Electricity prices have more than doubled since 2014, in Australia, and gas prices have followed closely with a 50 per cent increase since 2011.
These evaluations, from a Grattan Institute 2018 report – Mostly Working: Australia’s Wholesale Electricity Market, show the stark increase in energy costs that Australian manufacturers have experienced, and continue to experience.
In an industry that dominates a large part of the Australian economy, the Energy Efficiency Council and The Ecoefficieny Group are pushing manufacturers to make steps, big and small, that will have a huge impact on energy savings.
The Australian Manufacturing Gas Efficiency Guide 2018, developed by the Australian Industry Group, Clean Energy Finance Corporation, and the Energy Efficiency Council, indicates that manufacturing contributes about $100 billion, gross domestic product, to the country’s economy annually.
The manufacturing industry supports about 900,000 jobs, which accounts for about 7.4 per cent of Australia’s total employment. According to the guide, Australia’s manufacturers are the most energy intensive in the OECD.
Energy Efficiency Council CEO, Luke Menzel, said energy costs and consumption have changed dramatically in the past four years. For the past few decades, up until recently, Australia has been very lucky with its energy use, which means that manufacturers haven’t had to think about it, he said. “Because energy costs were relatively low, it wasn’t really the most valuable area for them to focus on. As a result, energy management opportunities weren’t being picked up. We are really lagging behind all of our major competitors.
“With price increases, the attitude towards energy management is shifting. There are some significant opportunities in the manufacturing sector. For manufacturers that haven’t previously looked at energy efficiency, it is fairly standard to be able to improve an operation by about 30 per cent,” said Menzel.
“It’s different if you go sector by sector, but there’s often low hanging fruit. It’s not about replacing large pieces of equipment, it’s about ensuring it’s running as productively as possible. Many more manufacturers are looking at these issues closely because of the price spikes.”
Manufacturers can make small improvements by monitoring where the most energy is being used and finding ways to minimise this, said Menzel. He suggested getting an external energy advisor to look at a company’s processes. “A fresh pair of eyes can do a world of good. In a business, there are ways that things have always been done. Getting someone to question practices is where you can get some quite simple wins.
“Sometimes there are steps in the production process that are not necessary. It’s about making sure there’s a reason for doing it,” he said.
The Ecoeffiency Group director, Penny Prasad, said the first steps businesses should take are looking at which tariff they are on and deciding where they could be making savings. “One of the first things we look at is whether they are a small user or a large user. A large user is using more than 100MW per year. If you are a large user, you are placed on a tariff, which includes demand based charges that can be as much as 40 per cent or more of an electricity bill. Small businesses can try to improve their energy efficiency and knock that down to allow them to change to a non-demand-based tariff.”
One suggestion Prasad has is cutting costs by looking at what hours of the day equipment is operating and whether that use can be minimised or even moved to a different part of the day. “They can also put in more energy efficient equipment. A lot of them just don’t have that basic understanding of their tariff and what they are paying for.” She also suggests looking at renewable energy.
The Australian Manufacturing Gas Efficiency Guide 2018, explained that Australians are also large users of natural gas. In 2014-15 Australian manufacturing was responsible for about 40 per cent of total natural gas consumption. Recent analysis has found that by implementing energy efficiency measures and switching from gas to other clean energy sources, Australian industry can reduce gas consumption by at least 25 per cent on current levels, or 201 petajoules per year.
The Energy Efficiency Council’s Navigating A Dynamic Energy Landscape: A Briefing for Australian Businesses report from August 2018, indicated that the cost of building large-scale renewable energy generation is now lower than the cost of building new conventional fossil fuel generators. Since 2010, large-scale solar costs have fallen by 80 per cent, and onshore wind energy installation costs have dropped by 39 per cent. By 2025, further reductions, of 59 per cent and 26 per cent respectively, are projected.
But, Prasad said for businesses, it can be a struggle to choose investing in renewable energy over other key projects. “They have to decide, as a company, where to spend their investment dollars. That’s where it becomes a competition between what money needs to be allocated where in the company. Or, they need the money to invest in those capital projects, but sometimes they just don’t have that money. This is where energy efficiency partnerships can be good where capital costs of equipment can be paid off via energy savings.”
Prasad said that although it is good that some companies are opting for solar panels on their roofs as a solution to minimise costs, companies should invest in energy efficient equipment first. “It all depends on what the payback is for the projects. The payback for solar panels, for example, may take four years, whereas the payback on equipment could be much quicker. Large manufacturers can look at other renewable energy options such as bioenergy or select electricity providers that produce electricity from renewable energy resources. For example, dairy processor, Burra Foods has a power purchase agreement (PPA) with Flow Power for the supply of electricity produced via wind power,” said Prasad.
SEW Eurodrive Australia industry specialist, John Gattellari, said customers can make huge savings by upgrading to energy efficient equipment. “Manufacturers need to consider how the efficiency of a product contributes to the running cost of the entire system. When you consider a non-optimised system, excess energy costs can add up substantially during the lifecycle of a product.”
SEW-Eurodrive is a German designer and manufacturer of geared motors, frequency inverters, servo drive systems and decentralised technology. By introducing an optimised mechatronic combination of motors, gearboxes and drives electronics to a facility, manufacturers can unlock the real potential of cost savings, said Gattellari.
Similarly, the Australian Manufacturing Gas Efficiency Guide 2018 suggests adding equipment that will ultimately reduce the cost of running a manufacturing plant. An example of savings achieved at a building products manufacturing plant is given in the guide. The plant produces various types of fibre cement products for the building industry, such as weatherboard, flooring, eaves and soffits.
A new control system was installed on its 8MW boiler. The control system included various features to improve combustion and reduce emissions, including high precision control of air and gas valves and dampers using servo motors, water level control, and pressure and temperature set-point control. With these features, among others, the implementation of this initiative was able to reduce gas consumption by 5.6 per year, which equated to savings of $42,000 per year. The total investment cost was $119,600, so the project was able to provide a payback in less than three years.
Controlling energy consumption
Choosing where a company purchases its energy can also help keep costs low, which is where Flow Power helps manufacturers. The company works with customers in a very different way to most energy retailers by partnering with providers to give customers transparent access to all of the tools a traditional energy retailer would use. This enables its customers to make informed choices, minimises the hidden costs and connects them to the signals of the power market.
At the start of 2018, fixed-rate contract prices were about 14c/kWh in Victoria. Flow Power had just signed a series of customers onto its PPA with Ararat Wind Farm. Benefitting from its more transparent model, some of those customers were able to respond to the market signals through demand response programs like the Australian Energy Market Operator and the Reliability and Emergency Reserve Trader. They ended up paying about 5c/kWh.
Flow Power suggested buying wholesale to get transparent access to the market rather than a fixed rate. While the fixed rate may seem better in the short-term, over the long term, the variable will be lower, the company explained.