10 Steps to Manage Business Energy Costs

Many businesses are looking for ways to better manage their energy costs.

The following steps can help small, medium and large businesses understand how to take control – to manage their energy use and reduce their energy costs.

They range from simple to more sophisticated Steps and are set out in a suggested progression.

The Steps provide links to references for further help and advice, and case studies of real time Steps implemented by businesses.

Start with simple, ‘good practice’ steps for businesses to take at low or no cost (Steps 1-5):

Who manages energy in your business?

To understand how to manage business energy costs it is important that there is a clear responsibility for understanding, reviewing and progressing energy cost reduction opportunities. This will best be achieved by nominating someone within your organisation to look after all energy matters. This ‘energy champion’ will handle  reviewing your bills and tracking your energy use over time. You can  use the interval data from your energy retailer to track intermittently used machines throughout the day.

Your energy champion will identify and put in place energy cost saving Steps that provide the best returns on investment. They can achieve this in consultation with management and independent experts.

Suggested reading

Navigating a dynamic energy landscape: A briefing for Australian businesses

With support from the Victorian government, the Energy Efficiency Council has published a briefing outlining the trends and technology driving the energy transformation and how business leaders can leverage and take control of their energy position:

www.energybriefing.org.au

The energy market is dynamic and competitive and therefore it is unlikely to be the “set and forget” arrangement of several years ago. It is important that you regularly review your energy contract and invoices to make sure your energy agreement is right for your business.

Larger consumers can get the best energy deal by understanding the different types of energy contracts for businesses or by using an energy broker to gather, analyse and report your current status from the data as well as identifying options for achieving a better outcome.

Get your energy data

To manage your business energy costs, you first need to get your energy data over the last 12 months. You can get this data from your energy bills, or by asking your energy retailer. This information will tell you how much energy you consume, and whether this varies throughout the year. You can also use this data to compare your energy costs after you undertake any of the recommended steps.

Compare energy offers

The Victorian Government's Victorian Energy Compare website can help you find the best energy deal. You will need to have been at your premises for more than 12 months and be on an energy retail offer.  

Businesses with energy consumption close to that of households or just a few times larger (less than $20,000 per annum ) can use arrangements similar to households to get an energy contract. Each energy retailer will offer a range of contracts, each with set terms.

Click here for further information:

https://www.victorianenergysaver.vic.gov.au/energy-advice-for-business/accessing-and-understanding-energy-data

Get advice from an energy broker

If your business spends a large amount of money on energy (e.g. more than $50,000 per annum), there are good reasons for engaging an expert to help you. Energy brokers have a deep understanding of the commercial energy business and market trends. They are independent and will track gas and electricity market prices to help their clients get the best energy deal. They may be able to achieve far bigger savings for your business than you can access yourself.

Securing the lowest energy price may be your top priority when renewing your energy contract. However, the terms and conditions of supply are similarly important, and should be carefully reviewed and negotiated, especially in the current volatile gas and electricity market. An energy broker can help you.  

You can find a suitable energy expert through word of mouth or via an industry association such as the Energy Efficiency Council (EEC). The EEC has a searchable database of independent energy brokers:

www.eec.org.au/for-energy-users/find-a-provider

There are many simple steps you can take that will immediately reduce your energy use and cut costs.

The type of actions will depend on how you use energy and the type of equipment in your business.

The following actions are applicable to most businesses.  

End of day shut-down procedure

Develop and commit to an overnight and holiday shutdown procedure. This can be as simple as having the last person to leave turn off the lights and other equipment.

Set computers and other equipment to automatically turn off at the end of the day. Appliances such as printers and photocopiers often can be set to ‘energy saving’ modes.

Installing simple timers on equipment such as boiling water taps can make sure they’re off overnight and still ready to use when you arrive at work. You could also automate these processes with a building management system or equipment timers.

Larger businesses should consider shut down procedures for data centres and computers. Try to minimise or shut down the out of hours energy use of larger equipment such as boilers, chillers and air compressors.

Remind after-hours cleaners to turn off lights when they leave.

Service your equipment

Regularly cleaned and serviced equipment will operate better.. For example, refrigerated display cabinets use up to 10 per cent more energy if not cleaned often.

Make sure sensors and timers are working as they are supposed to.

Set up a process to check for leaks in compressed air and steam systems.

Businesses are encouraged to conduct their own energy assessment on a regular basis to understand where energy can be saved. Simple Steps to reduce energy consumption can provide immediate cost savings.

If you want a detailed energy assessment, go to Step 4.

It’s important to know where you are using energy and to track your energy use and costs over time.

