Are you aware of the average electricity cost for small business? As a small business owner, understanding the average electricity cost you're paying is crucial for budgeting and managing your expenses. Knowing how much electricity typically costs can help you identify opportunities for potential savings. In this Savvy guide, we'll explore the average price of electricity for business owners around Australia, and provide valuable insights to help you make informed decisions about managing your electricity consumption.
What is the average electricity cost for small businesses in Australia?
On average, small businesses in Australia will pay between $700 and $1,400 a month for their electricity. Those in the NT and WA will pay less than businesses in the southern and eastern states. Businesses in SA pay the most for their business energy plans.
It’s worth noting that generally, electricity tariffs for small business accounts are higher than for domestic retail accounts. The average business pays around 32c/kWh for their electricity, whereas domestic customers pay an average of 26c/kWh.
The average electricity cost for small businesses in Australia will vary depending on various factors, including your location, the industry you’re in, your energy consumption pattern and the energy plan and retailer you choose.
For this reason, if you want to find ways to cut costs, it’s very important to compare business energy plans from a number of retailers to make sure you’re getting the best electricity plan possible for your business.
What uses the most electricity in a retail or office environment?
If you’re thinking how to reduce the size of your energy bill, you’ll first need to know where all your electricity is being consumed. In an average shop or office, these are the main culprits:
Air Conditioning and heating:
Heating and cooling systems are the largest contributor to electricity consumption in retail and office environments. The use of air conditioners in Australia has increased exponentially in the past decade, particularly during hot Australian summers or chilly winters. They account for about 40% of energy use in the average business. You can find more advice about the cost of running various appliances with Savvy's winter energy guide.
According to the Australian Government’s Department of Climate Change, Energy, the Environment and Water, around 25% of energy use goes towards heating up water.
Another 30% of your energy use will be accounted for by the appliances you run. These include fridges, freezers, dishwashers, computers, modems, printers and security systems.
The remaining power use – between 8% and 15% of your total consumption, will go on lighting for your business. Switching to LEDs instead of incandescent lights could save you up to 80% on the cost of lighting your business space, and therefore on the size of your small business electricity bill.
How can I cut down the size of my business electricity bills?
Here’s several handy tips for reducing your business energy costs:
Running air conditioners at a too low a temperature can significantly increase electricity usage. Aim to keep the temperate difference between outside and inside at around seven to eight degrees to make people feel comfortable when they come into your business. So, for example, if it is 32°C outside, set your thermostat at 24°C so people feel comparatively cool when entering your building. Maintaining a constant temperate of around 22°C – 24°C in your office environment should make the majority of customers and employees feel comfortable in summer.
The same principal applies to heating your business environment. Don’t make the inside temperate too hot in winter. A temperate of 20°C – 22°C is ideal for winter, when our bodies are accustomed to a cooler temperature. This will ensure that people who are wearing several layers of clothing don’t feel too uncomfortable when they come into your shop or business premises.
It goes without saying that you should ensure all your business lighting is energy efficient. LED strip lighting is a great choice for businesses looking to save energy and money. It's both energy-efficient and cost-effective, helping to lower energy use and maintenance expenses. LED strip lighting also produces less heat than other lighting types, allowing for longer usage without overheating. Consider installing motion-sensing lighting options if you have a large retail space with areas at the back that are not visited so frequently. By dimming or turning off lighting in areas that aren’t being used, you can considerably reduce your business lighting costs.
Energy efficient appliances:
Swapping to energy-efficient appliances in your business is a smart move for both the environment and your bottom line. The Australian Government-backed energy rating label system helps consumers make informed choices when purchasing appliances. The more stars an appliance has, the more energy-efficient it is, meaning it consumes less electricity to operate.
Energy-efficient appliances not only reduce your carbon footprint, but also lead to significant savings on your energy bills over time. Look for appliances with higher star ratings to maximise energy efficiency and contribute to a sustainable future.
For example, a 2.5-star-rated fridge may consume around 800 watts of electricity per hour. On the other hand, a 5-star rated refrigerator may use only 120 watts of electricity.
Let's calculate the energy savings between an 800W fridge and a 120W fridge if electricity costs 25 cents per kilowatt-hour (kWh):
For the 2.5 star, 800W fridge which is on for 365 days a year:
Energy consumption per year = 800W x 24 hours x 365 days = 7,008,000 Wh = 7,008 kWh
Cost of running the 800W fridge per year = 7,008 kWh x $0.25/kWh = $1,752
For the 5-star, 120W fridge running for 365 days a year:
Energy consumption per year = 120W x 24 hours x 365 days = 1,051,200 Wh = 1,051 kWh
Cost of running the 120W fridge per year = 1,051 kWh x $0.25/kWh = $262.75
Energy savings = $1,752 (800W fridge) – $262.75 (120W fridge) = $1,489.25
By choosing the 120W fridge over the 800W fridge, you can save $1,489.25 on your energy bills per year. This significant energy efficiency difference highlights the importance of selecting appliances with lower power consumption, as it not only reduces your electricity costs but also minimises your carbon footprint and contributes to a more sustainable environment.*
*Note that these figures are for illustration purposes only, current as of July 2023 but subject to change. They assume an average price for electricity of 25c/kWh.
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Savvy is partnered with Econnex Comparison (CIMET Sales Pty Ltd, ABN 72 620 395 726) to provide readers with a variety of energy plans to compare. We do not compare all retailers in the market, or all plans offered by all retailers. Savvy earns a commission from Econnex each time a customer buys an energy plan via our website. We don’t arrange for products to be purchased directly, as all purchases are conducted via Econnex.
Any advice presented above is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an energy plan. For further information on the variety of energy plans compared by Econnex, or how their business works, you can visit their website.