Australia is in the grip of an energy crisis. The nation’s aging electricity infrastructure, rising energy costs, and increased demand for power have put a strain on businesses that show no signs of abating.
With electricity prices expected to rise by 35% in 2023/24 and a forecasted 10% shortfall in current domestic demand for gas, the ability to control energy costs and secure energy independence is top of the agenda for senior executives and business owners as they assess what actions can be taken to future-proof their operations against energy volatility.
What caused the Australian Energy Crisis?
The war in Ukraine and the increased demand for coal and gas
The decision by the world to abandon Russian coal and gas in a show of solidarity against invasion resulted in a massive increase in demand for fossil fuels from other sources, resulting in record-high global coal and gas prices.
Australia is currently in a situation where fossil fuels are being sold on the international market, forcing domestic energy generators to repurchase them at inflated prices, sometimes four or more times higher, to fill shortages and replace coal outages.
Failing coal generators and La Nina has reduced the amount of coal in the market.
In addition to coal and gas leaving Australia in lucrative exports, La Nina-induced flooding of coal shafts has led to less coal than usual being available on the market.
Flooding at mines across Australia, including Yallourn and the Hunter Valley, has resulted in significant production cuts and a priority shift to international markets, putting pressure on domestic coal generators and increasing demand for gas generation in Australia by 15%.
The number of outages in Australia’s ageing coal generation fleet, with more than 25% offline for more than a year, also increased demand for gas, driving up prices even further.
Batteries used to be so simple. They started our cars, powered torches and watches and annoyingly,
were rarely included with kids’ toys at Christmas. Over recent years, however, batteries have played
an increasing role in our daily lives.
How are businesses being impacted?
Businesses around the nation are suffering significantly because of the energy crisis. Due to unreliable electrical supply and increased overhead expenses, many commercial enterprises struggle to set viable prices or maintain production levels. Due to financial pressure and operational uncertainty, many businesses—particularly those in the heavy industrial, mining, farming, hotel, and retail sectors—have been forced to downsize or even close their doors, which has hurt employment.
Operating costs have risen for asset managers, building owners, and tenants, and as with any crisis, existing issues and problems are amplified. Energy-intensive buildings with high service charges will become unappealing and difficult to let as commercial tenants seek to reduce their overhead costs. Lease agreements could be at risk of not being renewed, and without rent coming in, yields will decrease.
The rate at which this has happened has made it nearly impossible for many senior executives and business owners to plan for and implement traditional solutions, such as passing on price increases to customers, seeking alternate inputs, and hedging. Many people are scrambling to secure energy contracts and are engaging in emergency-style negotiations.
What steps are the Australian Government and Energy Industry taking to deal with the energy crisis?
The Australian Government has partnered with states and territories to deliver the Energy Price Relief Plan to address price increases and supply shortages.
The Energy Price Relief Plan will:
- Take action to limit gas & coal prices.
- Provide targeted energy bill relief for households and businesses.
- Invest in cleaner, cheaper, more reliable energy for the future.
Temporary cap on the price of gas and other measures
- Introducing a 12-month emergency gas price cap on new wholesale gas sales by east coast producers
- The NSW and QLD Governments are setting ceilings for the price of coal used for electricity generation.
- Introducing a mandatory code of conduct for the wholesale gas market, including a reasonable pricing provision.
- Accelerating reform of the Australian Domestic Gas Security Mechanism to ensure a sufficient gas supply for the domestic market.
- Boosting resources for the ACCC for implementation, monitoring, and enforcement.
Temporary cap on the price of gas and other measures
The Australian Government will deliver targeted and temporary relief on power bills to eligible Australian households and small businesses. The Energy Bill Relief Fund will provide up to $1.5 billion to directly relieve electricity bills.
Investing for a renewable future
The Australian Government’s Powering Australia Plan focuses on creating jobs, cutting power bills, and reducing emissions by boosting renewable energy. The plan will see the Government lift the share of low-cost renewables in the National Electricity Market to 82% by 2030.
An example is Australia’s first renewable training facility, which opened in Queensland and was a joint effort between Electrogroup, the ETU, Master Electricians Australia, Kane Builders, Spinifex Energy, and investment from the Queensland Government.
