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Australian energy price drivers

Western Downs Business Report:

Find out why Australian energy prices are rising

7 Strategies to effective energy cost management

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An insightful and practical three part report

SECTION 1: Australian price drivers. Learn about global and national trends that effect your energy prices now and in 10 years. 

SECTION 2: Seven strategies to effective energy management and cost redution. 

SECTION 3: Western Downs business case studies. What have businesses in your region acheived with a solar strategy. 

AUSTRALIAN ENERGY PRICE DRIVERS

Every Australian consumer has felt the pain of rising energy costs over the past ten years. The following information provides valuable insights about market pressures behind energy price rises. From this information, you'll be able to develop an informed and effective cost management strategy for your business.

The upward pressure on energy prices: 1. Energy consumption increases. 2. Closure of coal-fired power stations (Northern and Hazelwood in 2017 and Liddell in 2022). 3. Raw material costs (Black coal, gas). 4. Energy provider profits (trade rules and ‘gaming’). 5. Poor national energy planning.

So, what can you do? - Identify the market pressures that cause energy price increases and forecast your future costs. - Map your energy consumption patterns and energy billing rates. - Form a strategy to control energy consumption and manage energy costs.

Energy management is a cost reduction opportunity for your business. Conversely, mismanagement or neglect will result in excessive energy costs. With the right perspective on energy planning, you'll have the understanding to take conscious steps towards a favourable outcome.

1

Energy consumption demand

Energy consumption increases have put a greater pressure on resources and management of the Australian energy grid.  

General Western world trends are fairly clear. We are using more electricity in our personal lives and in our work environments. This is no mystery. Think back to what life was like in the 80’s or 90’s and compare it to now. We have a much wider variety of energy consuming appliances in our homes and workplaces, and we generally have more of them.

This has a direct effect on energy costs, particularly in peak times. The power grid needs to deliver electricity to your appliances instantaneously. This means the management of our power stations and national grid need to plan for and deliver electricity when you decide to use it. This is an overwhelming task that must be done right or, like South Australia’s experience in recent years we will face blackouts.  

Increased energy consumption contributes to the management and generation costs of the Australian grid. It also means maintenance of power lines and sub stations must be in line with energy demand needs.  

Whilst management costs are fairly stable from year to year, cost growth is still an expected outcome as development projects will be required to keep up with demand.  

The Nation Energy Market (NEM) was formed in 1998 to connect Eastern and Southern energy grids. It is the longest interconnected power grid with over 40,000km of high voltage line. During 2017-18, over $17 billion was traded through the NEM, serving 9.7 million consumers.

2

Closure of coal power stations

The closure of the Northern and Hazelwood coal power stations in 2017 accounted for around 60% of the price increases ($6 billion) between 2015 and 2017.

In 2022, the Liddle power station is also set to close, which may provide further price increases to the whole market. Global investment of coal technology an infrastructure is decreasing, as the attraction to renewable energy draw the attention of large investment firms.  

The cost of maintaining older coal stations is becoming unsustainable and the prospect of opening large new power stations is becoming more unlikely, due to diminished investor confidence in coal sector returns.

3

Raw material costs

The cost increases of coal and gas accounted for approx 40% of the wholesale price increases between 2015 and 2017. In 2018 coal prices increased sharply again, but 2019 prices had dropped by around 25% to land at 76.2 per metric ton. The drop has not been felt in the pockets of most Australians.  

This price drop is a reflection of a global move towards renewable energy and results in a lower global demand for coal. It’s unclear how trends will continue for coal prices, however it is unlikely that raw material price drops will result in lower retail prices.  

Coal Price History Data (USD per metric ton)

coal prices 13-19
4

Energy provider profits

As with most industries, there are wholesalers (energy generators) and retailers. Energy generation costs are typically 10-20% of the total retail price of electricity. Grid transmission and distribution accounts for approx 50% of retail price.  

Wholesale and retail profit margins are a significant factor to the record highs that we are currently experiencing.  

It's reported that energy wholesalers added over $800 million to the retail cost of energy in 2015-2017 due to ‘gaming’. Gaming is an artificial control of supply to create scarcity for the trading price of energy. Somehow, this practice is currently legal. Energy retailers are also reporting record high profit margins.  

