19 July 2012 – Most businesses are still looking for “quick wins” to improve their energy efficiency and would only consider projects offering payback within three years, a report into energy efficiency by the Australian Industry Group has found.

The report, “Energy shock: pressure mounts for efficiency action”, surveyed 39 respondents and also found the introduction of carbon pricing was a strongly cited motivation for future energy actions.

Other key findings were:

  • an increasing share of business effort being directed towards energy efficiency improvement, and pressures mounting to do even more
  • to date most efficiency improvements have been modest, indicating that business capital for investment is either not available or is largely reserved for other purposes
  • the most popular energy efficiency activities included changing staff practices to encourage energy efficiency and identifying major areas of high energy use in the business
  • the biggest drivers for efficiency action are concerns about energy prices and the desire to maintain or enhance business profit margins
  • while many government policies to support efficiency are in place or under consideration results suggest uptake would be greater if industry was more closely engaged in development and roll-out.

In his preface, AIG chief executive Innes Willow said energy prices were attracting intense public and political attention, particularly given the introduction of carbon pricing and enormous ongoing investment in energy networks.

“Businesses are not immune to rising prices that have beset households, as Ai Group’s Energy Shock: Pressure Mounts for Efficiency Action shows,” he says.

“Most businesses see energy as a big expense, but not all businesses are equally exposed.

“For many businesses who feel the pinch of rising energy prices, the intensity of other even more urgent costs and pressures can make it hard to devote time and capital to energy issues.

“For businesses at the higher end of energy intensity, energy prices are a core issue and reducing energy costs merits significant investment.

“As prices have risen, more businesses have slipped into the category of higher energy spending, where carbon price impacts are also more keenly felt.

“Challenging conditions for many non-resource businesses are likely squeezing revenue and profit margins, further intensifying the significance of energy costs.”

Mr Willox says this trend can be expected to continue in light of both carbon and other looming pressures on energy prices, including rising network costs.

However, many businesses can contain the resulting costs through greater efficiency in the use of energy.

Mr Willox says previous Ai Group research showed that in the five years to 2010, two thirds of businesses had made no or negligible improvement in their energy efficiency.

“Our latest results indicate broader, deeper action on efficiency over the past three years. Three quarters of business now report that they have taken or are planning actions to improve efficiency, though much of this activity is preparatory or investigative.

“Energy efficiency savings achieved recently are stronger than those outlined in previous research, and are growing more ambitious over time. Only a third of respondents reported minimal recent improvements, with another third achieving between 1 and 5 per cent reduction in energy used to produce each unit of revenue.

“The remainder are doing even better. The perceived strength of motivations to improve efficiency is increasing across the board, with high energy prices, cost control and carbon pricing widely seen as strong drivers for efficiency improvement.”

Mr Willox says many businesses can make even greater efficiency gains by following through on investigative work with large investments.

“However, this is easier said than done. In many businesses the necessary capital is either not available or reserved for other purposes.

“The last few years have seen a proliferation of government policies intended to overcome barriers to and support business energy efficiency improvement. More are under development. These may be having a significant effect.

“Yet the survey also suggests that without much closer coordination with business, many of these policies risk being seen as irrelevant, and will fail to reach much of their potential market.”

Low Carbon Australia’s CEO Meg McDonald said the Ai Group report highlighted that an increasing share of business effort was being directed towards energy efficiency improvement.

“Low Carbon Australia’s message, for all Australian businesses, is that if you are serious about reducing your energy use, there are options available to you and we can help with finance to cover the upfront costs,” she said.

“The survey also shows that businesses are concerned about the payback periods of many energy efficiency technologies. Low Carbon Australia specialises in a range of finance options structured so that positive cash flow starts from day one.

“Smart business owners are changing the way they think about their energy use, using new technology to better understand their practices and get rising costs back under control.”

For the full report go to https://www.aigroup.com.au/policy/reports/