Australia’s disaffected electricity consumers are about to get a taste of what the future might hold with the official launch of a new retailer that will offer an “electricity supermarket” with the choice of renewable energy power sources.
New Zealand-based Powershop has been quietly establishing its first Australian venture in Victoria and makes its official launch today. In coming days, it is expected to announce a series of deals that will offer consumers the choice of sourcing their electricity from wind, solar, biomass, or community energy projects.
Powershop offers an “online supermarket" that it says allows customers to buy a suite of products -- the amount of renewable energy and their choice of source. It does not lock customers into contracts, and households can take advantage of one-off specials for future use. It seeks to make the purchase of electricity similar to the way we might buy gas or other consumer products.
The significance is not what this might say about this particular brand, but rather the change it is heralding in the electricity market. The consumption of electricity has traditionally been dominated by the interests of those who supply the fuel, and those who transport it and retail it.
Now, the emergence of new technologies, such as rooftop solar PV, is changing the game, because it allows customers to supply some of their own energy. The addition of storage will accelerate that change, and the adoption of smart technologies -- from simple monitoring devices to those that can control consumption -- has led to the emergence of an array of customer-focused businesses such as home security firms, internet suppliers, appliance manufacturers and retailers, and home building in the domestic market.
Powershop was established in New Zealand about five years ago by a bunch of self-described "geeks" in the electricity business who identified an opportunity to set up an online market for electricity consumers. It is owned by Meridian Energy, the recently floated renewable energy giant that co-built Australia’s largest wind farm, the Macarthur project in Victoria, and operates the Mt. Mercer wind farm.
So far, Powershop has grabbed a share of about 5 percent in the New Zealand market. More importantly, it rates highly on customer satisfaction, a metric that has constantly eluded traditional utilities.
“Our underlying philosophy is to turn electricity into a consumer good,” said company founder Ari Sargent. “There has been no real engagement between the retailer and the customer, but we have found that it is possible to engage with them and deliver satisfaction."
Sargent says the traditional utilities have profited from what they see as consumer apathy over the last ten to fifteen years. But the sharp rise in bills and changing technologies -- both in the energy market and the internet and smart appliance space, is changing this. “I suspect their wakeup call is coming. It’s a bit like telcos: the old-school approach is self-perpetuating."
Sargent says the next steps will be to integrate home offers and incorporate solar PV. This fits in with many industry predictions that current retailers will be challenged by innovative offerings and partnerships that could include firms that offer home security, internet, and appliances, and even builders. All base their products around customer service. All have experience “inside the home,” rather than delivering a service to the front door, which is all the traditional utilities have achieved to date.
Sargent thinks that what has happened in Australia with rooftop solar PV is “kind of dumb.” Too many installations are not properly metered, particularly where consumption is in the home. “People need to see that the money spent on the roof is providing a benefit.”
Ben Burge, the head of Powershop’s Australian business, says the company has been testing the market for nearly a year and is only now rolling it out on a commercial basis.
In coming days, Powershop plans to announce a series of deals with third-party providers of renewable energy, which means that customers will be able to buy particular “brands” or power sources to suit their needs or budget.
“Until now, households have been forced to pay for power at a set price, after they’ve used it,” he said in a statement. “This gives complete control to power companies in Victoria, where the spread between the most expensive and the cheapest rates is bigger than anywhere else in Australia." He added, "With Powershop’s [mobile phone] app, you can buy power when it’s cheaper, grab one-off specials, and pay when it suits you." Powershop also says it has delivered an average reduction of 11 percent off of consumers' annual power costs and expects to achieve bigger savings in Victoria.
“This market is ripe for disruption,” Burge concluded.