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.
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.
As the energy crisis continues to impact businesses across the country, what are individual energy providers doing to support businesses who are struggling to keep up?
Energy bill increases are due to officially increase as of July 1, so you may not have experienced an increase in energy costs just yet. If the rate hikes do start to impact your ability to manage your energy bills, here’s how some of the major energy providers are supporting Australian businesses:
AGL
Having been in business for 180 years, AGL powers businesses from construction sites, to offices, shops, science labs, breweries, restaurants and zoos. If you’re struggling with increasing energy bills, AGL has a financial hardship program that invites customers to speak directly to their specially trained consultants, who will work with customers to set up a personal payment plan that considers your financial situation and what you can afford to pay. If your business falls under a residential energy category, such as aged care, retirement facilities or churches, you may also be eligible for AGL’s customer hardship policy known as Staying Connected.
Price hike takes effect: August 1
Origin Energy
Similar to AGL, Origin Energy has a financial hardship policy known as the Power On Program available to residential customers, which supports payment plans. If your business requires help setting up a payment plan, Origin can shape one to match your needs, which covers both your existing debt and future energy usage. Origin can also offer estimates of how much your future energy will cost, and advice on how to keep costs down with business energy tips.
Price hike takes effect: July 1
Alinta Energy
Alinta also offers a financial hardship policy for residential customers, however they clearly state that “if you are a small business customer, we will be unable to provide you with access to our hardship program.” That said, Alinta encourages business customers to contact them if you’re having any trouble managing your energy bills, or if you’d like to discuss your impending increased bills.
Price hike takes effect: August 1
Other retailers, including EnergyAustralia, offer similar hardship programs and assistance, although some smaller energy companies are urging customers to actually switch to a bigger retailer that is in a position to better absorb wholesale price increases, and therefore won’t pass on as big price hikes.
Massive price increases took effect as of July 1 with retailers like ReAmped (100%), LPE (100%), Discover Energy (285%) and GloBird (147%). If you’re currently with one of these energy companies, you should take action immediately to find a better deal.
The energy market is currently very volatile and it can be difficult for businesses to navigate. At Make it Cheaper, we can help; we work with a number of high-profile, established energy providers, including the biggest brands in the market. We regularly review the energy market, to help businesses take control of their energy bills and achieve potential savings.
Contact us at Make It Cheaper for an obligation-free review to see if we can help your business get a better deal with 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.
Sky-rocketing energy wholesale costs, renewable energy policy, and annual networks and default offer repricing are three big influences in energy costs today. Find out if they’re set to make your energy bills higher or lower – and what the outlook is for the next 12 months.
While almost everyone agrees that renewable energy is the ideal way forward, the path towards an eco-driven energy infrastructure is certainly challenging.
Globally, in 2020 around 29% of all energy produced was generated from sunlight, wind, rain, tides, waves and geothermal heat, up from 27% the year before.
But right now, green energy may be a luxury that some residents and businesses don’t have the option of considering, due to their state’s low uptake of eco-friendly energy supply. Furthermore, their attention may be focused on their bill rather than the environment, with a huge increase in wholesale energy prices set to impact the entire market – most notably two states.
Energy repricing in 2022
A huge influence on your energy bills is the annual repricing by networks (the owners of the poles and wires) and of the default market offers by the regulators, which happen every July.
Energy retailers use these two important changes to update the rates they charge, reviewing their entire energy supply chain including wholesale, operational and environmental costs.
In 2021, this saw energy prices fall. Statistics from the Australian Energy Regulator (AER) confirm that on average, in the fourth quarter of 2021, energy prices decreased in all regions except Queensland and Tasmania compared to Quarter 3 2021.
However in 2022, wholesale energy prices are soaring. The latest data from the Australian Competition and Consumer Commission (ACCC) reveals that energy is currently the cheapest it’s been in eight years, but that’s all set to change.
The global surge in coal prices is set to significantly push up electricity prices across the country, but the hit to your bottom line will be felt the hardest in two states in particular.
Queensland and NSW to feel the brunt of rising prices
Because of their reliance on coal exports, NSW and Queensland will face higher prices than other states. In Queensland, the issue has already erupted, with one retailer, Locality Energy (LPE), announcing their energy prices will literally more than double overnight.
“The Queensland wholesale electricity market is experiencing extreme and consistent price volatility that we have never seen before. This means that LPE can no longer provide competitive rates,” they stated.
“At this point in time, LPE cannot give you an exact price increase. But please be aware that we are increasing your c/kWh usage rate by over 100% by 1 June 2022.”
LPE is not planning to close, but they will “stop servicing customers in the Ergon (south east Queensland) region”, because they don’t want to “place additional financial pressure on customers.” They’re also calling on the government to look at ways to subsidise and stabilise these unsustainable wholesale energy increases, in a similar way that they have for motorists at the petrol pump, in the hope that retailers can pass the reductions on to customers.
Another retailer, Discover Energy, has let customers know their solar tariff is reducing from 16c/ kw to just 1c per kw, citing an oversupply of solar energy. The grid is receiving more energy than it can cope with during peak daylight hours and current energy infrastructure is not equipped to sufficiently manage, store and repurpose it, so retailers like Discover Energy are no longer willing to pay for it.
In addition to energy wholesale prices, other things impact your bill such as:
your current usage
contract benefits period
whether you have solar and/or gas
In the current climate, if you haven’t reviewed your business’s energy contract in the last 6 months, there could be a huge opportunity to save.
We’re calling on the Government to look at ways to subsidise and stabilise these unsustainable wholesale energy costs in a similar way that they have for motorists at the pump. This way retailers can pass on the reductions to customers.
Origin’s coal plant closure
Another influence on energy prices in 2022 is Origin Energy’s decision to close their coal-fired power plant – Australia’s largest one – seven years early.
In February this year, the energy retailer confirmed its plans to retire Eraring Power Station, which has been operating for 35 years on the central coast, in 2025, ahead of its previous retirement target of 2032.
The company will repurpose the Eraring site to install large-scale battery storage of up to 700 megawatts, in alignment with their push into renewables. Similar battery site plans are underway for the shuttered Hazelwood (2017) and Wallerawang (2014) coal power stations.
While this is undeniably a positive move towards a more renewable energy market, it highlights the risks of Australia’s clean energy transition, which is currently without a national or regulated plan for the exit of coal.
Right now, some consumers are benefitting, as renewable energy grows as the cheapest form of electricity generation. But we’re at risk of future closures without clear government policy and oversight, which is having significant impacts on electricity prices, and on regional economies that depend on coal.
Get an obligation-free energy review
At Make It Cheaper we constantly review the energy market, working 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.
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