Like most businesses today, manufacturers are looking for ways to work smarter. Often that means finding suppliers that give your business greater control – electricity is no different
Let’s learn a little more about fixed-rate contracts
Most electricity retailers will offer businesses fixed rates for their electricity contract. The rates reflect the fluctuations in the market that your retailer is buying from – the National Electricity Market or the wholesale market. The wholesale market electricity price change every half hour and usually float around 8c/kW. But prices can rise to $14/kw in a peak. Most retailers will set fixed rates based on the ASX Energy Futures,
Whether the fixed-rates are at peak or off-peak, retailers arrive at a rate by looking at the predicted market movements and adding their margin. The result? You’re provided with a ‘take it or leave it rate’ that gives you no control when rates rise.
What’s happening in the wholesale electricity market
The power market is changing. Here are three of the main supply factors leading to the change:
- Unscheduled generation (wind and solar): Even though wind and solar generation offers advantages (like zero emissions and no fuel or resource cost), its unpredictability can cause issues when customers are on fixed rates because customers require a continuous supply.
- Gas-fired generation: Gas-fired generation is on the rise as a balancing source of generation for Australia because of its flexibility. This has caused gas prices to rise across the market – affecting prices of the electricity market simultaneously. For gas-fired power plants to recover higher input costs, electricity pricing will need to increase.
- Coal generation: With the closure of the Hazelwood Power Station on 1 April this year and the questionable future of coal-fired generation, fixed-rate retailers have taken to rising prices in the retail contract market.
What does this mean for you?
Although the peaks are rare, those on fixed-rate prices are left with the higher rate and without any access to the lows of the market. For manufacturers, that has direct impact on their bottom line.
It’s simple. Ask yourself, ‘Why should I deal with high power prices every day of the year?’
With all this going on in the market, as a business owner it might be wise to consider an alternative to a fixed-rate contract.
At Flow Power, we have the tools and expertise to help you master the power market.