As time goes on, the consumer is set to gain greater control over the way electricity is produced and distributed. Want to be one of the people with the power? Jai Breitnauer explains.
Words Jai Breitnauer
Last summer, our family enjoyed our annual road trip. One particular South Island sight stuck in my mind: Lake Tekapo, a majestic 83 square kilometre freshwater lake, 700 metres above sea level. Whether you are standing on the shore by the beautiful Church of the Good Shepherd or relaxing in the hot pools at Tekapo Springs, the sight of the expansive blue water surrounded by the magnificent Southern Alps wearing a crown of endless blue sky is breathtaking.
Feeling so close to nature rarely goes hand-in-hand with the consumption-heavy daily lives we lead, but the pine trees at Tekapo don’t just provide shade. They also shield the view of the imposing Tekapo A hydro-electric power station. Opened in 1951, it was the first of eight that make up the Waitaki power scheme. Tekapo A alone generates enough energy for 16,000 New Zealand households a year, and it’s one of the smallest. Together, the stations of the Waitaki scheme – adminstered jointly by Meridian and Genesis – provide around 50 per cent of New Zealand’s stored power. It’s just one of the many schemes in New Zealand that use natural, renewable resources to generate environmentally friendly power for the nation.
Energy on tap
“Overseas, you pay a premium for green and renewable energy,” says Guy Waipara from Meridian. “In Australia, for example, coal is dirt cheap and the infrastructure was built a long time ago. To change to wind and solar would cost around five times as much as continuing with the status quo.”
A wind farm here in NZ produces more than twice that of a similar-sized wind farm in the UK.” – Guy Waipara, Meridian Energy
New Zealand doesn’t have an abundance of fossil fuels, but it does have plenty of renewable sources of energy. Currently, 80 per cent of New Zealand’s electricity comes from geothermal, hydro-electric and wind farms, with the government aiming for 90 per cent by 2025. For ‘Gen-Tailer’ Meridian, which generates power as well as being an electricity retailer, this is a core part of its business model.
“Our energy has been 100 per cent renewable since we launched in 1999,” says Waipara. “New Zealand wind is some of the best in the world – we’re in the Roaring Forties after all. A wind farm here produces more than twice that of a similar-sized wind farm in the UK. Then there’s our hydro and geothermal resources. Our renewable energy market is one of only a handful globally that isn’t subsidised.”
Sounds great doesn’t it? But not all electricity providers use green sources. We mustn’t forget about coal-guzzling Huntly. Plus, our reliance on hydro has actually decreased from 72.9 per cent of electrical energy in 1990 to just 54 per cent in 2007, according to Te Ara Encyclopedia of New Zealand.
Waipara is the first to admit that while being a Meridian customer means you are supporting the generation of renewable power – hydro provides more than 80 per cent of New Zealand’s renewable energy – the electricity you are using at any given moment won’t necessarily be ‘clean’. “All the power we produce goes into the grid and mixes with the rest,” he says. “It’s like pouring different coloured water into a pool – our water might be green, but the pool ends up brown.”
Green energy is cheap energy
If New Zealand is blessed with so many sources of green power, why is the colour of the grid so murky? It’s all about supply and demand; at peak times we need Huntly for back-up.
Here’s a simple example: it’s 7pm and the news has just finished. Everyone who has been sat comfortably in front of the TV gets up to put the kettle on. While they’re making a cuppa, they decide to flick the dishwasher on and perhaps pop some dessert in the microwave too. Suddenly, a network that has sat quietly maintaining computers, televisions and highwalls at a relatively flat rate is humming with the weight of a spike in demand. Not only does an increase in electricity production mean reliance on Huntly, but the load on the grid is causing more wear and tear on the infrastructure as well.
Relying on natural sources of electricity generation requires the consumer to use power in a more even fashion and we’re just not used to that. Once again, we’ve been spoiled with an ‘energy on demand’ system that doesn’t ask us to take responsibility or interact. Many people don’t even understand how the system works. Not only is this situation not good for the environment, it’s not good for our bank balances – all of us will have been hit by an unexpectedly large bill at some point.
But hold up, change is afoot. Not only has the government altered regulations around energy markets, giving new, small companies access for the first time, but the nationwide smart meter roll-out means we can now get accurate real-time information about our energy usage. Enter Wellington-based Flick Electric.
Smart choices for better living
“Our business model is quite different to anything else right now,” says founder and CEO, Steve O’Connor, who soft-launched Flick in Wellington in August 2014 and went nationwide last year. “In fact, we think we’re a world first.”
Currently, most New Zealand retailers (and those in Europe and America), sell electricity at a flat rate that builds in a contingency should there be disruption in the supply of power. They would say that protects the consumer from spiralling costs should there be a drought, poor wind or a spike in prices; but that margin of error is also a great place to hide non-essential price increases that, in reality, only profit company shareholders.
