by chris | Oct 7, 2016 | Energy
Following a recent article on energy advisors published on LinkedIn by Energy Action CEO Scott Wooldridge, similar considerations apply to the New Zealand Market.
Correlations between the Australian and New Zealand energy markets
Similar to Australia, for a number of years now energy retail margins have been squeezed significantly due to increased market participation and retail options, increased fluidity in the ASX market and subdued energy demand leading to a lack of requirement for more generation capacity. Since late 2012 when over the counter retail prices dropped by around 20% to almost the same level as long term average wholesale Spot pricing, 3 year fixed price variable volume (FPVV) contracts have largely been priced at similar levels year on year.
With a large number of new entrant energy retail brands (some with or without ownership of generation assets) competition continues to increase which has assisted in keeping pricing down and keeping the big 5 honest. As energy consultants and advisors it is our job to ensure that customers get visibility of all available and reputable retail options and provide safety in the knowledge that pricing and contract terms / conditions are independently vetted before being accepted.
The energy retail space is not the only part of the market that is facing competition. In New Zealand there are over 30 companies offering procurement services for electricity and gas. The consultant and adviser industry for energy is not regulated, effectively anyone can put up a shingle and start a business that offers procurement services.
Questions to ask potential energy advisors
The quality of service and outcomes varies drastically. If it were my business, there are only a small handful of organisations I would consider using in New Zealand to obtain an energy contracts on my behalf. The following are few questions I would ask before engaging a professional services company to act on my behalf:
1. Does the company you are working with have certification with the Financial Markets Authority.
Post global financial crisis, New Zealand made a number of changes to the Financial Securities Act, this extended to any company offering trading or advisory services around energy futures, derivatives and wholesale market products. To comply with the act, companies must hold accreditation under section 38 as this ensures companies have a high standard of conduct and expertise when advising customers of their options.
2. Does your adviser or Consultant review the entire market?
There are currently 29 energy retail brands in New Zealand, however only around 15 or so can supply business and not all of these can supply all regions in NZ. A smaller number again can supply natural gas and LPG however, many consultants only obtain pricing from favoured retailers meaning customers may only see pricing from 4 or 5 companies. In cases like this the customer may be missing out on the best available pricing and contract terms from reputable retailers due to sub-par market evaluations.
3. So you get a report that only outlines the price of contestable energy…
Around 35% of electricity costs and around 40% of natural gas costs relate to third party charges such as transmission and distribution. While these costs are not contestable charges there may be opportunities to reduce the impact of these charges i.e. aligning capacity so it better matches peak demand or required throughput. Some networks also have the option for customers to move load groups to better suit their energy profile; this can also lead to annual savings. Are these charges being reviewed as part of the procurement process by your consultant or adviser?
4. Energy market intel – what’s happening?
The rate of change in both energy markets is only increasing. While we can’t necessarily predict what will happen, it is still important to keep your finger on the pulse. Does your adviser or consultant track wholesale pricing, the forward ASX curve, industry developments? Do you get regular updates in these areas? Knowing when to go to market and timing it right can have a massive impact on pricing obtained, it should not be a matter of waiting until the end of your contract term before looking at pricing as in most cases this will limit your options as you have to take what the market is offering or risk default business prices.
5. Contractual terms and conditions
While the Commerce Commission recently cleaned up anti-competitive clauses in energy contract, such as automatic renewals, right of renewals and right to match terms, there are still a few gotcha clauses to look out for, such as maximum and minimum quantities, assignment and conditions of force majeure. Does your consultant outline these issues in their procurement process and how they may impact you as a customer in the long term?
6. Large Energy Consultant or Adviser versus small Consultant or Adviser, does it matter?
A better question would be how many procurement exercises does the company you are looking to engage with conduct a year? The energy market is highly dynamic, energy retailers are entering and leaving the market at unprecedented rates and pricing models and practices are changing daily. If the consultant or adviser is not pricing in the market on a regular basis, then you and they are likely to be caught out by the market changes. Look for companies conducting over 100 procurement exercises per year, Total Utilities as an example conducts over 500 procurement exercises per year.
