SMEs & the energy spent on energy

Gareth Arbuthnot

State Manager Business Banking Vic/Tas, ANZ

It’s not just Australian households feeling the pinch of rising energy costs - the country’s small-to-medium enterprises have long been challenged with soaring and unpredictable gas and electricity prices.

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Source: Foamex Group

A report by the Australian Energy Regulator in March showed in Victoria alone wholesale electricity prices rose 85 per cent in the year following the closure of the coal-fired Hazelwood power station.

"Prices are moderating … but we don’t expect them to go back to the historic lows anytime soon,” - Menzel

Generation is not the main issue: driven largely by increases in network costs, energy prices can be difficult to forecast and have the potential to impact both the productivity and competitiveness of Australian businesses.

Thankfully however, a recent report by The Energy Efficiency Council shows electricity futures prices and wholesale gas prices have eased in 2018, driven by new forms of generation including wind and solar.

“What we’ve seen over the past six months or so is that prices are moderating as more capacity comes on line but we don’t expect them to go back to the historic lows anytime soon,” Energy Efficiency Council CEO Luke Menzel says.

While a normalisation of prices can be viewed as good news it doesn’t do much to alleviate the concerns of many businesses which continue to look for ways to minimise power costs.

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Source: Foamex Group

Data and energy

Data, analytics and technology – all of which can be employed by SMEs to better understand their energy use and develop strategies to minimise costs - have advanced over the past decade.

“Data can be a key tool to unlocking the energy jigsaw puzzle and unearthing savings,” ERM Power Head of Digital Innovation and Advisory Pete Tickler says.

“There are data sets available for any business which can help a company to understand its energy use and develop a plan to minimise it.

“The plan will depend on a business’s individual drivers - it could be related to costs, or managing emissions and sustainability, for example.”

Tickler lists three main opportunities for businesses to reduce their energy usage, including:

Basic operational health which can be as simple as turning off equipment when not in use;
efficiency upgrades; and
implementing onsite energy generation - although it’s important for businesses to look for ways to reduce their profile before reviewing the availability and suitability of renewables.

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Crane and building construction site against blue sky

Source: Foamex Group

Responding

Australian-owned and operated Foamex Group has been supplying polystyrene building materials since 1982 and has recently undertaken a number of projects to limit energy use and reduce cost.

“Energy is a major input cost, one we haven’t always had a huge amount of control over and for us it’s a non-negotiable, we need it to make our product and when costs are spiralling out of control, energy consumption is something that we put a lot of time into,” Foamex Group General Manager Justin Kelsey says.

The manufacturing of Polystyrene requires large amounts of steam generated by onsite boilers. To improve the efficiency of this process, Foamex installed heat exchangers and is harvesting heat energy from the steam which is re-used to keep machines at temperature. This helps to reduce gas consumption and cost while maintaining output.

“We've had a reduction in our cost by up to 15 percent by employing this sort of energy tracking reduction scheme,” Kelsey says.

“We've also been able to tap into some production efficiencies - we've been able to produce for longer periods without having to wait for the boilers to heat up or cool down meaning our staff can also do what they’re paid to do immediately, without having to waste time.”

Foamex Group has partnered with a solar solution provider to investigate the potential of harnessing energy from the sun to assist with peak power demands, utilising both state and federal funding.

Set to roll out in early 2019, the company is confident it will be able to reduce its reliance on grid consumption to help manage energy use through peak demand periods.

“Some of the cost saving hypotheticals for our solar project is to the tune of a couple of million bucks over the next 25 years and we’d be happy if we got half of that,” Kelsey says.

In assessing the availability of energy saving solutions and their potential value, Kelsey believes industry networking is vital.

“There's a big decision process for us as to whether or not we'll lock in energy contracts for an extended period of time or whether it's short term pain, those decision points were weighing heavily on us and it was a really important one to get right,” he says.

“We spoke with as many businesses as possible including other manufacturing businesses in our industry and got a bit of a feel for what they were doing. People were quite collaborative in terms of the projects and initiatives that they've got up and running.”

“We also spoke with experts in solar energy and businesses who had deployed solar projects about the results they’d seen.”

Kelsey encourages business owners to investigate the availability of government funding which has enabled its solar project.

“I think it's important to keep an ear to the ground in terms of what federal or alternate funding might be out there and tap into those people that follow it very closely,” he says.

“That's been a good sounding board for us and we’ve also had a couple of consultants that we have worked with that have been focused on specific state-based funding, and that’s helped increased our awareness on what’s available for manufacturers.”

Gareth Arbuthnot is State Head VIC and TAS Business Banking at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.