Citi bank: “Soaring electricity and gas prices will cut 5-14 per cent from pre-tax profits at a range of companies over the next year.”
First the good news. After a collapse in July, government funding available for commercial solar below 100kw has bounced back from its lows. This means there is some additional federal money available to offset the cost of a commercial solar project.
Take back control of your power bills and produce your own power! The catch - it’s temporary; as of 1 January 2018, they will fall again by around 10% in value. That could be up to $5,000 more from your hip pocket.
Why are power prices remaining so high?
After government arm twisting of the gas companies this week, that could have forced exports to be limited, it seems the gas producers agreed to hand over sufficient supplies to cover a 54-petajoule shortfall. Regulators identified next year there was a real risk that Australia could actually run out of gas going into 2018 but for now, this risk seems now to have abated.
South Australia and Victoria remain at risk of shortfalls as Bass Strait production is expected to fall next year by almost 100 Petajoules. This shortfall comes at a time when demand for gas is rising again. This is no great surprise given the backdrop of coal plants shutting, and gas-fired plants firing up to meet the shortfall, but it comes after five years of falling demand.
Unfortunately, NSW and Victoria will still have to pay 11 per cent more than those in Queensland due to the cost of piping gas south, but at least your gas hob won’t splutter and die!
What is the soaring cost of energy doing to company profits?
Over the past six weeks, Australia’s largest energy users — from packaging and brick makers to supermarkets, soft drink bottlers and poultry producers — have all warned that hundreds of millions of dollars in additional energy costs will be passed on to consumers.
Citibank has previously claimed soaring electricity and gas prices will cut 5-14 per cent from pre-tax profits at a range of companies over the next year. It said the timing of the hit would depend on when long-term contracts used by major companies would roll off, exposing them to new supply and price conditions.
Why is commercial solar so popular now?
More and more of our commercial customers are turning to solar to reduce their ballooning power costs, and as seen by the chart below, the average size of installations is growing sharply helping reduce grid dependence. Typically, households will not usually be over 5kw so above that figure is usually commercial size.
For manufacturing businesses across Australia that have large power requirements, the hurt is coming in the form of a doubling or indeed tripling of their power bills. We see perhaps 50-100 companies a week, and there is a clear and present danger as their power contracts come up for renewal.
While only five per cent of the nation’s businesses currently have solar power, this figure is growing fast for reasons of simple economics. Solar power is often cheaper than grid power and there remains federal funding available to help offset project cost.
Australia’s energy sector and distribution network is on the brink of great change. Renewable generation, storage and demand side management control that harnesses energy from batteries is coming. Ironically the current political turmoil over energy policy and greed of energy producers has only accelerated that change. The higher the price of power goes, the more businesses are attracted to solar power, as it becomes cheaper and more available. Behind the meter supply will take more and more businesses away from the grid.
If you would like us to conduct a free energy audit of your electricity and gas bills and see if commercial solar is right for your business – do contact us.
Doing nothing is the worst thing you can do as a business owner or manager while the landscape is shifting.