The fast-changing Australian energy market: what it means for your business
24 August 2021
The Australian energy market is undergoing a period of deep transformation, as it aims to reduce its reliance on fossil fuels and increase the amount of generation from renewable sources.
Recent figures show that this is heading in the right direction. The 2021 Australian Energy Statistics for electricity generation show that 24 percent of Australia’s electricity came from renewable energy last year, up from 21 percent in 2019. Added to this, the incoming CEO of the Australian Energy Market Operator (AEMO), Daniel Westerman, announced an ambitious target of ‘engineering electricity grids capable of running 100 percent renewable energy by 2025’ and highlighted that Australia has seen a ‘one-thousand percent increase in the number of large-scale solar farms deployed and a doubling in the number of wind farms’ over the last three years.
While Australia has often been in the headlines for a perceived resistance to the low-carbon energy transition, these figures and ambitious statements are hugely welcome.
However, with major changes come equally major challenges. While the move to renewable energy is a necessary transition, it means a complete transformation in how Australia’s grid is structured and operated. It needs to be able to connect multiple sources of energy to deliver reliable and low-cost electricity to consumers and businesses. It also needs to have enough capacity and flexibility during this transition be stable enough to mitigate the damage of outages such as the one seen when the Callide coal-power station failed in Queensland earlier this year – which resulted in over 400,000 homes and many large businesses being left without power for several hours.
Renewables are, by nature, an intermittent source of power. The Minister for Emissions Reduction, Angus Taylor, went as far to say that, “The speed and scale at which variable renewables are coming online is causing disruption on a level that we have never seen before. Intermittent generation is causing increasing volatility in the wholesale electricity market. This is making the grid more difficult to manage, creating volatile prices, and undermining the retention of less flexible dispatchable capacity.” Therefore, if we are going to have a 100 percent renewables system, the grid needs to be supported with other low-carbon sources able to provide the essential balancing act between supply and demand, such as large-scale battery storage.
For C&I organisations, understanding what these changes mean for them - in particular the price they pay for their energy, as well as how they use it and the source it comes from – is extremely complex. Given the ever-evolving market and resulting price volatility, this can be really challenging for any one person or a non-energy business to understand.
Therefore, businesses need the support of their energy retailer now more than ever to help them understand how the rapidly transforming market impacts them. As an energy partner, we need to ensure the low-carbon transition presents opportunities not threats, enabling you to take control of your costs, consumption and energy source and move towards a cleaner energy future.
How can we do this? There are several key areas where we can help:
Traditionally, relationships between Australian energy retailers and customers have been fairly transactional, as customers usually choose the retailer based on the best price for their energy. This makes perfect sense in that they are procuring electricity which, as a commodity, has no discernible differences.
However, as new energy challenges and technologies emerge, and the pressure to become more sustainable increases, businesses will need an energy partner who can help them relate any changes in the market to their business to ensure they are not negatively impacted.
Energy bills in Australia can be complex and retailers need to clearly explain what each charge is and how businesses can affect them. For us, price transparency is key. It’s vital that, as a customer, you understand what impacts your prices, how your bills are calculated, and what risks and opportunities are present in the market that you can take control of.
SmartestEnergy takes a completely transparent approach to help customers build an energy strategy that is right for them. As we have no generation assets to protect the interests of, customers can be assured that we’re only working in their best interests and all of our decisions are independent. It’s all about engendering trust and knowing that your energy partner is working for you.
As mentioned, Australia is a country primed to take advantage of renewable power, with long hours of sunshine for solar PV and a coastline perfect for wind. In fact, 28 of Australia’s major energy intensive organisations, including Bunnings, Woolworths and Telstra have committed to source 100% of their electricity from renewable energy, many of them through the RE100 initiative.
However, it’s not been that easy for Australian businesses to make the switch to renewable energy, even when the carbon and cost benefits are clear. Recently, more than 100 Australian businesses came together to call for stronger government investment in renewable energy uptake and it’s easy to see why – as well as significantly reducing emissions, it can also eventually lower energy bills.
There are also reputational benefits – according to a recent survey from Greenpeace, over two thirds of respondents in Australia said they were more likely to buy a product from a company that used 100% renewable energy.
SmartestEnergy is making it easier for businesses to achieve their renewable ambitions through a variety of options, including our low-risk Power Purchase Agreements (PPAs), helping businesses make the switch to renewable power so they can enjoy the benefits from a financial, environmental and reputational point of view.
Many energy companies have been guilty of working in silos, with the retail and wholesale trading departments working in relative isolation from each other. The wholesale team is responsible for maximising value from their generation assets, and the retail division adds margin to wholesale rates to sell to end users.
However, due to greater decentralisation, it’s vital that every department within an energy company communicates and collaborates, as this will enable them to provide truly holistic support for their business customers to unlock mutual value.
At SmartestEnergy, if a customer asks for support in placing their next contract, for example, the retail sales team can use internal relationships to develop a proposal with insight from energy experts across trading, risk, commercial and operations, all facilitated by aligned incentives.
Empowering our customers to make the most of the low-carbon transition
The Australian energy market is complex and constantly evolving. At SmartestEnergy, we want to empower customers to see energy as an asset that can be managed intelligently to create additional value. We do this by being experts in the market and then sharing this expertise, so you know you are working with a partner that has the depth of experience to guide you every step of the way.
SmartestEnergy makes the ideal partner, as we’re thinking about both the ‘now’ and the ‘next steps’. Our assets are our customers, and we can help you to navigate the latest changes in the Australian energy market so you can optimise your energy, and ensure your energy strategy aligns with a low-carbon future.
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About the author:
Daniel Smith
Vice President Commercial
Dan is responsible for the commercial activities in Australia, primarily Sales, Operations and Marketing related to electricity retail. Dan started his energy career in consultancy in 2006 and joined SmartestEnergy to support the UK start-up of the Commercial & Industrial retail business. Dan led that division before coming to Australia. Dan has been central to developing the customer centric culture and renewable focus at SmartestEnergy. He is committed to supporting the Australian renewable transition, simplifying any complexity for businesses on their journeys.