The energy market is changing rapidly, with rising prices forcing businesses to reassess costs and the way they use energy. The solution is a thorough review of their options to deliver a clear data-driven plan acknowledging their unique energy usage and effectively deploying their capital.
A fundamental driver of the change in the energy industry has been the rampant increase in the wholesale price of energy. Electricity prices have doubled over the past twelve months and gas prices have jumped even more. The outlook is for energy prices to remain high.
The energy environment in Australia has been shaped by a lack of policy at the national level. This uncertainty about government policy has scared off investors in electricity generation, pushing energy costs higher, according to business-only energy retailer ERM Business Energy.
Megan Houghton, executive general manager of ERM Energy Solutions, says organisations have flagged that the increasing cost of electricity is one of their most pressing concerns.
“Our own data shows commercial and industrial customers are paying up to 170 per cent more for energy and green schemes in the past couple of years. Recontracting is often a shock for businesses, many of whom are rolling off two or three-year deals, coming to the market for tenders and finding their energy costs have jumped significantly.
“This has led to effective energy management becoming a higher priority for businesses, both in terms of procurement and the need to drive energy efficiency. Some business can even use their energy assets to create offsetting revenue.
Houghton says there are also multiple emerging technologies enabling the customer to take greater control on their side of the meter.
“But this proliferation of options only makes the choice of solutions harder for businesses,” she says.
ERM Business Energy aims to help businesses save money and maximise their energy productivity. Every kilowatt of power not consumed represents a saving in carbon emissions, lower energy costs, and lower demand charges, helping customers to boost their productivity.
Yet not all businesses are acting. A market research survey of Australian businesses undertaken by ERM in July/August 2017 revealed that just four in 10 organisations have a formal energy management strategy in place even though energy represents a major and growing input cost for the majority of businesses.
“Going further, the market research also indicated that just 20 per cent of businesses in Australia have key performance indicators (KPIs) in place driving energy management or greater sustainability. This practice is a must-have for C-Suite leaders in the current and future energy market,” Houghton says.
While some businesses may have taken action, it’s often a fragmented approach.
“The risk is that they don’t have the full picture or could be missing out on technology and options better suited to their business that would maximise their return on investment.”
Nor is the solution to lower energy costs always obvious. Businesses need industry advisors who take a holistic view and are technology agnostic.
This is where ERM can help businesses to understand product and technology options and how they best work together to deliver greater energy productivity.
“We know from our research that businesses often don’t have the time, resources or in-house capability to understand how all the pieces of the puzzle fit together to create the optimal energy plan,” says Houghton.
The company’s data-driven approach to determining an accurate energy management plan provides customers with confidence when choosing a solution to maximise their use of energy and to reduce their costs and greenhouse gases.
“Without data analytics, customers don’t know their best value solutions. Using businesses’ own data, we create accurate, results-focused energy management plans and couple the right technology with the appropriate partners to support the implementation of the energy plan. We measure and verify performance, provide options for financing solutions, and keep businesses on track to meet their goals,” Houghton says.
It is critical for businesses to take a portfolio approach, understanding what they can do to reduce demand in their own businesses and how that may affect their exposure to the wholesale electricity market.
“You need expertise on both the supply and demand side and the data analytics to make an evidence-based decision on what is best for your business,” she says.
“Businesses with complex energy requirements need to avoid making a one-product purchase where they pick a winner to reduce costs – be it lighting, solar, or another technology solution – because this can waste their precious capital.
“Businesses get maximum value from an integrated solution that best fits their unique energy usage and can help them generate additional revenue. There is no one-size-fits-all solution in energy management. Each plan needs to be tailored to a business’s individual needs.”
*Article as published in the Australian Financial Review on 26 September 2017.