Manufacturers spending more to boost energy efficiency

A report shows expenditure on energy as a percentage of turnover increased by 10% between 2008 and 2011, as pressures mount from the carbon tax and rising electricity bills.

The Australian Industry Group (Ai Group) study, Energy Shock: pressure mounts for efficiency action, also showed two-thirds of the 300 businesses surveyed improved their energy efficiency in the three years to 2012.

This figure is markedly higher than the results of a similar study of the five years to 2010, which found that only one-third of businesses had made headway in improving the energy efficiency of their operations.

The report follows findings from another Ai Group study released earlier this month – Ai Group Survey of Carbon Tax Cost Burden – showing 40% of manufacturers plan to increase at least some of their selling prices from 1 July 2012 as a result of the start of the carbon tax. 

Ai Group chief executive Innes Willox said the most recent study shows “a major rise in action to boost energy efficiency, but also identified barriers to further and deeper action.”

Energy Shock: pressure mounts for efficiency action surveyed businesses about their use of energy – including electricity, gas and liquid fuels – along with their management of electricity costs and energy efficiency practices.

It also sought respondents’ views on policies to encourage additional action in these areas.

The report found that retail electricity prices for small users will have risen 37% between 2010 and 2013, with the two biggest factors being network costs, which added 15 percentage points, and carbon pricing, which contributed about 8 percentage points.

Willox says this suggests the business spend on energy will grow, however, “These impacts will be compounded by the challenging conditions facing many non-resource businesses, with costs rising and with revenue and profit margins being squeezed,” he said.

"Many businesses are starting to feel these strains. Most respondents described energy costs as a major expense. This appears to have been a catalyst for action by businesses to improve their energy efficiency, although most businesses will need to do more to blunt the impacts of rising energy prices.”

The most common efficiency actions reported in the survey are changing staff practices to encourage energy efficiency and identifying major uses of energy in the business.

“While a growing number of businesses are taking action to improve their energy efficiency, most are looking for quick wins and would only consider an energy efficiency project where the expected payback period was less than three years,” said Willox.

The report showed the biggest drivers for efficiency action were concerns about energy prices and the desire to maintain or enhance business profit margins.

The anticipated introduction of carbon pricing was also a strongly cited motivation for future energy actions, according to Ai Group.

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