Harvey Norman, IKEA lead big retailing buyers group looking for renewables

A group of leading “large format” retailers have been given permission by the competition regulator to form a “buyer’s group” and are targeting renewable energy supplies in a major auction for their energy contracts.

The group of 41 of some of the best-known retailing companies, including Harvey Norman, Bunnings, Beacon,  and IKEA represent more than one terrawatt hour of annual electricity consumption across the country, and have been given permission by the Australian Competition and Consumer Commission to form a “bulk-buying” group.

They say this will deliver them an opportunity to negotiate a better deal than they could individually, and they will conduct a tender process for the supply of their aggregated electricity demand.

“Electricity is usually the third biggest cost for most of the businesses in this buyers group,” says Philippa Kelly, CEO of the Large Format Retail Association.

“Today’s authorisation means these businesses will have access to competitively priced and reliable electricity supply which will further secure their ongoing business operations.

“As part of the tender response we are hoping to have strong representation from the renewable sector. With an 11-year horizon, and the size of the supply deal, we think it’s big enough for some respondents to consider investment in new sources of generation.”

The group spans 4,096 individual sites across every state and territory, and in 2018 collectively consumed 942GWh in the National Electricity Market, 86GWh in W.A.’s main grid, and almost 10GWh in the Northern Territory. That cost them

Many of the retailers, such as IKEA, have already rolled out significant installations of rooftop solar to provide part of their electricity needs, but now want a broader deal to further reduce their costs.

That aggregated demand would be enough to support around 300MW of solar or wind capacity. And it seems unlikely that any fossil fuel technologies will be able to compete with the cost of wind and solar, even when it is “firmed” to better match the demand profiles of the customers.

The retailers are not the first buyers group to seek renewable energy contracts, and the South Australia Chamber of Mines and Energy last year signed a stunning deal for five of its biggest energy consumers last year with Sanjeev Gupta’s energy companies.

“We wanted energy affordability, energy reliability and energy security, and this deal with SIMEC ZEN Energy delivers all three,” Rebecca Knol, the CEO of SACOME, told RenewEconomy at the time.

Many other businesses have followed, including Bluescope, CUB, Mars, and numerous banks and universities. This week, the City of Sydney and the City of Newcastle both signed deals for the supply of all their electricity needs from wind and solar, and will make big savings doing so.

Mining giant BHP has signed a contract to supply 100 per cent renewables for its two huge copper mines in Chile, which will make money even after a $1.1 billion write-off of an existing coal supply contract, while miners are increasingly turning to wind and solar and storage for their energy supplies.

The ACCC authorisation runs for a period of 11 years. In that period electricity supply under this agreement must not surpass 1% of total consumption in each State or Territory.