Businesses urged to electrify everything

The federal government is offering tax deductions to small and medium businesses for money spent on measures that enable them to quit gas and electrify.

The new Small Business Energy Incentive is tipped to help up to 3.8 million small to medium sized businesses, by offering tax deductions of up to $20,000.

The initiative is available to businesses with a turnover of up to $50 million, and rewards those that make concrete energy efficiency steps, including electrifying their cooling and heating systems, installing batteries and heat pumps, and upgrading fridges and other appliances.

Eligible assets or upgrades will need to be first used or installed and ready between 1st July 2023 and 30rd June 2024. The initiative is expected to cost a total of $314 million.

“This incentive is all about helping small business save energy and save on their energy bills, support that comes on top of the direct energy bill relief for small businesses that will be a centrepiece of the budget,” said Federal Treasurer Jim Chalmers.

Energy Minister Chris Bowen said that while small businesses were aware of their options, the capital costs of installing energy efficiency measures can be prohibitive.

“The Small Business Energy Incentive unlocks that investment to help businesses save on their bills over the medium and long term,” he said.

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Accelerate electrification

Energy non-profit Rewiring Australia welcomed the initiative. Co-founder and chief scientist Dr Saul Griffith said the move would accelerate electrification.

“Swapping out fossil fuelled devices and energy sources for renewable-backed electrification is the fastest, most cost effective way to decarbonise our domestic economy.

“It embeds thousands of dollars’ worth of annual savings into the annual operations of small businesses, savings that accrue over the long term,” Griffith said.

Many small businesses are reliant on fossil fuel energy and have suffered serious bill shock this year as commodities such as gas have spiked.

“But when you assist small businesses to swap out polluting energy sources and machines for renewable-powered electric versions you permanently lower the cost base of a business.”

Luke Menzel, CEO of the Energy Efficiency Council, pointed out that the initiative will not only help accelerate the transition, but have trickle-down effects on the economy.

“It's encouraging investments that will bring down those energy bills now, and in the context of a highly inflationary environment if we can bring down our business energy bills that’s one less cost that businesses then have to pass on to consumers,” he said.

Menzel added that businesses should jump on board as quickly as possible, given the incentive has a one-year window.

“We don’t know if it will be extended beyond the financial year 2024,” he said. “So, it’ll be really important for businesses to get on the front foot.”

In a Linked-In post Lynne Gallagher, CEO of Energy Consumers Australia said that the move would be welcome news for small and medium-sized enterprises (SMEs).

“SMEs face considerable challenges to receiving good consumer outcomes in the energy sector,” Gallagher wrote.

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This article was first published on RenewEconomy. You can read it here.