Reducing energy market impacts on your business

Reducing energy market impacts on your business

With mainland east coast wholesale electricity prices increasing on average 234%1 in the past six months it is important more than ever to understand the market and contracting options that could ease the energy cost impact on your business.

Strategically timing your contracting and improving energy efficiency could help to reduce your energy costs, while accessing programs like Demand Response could earn you additional revenue.

1. Understand energy market changes

A perfect storm of energy events – extreme weather leading to increased demand at the same time as reducing renewable generation, unplanned outages at power plants and increased call on gas-fired peaking generation to fill the gap – has driven wholesale price volatility, which is starting to be reflected in higher household and business energy bills.

Staying up to date with wholesale energy market trends can help your business navigate any potential volatility.

You can access the latest information through wholesale energy market reports produced by the Australian Energy Regulator. An expert account manager or energy advisor can guide you through the energy market and the way it operates.

2. Consider all contracting options

We understand your business may be facing huge cost pressures and are aware that many industries have been forced to consider shutting or reducing their operations. Large price fluctuations and significant volatility in the Australian electricity market are driving higher costs for many businesses. Consult with an expert account manager or energy advisor to explore alternative contracting options, including looking at the term of your contract.

We offer a range of fixed-price and progressive purchasing models that could alleviate the pressure of increased wholesale electricity prices. Your business may be better suited to a product that allows you to progressively purchase energy in smaller parcels rather than locking in rates on three- or four-year terms. These options can help to reduce the timing and pricing risk in a volatile market.

3. Plan when and how to request a pricing offer

It is important to consider and review your energy budgets either before or as part of the contracting process. Allow for flexibility in your budget so you have a buffer should prices increase further.

Timing is critical. Wholesale electricity prices change constantly and getting the timing right in a volatile market is important. Give yourself enough time to review and consult on new terms before your current contract expires. Price validity periods (the period of time you can accept rates offered by a retailer) offered by energy retailers can be short – even as little as 24 hours in today’s market – so be ready to act.

Discuss how you will evaluate offers considering factors, other than price, that can increase costs over the contract term. Take into account the level of service offered by the energy retailer, the risk of late or inaccurate invoices, the resources required to manage inaccurate bills, as well as access to your consumption data.

4. Consider participating in a Demand Response program

For businesses that are able to reduce their energy usage during periods of high demand, or that have on-site generation such as back-up generators and co-generation plants or battery storage, participating in a Demand Response program can provide additional revenue that can help offset energy costs.

Shell Energy offers access to four types of Demand Response that will suit different energy load and patterns, equipment and system automation, and response capabilities.

One type of Demand Response is the Reliability and Energy Reserve Trader (RERT) function. Managed by the Australian Energy Market Operator (AEMO), it can be activated when demand on the electricity grid is high to prevent blackouts caused by generation or network constraints and extreme weather events.
Our dedicated Demand Response team or your energy advisor can offer guidance on the programs that could be suitable to your business.

5. Tune up your business’s energy efficiency

If you haven’t already done so, consider how energy efficient your business is. There are significant opportunities to realise lower costs, energy consumption and carbon emissions by boosting energy performance.

Energy efficiency plays a valuable role in lowering costs while allowing businesses to do more using the same or less energy. Improvements like equipment optimisation and upgrades, management software and automation can deliver quick wins for your business, with many projects offering short payback periods. For more information on how Shell Energy can help your business control energy costs in a volatile market, talk to your energy advisor or contact us.

1Based on Shell Energy’s wholesale prices across Qld, NSW, Vic and SA from Dec 2021 – June 2022.