The enduring cost-of-living crisis (which is expected to peak this summer) and skyrocketing fuel and energy prices have put small businesses and households up against the wall.
Default market offers (DMOs), a regulatory price cap – that energy retailers have to abide by – set on standard plans, rose to $227 in NSW; $165 in Queensland and $61 in Victoria in May last year.
To cushion the deteriorating effects of such events, the Australian government has allocated $62.6 million for an energy efficiency grants program for small (and medium) size businesses in budget 2022.
Energy is one of the most important aspects for any business, be it small or big. In Australia, small businesses are going through an impact due to a surge in power bills.
Understanding the usage of electricity when it comes to small businesses is also significant and crucial.
In this blog, we try to analyse the problem and try to figure out possible solutions, particularly for the summer when power usage gets high for most businesses in hospitality and service.
Here, you also get tips to reduce power bills during summer and also in the longer run.
Skyrocketing power prices
Owing to the energy crisis, power bills have surged and this has created worry among small businesses.
Experts have predicted a steep increase in retail power prices, which adds to the worry, and it is not easy for small businesses to keep functioning under such circumstances.
The recent Ukraine-Russia war has added fuel to the fire with an increase in oil and gas prices as the coal-backed power stations have undergone outages.
The rising power bills have added to the woes of small business owners, who had already faced hard times because of the pandemic. Other major areas which have troubled small business owners include supply chain crunch and extreme staff shortages.
These have contributed to additional wage bills. Small businesses like salons to hospitality and dry cleaners are mostly affected by the surge in power prices, and they are looking for remedies to this adverse situation.
Industrial and commercial users who have high power usage, such as supermarkets, are exposed to the current market scenario. These also include high wholesale costs and added network charges.
Energy usage in businesses
Coming to the important factor, which is energy usage by businesses, let us uncover how much of it is used as such.
As per an estimate, the average electricity consumption by any Australian small business is in-between 13,000 and 36,000 kWh (kilowatt-hours) per hour and this is an estimate for the small businesses in Australia.
The consumption is also dependent upon location, tariff, and nature of business. Though it must be noted that the electricity consumption also depends upon the size of the business, operational hours, total power usage requirements and energy efficiency.
There are different appliances and equipment that use energy to varying degrees. Air conditioning, heating appliances, lighting, laptops, computers, printers, internet routers, modems, refrigerators, and dishwashers are the usual suspects in small and medium business setups who are devourer of power.
Talking about Australia in particular, there are industries that use most of the electricity. At the top position is the manufacturing industry, which uses as much as 52,461 gigawatt hours as estimated by the Australian Bureau of Statistics.
The mining industry is the second-highest consumer of electricity, with the usage of up to 23,424 GWh yearly. After mining comes the electricity, gas and water sector, which consumes up to 6,543 GWh per year.
The least amount of electricity is consumed by the construction industry, which amounts to 2,138 GWh annually. Coming to the average office power bill, the same amounts to $1045.
Reading between the lines on your electricity bill
About 23% of Australian businesses reported that their energy requirements increased during the winter. The same goes true for the summer, when many businesses report an increase in their energy usage.
There are means by which small businesses can reduce their energy consumption. To begin with, they need to understand their business energy requirements. They need to figure out the appliances or equipment that use the most electricity.
Monitoring energy spending is another facet where they can control the usage of electricity. This could be done by installing energy monitors and then monitoring and understanding your energy usage patterns.
Installing solar panels and battery storage can also help in reducing the dependence upon energy retailers and small businesses can therefore cut down their power bills.
Albeit, the capital costs of solar panels are high, but it pays off well in the long run.
Finding the best electricity tariff deal for the business can also work out wonders. This can be done by comparing the commercial electricity plans and by researching and comparing the usage and supply of the power. Small businesses can also look for government-backed rebates and incentives.
Avail rebates offered by various state governments
Small businesses can also avail rebates offered by different state governments. They can replace old appliances like cloth dryers, heating and cooling appliances, fridges, freezers, hot water systems, commercial lighting, outdoor lighting, motors, and so on.
The various state governments offer rebates and products that can help small businesses save some money. To cite an example here, business can get rebates under VEU program in Victoria and ESS program in NSW.
The Australian government has set a green house gas reduction target of 43% below 2005 levels. The government aims to achieve it through transitioning from gas and fossil fuels to renewable sources of energy and energy efficiency programs like VEU and ESS. The rebates, incentives, and discounts that are given to businesses for LED lighting upgrades vary in accordance with energy certificate price and type of activity.
10 tips for reducing energy usage in summer
Let us now share with you the tips that can help to reduce energy usage in summer. These tips can help small businesses to reduce energy use and save money in the longer run.
- Choose a better energy retailer: compare the tariff offered by various energy retailers and choose the one offering the best deal.
- Go solar: A good alternative to grid power is solar power, and many small businesses throughout the world have cut down their dependence upon grid power by opting for solar power. Though the installation costs are higher, in the long-run, it gives respite to the businesses.
- Install LED lights: Energy-efficient LED lights equipped with add-ons like motion sensors offers greatest energy savings and longest lifespan.
- Run an energy audit: For this purpose, you can hire a company which helps you in auditing your energy usage. This provides you with a good perspective on all your energy needs and supply.
- Replace old appliances: Replace old and inefficient appliances with new ones. Check if you are eligible for incentives / rebates for the upgrades you’re planning to do.
- Use blinds to control direct sunlight: In the summer, blinds come handy to regulate temperature inside a workplace.
- Install heat pumps: Heat pumps are a low-carbon emission and energy saving alternative to traditional air-conditioners. They can also be used for air-conditioning, space heating and water heating. When used for heating purpose, heat pumps are 3 to 4 times more efficient than conventional aircons. In Australia, the annual energy cost of gas storage water heaters are 2.5 times more than high efficiency heat pump water heaters.
- Adjust your thermostat: Setting thermostat to 23-25 degree Celsius range is ideal for summer. Raising it by one or two notches brings more energy-savings.
- Apply reflective coating: By applying reflective coatings on external surfaces, small business owners can better regulate temperature inside the workplace and reduce energy usage of air-con system.
- Take care of your appliances: Do regular maintenance of the appliances.