As power prices skyrocket in Australia and uncertainty continues to surround the stability of energy sector, consumers want more control over how, when and where they use their electricity. For small Australian retailer Flow Power the notion of giving power to the people is far from new.
The story of Flow Power begins more than two decades ago, way back when the country was facing deregulation of the electricity market in 1994.
It was at this time Matthew van der Linden founded energy management business, Utilacor.
Utilacor has been heavily involved in the industry since deregulation, with a goal to try and save customers as much money as possible.
“It was a really good time to get involved. I started out looking for ways to save money, and what we actually started to do through Utilacor was we put a few customers onto wholesale as a way to save money in those earlier years,” Matthew explains.
“At some point I decided if I really wanted to make this a big thing I would need to start a retailer of our own.”
So, eight years ago, Matthew introduced Flow Power to the market.
In a major difference to more traditional retailers, Flow Power operates by completely cutting out the “middle man” in a bid to ensure consumers are getting the absolute best deal possible.
“You’ve got customers, retailers and generators; traditionally, customers buy from a traditional retailer and that retailer usually sells fixed-price energy to the customer,” Matthew explains.
“Now the retailer would get this energy from the wholesale electricity market, so they go and buy directly from generators; they go and buy from the derivative or futures exchange, like a financial market; they go and build their own generators; and they go and build large-scale renewable energy generation.
“Our goal is to make available all the same tools that a typical retailer uses, directly to customers.
“So, although we are a retailer, our aim is to cut out what we might call the traditional retailer and give all those tools directly to the consumer to use to buy their energy.
“Through doing that, you can save an awful lot of money – the customer knows what they are paying and through doing that, they can get a very long way ahead.
“It’s basically trying to cut out the middle man and provide all the same tools to customers.”
The company is doing this with a helping hand from the Australian Renewable Energy Agency (ARENA) and the Australian Energy Market Operator (AEMO) through the $37.5 million demand response initiative, launched in October.
Through the initiative, ARENA and AEMO awarded funding to 10 pilot projects that will deliver 200MW of capacity by 2020.
Flow Power was awarded $2.6 million to rollout its kWatch Intelligent Controller technology.
The controller has been designed and manufactured by Flow Power and provides live data feeds about energy use.
The kWatch units will be rolled out across 95 commercial and industrial customers sites in the next three years.
Matthew says demand response is “bread and butter” for Flow Power.
“It’s what we do,” he says.
“One of our goals is to change the way people look at energy, rather than it just be a contract they sign every two or three years, and turn it into something that becomes part of their day-to-day business and something they get involved with.
“I think demand response is essential and what’s been missing in the broader debate of what’s wrong with the market.
“Obviously we’ve got this demand response stuff going on in the background, and there’s a lot of effort going into it, but right now you would argue that its not having a big impact on the market as of today.
“Our hope would be in 12 months it does have a big impact, but the key thing to understand it is actually essential.
“The electricity market is extremely dynamic and the fact that we don’t have demand response in the market actually makes no logical sense.”
Matthew says the best way he can describe the current situation in the energy market is by comparing it to the road network.
“Most people in the market just use power whenever they want to, and it was constructed to allow that to occur,” he says.
“If you built a road network that worked like our electricity market then you could literally hop on a road at any time of day, get your own lane and drive into the city without any delays whatsoever.
“That’s how the electricity market has been designed, but it’s actually more dynamic than the road network.
“Everyone knows if you get on the road at 9 o’clock and it clogs up, well, the electricity network has been designed so it never clogs up – but it does. That’s why the price of power has gone through the roof because it is that dynamic.
“The idea of making customers respond to the market more, it’s actually absolutely critical to the future of the market.”
While battery storage technologies will help “without a doubt”, Matthew says they are still quite expensive and customers have started looking for alternatives.
“Demand response, or connecting customers to wholesale prices, isn’t that expensive to do and it reduces their costs quite significantly,” he says.
“The reality is, customers are actually very motivated to try and find solutions, and customers always have.
“And that’s probably another thing that the market misses. There has been enormous amount of money spent on the market to date on energy management.
“People have always implemented energy management – but they’ve never implemented energy management in response to shortfall generation, or price in the market.
“They have always implemented energy management for other reasons that actually aren’t the true reasons for the high prices in the market.
“So, going forward, if you can connect customers to the underlying problems in the market, imagine investing in all that energy management for the right reason – it would actually reduce the load on the market and make a significant difference to the market.”
This is why it is so important for Matthew, through Flow Power, to connect customers to wholesale energy prices.
Flow Power has recently signed Australia’s first ever large-scale renewable corporate power purchase agreement (PPA) for the Ararat Wind Farm, in south-west Victoria.
The 240MW wind farm, the third largest in Australia, is now operating at full capacity and Flow Power signed a landmark deal to secure 50MW of that output.
This deal puts Flow Power in a position to connect its customers directly to generation sources.
“It’s a really good example of how providing customers with direct access to the same things that traditional retailers have access to, can provide huge savings,” Matthew boasts.
“Customers can come to us and buy a chunk of that power and get the price that is something close to the cost-price of that energy, which is very important.
“We’re connecting customers directly to the generation, and by doing that with a variable generator, which is what we have with the wind farm, its almost the perfect scenario.
“Those customers connecting to that variable generation will respond to that generation and will probably change their behaviours over time. So, some of our biggest customers will actually turn their pumps off when the wind doesn’t blow, which is exactly what the market needs.”
Flow Power is the first Australian retailer to offer this kind of direct connection to clients, but Matthew expects this to change soon.
“I believe we’re the first, but I don’t believe we’ll be the first for that long,” he says.
“Hopefully, through the effects we have on the market, other retailers will follow, because its logical and customers will move rapidly to pick it up and they want to compete, they’ll have to.
“Although this first deal isn’t huge – we would like to take this to 500MW or 2000MW over the coming years – we believe customers will take it up very rapidly in this current market, and our aim is to scale this out and make this the normal, the standard.
“The Ararat wind farm is still quite young in its evolution, but the level of interest we got well exceeded our supply. It is interesting times for us here as we try and push forward.
“We are very ambitiously trying to educate the market on alternatives and that’s probably our biggest struggle is education in terms of just letting people know there is another way.”
With demand response growing on the horizon and the industry in the midst of a significant revolution, where does Matthew see the future of the energy industry?
“This is a very dynamic market that doesn’t behave dynamically, and that’s because 90 per cent of the market is on these fixed retail contracts, so I see it dramatically changing.
“It is probably one of those few industries where a true revolution can occur.
“I see consumers becoming a lot more involved with how they use their power, and it becoming a lot more dynamic, a lot more integrated.
“The idea that customers can come in and own a power plant, or own a chunk of the Ararat wind farm, put solar panels on their roof or install their own battery – is all now entirely feasible, and I think those sorts of things will dramatically change.”