Retail prices for gas and electricity are determined by several underlying factors: wholesale energy costs, renewable energy policy, regulatory caps and annual network charges.
In 2022, these factors conspired to push energy prices sky-high across the country, putting significant pressure on businesses’ energy budgets.
Now, as we approach the end of the calendar year, it’s about time to revisit the energy price outlook and consider whether there’s light at the end of the tunnel.
What will happen to energy prices, according to investors?
“Futures markets” provide reliable insights into what investors expect to happen to energy prices over coming months and years.
The contracts traded on futures markets are, in effect, bets on whether the price of a commodity (like energy) is likely to rise or fall over a certain period. If investors expect the price of energy to go up over the next 2 years, say, they will pay a higher price for energy contracts that are redeemable in 2 years.
In June 2022, futures data from the Australian Competition and Consumer Commission (ACCC) showed that wholesale electricity prices in SA, VIC and QLD were expected to continue rising for the next 4 years, while prices in NSW were expected to rise into 2023 before plateauing.
What will happen to energy prices, according to economic experts?
Another source of insight comes from economic modelling.
Currently, modellers at the Commonwealth Bank of Australia (CBA) are predicting that electricity prices will be “very high” in the winter months until 2025, and “high” in summer months. Their prognosis for gas prices is even worse.
Modelling by Cornwall Insight Australia paints a similarly troublesome picture for energy-consuming businesses, predicting that all states in the NEM “will have an annual median price of around $200/MWh, up until FY2025.” To put that figure in perspective, the median electricity price across states in 2021 was ~$40-80/MWh.
So, Australia’s energy price prospects aren’t looking great for the next few years. But what about beyond?
Renewables: The light at the end of the tunnel?
Most experts agree that the energy outlook is most likely to brighten when renewable, non-carbon-emitting modes of energy production become the norm in Australia.
The increasingly limited supply of coal and liquefied natural gas (LNG) available for domestic energy generation is widely acknowledged as the major factor driving up both wholesale and retail energy costs.
And so, the question isn’t when energy prices will go back down, but rather: How quickly can Australia transition to renewables and wean ourselves off fossil fuels?
What can businesses do in the meantime?
Let us help. Ensure your business isn’t paying a cent more than it needs to pay for electricity and gas.At Make it Cheaper, we constantly review the energy market, helping businesses compare options and take control of their energy bills to achieve savings. Contact us for an obligation-free review today on 1300 957 721.
Looking to save on your business energy bill?
We find savings for 4 out of 5 businesses. See how much your business could save.
As electricity and gas prices skyrocket in Australia, many businesses may be unaware of the energy bill shock that’s in store for them. Here, we recommend a proactive approach to dealing with the financial angst to come.
Proactive versus Reactive Problem-solving
Most people are good at dealing with problems reactively and bad at dealing with problems proactively. To understand what we mean by this, consider the analogy of someone who suffers sporadically from back pain.
When the person’s back becomes inflamed and sore, he is willing to do anything to fix the problem. He will pay to see a physio, diligently stretch and perform core exercises, and avoid sitting in a slouched position for long periods.
Yet as soon as the obvious pain subsides, the back pain sufferer stops doing the things that are necessary to avoid another bout of suffering. He skips his physio appointments, stops stretching and exercising, and goes back to slouching at his desk for hours on end.
Why?
Why Are People so Bad at Dealing with Problems Proactively?
People’s innate tendency to deal with problems reactively rather than proactively is ostensibly an energy-saving measure. It takes time and effort to deal with latent problems before they manifest as actual problems, so it’s easiest (or so it would seem) to ignore them. Most people already have plenty of actual problems on their plate, so why would they waste energy thinking or even doing something about potential problems?
Unfortunately, our tendency to ignore problems until they are staring us in the face often backfires. The reality is that we can generally address problems at a much smaller cost if we take a proactive rather than reactive approach. Just think of someone who never has to pay for expensive surgery because she proactively stretches and exercises to avoid her back pain becoming unmanageable.
Addressing your business’ rising energy costs before you get the shock of a massive quarterly bill is another prime example of how being proactive actually saves you time, effort, and money in the long run.
How to Deal with Rising Energy Costs Proactively
Energy costs are rising dramatically in Australia. With regulators recently approving price increases across the country, nearly all businesses are going to pay more for gas and electricity in coming months, with rates increasing by anywhere between 5% and 100%.
And yet, many businesses may still be unaware of the financial pain that’s in store for them, for the simple reason that companies typically pay their energy bills quarterly. As it stands, these businesses are like the back pain sufferer who is blissfully unaware that his lifestyle choices are about to cause him a bout of agonising suffering.
