Are electricity shortages affecting Australian SMEs?
Published on 09/01/2023 by Ojasvini
Access to a stable and reliable electricity supply is crucial for the daily operations of many businesses. Does electricity insecurity affect the productivity of Australian companies? Read more to find out what Australian companies and decision-makers are doing to cope with electricity shortages and more about general energy consumption.
In this article
An unreliable and unstable electricity supply can affect many aspects of business operations. There could be significant impacts on overall productivity, leading to unexpected halts in manufacturing processes, production, and other similar areas. As per an article by 2GB, ‘the wholesale electricity price has also risen 140 per cent in the last 12 months’. This data indicates that there has been a significant increase in electricity prices over the past few months.
To understand the situation and evaluate how small businesses are responding to electricity insecurity, Software Advice interviewed 259 Australian respondents who are either owners, executive managers, or senior managers —meaning the decision-makers— of small to mid-sized enterprises (SMEs) in Australia. We collected their responses to understand what electricity price changes they have experienced, what they are doing about it, whether this surge has impacted their company’s performance, and more about general energy consumption. For the full methodology, scroll to the bottom of this article.
Have companies experienced electricity outages this year?
We asked all surveyed respondents whether their company had experienced any electricity outages this year so far due to supply issues. These are the responses we got:
As per our survey data, 38% of the respondents said ‘no’ to having experienced electricity outages this year, and they don’t think it will happen in the next few months. 21% of them said ‘no’ but added that they expect to experience them in the coming months.
Frequency and average duration of electricity shortages
Of those who said yes to having experienced electricity outages (42%), we asked them about the frequency and the average duration of such outages and observed the following:
- 53% of the respondents said that their company experienced 2-4 outages this year
- 23% of them said they have experienced only one
- 19% of the surveyed respondents answered they had 5-7 outages
- 3% of them said 8-10 outages, while the remaining 2% experienced more than 10 outages this year
In terms of the average duration of such outages, this is what they answered:
- 39% of the respondents said that the average duration was 30 minutes to less than 1 hour
- 37% of them said that it was 1 hour to less than 3 hours
- 17% of the surveyed respondents agreed to have experienced outages lasting less than 30 minutes
- 6% of them said to have experienced electricity outages for 3 hours to less than 6 hours, and the remaining 1% said that the average time was 6 hours or more
95% respondents have seen an increase in electricity costs
To understand the observation of SME decision-makers regarding electricity prices, we asked them whether the price of the electricity bills paid by their company has increased since the beginning of the year. Unsurprisingly, a combined total of 95% of the survey-takers agreed on seeing an increase in the price of electricity bills. Of these 95% of respondents, the following granular results were observed:
- 43% said that the prices have significantly increased
- 40% said that they have slightly increased and they expect them to increase even more
- 12% said that the cost has slightly increased
An important point to note here is that only 4% of the surveyed respondents said that they have not seen an increase in electricity prices but that they, too, expect to see an increase in the future.
Has the Russia-Ukraine war played any role in the electricity price surge?
According to an article by the Centre for Economic Policy Research (CEPR), ‘the Russian-Western standoff due to the invasion of Ukraine has produced an unprecedented increase in energy prices, especially in Europe’. The article further states that electricity prices have been steadily rising globally due to high demand in the advent of post-pandemic recovery.
45% feel there has been an increase of 11-20%
Delving deeper, we asked respondents who said ‘yes’ to seeing noticeable increases in the electricity bills paid by their company the estimated percentage of such an increase. This is what they said:
As per the data, a combined total of 76% of respondents noticed a 5% to 20% increase in the price of the electricity bill this year. In addition, 16% of the surveyed respondents saw a 21% to 50% surge in their bills.
What majorly accounts for electricity price increases?
As per the information published by the Parliament of Australia, ‘there are three major components of a typical energy bill: wholesale costs (covering electricity being generated or gas being extracted); network charges (paying for the reliable delivery of energy via power lines or gas pipelines); and a retail margin (paying for meter reading and other services)’. A change in any such factor would ultimately lead to a change in electricity prices.