7. Insured or not?
For companies providing professional services, they should hold public liability insurance and professional indemnity insurance of more than $2 million dollars.
So are energy advisors friends or foes?
Energy advisors and consultants should develop a relationship with their customers built on trust. This trust is based on significant market knowledge and intellectual property, creative business problem solving and transparent processes while upholding strong business ethics to ensure sustainable business and commercial outcomes.
This is achieved by market wide reviews, in-depth reports and financial analysis to ensure that all angles are covered and customers get the best possible information to make strategic business decisions.
by chris | Jun 14, 2016 | Energy
The 2016 Energy Management Association of New Zealand conference was recently held in Auckland. This was attended by myself and Pushkar Kulkarni from Total Utilities along with Dr Paul Bannister from Energy Action. Paul was presenting as part of the speaker programme. His presentation can be found here along with his review of the event here.
Productivity and partnerships
The program consisted of 30 speakers over two days. Overwhelmingly this year’s theme was on productivity and partnerships, the New Zealand productivity commission gave energy management a pass mark but added comments of “must try harder”.
In a small but dynamic market like New Zealand, partnerships are definitely key to making business successful. To be effective we can’t do everything ourselves. If we do, we run the risk of being the old cliché, a jack of all trades and a master of none.
Working with companies that hold specialist expertise can assist in writing business cases that are technologically and financially robust. Having a solid business case allows the business to move forward and instigate change. The right provider can be relied upon as a trusted adviser in their specialist field.
Strategic Energy Management
With energy management, a compelling story will provide qualified evidence, measurement and assurance. This evidence can be used as a strategic tool by company executives. It is important to consider and answer questions under the following categories:
• Strategic
• Economic
• Commercial
• Financial
• Management
Energy management and optimisation must create outcomes that lead to strategic value. All work must consider the wider business strategy and take into account other business cases and projects that are being run in parallel. It should not be used as a mechanism by the engineering department to merely justify the purchase of new gadgets, widgets and kit. This view is echoed by my colleague David Spratt when companies review their IT asset bases.
Total Utilities, as fully independent consultants, are able to give unbiased advice to optimise energy consumption ensuring businesses maximise the value of their energy using assets. We have specialist, qualified staff who are experts in energy efficiency and can assist in building a comprehensive business case.
For more information on how we might assist your business in driving more value from your energy consumption please contact myself on 021 650 336, [email protected] or Pushkar Kulkarni – Sales Manager | Energy Efficiency on 021 273 4337, [email protected]
by Paul Bannister | Jun 13, 2016 | Energy
As the New Zealand agents for Energy Action we are able extend our vast market knowledge, expertise and business and financial analytics to Trans-Tasman customers.
The following is a guest post written by Dr Paul Bannister from Energy Action regarding the recent Energy Management Association of New Zealand conference that he recently attended along with Total Utilities.
I spent most of last week in NZ attending the Energy Management Association of New Zealand conference, and was once more reminded of how well the Kiwis do some things.
For starters, there was the conference itself. Two days of excellent speakers – enough to keep my attention for probably 75% of the time, which is well above average for a conference. Over 100 in attendance including practitioners, clients, suppliers, etc. Easily a match for many of its peers in Australia, in my humble opinion.
Then there was the EECA Awards night. This is energy-efficiency-in-New-Zealand’s “night of nights”, with 11 industry sponsored awards covering all aspects of energy efficiency, showcasing many excellent projects. As an event, this is way beyond anything we have in Oz, with a comedic MC (and indeed a fairly comedic Chairman of the Energy Efficiency and Conservation Authority), big production values, etc etc. Minor grumbles about food aside (they starved us until 8:30pm and then served us canapes…), it was an excellent evening and an insight into many project types you don’t see in Australia, particularly in the industrial and institutional sectors. Most obviously, the Kiwis are well ahead of us when it comes to biofuels, prompted particularly by the lack of reticulated gas in the South Island. In general I’m of the opinion that NZ has a greater focus on industrial energy efficiency than I’ve seen in Australia; while their commercial sector work has some catching up to do.
