Wholesale Energy Market Price Changes: Can You Take Advantage?
With Australian businesses squarely focused on responding to today’s uncharted challenges, it would be little wonder if you missed changes in Australia’s wholesale energy market prices. However, at a time when finding business cost savings is paramount, these price changes may present you with a chance to lower your business energy costs and take more control over your future power bills.
Changes in wholesale energy market prices
Wholesale electricity prices for the eastern states have reduced significantly since October 2019. With demand affected by the lower than usual recent temperatures across much of Australia and, more recently, lower consumption due to COVID-19, wholesale energy contract prices have dropped. These prices affect peak and off-peak electricity rates.
Contract Market – Financial Year 2021 Flat
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Conversely, some of Australia’s environmental certificate schemes are experiencing increased market prices due to an anticipated tightening of certificate supply. With some companies unable to visit sites and carry out installations (for example, of energy efficiency products) and auditing, some scheme activities have been suspended. Less scheme activity is contributing to these higher market prices.
Cal Year 2021 – Monthly Average Certificate Prices
Source: Indicative Cal Year 2021 certificate prices, calculated into monthly averages
What this means for customers
Most business energy customers are on fixed-price contracts. These are electricity contracts in which the rates are set based on market wholesale energy prices on the day you contract. On a fixed price contract, you run the risk of fixing all your electricity and environmental certificate rates when market prices are high.
Some businesses, however, choose a more flexible, alternative business energy contract, also commonly known as a progressive purchasing contract. These contract types allow you to set your electricity pricing, and therefore your contract timing risk, over a longer period.
These contracts also offer you greater control and flexibility as you can make your electricity and environmental certificate purchasing decisions separately, and better respond to market conditions. For example, a customer may choose to delay setting some of their environmental certificate prices until a later time, while locking in their electricity pricing early to benefit from lower wholesale prices. These decisions require customers to monitor electricity market conditions and make informed decisions that are right for their business. There is a risk with this approach but also opportunities when market prices fall.
To keep up to date with the wholesale energy market, subscribe to our regular wholesale market reports.
If your business energy contract is soon up for renewal, speak with your business energy retailer to find out if this is the optimal contracting option for your business.
With many businesses suspending or limiting activity, as an ERM Power customer you don’t have to worry about additional costs or penalties for not reaching your contracted energy forecast. Unlike most other retailers, ERM Power does not impose any “take or pay” or other penalties for energy usage variations. This is not something new. We have always offered this flexibility, and during this time we hope this goes some way to reducing pressure on our customers.
Find out more
At ERM Power, our business retail energy offering includes our Fixed, STEP Online and STEP Index products. If you are a customer, contact your Account Manager today or get in touch so that we can help you choose the right option for your business.