Don’t get burnt by gas price rises: tips for homes and industry

Gas prices are on the rise, starting today with a 17.8% increase this year in New South Wales, with other parts of eastern Australia expected to follow in coming years. That means it’s a crucial time for Australian homes and industry to ask how they could be cutting their gas costs, especially by finding ways to use energy more efficiently.

Typical annual gas bills will rise by between A$155 and A$225 for NSW households depending on where people live and how much gas they use. That’s according to the independent NSW price regulator IPART, which approved the increase.

Elsewhere, many other Australian households and businesses are bracing themselves for higher energy costs as the development of LNG exports looks set to push up domestic gas prices. The eastern coast of Australia will be particularly affected, with the start up of Queensland LNG exports due later this year, just as a wave of existing domestic supply contracts are set to expire and need to be renewed. The effect will be felt almost immediately.

So which households and industries are most likely to feel the burn of the gas price hikes? And what can you do to reduce these energy costs at home or in a high-energy industry?

SAVING GAS AT HOME

In the residential setting, households using gas for heating, cooking and to power hot water systems will be most affected by higher gas prices. While gas prices are expected to rise on the eastern seaboard, people living in colder states such as Victoria will be the most vulnerable.

The average Victorian household gas use is about 50 gigajoules per year, and annual gas bills are in the range of A$1000 to A$1500, depending on the location. An increase of 10% over two years (if current trends continue) could see household gas bills rising by about A$100 to A$150 within two years.

ClimateWorks research shows simple actions can reduce a typical household’s gas use, which include:Upgrading to an efficient gas heater (from 2-star to 4-star);

  • Switching to a solar hot water system; and
  • Installing or upgrading your ceiling insulation.

In Victoria, upgrading to an efficient 4-star gas heater would result in a saving of A$198 a year for a small house and A$460 for a large house.

Switching to a solar hot water system would save an average of A$40 a year for a small house and A$142 a year for a large house while upgrading ceiling insulation and draught proofing a large house would save A$217 a year.

SAVING GAS FOR INDUSTRY

In the industrial sector, gas is used in large volumes for various purposes including heat as well as electricity.

However prices for industrial users, which have typically ranged between A$3.50 and A$4 a gigajoule, have surged to about A$8 for some short-term contracts.

Some analysts are warning prices could temporarily spike above A$10 before moderating again to a level substantially higher than previously.

The industries more sensitive to gas price hikes are the chemicals, glass, fertilizer and refining industries, as gas represents a significant portion of their cost of production. 

There have been some predictions that an increase in wholesale gas prices could cause a number of companies in these industries to curtail or even close production. However, there is considerable potential to save gas in industrial production.

So what can these gas-intensive industries do? Our research found that companies accounting for more than half of Australia’s total energy consumption have reported energy efficiency projects that could save up to 15% of their total gas use, lowering energy costs by more than $400 million and cutting emissions by 5 million tonnes a year.

Those cost savings will be even higher as gas prices increase. The energy efficiency improvements could free up to 92 petajoules of gas a year within manufacturing and 104 petajoules overall. To put that in perspective, NSW’s entire annual gas consumption is about 150 petajoules, so that could be a significant saving for Australia.

Opportunities for industry to reduce their gas use include:

  • Improvements to operational processes, such as upgrading technologies, including metering, controls, load optimisation activities;
  • Improving process design;
  • Equipment upgrades for heating and boiler systems; and
  • Changes to staff behaviour and maintenance practices.

Of the gas savings identified, more than 40% have a payback period for business of less than two years.

Gas prices can indeed affect household budgets and companies’ bottom line. However, Australian households and businesses can take action to reduce their gas use and save money on their energy bills. Doing so will also help reduce Australia’s greenhouse gas emissions, which is good for all of us in the longer-term.

(This Insight article intially appeared in The Conversation on 30 June 2014)

By Anna Skarbek, Executive Director, ClimateWorks Australia