Future-Proofing Your Business: How SMEs Can Prepare for Rising Energy Prices and Market Volatility

Australian businesses face unprecedented energy market volatility. SME electricity bills increased by 19% nationally between 2021 and 2022, with NSW businesses seeing increases of 42%. Australia’s electricity market now exhibits elevated volatility driven by weather-related spikes, coal unit outages and renewable energy variability.

Energy market volatility will persist. Structural changes including coal plant closures, renewable energy integration, and transmission infrastructure delays are creating permanent uncertainty. Smart businesses need proactive strategies for managing these ongoing challenges.

Understanding the New Energy Landscape

Australia’s National Electricity Market operates differently than five years ago. AEMO data shows wholesale prices jumping from approximately $79/MWh in March 2025 to $232/MWh in June, then dropping to $109/MWh in July. These swings reflect structural issues including coal plant closures and renewable energy intermittency.

Three factors drive this volatility. Coal generator outages create sudden supply shortages. Weather events strain transmission networks. Renewable energy intermittency means periods of oversupply followed by rapid price spikes when wind and solar drop simultaneously.

For SMEs, this means budgeting becomes nearly impossible using traditional approaches. Fixed-rate contracts may actually increase costs during peak volatility periods.

Peak Demand Timing Strategy

Time-of-use periods differ by network and tariff. For example, Ausgrid moved to two-period ToU (Peak/Off-peak) from 1 July 2024, while Energex business demand tariffs measure peak demand during 5-8pm weekdays. Always confirm your network tariff schedule and retailer Energy Fact Sheet before making operational changes.

Your energy manager should audit your consumption patterns against these periods. Manufacturing businesses often find significant portions of their electricity use occurs during peak periods by default. Shifting energy-intensive processes to off-peak periods provides immediate cost relief while maintaining operations.

Strategic Contract Structures

Fixed-rate contracts carry significant risks in volatile markets. When spot prices average $109/MWh but spike to $232/MWh monthly, traditional contracts may lock businesses into unfavourable pricing.

Wholesale pass-through contracts work for businesses with energy literacy and flexible operations. These contracts expose you to spot price movements but include caps to limit extreme price events. The key is matching contract structure to your risk tolerance and operational flexibility.

Power Purchase Agreements (PPAs) provide price certainty for businesses committed to renewable energy. LGC prices have fallen materially in 2025, with AEMO reporting approximately $20 in Q2 and July spot prices around $11, improving the economics of some renewable PPAs compared with 2022-23 levels.

Blended contracts combine elements of fixed, wholesale, and time-of-use pricing. These structures work well for businesses with mixed energy usage patterns and moderate risk tolerance.

Operational Efficiency Implementation

Energy efficiency becomes more valuable as prices become more volatile. A 10% reduction in consumption provides greater cost certainty than any contract structure when base prices are unpredictable.

Air conditioning systems offer the highest impact for most businesses. Each degree above 20°C for heating increases costs by 10%. In volatile markets, maintaining temperatures between 18-20°C for heating and 24-26°C for cooling provides both cost control and operational predictability.

Manufacturing businesses should prioritise load shifting during high volatility periods while planning efficiency upgrades for longer-term benefits. Moving energy-intensive processes to off-peak periods provides immediate cost relief while efficiency upgrades deliver longer-term benefits.

Technology and Monitoring Systems

Real-time energy monitoring becomes essential when prices change hourly. Smart metres and monitoring systems help identify consumption patterns and opportunities for load shifting.

Demand response systems automatically reduce consumption during high-price periods. These systems work particularly well for businesses with flexible operations like cold storage, manufacturing with buffer capacity, or operations that can reschedule non-critical processes.

Battery storage systems provide protection against price spikes and enable load shifting. With falling battery costs and increasing price volatility, the economics of commercial storage improve significantly. Businesses can charge batteries during low-price periods and discharge during peak periods.

Financial Planning and Risk Management

Traditional energy budgeting methods fail in volatile markets. Use scenario planning with price ranges instead of historical averages.

Energy hedging through financial instruments helps manage price risk alongside physical electricity supply. These products work well for larger energy users who can’t implement significant operational changes.

Build energy price volatility into cash flow planning. Maintain additional working capital to handle month-to-month price variations. The businesses that struggle most during volatile periods lack financial buffers to handle unexpected cost increases.

Consider energy-as-a-service models where third parties manage your energy costs in exchange for guaranteed savings. These models work particularly well for businesses that lack internal energy expertise.

Government Incentives and Support Programs

Federal and state governments offer various programs to help businesses manage energy costs. The Commonwealth’s $20 billion Rewiring the Nation program funds transmission infrastructure, with benefits phasing in over multiple years as projects complete.

Energy efficiency grants and rebates remain available across all states. These programs become more valuable during volatile periods because they provide guaranteed cost reductions regardless of market conditions.

Professional energy brokers can identify available incentives and provide guidance while negotiating better contract terms. The complexity of current energy markets makes professional guidance particularly valuable for SMEs.

Building Long-term Resilience

Future-proofing requires strategies that work across different market scenarios. Businesses that thrive during volatile periods combine operational flexibility with financial planning and risk management.

Operational flexibility means having systems and processes that can adapt to changing energy costs. This might include variable production scheduling, alternative energy sources, or the ability to reduce consumption quickly during high-price periods.

Financial flexibility involves maintaining diverse energy contracts, adequate working capital, and clear decision-making processes for responding to market changes.

Strategic flexibility means regularly reviewing and updating energy strategies as market conditions change. The businesses that struggle most set energy strategies once and never revisit them.

Energy market volatility in Australia is likely to persist for several years as the grid transitions to renewable energy. The businesses that prepare now with comprehensive strategies will have significant competitive advantages when competitors wait for markets to stabilise.