“Flick only charges you for being your retailer,” says O’Connor. “You then have access to the energy spot market, which changes every half an hour. You pay actual market prices for your power and network costs with no extra added on by us.”
Not only does this model offer the customer significant savings, (“the average customer saves 17 per cent on their bill against their previous retailer,” says O’Connor), but it also encourages customers to think about how they use power and if there is a better time to carry out some tasks, like washing.
Overnight, New Zealand electricity is almost 100 per cent renewable – and the price plummets. Put simply, if we are choosing to use power when it’s cheaper, it’s also greener – and those decisions help stagger demand on the grid.
O’Connor likens it to buying strawberries at the supermarket. “In the winter they’re shipped in from abroad and cost $8 a punnet, but in the summer they’re local, more environmentally friendly and are only $2 a punnet. The principle is the same with electricity.”
Flick isn’t the only company encouraging consumers to use power when it’s cheaper and ‘in season’. Another online start-up, Electric Kiwi, offers its customers close to wholesale prices, plus a free hour of off-peak electricity each day.
“Smart meters mean we’re able to get more information about you as a consumer,” says Electric Kiwi GM Julian Kardos. “We’ve changed the pricing model to reflect power usage based on that information. Instead of discount incentives and different rates for different customers, we’ve given everyone access to a flat rate and the ‘Hour of Power’ – a free hour of off-peak electricity each day.” Kardos says if you do nothing, you will save an average of 4.2 per cent, but if you think about your power consumption and complete high energy jobs during that hour you could save 10-15 per cent.
“And importantly, we’re reducing the peak load on the network and encouraging people to consume power at night when it’s mostly renewable,” says Kardos. “Our model is good for the country, as well as the individual consumer.”
The rise of the pro-sumer
Steve O’Connor calls this sea change ‘pro-sumerism’ and says Flick’s business model has been set up in preparation for what is to come. “The energy sector hasn’t really changed for 30 years, but within the next five years we’ll see 50 years worth of disruption,” he says.
He’s talking mostly about the falling cost of innovative technology, making choices about power consumption more accessible. “Solar panels are starting to become really affordable, plus Tesla have been developing a new battery that can store energy for use later on. The market is no longer at the feet of energy providers; we’re going to see a world where people can choose to buy electricity when it’s cheapest, choose to store it or use it, choose to produce their own energy and choose to sell power back to the market for a profit.”
O’Connor also foresees a market where there is more energy sharing. As well as being able to sell surplus electricity back to the market, you could choose to donate it to a family member or someone in your community in need. “It’s like Uber, but for electricity,” he says.
In order to facilitate this change, Flick has developed an app, called Choice, to help would-be ‘pro-sumers’ engage with their energy usage more wholly. “We launched it in February and it gives you information on current price info and also generation info – you can trace where your energy is coming from,” says O’Connor. “These tools allow people, even non-Flick customers, to understand the relationship between price and sustainability”.
This means you can make a choice to reduce your power consumption when there are fewer renewables in the market and then increase the amount of electricity you are using, the greener the grid gets.
“We have a vision of the future at Flick that lends itself to the pro-sumer model,” says O’Connor. “We also like the connectedness of that future market. Right now, buying electricity is a one-way transaction, dominated by the few, but that is quickly going to change.”
Blowing the energy budget
“Around 80 per cent of electricity in the market is renewable.” – Andrew Booth, solarcity
When it comes to renewable electricity, New Zealand is a world leader. But if you look at our country’s energy budget as a whole, we are well below our potential.
“Around 80 per cent of electricity in the market is renewable,” says Andrew Booth from Solar City. “But if you consider other forms of energy, like gas and petrol, the best estimate is that 38 per cent of our energy budget comes from renewables. New Zealand hides behind our electricity statistics; we’re dragging our feet in other areas.”
New Zealand actually has one of the highest per capita CO2 rates in the world and transport is a big contributor to that. Particularly fleet vehicles, which make up around 70 per cent of car and van ownership in the country. If businesses switched from having fossil fuel vehicles in their fleet to electric or even hybrid vehicles, the improvement in our renewable energy statistics would skyrocket.
The issue until now has been around cost. Electric vehicles are at least twice as expensive to buy as a standard car and while they are cheaper to run in the long-term, the infrastructure to support widespread usage, like public charging points, simply hasn’t been available. With the disruption currently hitting the electricity market, this is about to change. Improvements to infrastructure for electric vehicle use in cities, plus the fact that it’s practically free to charge your car or van up overnight, are making these vehicles more desirable, and lowering their price tags.
We’re not quite there yet, argues Booth, who believes a greater commitment to solar power may be the tipping point.
“When the weather is hot and dry we need to hold water in dams – but that is when solar works best,” he says. “Private solar panels on houses contributing to the owners’ needs and the national grid is a scenario for success.”
Booth believes that New Zealand is one of the only countries in the world where solar panels are economical. Couple that with the introduction of new batteries for domestic power storage, estimated to be widely available by 2018, and we’ve got a revolution on our hands.