The cost of grid electricity and fuel across Australia is having a direct impact on the purchasing decisions of Australian businesses, according to Commonwealth Bank’s (CBA) latest asset finance report, Equip 9.
Higher energy and fuel prices are placing greater cost and revenue pressures on local businesses with the majority (89 per cent) now seeing this expenditure as a key factor when looking to lease or buy new equipment, such as energy efficient vehicles, solar panels and heating, cooling, and lighting equipment.
Between 2015 and 2017 wholesale electricity prices rose 130 per cent, resulting in a doubling of the price paid for electricity traded in the National Electricity Market (NEM). As a result, of the 33 per cent of companies currently considering new 'green' equipment, more than half (54 per cent) state their decision-making is now primarily driven by energy efficiency.
Sylvia Terry, CBA’s General Manager of Asset Finance, said: “Rising energy costs dramatically impact the potential return on investment for energy-efficient equipment. More than 70 per cent of businesses are currently looking to replace or acquire new equipment, and offsetting the high cost of energy is a strong incentive for these businesses to consider efficient equipment."
Barriers to investing
“Businesses are increasingly factoring in smart purchasing of efficient equipment to achieve operational and cost benefits, but there are still a number of barriers holding back widespread adoption,” Mrs Terry said.
“Companies are willing and open to becoming more energy efficient and are no longer being turned away by the higher upfront costs. But it appears there is a lack of awareness of the long-term cost benefits associated with investing in energy efficient equipment that is holding businesses back.”
The report showed a third of companies (33 per cent) said the reason they hadn’t invested was that they were unaware of the real benefits, compared with 13 per cent who indicated cost was the main barrier.
Impact of rising energy costs
Smaller businesses are leading the way with 41 per cent of these businesses already investing in efficient equipment.
Organisations that have already invested have reaped a significant dividend, reporting an average saving of 30 per cent on energy costs rising to a 38 per cent saving for the largest companies.
“As businesses continue to look to reduce their overhead costs, it’s likely the momentum towards energy-efficient purchases will only increase, as awareness of the available options improves and availability becomes more widespread,” Mrs Terry said.
 Grattan Institute, Tony Wood and David Blowers, “Mostly Working: Australia’s wholesale electricity market”, 2018
 Smaller businesses are defined as businesses with earnings between A$25-$150 million.
 Larger businesses are defined as businesses with earnings over A$500 million.