Where there are multiple energy providers available to you, it is well worth shopping around to find better rates every two years or so.  

5

Poor national energy planning

The Australian Government also has a key role to play in the cost of energy prices to consumers.  

The energy debate in Australian between coal and renewable seems to permeate consumer, industry and Government groups alike. This activity tends to polarise an ‘us v them’ stalemate conversation in parliament that provides very little progress or consumer relief for energy costs.  

In 2017, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) provided an industry review on Australia’s energy future with the Electricity Network Transformation Roadmap

The report was presented to parliament by Alan Finkel, Australia’s Chief Scientist. Mr Finkel advised that subsidising both renewable and traditional energy was an ineffective strategy for cost reduction.

The recommendation to Government is to recognise growing global trends in renewable energy investment, then to map a path to manage Australia's job and investment transitions to a renewable energy future. 

Regardless of personal views around the traditional vs renewable energy debate, there are clear global indicators that support a renewable future. In comparison, the coal sector is experiencing a withdrawal of global investment, as seen with the failed global funding efforts for the QLD based Adani mine project.

Maintaining or increasing the coal and gas energy industry goes against the global investment trends and could ultimately land Australia in a two-horse energy supply race. Neither technology is working to its full potential. Transitioning into renewable future will be a more cost effective energy supply source for Australia.

The recommendation goes on to point out a gradual transition to renewable energy will allow for the inevitable decline of jobs in traditional energy industries whist allowing for the growth in renewable energy jobs.  

Global investment in the energy sector seems to be highly overlooked in the Australian energy debates.  

Investors are excited about technology developments that occur in the renewable energy sector in the same way they would be in the technology sector.  

Wind, solar and battery technologies are developing quickly. Investment returns now match, or beat, coal and gas returns.  

Unlike coal and gas, renewable technology still has a strong path forward in energy efficiency development. 

Understanding the global investment perspective is a different conversation than the environmental debate and is worth more weight when discussing the future of Australian energy costs.

A new business perspective on energy

Most Australians are in the dark when it comes to energy market forces, or even understanding an energy bill. Having a little more insight to the price drivers will allow you to view the future landscape of energy prices in Australia.  

It’s clear that these upward market pressures will not disappear anytime soon. Events like power plant closures or wholesale trading tactics have the potential to spike energy costs. If coal power wholesalers see diminishing returns, they are likely to need to increase costs to maintain operational balance.  

The bottom line is that energy prices are almost certain to continue to rise. It’s highly likely that your energy bill will double within the next 10 years. If that's the case, how will your business deal with that cost increase?  

Renewable energy is a proven and reliable source of energy for millions of consumers. Results for Australian businesses can provide typical ROI’s of 3-5 years with a system life expectancy of 10-25 years. That's a much better return than operating without solar.

GI Energy provides free professional guidance on solar energy for businesses. Our proposal service level is insightful, un-pressured and designed to provide you with the information you need to make an informed choice about the viability of adapting a renewable energy solution to help your business manage energy costs well into the future.  

If you are already convinced you need to take control of your energy costs by investigating a solar solution for your business, fill in the form below and we’ll send an instant email with information on how to get started.

7 Strategies to effective energy management and cost reduction

1

Map your current energy trends

The very first thing you can do to gain control of your energy costs is to establish your energy profile. This is essentially a map of your daily, weekly, monthly or seasonal energy consumption trends.  

When you have an understanding of your energy profile, you can begin to identify areas of opportunity:

  • Are you experiencing regular spikes of energy consumption? These are often billed at expensive penalty rates via the ‘peak demand’ charge.
  • Is there a trend or evidence to consider a case for more energy efficient equipment in the business?
  • Is there any opportunity for better energy management?
  • Will self-generation energy (solar/wind etc) be an effective strategy for your business?  


In most cases, your energy provider holds ‘interval data’ of your energy consumption. It’s collected from your energy meter in 30-minute intervals. The data can be obtained for periods of 3-6 months relatively easily. Data is provided in a spreadsheet format. A data analysis tool is required to create daily, weekly or monthly charts.  

It’s possible to create an energy profile report yourself with the right skills in MS Excel. GI Energy provides this service at no charge when you engage us to provide a solar system quote. 

