Perfect Time for Australian Retail Energy Efficiency Measures

AUSTRALIAN energy prices are climbing rapidly, and the countries businesses are beginning to take evermore interest in improving energy efficiency.

Sean Lucy, Head of Origination, Environmental Finance Solutions at the National Australia Bank (NAB), writing for Climate Spectator states that now is the perfect time for business leaders to engage with the energy efficiency agenda, and that those that do may find that the opportunity is much more significant than they ever expected.

Lucy explains that NAB has been working closely with ClimateWorks Australia over the last few months in examining energy efficiency opportunities for Australian retail businesses.

Using the analysis from their Low Carbon Growth Plan for Australia Retail Sector Report study, ClimateWorks reckon by 2020 the Australian retail sector will use 28 percent, making it the largest energy user in the commercial buildings sector.

Lucy writes that ClimateWorks estimate the electricity prices to have reached AUS$157/MWh by 2020, with the resultant value of energy savings opportunities just in the Retail Sector amounting to AUS$1 billion annually. 

Lucy also digs a little deeper into the business case for energy efficiency investment today, NAB and ClimateWorks have translated these macro findings onto the specific circumstances of a number of top listed retail companies on theASX 200 (Australian Stock Exchange). By comparing this to the available analyst forecasts, they produced a model of the impact of a focussed energy efficiency investment programme for each business.

Lucy says the results of this analysis are startling.

To quote Lucy: “Across the sector, we see the ability to add an additional 3-14 per cent to Earnings Before Interest and Tax (EBIT) through a systematic focus on energy efficiency. For the major players, this is equivalent to approximately AUS$2 billion in revenue growth – an enticing prize in a market predominantly focussed on heavy discounting to counter weak consumer sentiment and aggressive competition.”

He added that when measured in relative terms to expected growth rates, energy efficiency and saving investment opportunities are equivalent to a 2.1 to 5.5 percent growth in revenue. This growth rate would be as much as five times the historical growth rate of 1.2 per cent and double thre current growth projections, 2.2 per cent, for the Australian retail sector.

He also points out the gains in real terms. For example, a grocery chain investing in energy efficiency now could realise annual savings of AUS$26 million at current electricity prices, and based on the forecast for future energy price rises this saving would grow to AUS$52 million in the medium term.

He concludes by stating that those businesses that are prepared to and able to commit, the reward of energy efficiency measures will be significant. He writes: “Improved business performance plus a focus on an environmental agenda can deliver a bundle of broader benefits around employee engagement and customer retention. As this win-win potential sinks in to retailers’ consciousness, we expect to see a significant ramp up of energy efficiency activity.”

Picture of Bondi Junction Shopping Mall by Charlie Brewer

Thursday 23rd June 2011

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