Of course there is also a paradigm difference in NZ: their electricity is already mainly hydro so they have the march on Australia in terms of greenhouse intensity, even allowing for the sheep. So whereas we seem to think of gas as being clean, for them it’s actually more emissions intensive than electricity.
And then there was the forceful reminders of how much smarter their electricity market seems to be than ours. Before I rant on, just consider this: the purpose of a market is to enable buyers and sellers to meet and determine a natural price. So if you have too much generation relative to demand, electricity is cheap, while if there’s too much demand and not enough generation electricity becomes expensive. The ultimate reflection of this dynamic is the spot market, which is the price that electricity sells at on a 15 minute basis. Of course, normally we don’t see this because electricity retailers on-sell electricity to us at essentially fixed prices; if the spot market goes crazy, they take the hit on our behalf. But that makes no sense because as users of electricity we can respond to a spot price signal, so we need to have the ability to access that signal. In NZ, it is normal practice for large energy users to have some direct spot market exposure and indeed it is possible to buy electricity at a spot market linked price at a residential level. This sort of transparency is missing in Australia, and indeed we are a long way off from getting near to it. But in a generation market with increasing exposure to the variability of renewable generation, it’s increasingly important that we catch up with the Kiwis and join the 21st century.
Overall, I’m inclined to make an observation: Kiwi ingenuity has been driven by the necessities of working in a country with a hydro-dependent electricity system that goes into crisis around once a decade; that doesn’t have the population or gas reserves to support gas infrastructure across the South Island; and that has comparatively limited coal reserves. Economically, when the world catches the sniffles, NZ tends to catch double pneumonia because it the economy lacks the inertia provided by a large mining sector. Necessity is the mother invention and the Kiwis have responded by being smart and adaptable.
It’s hard not to contrast this to the situation in Australia where we have rich fossil fuel reserves, an electricity network that is stable to the point of stagnation and of course a mining industry that has been propping up our lifestyle for a half a century. So whereas the Kiwis have had to be nimble, it’s hard not to look at Australia and think we are just a little too secure and comfortable for our own good. Now I’m not knocking that security but at times I think we need to ask ourselves whether we have become complacent. Australia has many great minds, many great innovators and many great opportunities but a bit of a track record of forcing them overseas because the local policy and economic environment isn’t as supportive as that of our trading partners. We need to learn from the Kiwis and embrace a little bit of the frisson of excitement that change and instability can give so that we can be leaders of positive change rather than the ballast of resistance and intransigence.
by pushkar | Apr 5, 2016 | Energy
NABERSNZ is a scheme that measures and rates the energy performance of New Zealand office buildings. A Certified Rating ranges from 1-6 stars and represents an in-depth assessment of energy performance over 12 months. NABERSNZ Certified Ratings can be awarded to whole buildings, base buildings or tenanted areas.
The Total Utilities team comprises an accredited NABERSNZ (Trainee) Assessor who can assist any commercial building owner, developer or tenant in completing a building rating. Our services also extend to offering technical advice on how rating can be improved and working with the stakeholders in delivering an outcome that achieves measurable results.
Deja Vu! NABERS uptake in Australia and New Zealand
We work closely with the Projects and Advisory Services of Energy Action lead by Dr Paul Bannister who was involved in the development of NABERS in Australia and in the adaptation of the tool to NABERS NZ.
Paul has seen several parallels between uptake in both countries. The following article was originally published in the March 2016 edition of The Advocate, the magazine of the Property Council New Zealand and subsequently on the NABERSNZ LinkedIn Page which can be seen here.
