a shared liability with joint commercial incentives to improve productivity and fuel efficiency. They can help their transport partners by measuring, co-investing and even “opting-in” to manage carbon in their supply chains:

1. Measure

At minimum, an accurate picture of baseline energy use and greenhouse gas emissions is needed. Partnerships can collect,  analyse and verify such data to develop emission reduction plans. Supply chain carbon profiling is the starting point to reduce risk and gain competitive advantage in a low carbon economy.

2. Co-invest

When Freight Buyers invest time and money in fuel use projects, more knowledge and resources can earn a bigger bang for everyone’s buck:

  • Operational changes can boost productivity dividends from investments Transporters have already made. Changing operating hours so delivery vehicles can avoid peak commuter traffic is one. Another is making greater use of High Productivity Vehicles such as B-Double trucks through local road permit applications as well as site works expanding physical access and storage capacity at load and delivery points to allow ordering in larger load sizes.
  • Commercially, Buyers can specify low emission and fuel efficient technologies in their tenders and contracts. Paying a freight price premium supported by contract commitments allows transporters to secure finance and recover the higher capital costs of advanced emissions technology. Large Freight Buyers can even boost their transport partners’ negotiating power with technology suppliers through joint procurement contracts to reduce unit prices.
  • Capital investment can overcome barriers to adopting new technology which the carbon price – by itself – is unlikely to impact. Supporting R&D trials of latest technologies in local conditions will improve joint understanding. This may require funding which shares risks and puts some ‘skin in the game’ with all stakeholders sharing the rewards. LNG and Biofuels, for example, need to be conveniently available. Large freight users could install LNG or biodiesel refuelling stations at their Distribution Centres, which are hubs for regional & interstate linehaul and urban delivery vehicles. This would complement the emerging LNG and Biofuels distributor networks to speed-up trucking industry adoption of cleaner fuels.

3. Opt-In

What if large Freight Buyers could “Opt-in” to emissions trading so they could directly manage their transport carbon liability?  Freight contracts that pass-on carbon property rights would allow Freight Buyers to manage the carbon tax liability for all the transport services they consume, opening up international linkages and domestic offsets on greater economies of scale than only the largest transport firms could contemplate. It may help achieve the economic goal of any emissions pricing regime: To achieve targeted environmental improvements at the lowest marginal cost to society.

Collaborate to Win!

Intelligence on carbon and energy use within supply chains will improve decision-making and is the first step on the path to gaining competitive advantage in a low carbon world. Shared understanding of carbon and energy reveals business opportunities and manages risks. “Without conducting the study,” says one company MD who has done just that, “I have no doubt we would have targeted projects in areas with less potential for both environmental and financial return.”

Cross functional teams of Freight Buyers, transport operators and other stakeholders can develop more powerful business cases for reducing carbon use. Such teams challenge conventional wisdom by asking:

Are we doing everything right to minimise fuel and carbon use, everyday, on every truck, train, ship and plane?

There is no silver bullet; a portfolio of initiatives is needed. It takes more work to be energy-efficient. Efficient operation requires experimentation. And many measures will only deliver consistent, long-term results if businesses adopt them systematically.

Freight Buyers who want their transport providers to do it all alone will miss out on the substantial opportunities that arise from supply chain co-operation.  In the new low carbon economy, the opportunity cost of not collaborating is competitive disadvantage. Stay tuned!