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Adrian Merrick, Energy Locals Founder and CEO
In June, as wholesale prices soared in response to world events, people started very reasonably wondering what the hell was going on.
The high cost of coal and gas drove wholesale power prices dramatically higher. Many power stations that have coal on-site or nearby raised their prices too, mainly because they could. Eventually, the market operator had had enough and cancelled the market (yes, even the Australian energy market can be cancelled these days). Why? Because some power stations were bidding at silly prices or withdrew capacity from the market.
These generators claim that they couldn’t afford to run, but we know that not all were exposed to the newfound high prices of coal and gas. I mean, would you run a petrol station and not have a supplier of fuel? Of course not. But apparently some power stations did the equivalent.
Meanwhile, retailers such as us had a different challenge on our hands: how could we offer customers a reasonable price while the cost of electricity soared?
Many retailers stopped taking on new customers while they waited for the market to settle. Others even sent existing ones away. And the worst prepared had to close shop. Believe it or not, some even chose to sell their wholesale contracts (for a tidy profit) and tell their customers to leave or pay four times as much. Yes, that actually happened.
There’s a frustrating reason for all this: energy policy hasn’t changed much in 10 years. Political in-fighting has led to a standstill and underinvestment in the maintenance required to keep traditional power stations running efficiently.
So, the minute one cog in the machine came loose, things spiraled.
When power generators respond to price caps by stopping generation, it’s clear the system isn’t working for customers.
So, what can we do to fix it?
To start with, we’ve pushed for government-owned power stations to operate at the lowest cost for customers. Amazingly, this isn’t the case today.
Secondly, we’ve been as vocal as possible about the need to put price caps on fuel prices. This solves the problem at the source. Expecting customers to pay super high bills and then sugar coat it with a small bill credit much later is the scenic route and very unhelpful.
We’ve also advocated for extra support for customers who are struggling, including others in the energy supply chain contributing to solving the problem.
Finally, we learned that the market operator – which coordinates the maintenance schedules of large power stations – has no control over when sources of fuel supply can go into maintenance. At the time of writing, two major coal mines are offline for maintenance. This is crazyville and the market operator needs to control this situation so that generators can source the input fuel they need.
And of course, we need a domestic reservation policy to protect us from global coal and gas price spikes. Producers are taking fuel from Australia, sending it on ships and selling it to locals at the same price as to someone in Germany. That needs to be re-balanced, quickly.
A lot of people are now looking at Australia’s energy system – and looking for a way out of the stranglehold that big energy companies have on customers.
It’s a big reason people are looking to generate their own energy on-site. This is why we’ve made it a huge part of our work at Energy Locals.
This year, to offer greater energy independence to Australian customers, we fitted out 12 apartment buildings with 518kW of solar panels, 42 Tesla Powerwall batteries and 18 electric vehicle chargers, further proving ourselves as a safe pair of hands for customers wanting to see real change.
Adding this capacity at a local level also reduces load on the network – something we need when our energy system is under pressure.
These local renewable systems are also our contribution to Australia’s renewable transition.
And they led to some notable recognition, too: 4.5 stars in the Greenpeace Green Electricity Guide, the Canstar Blue Green Excellence Award. and the Mozo Green Electricity Award for a number of states.
Through the market upheaval, our focus was on staying steady for our members.
As retailers, there’s (quite rightly) a price cap on what we can charge for electricity. So when wholesale prices spiked, retailers who weren’t prepared found themselves unable to keep going.
So what did Energy Locals do differently?
Although we also offer wholesale prices, adjusted once each year, our approach has always been cautious. Instead of procuring the energy our customers need at the last minute, we lock it in for an agreed price – well in advance.
Hedging in this way means we don’t always get the lowest market prices. But we don’t expose ourselves to price spikes, either.
We earn no money from our customers’ usage so we have the same incentive as our members – to see energy rates go lower. Sadly, based on the wholesale market issues, this year’s price change was painful for many people in Australia.
Our pricing model means our members’ prices will move back down again when the market allows – and we’ll continue to offer a flat membership fee.
This year, we went to our members and did what we could to help. Whether that was finding concessions they might have access to, or different plans that made more sense for their usage patterns.
It all came down to providing the service we promised and being honest if we didn’t get it right.
It’s an approach our members appreciate, evidenced by being recognised as a ProductReview.com.au award-winner for energy.
One of the saddest reflections of a failed market was when Enova Energy went into administration. We spoke with the Enova team to see if we could help them – and their customers – be impacted as little as possible.
For each Enova customer who moved across to us, we made a payment to the Enova administrator. With a lot of their own customers as shareholders, this meant more people could recoup some of the money they had invested into the company. It also meant that existing customers could stick with a company that’s serious about renewable energy.
We took on as many as we could at the time. And we’ll continue to welcome more as the market settles.
Enova also had an agreement with Haystacks Solar Garden – a solar farm cooperative that lets you own a plot of solar panels and receive a credit for the energy it produces. We agreed to help them keep things running and we’re proud to do so.
Looking to 2023 – and beyond – there’s so much opportunity.
Our carbon offsetting program achieved the equivalent of taking 22,000 cars off the road this year. But we’re preparing to turn our focus to avoiding those emissions entirely – by buying our members’ electricity from renewable generators. We’ve wanted to do this for a while but it requires a bit of scale, and we’re getting close.
We’ll also get more members on time-of-use tariffs so they can shift their usage to times when it costs them less.
We’ll support the switch to EVs by putting our Go Locals charging technology where people need it, especially in apartment buildings.
We’ll keep providing extra support for the grid with our rapidly growing battery storage network.
And we’ll continue to be a safe pair of hands for respected building developers to install sophisticated renewable technology systems in large buildings – so more homes run on renewable energy, more of the time.
It’s been a hell of a year and I thank everyone that’s supported us. I wish you all the very best for a safe and enjoyable festive season.
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