2

Energy bill analysis

For the vast majority of businesses managers, the data on an energy bill is confusing and has no perceived correlation with daily operations. Energy billing is a complex process but learning the basics (or contracting expertise) can lead to previously untapped cost reduction potential.  

Is it good business practice to spend a currency (energy) without any understanding of the value of the energy currency (kWh's), or the cost of running your plant or facilities?

Energy bills are broken down into ‘fixed monthly’ and ‘variable consumption’ costs. Once fixed costs are separated out, reviewing consumption costs will reveal an opportunity for savings.

It can be difficult navigating an energy bill, but once key information is identified, married up with consumption profiles and analysed, you’ll be in a position to make very informed choices around energy management costs.

Try this simple bill analysis exercise: If you have an energy bill from ten years ago (or perhaps the oldest one you have) have a look at it and review the bill cost. Compare it with a current bill and work out the price increase rate between the bills. Apply that increase to your current bill to get a sense of what your bills will likely be in ten years from now. This is a useful perspective to consider when developing an energy management plan for your business.

3

Energy contract review

Reviewing your energy contract may not always be an option, but if it is - it’s well worth investigating. It will help to have a good working knowledge of how your energy bill is structured (rates and charges) and an idea of your energy consumption profile. You’ll be in a position to identify or negotiate a better energy supply contract.

If you are enquiring with a prospective energy company they’ll provide a comparison report to highlight the savings potential if you move across. Competition is rising across Australia with new energy retailers entering the market every year.

Even in areas where a single supplier traditionally is the only option, we are seeing change. For example, in the majority of regional Queensland, Ergon was the only energy supplier. A new retailer (Q Energy) is now available in these areas.

Due to the increasing base of energy suppliers, it’s becoming more important to review your energy contract every couple of years.

Of course, it would be painful to move suppliers that often but obtaining three quotes to ensure you are in line with market pricing will be valuable. Energy supply agreements are becoming very similar to home internet and mobile contracts in that price variation can change from year to year.

4

Is a solar strategy right for your business?

The answer to this question is generally yes, but without a thorough review process you would simple be placing a bet on what your returns will actually be.  

To gain a clear picture of the financial returns from solar, a good solar retailer will need to analyse the following details:

  • Your energy consumption profile
  • At least one recent energy bill
  • Your available roof space

With this information you should receive a formal quote providing detailed savings estimates and ROI information.

For many businesses, installing solar does provide a healthy ROI with typical cost recovery periods of 3-5 years.

If financing the purchase costs, repayments can be set lower than monthly solar savings. This means an immediate cashflow benefit can be in effect from the first month of operation.

The key to success with a solar investment is reliable production of the system over 10-15 years. To achieve this, you'll need to ensure a reasonable maintenance plan and dependable support is in place. Mismanagement will result in low or lost production for extended periods of time, unreasonable maintenance costs and potential safety issues.

Implementing the right system, strategy and support will deliver greater results for many years.

5

Do solar batteries add good value?

The general industry consensus at the present time is that battery costs are still too high to provide a reasonable ROI. Adding sufficient battery capacity to serve a practical business application could be anywhere between $10,000 to $500,000.  

Current market cost for batteries is around $1,000 for every kilowatt hour (kWh) of storage capacity. So a 10kWh battery can cost around $10,000, but isn't a lot of energy supply for most businesses. Battery ROI’s can be between 7-15 years depending on the application and energy cost rates.

Whilst battery costs are high when priced individually, installation of a battery and solar system at the same time can be a reasonable approach providing battery capacity is sufficient.

Every business has different needs. Experienced solar businesses can provide transparent advice about the viability of a battery. 

Business managers may consider batteries if:

  • There’s a need to control energy costs in the evenings
  • To have lower dependency on the grid and energy providers
  • For energy back up on critical equipment or facilities
6
5

Energy monitoring and analysis

If you do implement solar, adding a monitoring system to measure your solar production and your energy consumption will allow you to maximise your returns. These tools will help you identify opportunities for efficiency refinements like:  

  • Identifying peak usage patterns and assessing options for dispersing consumption to minimise heavy peak usage charges.
  • Identifying the energy consumption of specific plant equipment to calculate energy efficiency compared to new plant equipment.
  • Identifying opportunities to better utilise solar production.  


