"Energy Shock" for Australian Businesses

AUSTRALIAN businesses are set to be hit by soaring electricity costs, with prices predicted to be double 2008 prices by 2015, a report by Australian Industry Group (AIG) reveals.

The report “Energy shock: confronting higher prices” delivers a grim message for businesses, with the federal government’s renewable energy scheme expected to add a further $1.2 billion in electricity costs this year alone.

AIG's CEO Heather Ridout said in statement:

"It’s clear Australian businesses and households need to prepare for escalating electricity and gas prices over the next decade. Energy costs have risen substantially over the past five years, and there is no end in sight to these increases.

"This report assesses recent developments and medium-term trends based on the latest data and a survey of more than 150 companies. It finds that by 2015 electricity prices are projected to at least double from 2008 levels.

"Australian industry is already grappling with the challenges of a strong dollar and an economy nearing capacity. Cheap energy has been a key source of competitive advantage for Australia in the past, and while Australia is far from alone in confronting rising energy costs, industry is going to have to adapt to higher prices than we have been used to.

"Greater energy efficiency is an obvious strategy. Efficiency has long been core business for large companies in energy-intensive sectors, but the coming price rises will require many other businesses to focus on efficiency too.

"Ai Group’s survey, which included many smaller and medium sized companies, found nearly two thirds had not improved their energy efficiency over the past five years. Almost as many did not anticipate making improvements in the next two years.

"This is a worrying result. Ai Group will be working with members and governments to ensure that industry has the support it needs to get on the front foot to deal with this growing problem," Ridout said.

In what AIG admitted is a jolt to Australian commerce and industry, the report found that 7 percent of the company’s surveyed said they believed their energy efficiency has actually gone backwards.

AIG said they are working to ensure that any Australian climate change policy will not affect the competitiveness of manufacturing or risk the continuity of energy supply.

Ridout revealed that currently some federal and state green policies add to burgeoning energy costs, such as the commonwealth's small-scale renewable energy programme, which targets the most expensive renewables, and will cost electricity consumers (Aus)$1.12 billion in 2011.

In recent years there has been a large push for renewable energy, but it is only a small part of the industry

When broken down into sectors, the manufacturing industry is the most affected by energy costs, as it accounts for around half of the $13 billion annual electricity spend by Australian businesses.

Picture by of Telstra Tower in storm, Canberra by James Barker

Monday 21st February 2011

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