Where expectations between businesses and communities significantly diverge, grass-roots initiatives can often emerge in response to the local preferences and values of residents.
The energy industry is not immune to such intervention and technological advances and associated cost reductions in small-scale distributed energy sources, paired with growing consumer awareness and changing expectations regarding service needs and renewable energy, are providing multiple opportunities for community-centred energy models to take hold.
Common in places such as Denmark and Germany, community energy initiatives are increasing their presence in Australia. The Hepburn wind farm, for example, was the first community-owned wind farm in Australia, and was an initiative which progressed in response to community sentiment that state and federal governments were not doing enough to address climate change. Operational since June 2011, the 4.1 MW wind farm is comprised of two turbines and is located at Leonards Hill in Central Victoria.
In related events: in November, the Australian Renewable Energy Agency (ARENA) announced co-funding for an investigation by Brookfield Energy Australia (Brookfield) which could pave the way for the first off-grid town in Australia. The new Huntlee residential project being developed by LWP Property Group is expected to house 20,000 new residents in 7,500 homes. The $1.1 million initial study received $442,000 from ARENA, which Brookfield will use to develop an integrated housing model with the goal of generating a 10 times increase in the penetration of renewables for the equivalent cost of energy(1).
Enter another first, Enova Community Energy Limited, the first community-owned energy retailer proposed in Australia, who received approval last October from the Australian Energy Regulator (AER) for their retail licence application, subject to successful completion of their current capital raising ventures.
Community energy retail
Enova is attempting to position itself strategically within the Northern Rivers Region of New South Wales (NSW) by providing more locally-tailored opportunities for residents to participate in the renewable energy transition. The focus market for Enova will predominantly be environmentally-minded residents in the region, and also those with existing or potential for future rooftop solar photo-voltaic (PV) installations. Around 20% of the region’s population of 130,000 currently have rooftop solar PV installed(2).
The result of a growing sentiment by community members that existing retailers weren’t providing services suitable to meet expectations for renewable energy take up and investment, Enova will focus their services in offering best available 100% GreenPower products, best available Feed in Tariffs for renewable energy, and also installation and maintenance support to the immediate region.
The take up of solar PV has been growing rapidly in Australia over the past 5 years, as homeowners and businesses have increasingly responded to various incentive schemes to invest. Since 2009, there has been over a 30-fold increase in installed capacity of solar PV both nationally and in the NSW energy market.
By contrast, the public appetite for GreenPower – the voluntary government accredited program to promote additional investment in the renewables industry through premium renewable energy purchases – appears to be waning. Despite generating more than $500 million in additional renewable investments above and beyond existing mandatory requirements under the Renewable Energy Target (RET)(3), GreenPower sales have dropped by around 40% nationally and around 30% in the NSW energy market since 2009 (Figure 1).
Figure 1: National GreenPower Sales(4) and Installed Solar PV Capacity. Source: GreenPower Annual Audits and Clean Energy Australia Report 2014.
Multiple factors can explain this trend – falls in consumer confidence since the financial crisis and political uncertainty surrounding carbon pricing to name a few – but also increasing opportunities to invest in residential and commercial PV as a green energy alternative.
Noting these developments, Marchment Hill Consulting recently had the opportunity to discuss the current status of the Enova community energy initiative with CEO, Steve Harris, in order to share their views on community expectations and perspectives regarding renewable energy. Steve has 40 years of experience working in the Australian energy industry for large retailers.
Q1. First and foremost, why have you taken the community-owned retailer approach and how do you expect this model will better service the needs of energy customers in the Northern Rivers region?
Community ownership will ensure Enova stays community focused. If we used the standard retail provider model, how would we differentiate ourselves from the services that already exist in the marketplace?
Whilst large energy retailers are not against supporting local community energy initiatives, they typically aren’t geared in a manner which can effectively operate and provide the small-scale of specialised services that many customers want in our region.
This is the space that Enova wants to fill and operate within. Indeed, the reason we have gotten to this point is that members of our community haven’t been able to get the connection services they want and have instead taken to developing our community-centred approach.
Q2. High feed-in tariffs and market leading GreenPower products form the basis of your key incentives package to prospective customers. How will these products differ from those already being offered by existing competitors in the region, whilst also ensuring the ongoing sustainability of the company?
Energy retailers typically go for quick sales in terms of locking in customers to short-term discounted pricing structures. These normally last for around 12 months, with most automatically converting to higher rates after this time. Customers by then either forget or are unaware of these price changes.
Whilst Enova will not be large enough to absorb high short-term discounted pricing, we will endeavour to subsidise a transparent pricing structure which customers can have long-term confidence in. We will also target the many local residents with expiring solar PV contracts in terms of providing a similarly consistent and transparent pricing arrangements.
This approach can be supported by the lower operational expenses of being based within, and marketing directly to, a regional community.
Q3. In contrast to the uptake of solar PV, GreenPower has been losing favour in terms of sales for the past few years. Why do you think this has happened and does Enova see many growth opportunities in this retail market?
GreenPower requires a confident and strong relationship between consumers and retailers by which sufficient trust and understanding is developed to support the premium price tag. The larger retailers initially put a lot of effort into developing and marketing this support but have, for the past few years, focused instead on the quicker sales of short-term discounted pricing mechanisms.
Enova wants to fill the space left behind by this shift in marketing approach by focusing on building the strong long-term relationships within the local community that are needed to support GreenPower purchases.
Q4. Drawing the majority of start-up funds from within the Northern Rivers region is a considerable challenge to undertake. Is Enova facing any issues in terms of gaining necessary financial support from within the local community?
As a small outfit, we have obviously faced challenges in initial outreach and marketing that a larger organisation with a stronger funds base wouldn’t face. That said, we are committed to servicing the community, and are confident that we will meet minimum targets in order to ensure Enova is a majority community-owned enterprise.
Q5. Has Enova received much interest from community groups beyond the Northern Rivers, and do you see your initiative encouraging others regions to follow your model if successful?
There are dozens of communities across Australia that are interested in, and are following, the progress of our work to date. Once firmly established, we hope to provide the training and support that would be necessary for these other communities to follow in our footsteps.
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As a grass-roots energy initiative, Enova still needs to prove that sufficient local demand exists for the community services they intend to offer. However, if successful, they could indeed be the starting point for growth in new alternative green energy retail business models for like-minded communities across Australia, adding another dimension to the increasingly diversified landscape of the national energy market.