The good news is that addressing the problem of rising energy costs proactively is straightforward. We recommend a simple three-step approach:
Find out how much you are paying through your current energy plan
Compare this plan to other plans on the market
If you can save money by switching to another plan, do so
One of the reasons business owners may not get around to following this simple, three-step process is that they already have too many other problems to deal with – problems that are already staring them in the face. If that sounds like you, you may want to consider outsourcing your rising energy cost problems to Make It Cheaper. We will deal with your energy woes proactively, saving you the pain of a nasty bill shock at the end of next quarter.
At Make It Cheaper, we regularly review the energy market and work with businesses to help them take control of their energy bills and achieve potential savings. Contact us for an obligation-free review today.
Looking to save on your business energy bill?
We find savings for 4 out of 5 businesses. See how much your business could save.
The national energy crisis is putting pressure on Australian businesses, who are struggling to cope as rising prices and supply pressures take their toll on their operating budget.
But some businesses are set to feel the impact worse than others; for these industries in particular, shifting power consumption into the off peak hours could save them money on energy.
If it’s possible and practical to shift energy usage, this may then impact wages costs if you need to adjust staffing levels, so it’s a balancing act for all businesses right now. Here’s the hardest hit industries that could benefit from an energy audit:
Manufacturing
Factories, warehouses and industrial businesses run multiple heavy-duty machines and equipment every day, which is why the manufacturing industry typically consumes the most electricity. According to the Australian Bureau of Statistics (ABS), they collectively use around 52.4 billion kilo-watt hours (kWh) per year. By comparison, the average household uses around 5,500 kWh.
Mining
Mining operations suck up a lot of energy to operate, and at present only a tiny fraction of it (less than 4%) is derived from renewable energy. The industry as a whole is moving towards investing more deeply in renewable energy technologies, including large onsite solar PV and wind power arrays, but right now their heavy reliance on natural gas and grid electricity leaves them exposed to price hikes.
Hotels, high-rises and offices
With lights that stay on all day (and all night), and temperature control in place to make the environment cooler or warmer year-round, these big office or hotel structures are huge consumers of energy.
Restaurants and cafes
Restaurants, cafes, bars, nightclubs and other hospitality venues are amongst the highest energy business consumers. This is due to all the power it takes to run appliances like fridges and freezers for food; commercial dishwashers and ice machines; plus lighting, heating and cooling.
Retail
A Queensland supermarket owner was recently left devastated when he calculated that this annual energy bill would almost quadruple, from $58,000 to $218,000. Retailers use energy for long periods of time to power lighting, heating and cooling, refrigeration and special equipment, so this industry is likely to experience an increase in energy costs.
Where to from here?
While the above industries are set to be hardest hit, it’s unlikely that any businesses will escape unscathed.
A new Victorian Chamber of Commerce and Industry survey into the national energy crisis found the current energy market is impacting 47% of companies. A staggering 51% were forecasting changing their business investments over the next two months as a result, while 79% were uncertain about forecasting costs and investments over the next 12 months.
VCCI Chief Executive Paul Guerra said all sectors of the business community, and not just heavy industries that used larger amounts of energy, were concerned.
“We need to explore all options to alleviate pressure on businesses in the short term, while looking at longer term solutions that will provide certainty and benefits for businesses, the economy and wider community,” Guerra said.
To minimise the impact that rising energy prices will have on your business, it’s essential that you engage and take notice of your energy usage and billing. The longer you delay reviewing your options, the more likely it is that you’ll pay too much.
We support a range of SMEs, commercial and industrial businesses in various industries by helping them analyse their current energy needs and compare within the broader energy market to get the best value deal.
Contact us at Make It Cheaper for an obligation-free review to see if we can help your business optimise your energy usage and page a competitive price for your energy. Call us today on 1300 957 721.
Looking to save on your business energy bill?
We find savings for 4 out of 5 businesses. See how much your business could save.
After surviving two of the most difficult and volatile years in trading history, businesses are now facing a raft of new financial challenges – including a massive increase to energy bills.
Depending on where you live, your next energy bill is likely to be substantially higher. Here, we outline some of the support, incentives and individual actions you can take to minimise the impact on your bottom line.
Federal government support:
You may be eligible for national support and programs, such as CitySwitch: a sustainability program that supports office-based businesses to improve their day-to-day energy and waste efficiency. This program provides members with one-on-one support from an experienced program manager, with a goal of helping you implement initiatives that move your business towards carbon positive.
There are other programs related to driving energy efficiency and research and development grants. Learn more here.
State government support:
In recognition of escalating energy bills, a number of government concessions or rebates are available to help businesses manage. Depending on your state or territory, your business may be eligible for government energy efficiency and sustainability rebates and assistance.