Majority feels this has impacted their company’s performance
The same set of respondents who answered ‘yes’ to have seen a price increase were asked whether this increase had any impact on the company’s performance. A combined total of 81% feel that the increase in the price of electricity has impacted their company’s performance —with 42% saying that the impact was minimal and 39% saying it was substantial.
The remaining 19% of the survey-takers completely disagreed with the fact that this increase had any impact on their company’s performance.
How have electricity price hikes affected company performance?
Going forward, the respondents who agreed to have seen the electricity price surge impacting their company’s performance were asked in which ways such a hike has affected performance.
The data clearly shows that for the majority of the survey-takers (74%), electricity price surges have led to increased prices overall.
Moreover, the same subset of survey-takers was asked whether they think their company’s profits have decreased due to the increase in electricity prices. Unsurprisingly, the majority of the respondents (67%) said ‘yes’ to electricity price surges leading to a decrease in their company’s profits. These 67% of the respondents were further asked how much they think the company's profit will have decreased throughout 2022. A combined total of 64% of the surveyed respondents agreed to have seen a 5% to 20% decline in their company’s profits.
How are energy prices set and who sets them?
In Australia, ‘the Victorian government sets a market price for that state, and an Australian energy regulator sets the standard price for those in south-east Queensland, New South Wales and South Australia’ as per a news report by the Guardian. In addition, the report says that this price is generally the default market price and retailers typically look to offer electricity around these set prices.
Measures taken by companies to cope with price increases
We asked those respondents who noticed an impact on their company’s performance due to electricity price hikes the different measures their company has taken to cope with this surge. These are the responses we got:
- 53% said their companies reduced energy consumption.
- 39% of the respondents said their company modified processes —e.g., less electrical involvement, etc.
- 25% said that their companies installed their own renewable energy system —e.g., solar panels.
- 24% said they installed less energy-consuming electrical systems.
- 8% said they stopped production in peak hours.
In addition to the above set of answers, we also observed two unique responses:
- 10% of the surveyed respondents said their companies have not taken any measures yet but plan to take them soon
- 4% said their company has not taken any measures yet and does not plan to take them in the near future
Are companies receiving government support?
The same group of respondents who agreed to have seen an impact on their company’s performance due to the electricity price surges were asked whether the government is helping them. These are their responses:
- 41% of the respondents said that government aid does not exist
- 23% said that their company has requested the aid but is not yet receiving it
- 14% of the survey-takers agreed that their company is receiving government aid
- 12% of them said that the aid exists, but their company has not yet requested it
In addition to this, we asked a combined total of 50% of respondents who said ‘yes’ to the above question of government aid availability about the kind of aid that was available to them. The different answers given by the respondents included subsidies to migrate to lower consumption of electrical systems and equipment (50%), reductions in electricity bills (40%), monetary subsidies (28%), and discounts on the installation of renewable energy equipment (25%).
Our survey results revealed that the majority of Australian respondents have seen an increase in electricity prices. In addition, the majority of these respondents also feel that this increase has impacted their company’s performance negatively. We also found out the different measures taken by these companies to cope with the rising prices including reducing energy consumption, modifying processes, installing their own renewable energy systems, stopping production in peak hours, and more.
In the second part of this two-part series, we will try to gauge whether energy management software can help companies in some way. In addition, we will aim to understand what coping plans these companies have in mind and whether their plans have changed over time or not.
To gather data for this report, Software Advice conducted an online survey from 27 October to 7 November 2022, gathering the participation of 259 Australian respondents. The selection criteria for participants were as follows:
- Owners, executive managers, or senior managers of Australian small to midsized enterprises (SMEs) having between 2-250 employees
- Respondents working in companies having a physical workplace/office in which a significant portion of employees regularly attend
- Companies being at least a year-old
- Companies that:
- Manufacture and sell products
- Buy products from other manufactures and resell them
- Manufacture products as well as buy them from other manufactures to sell them
- Companies either selling products or services (including software) or both with the following business model:
- Business to business (B2B)
- Business to consumer (B2C)
- Business to government (B2G)
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