Section

Critical insights

Over the last ten years energy prices in Australia have become increasingly volatile. Australian manufacturers know this better than anyone; since 2017 in particular, high electricity and gas prices have had a big impact. This is especially the case for energy intensive sub-sectors like primary metal and metal products, chemicals, polymer and rubber products, non-metallic mineral products and food and beverages.

While energy prices have come down from the peaks of 2017, the underlying fundamentals in both electricity and gas markets suggest that this is a temporary reprieve. And with the world grappling with recession associated with the COVID-19 pandemic, there is a higher premium than ever on managing costs.

Manufacturers that are leading the field in energy strategy and management have minimised their exposure to energy market volatility with early investments in energy efficiency, demand management and onsite generation, protecting their core business and boosting overall productivity.

Beyond cost, emissions are emerging as a strategic driver for some manufacturers. All Australian states and territories have adopted the goal of net zero emissions by 2050, while the Federal Government is targeting net zero emissions in the second half of this century. Manufacturers are also reporting that larger customers are looking to reduce the carbon intensity of their supply chains. For most manufacturers, energy makes up a large portion of their greenhouse gas emissions, making energy management investments a cost-effective way of meeting these expectations.

Whether driven by cost or emissions, most manufacturers are paying closer attention to their energy use. Some manufacturers are just getting started, and can identify quick wins without much external support. However, manufacturers that are leading on energy strategy have gone further, working with external experts to review their sites for upgrade opportunities, and integrating a focus on energy management in their day to day systems and processes to drive continuous improvement.

As businesses deal with the first recession in thirty years and the biggest economic shock since the Great Depression, their priorities are shifting. Cost management is more crucial than ever. But for some, planned capital investments have been scaled back or stopped, with focus shifting to tuning and system optimisation.

However, many leading manufacturers are running the ruler over the Federal Government’s new, time-limited immediate expensing provisions. They have recognised that the immediate deductions of the full cost of new, eligible assets and improvements to existing depreciable assets is an unprecedented opportunity to make strategic investments that drive major energy productivity improvements in their operations.

Understanding net zero

Net zero emissions means achieving an overall balance between greenhouse gas emissions produced and greenhouse gas emissions removed from the atmosphere.

To learn more see Learn the lingo: understanding net zero emissions in Section 2 of the briefing for Australian businesses.