AIG’s Energy Shock Report confirms businesses’ worst fears

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  • Businesses urged to act now to counter price hike shock
  • Prices show no signs of going down
  • Spot prices are extremely volatile
  • Projections have deteriorated since data was collated

The Australian Industry Group has published an Energy Shock Report which confirms everyone’s worst fears – that electricity prices are set to rise further after having doubled in the last two years, leading to huge costs for businesses.

The report also states that businesses must act now to counter the huge shock that they might face in the future, by increasing energy efficiency, eliminating waste and self-generated power. Our experts here at Leading Edge Energy can help you do all that.

While the findings sound ominous; it gets worse – AIG points out that wholesale and energy futures prices have increased significantly since the report data was collated.

This means that while the projections are already pessimistic, the actual scenario and future outlook is even worse.
The report states that in a business environment where margins are already under pressure and there is limited ability to pass on rising costs, rising energy prices will continue to cause pain to businesses.

  • 39% of businesses experienced a price hike in 2016
  • 51% expect 2017 to be worse

If you feel your business is strained, you are not alone – 39% of Australian businesses experienced huge price increases in 2016 and the biggest pain has been experienced in the energy-intensive sector.

The outlook for 2017 is even worse, with 51% of businesses expecting higher prices. The report points out that electricity demand (and prices) can be moderated by greater efficiency and productivity in how we use energy – Leading Edge can help you with this.

AIG expects that wholesale price increases will be fully passed on to business energy users because retailers’ costs to hedge and manage their price risk will increase.

The number crunchers concluded that if electricity prices increase by $40-$50/MWh as expected, it will translate into $5.4 to $6.8 billion per year in extra costs for all businesses in eastern energy markets, including between $2.2 to $2.7 billion per year in extra costs for manufacturers.

The long and the short of it is that businesses are going to have to pay through the nose for energy and the only way to insulate against it is to act now. Energy audits, identifying and eliminating waste and self-generated power are essential if businesses are to survive.

Contact Leading Edge Energy now to find out how.  Call us at 1300 852 770

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