How to Reduce Energy Costs in Your Small Business

Energy is one of those overheads that quietly eats into your margins. For many Australian small businesses, electricity and gas bills have become a significant operating cost, and unlike rent or wages, they can often be reduced with relatively simple changes. This guide covers practical, evergreen steps you can take to understand and lower your energy costs without disrupting your operations.

Start With an Energy Audit

You cannot manage what you do not measure. Begin by reviewing your last 12 months of energy bills to identify patterns. Look at how much you pay per kilowatt-hour (kWh), what your daily supply charge is, and whether your usage spikes at certain times.

If your business is larger or energy-intensive, consider a professional energy audit. An auditor will assess your building, equipment and processes, then recommend specific improvements with estimated payback periods. For smaller operations, a do-it-yourself walkthrough can still reveal obvious waste, such as lights left on in unused areas or refrigeration running inefficiently.

Understand Your Energy Tariff

Many small businesses are on a default tariff that may not suit their usage. In Australia, electricity tariffs vary by state and distributor. Common options include:

• Flat rate: one price per kWh regardless of time.
• Time of use: cheaper rates outside peak periods (typically evenings and weekends).
• Demand-based: charges based on your highest period of usage, common for larger sites.

If your business operates mainly during standard hours, a time-of-use tariff may not help much. But if you can shift tasks such as dishwashing, laundry or charging equipment to off-peak times, you could save. Ask your retailer what tariffs are available and whether your meter supports them.

Also check whether you are eligible for any government energy rebates or concessions. These change over time, so it is worth reviewing annually.

Upgrade to Efficient Equipment

Old appliances and lighting are common culprits. Consider these upgrades:

• LED lighting: uses up to 80% less energy than halogen or incandescent and lasts longer.
• Energy-efficient refrigeration: look for high star ratings and keep seals clean and doors closed.
• Variable speed drives on motors: can significantly cut power use in equipment like compressors and pumps.
• Smart power boards: eliminate standby power for computers, printers and kitchen appliances.

Before purchasing, check the energy rating label and calculate the running cost over several years, not just the purchase price. Sometimes a higher upfront cost pays for itself within a couple of years.

If you are considering financing upgrades, our article on commercial property insurance explains why it is important to review your cover when you invest in new equipment or fit-outs.

Change Everyday Habits

Technology helps, but behaviour matters too. Simple habits can add up across a team:

• Turn off lights and equipment when not in use, especially overnight and on weekends.
• Set air conditioning to a reasonable temperature (around 24°C in summer, 20°C in winter) and use timers.
• Keep doors and windows closed when heating or cooling.
• Maintain equipment regularly; dirty filters and poorly serviced motors use more energy.
• Encourage staff to report leaks, draughts or faulty equipment.

If you operate from a shared office, coordinate with other tenants. Our guide on sharing office space includes tips on managing shared costs and responsibilities.

Consider Solar and Battery Storage

Solar panels can offset daytime energy use, and battery storage can help you use solar power in the evening. The payback period depends on your location, energy usage and the size of the system. Before investing, get quotes from accredited installers and check what government incentives are available. Also review your building's suitability, including roof condition and shading.

For a rough idea of costs and savings, you can use a solar panel cost calculator, but always confirm with a qualified installer who can assess your specific site.

Review Your Contract and Retailer

Energy retailers compete for business, so it pays to compare offers every year or two. Look beyond the discount percentage and compare the actual rates, supply charges, contract terms and exit fees. If you are on a standing offer, you are likely paying more than necessary. A quick call to your current retailer to ask for a better deal can sometimes work, but be prepared to switch if they cannot improve it.

Frequently Asked Questions

How much can a small business save on energy?

Savings vary widely depending on your starting point, but many businesses reduce bills by 10–30% through a combination of audits, equipment upgrades and behaviour changes.

Are energy audits worth it for small businesses?

If your energy bills are a significant expense, yes. Even a basic audit can identify quick wins. Some states offer free or subsidised audits for small businesses.

Should I switch to a different energy retailer?

Compare offers at least annually. Switching is usually straightforward, but check contract exit fees and ensure the new plan suits your usage pattern.

Frequently asked questions

How much can a small business save on energy?

Savings vary widely depending on your starting point, but many businesses reduce bills by 10–30% through a combination of audits, equipment upgrades and behaviour changes.

Are energy audits worth it for small businesses?

If your energy bills are a significant expense, yes. Even a basic audit can identify quick wins. Some states offer free or subsidised audits for small businesses.

Should I switch to a different energy retailer?

Compare offers at least annually. Switching is usually straightforward, but check contract exit fees and ensure the new plan suits your usage pattern.