For instance, in NSW you can apply for Lighting for small business. The Energy Savings Scheme helps businesses upgrade to energy-efficient LED lights, with the cost of purchasing and installing the LED bulbs (by a professional electrician) is heavily subsidised.
Meanwhile in Victoria, discounts and special offers are available from accredited providers under the Victorian Energy Upgrade program, which can help you with the cost of purchasing things like energy-efficient lighting; hot water system upgrades; heating, ventilation and air conditioning; and water-saving fixtures and fittings.
Furthermore, if you’re classified as a residential customer (such as aged care facilities), you may be eligible for one-off energy rebates in your state or territory. In Queensland, it’s a “cost of living” rebate worth $175 and it’s automatically applied to your next energy bill. In Victoria, it’s a $250 Power Saving Bonus payment, but you have to apply.
Different programs, grants and incentives are available depending on your location. Review your options here.
Individual business action:
The above support can help put your business in a better position to absorb increases to energy bills. Regulators have approved increases of up to 19%, and while this varies between states and territories, the bottom line is: most businesses can expect their energy bill to rise.
In your business, there are a number of things you can do to reduce energy costs and improve efficiency. This really boils down to being proactive on two fronts: first your energy usage, and secondly, how much you’re paying for energy.
If you are not in the habit of embracing energy efficiency in your business, then now’s the time to start. It can be tricky, depending on your business. If you run a hospitality business, for instance, you need to use energy at specific peak times, and there’s not much you can do about that.
That said, taking action on small but impactful habits can make a big difference. Try things such as:
Switching lights out to energy-efficient LEDs.
Turning off lights and temperature control when a room is not in use.
Turning off the air-con on moderate days when it’s not strictly needed.
Only running the dishwasher when it’s full.
Then, make sure you’re not paying too much for the energy you do use, by comparing your current energy retailer against the offers in the market. Compare both electricity and gas retailers and review different options such as time-of-use pricing, off-peak usage, or smart meters, to see what options you have to achieve greater energy efficiency throughout your business, and save money at the same time.
At Make It Cheaper, we regularly review the energy market and work with businesses to help them take control of their energy bills and achieve potential savings. Contact us for an obligation-free review today on 1300 957 721.
Looking to save on your business energy bill?
We find savings for 4 out of 5 businesses. See how much your business could save.
Taking the time to review and reduce your business’s energy consumption – and therefore, how much you pay – is a task that can pay dividends today, and well into the future.
There are two ways you can help lower your business’s energy bills: shopping around for a more competitive offer, and changing how and when you use energy.
With the following five tips, you can aim to do both and enjoy the best of both worlds:
1. Use energy at the right time.
Peak energy usage times come with a peak energy usage price. The reason for this is because when more people use energy, there’s more pressure on the energy grid, and that surge in demand translates to higher prices. The good news is, energy providers are quite upfront about the fact that they charge more or less for energy consumed at different times. Start by reviewing your business energy bill to see how much energy you consume, then identify energy hot spots throughout your business, so you can start looking to shift the timing of your highest impact energy-users.
2. Adjust your habits.
A few small tweaks can make a massive difference. Some actions, like encouraging your employees to turn off lights or fans when a room is not in use; replacing appliances when they break with an energy-efficient version; or adopting energy-saving measures to adapt your energy consumption, can make a big difference on your bill. According to the Department of Industry, Science, Energy and Resources (DISER), you could save $172 a yearby getting rid of a second refrigerator, or $193 a year by switching appliances like kettles and microwaves off at the wall when not in use.
3. Focus on lighting.
One of the biggest contributors to a business’s energy bill is lighting. As well as keeping them turned off when rooms are not in use, consider installing energy-efficient LEDs, which use far less energy than halogen bulbs, without compromising on quality. You could also set lighting to a sensor or timer, or install dimmer switches to further reduce energy consumption.
4. Set temperature bandwidths.
Combat the rising costs of power during winter and summer by being mindful about the energy you use, and how you use it. DISER confirms that for each degree heating or cooling is increased, energy use increases 5% to 10%. It’s recommended to set your heating thermostat to 18 to 20°C in winter, and around 25 to 27°C in summer, to avoid churning through too much power.
5. Shop around.
In addition to all of the above, you can make a powerful dent in your business’s energy bill by shopping around for a provider that delivers better value. Compare both electricity and gas retailers, depending on your needs and goals, and review different options such as time-of-use pricing, off-peak usage, or smart meters, to see if they could help you achieve greater energy efficiency throughout your business and save money at the same time.
Are you paying too much for your energy bills? Let our team of experts review your energy bill to try and find you a plan that suits your needs and saves you money – contact us today.
Find savings with a free business energy review
We work with leading retailers to find you a competitive deal for your business, then do all the legwork on the spot so you start saving, fast.
