By Jonathan Pooch

Let me be direct: most Australian manufacturers are carrying a significant energy risk right now, and most of them don’t know it. That world of low, stable energy prices where energy sat in the engineering manager’s inbox and not the boardroom is gone. And the organisations that haven’t updated their thinking are the ones most exposed to what’s coming.

The federal government’s Demand Side Statement of Opportunities (DSOO) is a signal worth paying attention to. The study, currently in development by the Department of Climate Change, Energy, the Environment and Water with CSIRO and the Australian Energy Market Operator, is expected to be released later this year. It will for the first time formally model the value of industrial energy users as active participants in managing the grid.

The CSIRO’s FlexCost study alongside it puts a price on what it costs to incentivise businesses to flex their energy loads, shifting consumption to off-peak periods, storing heat or power for later use, responding dynamically to grid conditions. The first FlexCost report is due this quarter.

This is a fundamental shift in how the energy system is being designed. And most manufacturers have no idea what it means for them.

Here’s what it means. We are entering a new world of renewables, batteries, solar and electrification, and with it comes a significant and growing risk for manufacturers who haven’t started thinking strategically about energy. Gas prices are up. Price volatility is increasing. The grid is becoming more complex.

And at some point, government funding becomes irrelevant, because the energy price itself will force decisions. The question is whether you’re making those decisions under pressure or whether you’ve already mapped your options and can move fast when the moment arrives.

I’ve been in enough boardrooms to know that energy is still largely viewed as a fixed cost. It is anything but. Historically, energy demand has been relatively stable and the approach has been to build supply to accommodate it.

That is changing rapidly, and decisions manufacturers make about their energy systems today will shape their cost base for the next decade or more. That’s not a sustainability argument. It’s a commercial one. You can believe in net zero or be entirely indifferent to it. Either way, the economics of energy are moving against businesses that aren’t paying attention.

People aren’t yet seeing energy as a strategic opportunity or a strategic risk. If energy is five percent of your total cost today, it could be 10 percent in five years. At what point does it become a C-suite conversation rather than something delegated to the engineering team to manage quietly?

The organisations doing this well have already made that shift. They’re asking not just how do we keep the lights on, but what is the risk to our entire operation, and what is the opportunity?

The good news is that the gap between where most manufacturers are and where they need to be is not as large as people think. Most of it is a knowledge and understanding gap, not a technology gap. The solutions are largely known. Heat pumps, electrification of process heat, electric thermal energy storage, solar paired with storage, these technologies exist, they work, and they are being deployed right now by the manufacturers thinking ahead.

Electric thermal energy storage (eTES) in particular is worth understanding. The concept is compelling: store heat during the day when solar is generating cheap electricity, then draw on it around the clock. For manufacturers running energy-intensive thermal processes, it offers genuine flexibility and resilience.

We are seeing real and growing interest from clients. The economics are still maturing and the capital requirement is significant, but the businesses getting ahead of this are moving when the timing is right, when equipment is at end of life, when expansion is planned, when the capital is already being spent. The forward-thinking ones are spending that capital on assets that will still be providing value in 20 or 30 years, in a post-gas world or with limited gas availability.

The DSOO and FlexCost work signals that government is starting to design policy and incentive structures around demand-side flexibility. Businesses that have already mapped their energy loads, understood their options and built a pipeline of projects will be first in line to benefit, whether that’s dynamic pricing, demand response incentives, or the next wave of government funding programs.

The ones that haven’t will be in the same position they find themselves in every time a grant round opens: scrambling, underprepared, and watching the opportunity go to someone else.

Maintaining and enhancing flexibility in your energy system will always provide value. The risk is real. The opportunity is real. And the window to get ahead of it rather than react to it is narrowing.

Jonathan Pooch is Managing Director of DETA Consulting, an Australia and New Zealand engineering and energy advisory firm. A chemical and process engineer and EMANZ accredited Energy Auditor, he helps industrial and commercial clients including Cheetham Salt Australia, Coca-Cola, Goodman Fielder, Saputo, Mondelez and Fonterra reduce energy costs, optimise operations and deliver measurable decarbonisation outcomes.