Victorian Energy Saver has information on accessing and understanding your energy data:

www.victorianenergysaver.vic.gov.au/energy-advice-for-business/accessing-and-understanding-energy-data

Audit your energy use

An energy audit will identify where your business uses energy and what you can do to reduce this.. An audit will recommend improvements specific for your business. This can include reviewing tariffs, investing in energy efficiency upgrades, and suitable renewable energy options.

Know who to turn to for advice - consider seeking guidance from a professional energy assessor

Energy assessors provide guidance on how you can reduce your energy bills.

When selecting an assessor, a good assessor should be able to:

  • Demonstrate energy auditing experience within your specific sector or industry
  • Provide details of their relevant expertise with appropriate qualifications and/or industry accreditation
  • Produce references, testimonials, and relevant case studies
  • Be capable of delivering energy audits to industry best practice standards (AS3598:2014).

Sustainability Victoria has identified independent assessors who operate across the state. These assessors can be found at:

https://www.sustainability.vic.gov.au/Business/Evaluate-energy-use-in-your-business/Find-an-energy-auditor-for-your-business

The Victorian Energy Upgrades program has a list of businesses in your area that can help large energy users understand their energy use and provide advice on where savings can be made:

www.victorianenergysaver.vic.gov.au/energy-advice-for-business/discount-energy-saving-products-for-business/custom-upgrades2

Word of mouth

Have you asked your friends or business colleagues about their energy use? Someone in your network may already have an existing contact and be able to help you find people with the expertise and right advice for you.

You can also check with your local council, or local business or industry association about the specialist energy assessors in your area and industry sector.

Further reading

A list of best practice guidelines, tools, apps and training support are available at: https://www.sustainability.vic.gov.au/Business/Energy-efficiency-for-business/Business-energy-efficiency/Energy-efficiency-best-practice-guidelines

Energy demand management involves optimising your demand for energy through financial incentives and behavioural change.

In addition to paying for each unit of energy used, many businesses have additional charges based on the amount of energy used at any one time or at a particular time of day. This can occur on your energy bills several different ways:

  • Demand charges – charges for the largest amount of power you used at any one moment in the billing period or season. These are charged per kW rather than per kWh
  • Peak or Time of Use charges – you may pay additional charges for energy used at set times (e.g. 3 pm to 9 pm on weekdays)
  • Businesses which use a large amount of energy may have energy prices which vary with the total level of demand in the energy grid and will face higher charges during heat waves and other high demand days.

These additional tariffs on your energy bills reflect the cost of using the electricity network at peak times. Demand management gives you a chance to pay less network costs if you use less electricity during those times.

Demand management can either be a voluntary reduction in energy use consumption at peak times or switching to using your own on-site generation and battery storage energy, instead of sourcing it from the grid.

Some large energy using businesses may be eligible to be paid for reducing their demand through the Reliability and Emergency Reserve Trader (RERT) 

It is important to understand your energy usage so you can choose the best plan for your business. All businesses can develop strategies for reducing or managing energy consumption during your greatest demand for electricity.

How do I get started?

Good energy assessors and consultants should identify demand management opportunities alongside energy efficiency, onsite generation and procurement options and provide your business with tailored, integrated options.

If your business spends a large amount of money on energy (e.g. more than $50,000 per annum), demand charges can be a material part of your bill. An energy broker can help you understand any demand charges you are paying and how to minimise them.

The Energy Efficiency Council has a searchable database of independent energy assessors:

www.eec.org.au/for-energy-users/find-a-provider

Sustainability Victoria has also identified independent assessors who operate across the state. These assessors can be found at:

https://www.sustainability.vic.gov.au/Business/Evaluate-energy-use-in-your-business/Find-an-energy-auditor-for-your-business

Save even more by investing in smarter energy (Steps 6-8):

Energy efficiency is one of the best ways for businesses to reduce costs.

Many Victorian businesses are saving energy by updating older, less efficient equipment with newer technology and improving their business practices and systems. This can be a simple upgrade, like upgrading to more efficient lights, or choosing to install efficient equipment when it comes time to buy new equipment or replace existing equipment.

The Victorian government's Victorian Energy Upgrades program is helping businesses to make these savings. In 2018, more than 17,000 businesses participated in the program and are anticipated to save an average of $3,700 on their annual energy bills as a result of the upgrades they undertook. Large energy users have the potential to enjoy significantly higher savings.

Incentives to upgrade

The Victorian Energy Upgrades program is available to every Victorian business and organisation.  

The program provides discounts on a wide range of energy saving products, including: lighting, heating and cooling, hot water systems, refrigerated display units, motors, and water efficient pre-rinse spray nozzles. These discounts are available through accredited providers across Victoria.  

Click here to find an accredited provider in your area. Choose the accredited provider that best suits your needs and book in a time for them to visit your business. Once you decide to go ahead with the upgrade, track your bills and see the savings.

Discounts apply only to products that have been approved under the program to meet minimum efficiency, quality, and safety benchmarks.

