Australia is at the top of the list of potential markets for New Zealand energy retailer Flick Electric, which has convinced more than 10,000 customers in its homeland to sign up to its digital platform.
In the space of less than two years, Flick Electric has changed the way many New Zealanders think about their energy consumption, thanks to an online platform that gives those consumers access to information about how the energy they are using is produced and more importantly, why it is priced the way it is.
Using the Flick app, customers can use this pricing information to help them decide when to consume and when to turn off – and once they’ve made the decision, they can access the wholesale price from the spot market.
In a market that is largely dominated by just a few retailers, Flick grew by 37 per cent each month throughout 2015. On a net customer basis, Flick was the second fastest growing energy retailer in New Zealand last year and the fastest growing retailer in the country in April this year.
From a founding team of six, the company now employs a staff of 45 in Wellington, including an in-house customer service team.
To date, Flick has raised NZ$8 million ($7.6 million) from New Zealand investors and is in the midst of another capital raise that co-founder and chief executive Steve O’Connor told SmartCompany will provide some of the resources the company needs to progress plans to enter the Australian market.
O’Connor, who is the former chief executive of startup incubator Creative HQ, says the likes of online energy retailer Powershop have paved the way for a company like Flick to cross the Tasman.
“We love the Powershop guys and what they’re doing and they’ve shown the way that New Zealand energy and innovation does do well offshore and I think Powershop is doing very well in the Australian market,” O’Connor says.
“They’ve shown the pathway for us.”
When Flick Electric does venture into Australia, O’Connor says it will likely be through a partnership.
“We would very unlikely go in there and do it all ourselves,” he says.
“As a retailer we’d probably find partners and whether that’s licensing our platform or joint ventures with partners, we would want to find people that understand the Australian market and we would focus on delivering a platform that delivers that differentiation and value in the market.”
Disrupting an industry
Flick Electric was founded by a group of six people, four of which had previously worked in the energy industry, including for New Zealand energy generator and retailer Meridian Energy.
O’Connor says that experience is what drives Flick Electric’s desire to put the customer at the centre of everything it does.
“I think it’s really important. We’re a bunch of entrepreneurial people, we’d worked in an industry which we knew wasn’t really putting the customer at the centre and we realised it wasn’t really using digital technology to the best of its ability,” he says.
As O’Connor puts it, “energy has just not changed for decades and decades [and] the same old people have been doing the same old stuff”.
“It’s kind of hard for these big guys because they have these legacy systems that they can’t move away from.”
And so entering the New Zealand market meant finding a way to change the rules of the game, says O’Connor.
“The New Zealand industry is strewn with companies that have tried to come into the energy industry and beat the big guys but the challenge is most of them realised they were just putting a model in place that was just trying to beat the big guys at their own game,” he says.
“And you’re not going to beat them at scale because they’ve already got that.”
Instead, Flick focused on breaking down some of the barriers that have long existed between the suppliers and retailers of energy and end consumers.
“We wanted to really change consumers’ experiences of how they use electricity and actually start to value it again,” he says.
In New Zealand, O’Connor says the majority of consumers have either “completely disengaged” from the process of buying electricity or it’s a “disgruntled purchase”. Despite energy being one of the most valuable products most people consume on a daily basis, there’s a “complete disconnect” with consumers.
“They don’t know what it has cost them, they don’t know where it’s come from, a whole range of things where in a whole range of other industries, that’s an accepted thing,” says O’Connor.
“A good reference point is if you go into a supermarket at certain times of the year you can buy a punnet of strawberries for $1 and at other times of the year you buy a punnet of strawberries and it costs you $10. And the $10 purchase is simply reflecting the fact they’re scarce, they’ve probably come from somewhere else, flown on a plane to get here.
“Consumers are used to that level of transparency, choice and control in their purchase decisions but the electricity industry has just never given it to consumers.
