BURDEN ON BUSINESS: Rising power costs have slugged the bottom line of business and here’s why costs continue to skyrocket.
Small businesses and homeowners all over Australia have been faced with rapidly increasing energy costs over the last several years.
The increase has been so drastic that Australia went from being one of the lowest-cost energy markets a decade ago to competing with Germany and Denmark for the most expensive power bills in the world today.
Rising energy prices put enormous pressure on businesses that rely on any significant level of power consumption.
Unpredictable price increases can result in budget shortfalls, drains resources from other projects, and forces them to additionally raise prices to pass the burden on to consumers. This, in turn, makes them less competitive that other businesses that can operate in a lower-cost environment. To survive, businesses need to understand what’s causing the problem, and how they can react to protect their interests and continue growing.
Why are power prices rising?
Energy costs are a politicised issue in Australia, which can make it difficult to track down exactly why costs are rising so dramatically.
Initially, in the early 2010s, the blame for the sudden price increase was laid on Australia’s carbon pricing scheme, which was introduced around the same time in 2011, and came into effect in 2012.
However, prices continued to skyrocket even after the program was repealed in 2014.
The culprit, it appears, is actually Australia’s electricity network providers, and some sorely miscalculated infrastructure investments.
Network companies, with the support of regulators, invested $45 billion dollars in 2010 to upgrade the grid to accommodate an expected spike in demand.
This investment was made on the assumption that a growing energy market would bring a return over the next 40 years.
The opposite happened, however, and Australian energy demand has actually gone down every year since 2010.
To finance their infrastructure projects, network companies had to raise prices, which only drove people to reduce their power consumption even more to try to keep costs manageable.
This vicious cycle has continued for the better part of a decade, and prices are still rising.
These astronomical prices, however, also present an opportunity for small businesses and particularly new energy providers. Renewables, specifically solar & wind companies, are growing in demand and offer stable, independent energy solutions to businesses and homeowners.
Businesses who are facing astronomical and unpredictable electricity bills are now in a unique position to look at the alternatives and even invest in their own personal power infrastructure. In turn making Australia a leading market for renewable energy.
The fantastic sunshine we have been experiencing on the Coffs Coast of late certainly adds to the argument.