Custom upgrades

Incentives are also available for businesses and organisations to invest in large, complex energy saving projects.

Custom upgrades can be tailored for a particular site. The level of incentive is based on the difference in measured energy consumption before and after an upgrade, and can be measured using two methods:

  • the M&V method, which determines incentives based on analysis of energy consumption data before and after the upgrade, or;
  • the benchmark rating method, which is based on improvements in a commercial buildings' NABERS rating.

Find an accredited provider in your area here.

Case studies

Case studies of businesses that have undertaken upgrades through the Victorian Energy Upgrades program: Metcash Trading and Violet Town Bush Nursing Centre.

Best practice energy efficiency guidelines, tools, apps and training support.

If you rely on gas as a source of energy, read this case study.

Improve your business' refrigeration efficiency – video series.

Business energy efficiency fact sheets, case studies and product suppliers.

Guides and case studies for a range of business equipment and technologies.

Case studies and guides for the food and farming sector.

Many businesses are implementing ‘behind the meter’ energy solutions, where they produce energy on site to meet some of their energy needs. Government incentives are available for investments in energy efficiency upgrades and for onsite renewable energy installations. The best combination is likely to be bespoke - optimising different actions depending on site and business specifics.

Solar photovoltaic (PV)

The first option for many businesses to generate their own energy is a rooftop or ground-mounted solar photovoltaic (PV) system.

Solar PV may be a suitable investment for your business depending on when you use electricity and the structure of your electricity tariff. To understand if solar PV is right for your business, you'll first need to understand your energy use - see Step 3.

The Clean Energy Council (CEC) has published a useful guide to installing solar PV for business.

The CEC has a list of approved solar PV retailers that use CEC-accredited designers and installers.

The CEC also has a list of accredited installers.

Solar with battery storage

Businesses with higher electricity needs during daylight hours can take advantage of daytime power generation from an on-site solar PV system. Businesses with night-time electricity needs can benefit from storing excess daytime solar generation in battery systems,. These can provide power on demand when the sun isn’t shining.

A CEC-accredited solar designer can size a solar PV generation and battery storage system to cover both your day-time and night-time electricity needs.

Other technology options

Generating energy onsite can also involve other technologies, including solar thermal (concentrated solar power), co-generation (combined heat and power), waste to energy and biomass (organic matter used as fuel).

The best combination of these technologies will depend on your site and energy profile, including when you use energy and what combinations of heat, gas and electricity are required.

Solutions to manage energy costs in this way are therefore often bespoke and you many need expert advice.

The Energy Efficiency Council has a list of experienced and independent energy consultants to assist you identify the best option for your circumstances.

Suggested reading

Beyond Zero Emissions has an Electrifying Industry Report describing how businesses can make the switch to electricity from other (often more expensive and carbon intensive) fuel sources.

Distributed energy in the property sector – today’s opportunities has been developed to provide useful and up to date information on clean energy technology options for different building types, locations and loads.

What options are available to help finance your energy projects?

Financial incentives

Government incentives are available for investments in energy efficiency upgrades (through the Victorian Energy Upgrades program) and for onsite renewable energy installations (through the Clean Energy Regulator).

Both ARENA and the Clean Energy Finance Corporation (CEFC) are also potential sources of funding for innovative and large projects.

Financing Options

You may access a range of different financing options to fund energy efficiency or renewable energy investments.  

Sustainability Victoria offers a free finance facilitation service to all businesses, property owners, councils and community groups seeking to invest in energy efficiency and renewable energy. For more information, go to https://www.sustainability.vic.gov.au/Business/Investment-facilitation/Sustainable-finance-for-energy-solutions

Environmental Upgrade Finance (EUF)

Environmental Upgrade Finance (EUF) is a council-based financing mechanism enabling building owners to better access finance for environmental upgrades to existing non-residential buildings. Under an EUF agreement, a lender provides finance to a building owner and the local council collects repayments through the rates system. The council then passes the property charge onto the lender.

To find out whether you can access EUF through your local council go to https://betterbuildingfinance.com.au/.

Solar Leasing

Solar leasing offers some benefits over ownership of a solar PV system:

  • low or no up-front costs for the installation of the PV system
  • no requirement for system maintenance
  • immediate savings on energy bills

An alternative to solar leasing is where a provider installs and owns a renewable energy source (e.g. rooftop solar) on the site of the business. Electricity generated is supplied solely to the business at an agreed rate.

This may be sometimes referred to as a Power Purchase Agreement (PPA).  Currently, some major energy retailers and renewable energy installers offer this type of product. A good place to start would be to talk to your existing energy retailer and compare their offering with other retailers. You may also want to look at the Clean Energy Council’s list of approved solar retailers.

