Australia’s rising electricity prices are turning businesses on to renewables

Buying renewables makes business sense in Australia—and not just because it saves firms money. Three-quarters of Australians prefer to buy products and services powered by renewables, a report from Climate Council has found.

An increasing number of Australian businesses are embracing renewable energy and storage in response to high and rapidly rising gas and electricity prices, a new report from environmental non-profit Climate Council has found.

These price developments have been driven by overinvestment in electricity network infrastructure, increasing gas exports, lack of competition and uncertainties over the national climate and energy policy, explains the report, titled Renewables & Business: Cutting Prices & Pollution.

At the same time, prices for wind and solar power generation have fallen substantially, making them price competitive with fossil fuels, while investments in renewable energy act as insurance against the contingency of higher grid electricity prices in the future, the report finds.

There are now clear bottom-line benefits to switching to renewable energies, James Wright, chief executive officer of Melbourne-based Future Business Council, told Eco-Business in an interview.

“Firstly, the overall cost of running a business lowers as a result of switching to renewables. Secondly, the control and certainty of future costs is clearer,” he said.

To promote the shift to green energy, local and state governments in Australia have introduced a number of instruments that support investments in renewables, including the Sustainable Melbourne Fund and the Sydney initiative Our Energy Future.

This is aided by “pay-as-you-go” (PAYG) business models, which allow companies to rent solar systems from energy suppliers and to continue to buy energy as a service without having to make upfront capital investments, said Wright.

“The investment, development risk, operations and maintenance of those solutions are bundled up and managed in a way that the business customer doesn’t have to worry,” he said.

The business incentive

Businesses not only reap financial benefits from renewables, but help to reduce emissions from the electricity sector, which, the Climate Council report states, is Australia’s biggest polluter.

In the absence of a change in policy at the federal level, businesses are going to move where the business case is strong, and it’s pretty strong in renewables.

James Wright, chief executive officer, Future Business Council

The businesses featured in the Climate Council’s report include mining companies, minerals refineries, steel manufacturers, factory farmers and meat producers. For some businesses, tackling climate change is important, but the biggest incentive is saving money, Wright told Eco-Business.

“That’s where we are now, where it’s just good business from an economic point of view to do this,” he said.

Meeting consumers’ demands

The benefits of investing in renewables, however, go far beyond electricity bills. According to the Climate Council report, three-quarters of Australians prefer products or services powered by renewable energy over those powered by fossil fuels, and four out of five believe that major businesses should use renewable energy.

“There are reputational benefits that come from staff, customers and other stakeholders having more faith in companies that switch to renewable energy,” said Wright.

“The vast majority of people want to spend their money with companies that are doing the right thing, and that also applies to where people want to work,” he said, pointing to a large mining company that has struggled to attract talent because it lacks a credible sustainability story.

Politics lagging behind

The current renewables boom in Australia has seen a 60 per cent increase in business installations of rooftop solar over 2016 and 2017, and another 5,000 megawatts (MW) of renewable energy projects are under construction. At the same time, the Australian government is facing criticism over its climate policy.

“Our national emissions reduction target, which sits at 26-28 per cent by 2030, is unambitious and inappropriate; we should be targetting more like 50 per cent to be in line with international expectations and other countries around the world,” Wright told Eco-Business.

“A more ambitious target will provide a clearer signal to the industry and to businesses about where we’re headed,” he added.

Australia has been hit hard by the effects of climate change in recent years, with more frequent and intense heatwaves, coral bleaching events of the Great Barrier Reef and an increasing number of bushfires – conditions that are predicted to worsen in the future.

“In the absence of a change in policy at the federal level, businesses are going to move where the business case is strong, and it’s pretty strong in renewables,” said Wright.

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