In addition to maximising solar benefits, monitoring is also useful in energy bill reviews and remote support of your solar system. Remote support will allow a technician to access critical diagnostic data for a faster resolution.  

The final benefit of solar monitoring is to send alerts to you or your solar provider to inform you about any issues the system may be facing. Alerts can include notifications about an oversupply of energy from the grid, loss of communication from the internet, system production issues or a system shut down. Without a remote alert system, you may experience loss of savings for extended periods.  

Monitoring systems are an additional upfront expense, but typically provide a better annual return on investment. Certainly, a must-have function for any modern solar system. 

There are also devices that can monitor individual appliances if they are using a 240W power socket. These devices can be helpful if you suspect your devices are inefficient or are the root cause of the majority of your energy consumption. They can be helpful tool for energy management at a device level.

Partnering with energy professionals

Whilst putting together energy profiles and bill reviews are achievable yourself, having an experienced professional do this work for you provides a more efficient and insightful result. GI Energy provides a free quoting service that is based on your energy profiling, bill rates, available space for solar energy and your business needs.  

The quote includes meaningful insights of:

  • Your energy consumption
  • Your energy rates
  • The estimated solar production
  • Your solar savings estimates
  • Internal return on investment data
  • Panel layout overlays (on your business roof)
  • Product recommendations and details
  • Examples of other GI Energy solar installations

   

Once you have an installed system, you’ll be reliant on good support to get the best from your system through it's life.  

Essential services will include:  

a) Remote monitoring access with your solar provider to help with: - Alert management - Remote Fault diagnosis - Solar production review - Technical support for internet connection of your solar system - Education and training where required  

b) Maintenance (servicing, education and advice)* c) Energy plan advice* d) Energy consumption review* e) Bill assessments*

*Service costs may apply.  

GI Energy has a complete after-sales service offering to be your dependable energy partner. 

To get started, we’ll need a current energy bill and permission to obtain your 30-minute consumption data from your energy supplier. We’ll do the rest.  

Once we have the information prepared for you, we’ll arrange a senior consultant to present the quote in person to provide clarity and options to modify the solution or results. You’re experience with our consultants will be professional, informative and mindful of the time we spend with you.  

Once you fill in the form below, we’ll instantly send you an email to provide instructions on how to provide an energy bill and authority to obtain 30-minute energy data from your energy supplier.  

We’ll then be in contact to arrange presentation of your customised solution. This is an exciting step for you towards greater control over your energy costs. Fill in the form below. You’ll be glad you did.

Western Downs case studies

WDRC
Dalby Leagues club

What should you know about GI Energy?

GI Energy kicked into life in 2011 on the principles of high-quality installation, great service and great value. If you spent a day in our office you would experience a happy, motivated and service driven culture. We've attracted likeminded people who care deeply about our clients having a positive and profitable experience with solar.

We have installation teams in 18 locations in Australia. We pick the best installers available and we treat them with great respect. We also take responsibility for all after sales service issues. This allows our installation teams to stay focused on doing great installation work without distractions that put them under pressure. Our installers are all highly skilled and professional and most have been with us for six years or more.

Our commitment to consumer protection is outstanding. We are a Clean Energy Council (CEC) - Approved Solar Retailer. What this means is that we adhere to a formal consumer code of conduct and we've had our sales and business processes reviewed by the CEC. We also have a formal complaints process to resolve issues in-house. If needed issue are escalated to the CEC. 

The core of the solar industry is driven by a global need for sustainable energy. We are big believers in this cause and feel very privileged to be doing the work we do. We want to provide well installed, quality and long lasting solutions. They are good for you, and good for sustainable energy.

Sales is an important part of any business, but it is often experienced in a negative way. Our approach to sales is to be helpful and ensure you are respected. Our customers love our approach and we know you will too.

After you've installed solar, we don't leave you to work things out for yourself. We make ourselves available to help you to get the best from your solar system. We can review bills and educate you on energy consumption matters and solar monitoring software. Without good after sales service, you could very well miss hundreds of dollars in savings or lose money through lost solar production. 

Finally, if you would like to understand what you could be saving with a solar system, don't hesitate in contacting us. If our solar solution is not right for you, we'll respect your choice to decline in a friendly and professional manner.

So let's get going! Submit your enquiry below and we'll be in touch soon. You'll be glad you did.