Delivering a forward-thinking facility of this calibre was a significant undertaking, according to Spinifex Energy Director Tom Warriner, who was subcontracted to complete the installation. However, bold vision and investment in and delivery of innovative projects like this are needed to combat the ongoing energy crisis.
This facility will provide our current and future electrical workers with the skills they need in emerging technologies for this growing industry and to meet Queensland’s renewable energy target.” Mr. Warriner explained.
Additionally, The Federal Capacity Investment Scheme will unlock $10 billion of private and public sector investment in clean, dispatchable storage and generation to ensure reliable and affordable electricity supply and reduce exposure to high coal and gas prices.
Five actions businesses can take to future-proof their operations
As a senior executive or business owner, you will ask – What can I do to manage and reduce our commercial energy consumption?
Below are five actions we’ve identified that will lower your energy costs and future-proof your business operations.
1. Manage and Reduce Energy Consumption
Businesses can gain a granular understanding of their energy usage through detailed data analysis, allowing them to identify energy use patterns along with seasonal and daily variances. This enables them to focus their efforts on actions that bring the most cost-effective outcome.
Some of the most common energy management solutions include:
- Energy management training: Training key personnel within organisations can help overcome the lack of knowledge in the underlying principles of energy management, improve in-house skills, and shift energy-consuming behaviour.
- Load-shifting: Varying the time of energy consumption, i.e., when equipment is operated, can better align with a lower cost tariff or maximise solar self-consumption.
- Equipment maintenance and upgrade: General maintenance of equipment, such as pumps, hot water systems, air compressors, and chillers, can significantly reduce billing costs.
2. Energy Grants and Funding
In a recent Victorian Chamber of Commerce survey, 58 percent of respondents said they would be more willing to invest in renewable energies or switch from gas to electricity with government financial support.
We have compiled a list of all current Federal and State energy funding and grants available to businesses.
To download the list and check your eligibility, Click here.
3. Energy Measurement and Verification
Many variables can affect the energy consumption in a business, such as weather, unusual events, number of employees, leakages, production faults, and the external pressures we are currently seeing affecting the local and global markets. Consequently, energy savings are incorrectly calculated when ignoring these variables.
Measurement and Verification protocols provide certainty on the amount of energy saved and help obtain valuable data to share across all stakeholders, prepare business cases for project funding, participate in existing energy efficiency schemes, and keep a transparent record of the reduced emissions from energy efficiency.
4. Energy Contracting
Some businesses forced to re-contract their electricity or gas supply face a 500 percent price increase. A few contracting strategies are available to help soften the blow, including Blend-and-extend, taking an existing contract and averaging its lower contracts with future higher prices, or accepting a short-term 12-month contract rather than the typical 24 or 36-month terms limiting the exposure to current high prices.
5. Investment in Renewable Sources like Solar Power & Batteries
Renewable energy sources such as solar power can help reduce dependence on traditional forms of electricity generation by providing clean and affordable power for businesses.
With energy prices at a high, the time it will take for solar or energy efficiency projects to pay for themselves is reduced. With an implementation timeline of three to nine months, businesses investing in energy projects can reduce their grid demand and insulate their business from present and future volatility. This can also provide cost advantages over local competitors who don’t have an energy strategy and are subsequently left to pay significantly more for their power bills.
Spinifex Energy recently completed an install for the Shearer’s Arms & Boardwalk Tavern in Queensland, whose electricity bills were due to double when their energy contract came up for renewal in 2023.
Looking to cut capital expenditure and future-proof his operations, Managing Director and QHA Board Member Matt Coorey approached Spinifex Energy to complete a full assessment of his business’s energy requirements and design a system that would provide significant savings and optimum power supply for his busy hospitality venues.
“Spinifex’s solution included a 100KW system for each venue which maximised the available roof space and would ensure our restaurant, gaming, and bottle-o facilities would always have power. We are projected to save over $70,000 annually and will have paid off the systems in 3 years.’ said Mr. Coorey.
Spinifex Energy commercial solar systems will lower your energy costs
Spinifex Energy is a leading commercial solar energy provider that designs and installs solar solutions tailored to your unique needs. Working for some of Australia’s biggest brands and projects, we will lower your energy costs and provide future certainty regarding your capital expenditure. We also assist and advise in obtaining federal and state government grants and funding.
Click here for an obligation-free solar assessment for your business, or to learn more, call +61 419 108 638
