If you want to entice people to install solar, you need to offer the incentive of a decent feed-in tariff. That’s the thinking of Energy Locals, a new entrant in the energy retail space. “Our end game is providing clean energy as a service,” says founder Adrian Merrick.
If a 10-cent feed-in tariff is enough to get a capital decision over the line, when the major retailers are paying 5-6c/kWh, Merrick will have another customer to buy surplus electricity from to then sell to his retail clients.
The key is to push the solar solution at all levels – to those who own it or are thinking about it, it can become a valuable revenue stream, especially for community groups who are rabid about fund-raising.
Keep it simple
Simplicity is the key, and Merrick (pictured) reckons Energy Locals’ business model, which avoids decisions about technology and plans, will increase demand for solar energy.
“When the average customer spends about nine minutes a year thinking about energy they run out of runway pretty quickly on that,” he says. “There’s a job for someone to do that but a lot of the large energy retailers are not incentivised to do it.”
Merrick gives an example of how the idea works.
Let’s say a local school with a solar system is looking to sell some surplus generation. “At the moment it’s pretty hard for them to get a look in with the retailers, who are looking at the really big deals,” says Merrick, who has worked as group executive manager of retail for EnergyAustralia and spent six years with E.ON in the UK.
“Energy Locals’ job is to facilitate the purchasing of that energy and then the offering of it to the community via a tariff that they can help control.”
- The company’s Fundraiser product allows organisations to partner with Energy Locals to provide an energy service they can promote to supporters and raise funds from.
- Its Community Power product allows organisations to sell energy without having to set up their own licences, processes and billing system. Organisations can create energy plans for their communities and earn revenue for projects.
- The Charge On product allows for organisations to raise money on an ongoing basis with a quarterly income stream.
The major retailers are paying feed-in tariffs around 5-6 cents per kWh, he says, but Energy Locals has set its FiT at 10c. When GST is included for residential customers the result is a net saving of 11c on the bill, as the 10c is deducted before GST is applied which means avoidance of another 1c of GST.
The relatively generous FiT isn’t about rewarding customers who have already paid for solar, he says, but about making the business case better for people who are thinking about investing in solar.
“A lot of people see feed-in tariffs dropping and dropping and the bonus schemes disappearing, so if we can provide a way that strengthens their own personal business case for investing in this stuff then that’s a good thing to do.”
But how many people have excess solar to sell? Pretty much every residential customer that has solar is exporting something, Merrick says. “For most solar owners and people thinking about solar the feed-in tariff is still a really important thing, an important part of their decision-making process.”
Energy Locals will target community groups and commercial organisations putting in local solar as they “generally have power to sell”, he says, and are looking for a “solar friendly” retailer who will pay a good rate and on-sell that energy in the local area and beyond.
Retail customers will pay for energy Energy Locals has bought on the wholesale market, with any energy bought via feed-in tariffs used to offset customer demand.
“We’re selling direct to end customers because we won’t reach all the customers who could benefit from our product design via partners alone,” he says. “It also allows us to build up data on segmentation, messaging effectiveness, etc, which we’ll share in an open source way with our partners.”
The risk to Merrick’s model is that the fixed feed-in tariff paid by Energy Locals can be higher than the wholesale price, as was the case when Merrick checked the NSW market while speaking with EcoGeneration.
The company started marketing its service in December and is initially targeting NSW and South-East Queensland.
Squeezing a balloon
Some customers have asked for FiTs higher than 10c/kWh but Merrick says it isn’t that easy.
“We’ve been modelling FiTs higher than 10 cents at the request of some community partners to provide them with options,” he says. “It’s just like squeezing a balloon though – if you go too far above the wholesale price … the balloon can burst.”
Merrick says Energy Locals has talked to some solar installers about forming partnerships so that they can “sell a package rather than just a system”. One agreement has already been signed with a NSW installer.
Such agreements, he says, will help them “offer a package tailored to the needs of a solar customer, which are slightly different to a standard grid customer.”
When it comes to physical installations of solar he expects to rely on external capital. “Super funds are keen to get into this,” he says.