A report released by the Australian Industry Group (Ai Group) called ‘Energy shock: confronting higher prices’, shows manufacturing companies are resigned to electricity prices skyrocketing in the future, with 30% of survey respondents suspecting energy cost will rise by up to 20% over the next two years.
The report, found here, was written to debunk some of the myths surrounding rising energy prices, and to provide information to utilities about the negative impact rising prices has on Australian industrial businesses.
The Ai Group online survey in November/December 2010 received 144 valid responses, with most respondents coming from small and medium-sized companies in the manufacturing sector.
The responses confirmed that most companies have experienced substantial electricity price rises over the past five years and expect more over the next two year.
However, despite price rises, energy costs are relatively small for many companies, according to the report, with electricity
costs equal to 2% per cent or less of sales revenue at about 65% per cent of respondent companies. For gas costs the figure is about 83% per cent of companies.
Even so, over the past four years Australian retail electricity prices have risen by around 30% in real terms which, though not a high percentage of most company’s outgoing costs, is still a major rise in such a short time.
Some companies have made small-to-significant improvements in their energy efficiency over the past five years, however 66% made no improvement and a small number went backwards. Fifty-seven per cent of companies expect no improvement over the next two years, and 27% per cent expect a marginal improvement.
According to Ai Group chief executive, Heather Ridout, Energy shock: confronting higher prices devlivers a ‘sobering message’ about the increasing energy prices which are impacting on business and community.
"This new research by Ai Group demonstrates that energy costs have risen substantially over the past five years and that there is no end in sight to these increases. It is clear Australian businesses and households need to prepare for escalating electricity and gas prices over the next decade,” she said in a statement.
"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.
"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.”
Ridout says the most worrying part of the report is the finding that nearly two-thirds had not improved their energy efficiency over the past five years.
The report calls for Government and industry bodies to help support manufacturers “get on the front foot to deal with this growing problem,” Ridout said.
By how much do you think energy prices will rise in the next two years? Comment below or on Twitter @manmonthly.