Additionally, you may wish to look at Power Purchase Agreements, see detail in Step 10.

Explore more advanced options to maximise your use of renewables (Steps 9 & 10):

Many businesses operate from multiple buildings in the same or similar location where each building is separately metered and has different energy requirements (e.g. manufacturing, warehouse and administration blocks).

Embedded Network

Businesses may also be location within an embedded network. Embedded networks are private electricity networks that serve multiple premises but have one metered connection to the National Electricity Market (NEM). Examples of embedded networks include apartment blocks, retirement villages, caravan parks and shopping centres.

If you are located within a shared building or embedded network, it may be possible to create a smart embedded network and share energy production to save money. A smart embedded network would operate in a similar way to a ‘behind-the-meter’ solar system, however, the system would be connected to multiple meters and contain smart distribution technology to provide to multiple premises.

Microgrid

A microgrid, which manages several loads and generation sources within a defined electrical boundary and can operate independently from the grid, may also be an option for managing energy costs. Energy within a microgrid may be traded between participants depending on site characteristics and generation.

Virtual Power Plants

Having your own generation equipment with smart controls may also allow you to participate in a Virtual Power Plants (VPPs). A VPP is created by aggregating multiple small solar photovoltaic (PV) and battery systems and coordinating them to mimic a larger power station, with the resources working together to generate, store and feed energy to users.

This is similar to a utility scale solar farm but instead of being in one location, the systems can be geographically dispersed and optimised into a single entity that can plan and adjust production dynamically and trade intelligently on the National Energy Market (NEM).

Participating in a VPP may provide your business with an additional revenue stream, as excess generation may be traded.

The Victorian Government has recently approved a serries of microgrid demonstration projects, which include innovative behind-the-meter models and smart embedded networks. These projects will testing social, economic and regulatory challenges to microgrids and may be a source of inspiration to microgrid participants elsewhere. For further information go to: www.energy.vic.gov.au/microgrids

The Energy Efficiency Council has a searchable list of distributed energy and microgrid providers based on location, or business sector, or specific products and services.

Power Purchase Agreement (PPA)

Larger businesses may wish to consider contracting their energy supply through a Power Purchase Agreement (PPA).

A PPA is a contract between two parties – one who generates electricity (the seller) and one who purchases electricity (the buyer). The PPA defines the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination.

There are many forms of PPA in use today and they vary according to the needs of buyer, seller, and intermediary e.g. financing counterparty. Before exploring a power purchasing agreement it is important to consider:

  • interest in securing a long-term stable electricity price
  • expiration date of your current energy contract
  • commitment to procuring renewable energy
  • size of your energy load (MWh per year)
  • when you use your energy (load profile) e.g. 9:00am to 5:00pm weekdays only, evenings, weekends, etc.
  • requirements at one or more sites
  • ability to enter into a contract for power for a minimum of 7 or more years (noting the longer the contract, the lower the power price) or ideally from 10 to 15 years duration

Resources

The Business Renewables Centre Australia (BRC-A) is an initiative supported by the Victorian government to facilitate the aggregation of power purchasing agreements and to provide a line of sight between energy sellers and buyers. The BRC-A will also have tools and guidance for those businesses contemplating this solution.

In 2018, the City of Melbourne concluded an aggregated PPA involving 14 off-taker s. Click here to read more about the lessons learnt from the project.

Aggregated Energy Procurement

Aggregated procurement is a centralised purchasing model where two or more organisations (or a third party on behalf of those organisations) join together to combine their needs and leverage negotiating strength. Participating businesses share the costs of legal, accounting and procurement advisors.

Progressive Energy Procurement

Progressive energy purchasing involves forming a framework agreement under which electricity is purchased in ‘blocks’ at different times, rather than purchasing all electricity requirements at once at a single price. By buying blocks of electricity, a business can secure low prices as they arise in the market and avoid renewing a contract at ‘the high’ and locking in high prices. It is a variation of the standard purchasing model that spreads the timing risk, allowing the electricity buyer to benefit from ‘averaging in’ or what is also known as ‘portfolio insurance’.

Speak with a professional energy consultant to identify the best options for your business.

The Energy Efficiency Council has a searchable database of independent energy consultants.

These steps provide links to references for further help and advice, and case studies of real time Step implemented by businesses.

Further assistance is available by contacting the Department of Environment, Land, Water and Planning customer service line on 136 186.

Disclaimer:

The following Steps may not be relevant to all businesses, so you should consider your own individual situation.

None of the information constitutes, or is meant to constitute, advice of any kind. If you require advice in relation to any matter, you should seek appropriate professional advice tailored to your circumstances.  

The State of Victoria will not be liable for any loss to you in relation to the contents of, or use of, or otherwise in connection with the information provided herein.

Page last updated: 20/11/19