“We decided to get Flick off the ground because we believed, using our own smart technology and digital platform aligned with smart meters, you could honestly … give consumers full transparency in the choices they make, you can give them choice and control, and you could engage with them and they could actually start valuing the product again.”
When customers sign up to Flick, they are given access to a platform that spells out all the costs involved in their energy purchase: the cost of generation, wholesaling, moving the energy around the country, the meter costs and the service fee that goes to Flick.
“It builds the level of trust with customers that we, being the retailer, are not just absorbing these costs … we’re telling you exactly what we’re taking,” O’Connor says.
“So if we put our price up, it’s really obvious. If the rest of the industry needs to put its prices up, it’s obvious. Sometimes the prices actually fall and retailers traditionally haven’t passed that on, whereas with us, it flows straight through to the customer.”
The next element of the Flick model is about giving customers access in real time to the different price signals in the industry, such as during peak times when the cost of generating energy increases.
“First of all, it’s the principle of showing customers scarcity and abundance of resources because we should never think there is just infinite energy resources. There simply isn’t,” O’Connor says.
“It also means customers who struggle to pay their bills at the prices they’re paying, they get really good choice about what they pay for things they want to do.”
Flick customers can also check a running tally of their bill throughout the billing cycle and using the digital platform, opt to receive notifications if the price of their electricity is getting close to their pre-set thresholds. They can also access information about how the energy they are purchasing is made.
According to O’Connor, an average household’s energy bill in New Zealand is NZ$2000 a year and Flick customers so far are saving an average of 19% or NZ$412 a year.
“There are no customers that are worse off, so you’re always better off on this system than not,” he says.
When it comes to taking the Flick model to other markets, O’Connor says the company is fortunate that energy markets operate in similar ways in all Western economies.
“Someone generates it, someone moves it around and someone looks after the customers in general terms … [the difference] is just how it is organised in terms of regulation that is put in place to make the system work,” he says.
“So we’ve just got to make sure our platform is adaptable to those different circumstances.”
The market itself also needs certain characteristics for the Flick model to work in it, including smart meters.
“For example, Victoria in Australia is good because they’ve gone and done that,” O’Connor says.
While there is no firm date for when Australian consumers will be able to sign up to Flick, O’Connor says the company’s plan for 2016 includes “resources to get on the place and start doing that work”.
“We’ve done enough desk-based kind of research to understand the different markets and how they’re roughly organized and whether there are smart meters and some of the things we need,” he says.
“So we’ve done probably as much as we want to on the ground here in New Zealand.
“It’s part of the current capital raise that gives us the resources to start to focus on that step.”
Why energy markets have to change
O’Connor doesn’t shy away from bold predictions, telling SmartCompany the change that will occur in the energy industry will be no different to the way ridesharing companies like Uber had altered the taxi industry.
“The industry has literally been a very small number of large players who generate and move electricity around and you have no choice, you pay whatever, they you how much you’re going to pay … and it’s not possible to have a different choice,” he says.
“It’s no different from Uber who’ve said, ‘we’ve got people who want to go somewhere and we’ve got people who’ve got vehicles. Why is it this industry that controls a fleet of cars and decides how much they charge for it?’”
O’Connor believes the energy industry has not kept pace with scores of other sectors that have handed consumers more control.
“Change is coming, it’s happening. And it’s much broader change than just new retailers like Flick that are putting the customer back into the centre and delivering extra value,” he says.
“The reality is consumers have never had a choice, have never had control and transparency and new technologies are going to make that happen. Soon consumers are going to be able to choose to power their own home, they’ll be able to decide whether they store power with battery technology … and that fundamentally changes this command and control.”
As for Flick, O’Connor describes his team as being “patiently inpatient”.
“You have to be inpatient being a growth company and a startup … you’ve got imperatives that you have to drive on but on some things you have to be patient,” he says.
“We’re trying to be really conscious of the bits that will be good for our customers and the bits that will be good for our business.”
Original article published by SmartCompany.