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Energy goes local as utility people strike out on their own

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One Step Off The Grid

Nearly three years ago, Adrian Merrick, then the head of one of the three biggest energy retailers in Australia, made a bit of a splash when he warned that the industry was reaching an inflection point, see out story Utilities wake up to threat of mass defection.

merrickHis message, as former head of retail at EnergyAustralia, was that solar PV was below grid parity, energy use was declining, storage was coming and so were micro grids. In short, consumers would have a new avenue to challenge or even by-pass traditional utilities.

The message to utilities, he said then, was that they had to reinvent themselves, and would need to do so quickly, because their strategy of relying on consumer “apathy would son be undone by new technology choices, and the grim reality for utilities was that they had the lowest customer loyalty in the service industry, and the poorest customer advocacy in the retailer sector.”

Australian consumers are still waiting for utilities to reinvent themselves, but now Merrick has struck out on his own, joining a growing band of new offerings that are focused on renewable energy, zero emissions, community groups and community energy.

Merrick has created a company with a compelling name, Energy Locals, and will soon find out if it is a compelling product too.

He says will try to reinvent the industry – or at least part of it – and deliver the sort of service that big utilities find so difficult, because their focus is on generating cash from their biggest depreciated assets, their coal and gas plants.

“I’m a frustrated entrepreneur and I want to work an 18 hour a day while I still can. This is why I am having a go at Energy Locals – I want something that gets close to the customer, that is a little bit commercial and does the right thing.”

The focus of Energy Locals is to provide a “retail service”, rather than actually being a retailer, per se.

This means that he will create a bespoke retail offering for any community organisation, or group. It could be an NGO, a business, a local community or a group with a piece of technology (say a community-owned solar farm) that wants to bundle a particular plan into a retail offering.

energy locals

Or it could be groups such as the Balunu community (above), which the company is helping to raise funds to replace the current diesel generators it depends on with solar and batteries, with tfuture energy savings to go into youth education.

“We are a specialist service provider to those people – we tailor an offering with total transparency,” Merrick says. “We take in all the requirements, including the output of the community or group’s locally produced renewable energy, and put that into a tariff. There is no incentive to act like a normal retailer.”

Merrick says the pricing strategy is up to the community group or organisation. The company may seek to make no margin, other than a fixed per customer fee of around $12-$15/month.

Any profits are then ploughed back into the community group, or organisation. The attraction is that Energy Locals, rather than the local organisation, is taking the risk.

The one flat rule is that all products must be carbon neutral – if it is not 100 per cent renewable, then it needs to meet that carbon neutrality by buying offsets.

The services have only just been rolled out, so Merrick is hoping to add quickly to the small number of  customers currently on his books.

He recently presented the concept at the Community Energy Congress in Melbourne and is in talks with a range of different groups about bespoke offerings, including the Bendigo Sustainability Group, which was involved in a community solar project of installing a 50kW on the local tramway depot.

He says Energy Locals is entirely Australian owned, and his shareholders include ERM Power, which gained some unfavourable publicity recently when it chose to pay a penalty price rather than invest in new renewable energy projects.

ERM is now explaining that as an “arbitrage” decision, and an attempt to lower costs by taking advantage of tax losses, and the likely fall in renewable energy certificate prices in the future. It says it has recently contracted 300MW of large-scale wind and solar, although it has yet to release the details.

Merrick says that publicity was unfortunate, but with Energy Locals the focus is very much on helping groups develop their own renewable energy generators and, if they can’t, to deliver carbon neutral energy. “It is not an opt in,” Merrick says.

This article was originally published on RE sister site, One Step Off The Grid. To sign up for the weekly newsletter, click here.  

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  • cleveralias

    Isn’t this just greenwash from ERM, and perhaps a belated bit of conscience cleansing from Adrian. Surely the related party nature of the relationships mean’s this is just yet another cynical attempt to maintain customer margin (fixed fee each month in this case) with another nebulous white labelled retailer model.

    Not for profit….. I think not.

    They still have the direct monetary incentive to screw the customer as hard as possible.

  • MaxG

    Well, “whatever”… their plan works for me, and I have chosen them after Urth went down the gurgler.

  • Jonathan Prendergast

    I have that graph on my phone and computer from the story in 2014 regarding the inflection point, and have shared it many times with others. It so neatly shows the status and threat of the transition for utilities.

    Congrats to Adrian on the new venture.