Photo by Nick Cross
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by RichardGardiner | Sep 1, 2015 | Energy
Article extract from the September issue of Business Plus Magazine published by the EMA.
The Changing Face of Electricity Supply Worldwide: Can NZ Compete?
By Richard Gardiner and Hans Buwalda
New Zealand is advanced on a global scale in generating most of its electricity from renewable sources rather than the less clean, non-renewables such as coal and other fossil fuels.
But in committing to do better, there is an economic price to pay.
New Zealand is a small, advanced but geographically remote First World economy. Renewable electricity generation based on the use of hydro-electricity, geothermal energy and wind power, etc, typically accounts for about 85 per cent of New Zealand’s total electricity generation.
The proportion of renewable sources has been growing steadily in recent years, with the commissioning of new geothermal and wind power stations and the progressive retirement of aging coal and gas-based generation. This trend now includes the planned closure of Contact Energy’s gas-fuelled Otahuhu B Power Station.
With such a high existing renewables component, it is much harder for us to achieve significant reductions in our electricity-related CO2 emissions/kWh than it is for larger, less remote trading partners overseas.
World catching up
Governments are committed to creating a new international climate agreement at the United Nations in Paris this coming December. In preparation, governments have agreed to publicly outline what climate actions they intend to take post-2020. These are their Intended Nationally Determined Contributions (INDCs), which will largely determine whether the world achieves an ambitious 2015 agreement and is put on a path towards a low-carbon, climate-resilient future.
In its INDC, New Zealand has committed to reduce GHG emissions to 30 per cent below 2005 levels, in the next 15 years by 2030. The likely cost to the New Zealand economy of meeting the 2030 target in terms of GDP is greater than that implied by other governments’ targets. This is due to a number of factors, such as already achieving a high (+/- 85 per cent) level of renewable electricity generation, plus the fact that almost half of New Zealand’s emissions originate from agriculture.
The emission reduction pathways on which other countries’ targets are based differ from the pathways possible for New Zealand.
A significant part of both the US and the EU commitments is based on opportunities for reducing the carbon-intensity of electricity generation. The current proportion of electricity generated from renewable sources in the US is 13 per cent, and in the EU is 25 per cent. Clearly there is significant scope for CO2 emission reductions in both those major economies through further increases in renewable electricity generation, particularly as much of that will substitute for electricity currently generated from coal.
Already, the mix of renewables and non-renewables used in electricity generation is changing globally.
Back in May, BloombergBusiness in the US reported that, “The race for renewable generation has just passed a turning point. The world is now adding more capacity for renewable power each year than coal, natural gas and oil combined”.
It also advised that, “solar power makes up less than 1 per cent of the electricity market today but could be the world’s biggest energy source by 2050 according to the International Energy Agency. The question is not if the world will transition to cleaner energy, but how long it will take.”
The New Zealand emissions trading scheme (ETS) is due to be reviewed this year. Achievement of our INDC highlights the need to address our domestic policies. It is clear the current ETS will not, on its own, ensure New Zealand’s progression to a sustainable, low-carbon economy.
Supporting sector-specific policies and measures are also required. It may be that some sectors should be included in a different way in the ETS.
Tips for NZ businesses
New Zealand business customers of electricity and gas need to focus on:
• Price minimisation – by checking the market systematically via a professional procurement process and bulk purchasing power.
• Usage optimisation – by monitoring usage in detail, highlighting potential kWh reductions and then taking effective action utilising energy specialists.
• Wider environmental considerations (for large organisations at least).
Large organisations, whether public or privately-owned, need to consider their environmental impact on the wider community, and especially their contribution to lowering greenhouse gas emissions (GHG), particularly CO2.
Richard Gardiner is managing director of Total Utilities Management Group Ltd, email [email protected]
Hans Buwalda is managing director of Environment Health & Safety Consult, email [email protected]
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