TIME RIPE TO CAPITALISE ON ENERGY-EFFICIENCY INITIATIVES
The repeal of the carbon tax has left many businesses pondering what impact its removal will have on energy markets in Australia. As Phil Harrington, Carbon & Energy Business Unit Manager at pitt&sherry explains, the potential effect of the tax’s removal should not be exaggerated and businesses should instead focus on energy-efficiency initiatives and fuel choices in their control.
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ccording to Harrington, the opportunity for Australian businesses to invest in energy-efficiency initiatives to save on costs has never been better.
As electricity prices level out after unprecedented rises, gas heads towards a well-documented price hike and energy-efficient alternatives become more valuable, Harrington believes energy management ‘rules of thumb’ which have guided businesses over the past decade should be re-evaluated. With electricity prices in Australia more than doubling in recent years, Harrington says there has been a perception amongst the business community that the short-lived carbon tax was a major reason behind the increases following the levy’s introduction in July 2012. “Something many businesses don’t understand is that the carbon price actually had a very trivial role to play in electricity’s price lift,” explains Harrington. “It was mostly driven by over-investment in electricity networks to meet demand that never materialised. So taking the carbon price away changes nothing fundamental.” And the fundamentals are that the business case for investment in energy-efficiency initiatives has actually never looked better than it does today.
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“This is primarily because the cost of electricity has risen to be so high that the value of saving electricity is also extremely high as a result ... and now gas is on a similar path.”
Emerging energy market Analysis by pitt&sherry has found that electricity prices will likely remain stable, or even decline slightly, in the coming years. In contrast, gas prices are expected to rise significantly as the majority of Australia’s booming liquefied natural gas (LNG) production heads for the highly profitable export market. According to Harrington, the changing market has created an energy environment where businesses would benefit from assessing a range of energy-efficiency technologies now available. “How energy markets have worked over the past five to 10 years is now pretty much out the window. Some ideas you hear are that gas is cheap, renewables are expensive and energy efficiency has a long payback. That’s all been turned on its head in recent years. Businesses should rethink their energy strategies and redo their calculations based on a different pricing outlook and new policy environment. Business will need to make an informed and fresh decision about what’s optimal for them in the new energy environment,” says Harrington.