The manufacturing sector consumes large amounts of electricity and costs business owners thousands of dollars a year. however, a new competitor on the scene is about to take on the big players. Mike Wheeler explains.
Australia’s manufacturing sector accounts for just over 19 per cent of the country’s electricity consumption, according to the 2016 Department of Industry, Innovation and Science Australian Energy Update statistics.
The residential market consumes only seven per cent of the market, which puts into context just how much energy manufacturers need to keep their businesses running and the associated costs the come with it.
It was knowing this that got Matthew van der Linden thinking “there must be a better way” for manufacturers to manage their power consumption. Thus, Flow Power was born. Flow Power gives companies access to wholesale prices that are usually the purview of retail energy suppliers.
“We recognised very early on in the piece that a great way to save customers money was to open up customers to the wholesale electricity market,” managing director van der Linden said. “But to really scale it up, we had to create a retailer.”
Being at the mercy of market forces and nature is no way for mining companies that operate at their maximum. Manufacturers need an assured, constant power supply to keep their businesses on track. Power is also a high fixed cost that eats into the bottom line of profitability.
Flow Power allows consumers to access the wholesale market with all the benefits that entails. The company offers two solutions for consumers – the Freedom package or Mastery.
Freedom is a spot market price that can save manufacturers tens of thousands of dollars over a four- or five-hour period every year.
“The average price for electricity is around about eight cents a kilowatt at the moment,” van der Linden said. “Very rarely, for short stints it can go up to $14 a kilowatt an hour. When you convert that $14 a kilowatt hour to an operation that is running megawatts per hour, you’re talking tens of thousands of dollars in savings over that small period of time.”
Flow Power helps operators spot those times so they can then adjust their energy needs. For example, this might entail a manufacturer to shut down a high-energy use plant over those short periods of time.
Alternatively, they can shift to local generation sources, like a generator or battery storage. It’s been a challenging project, van der Linden explains, but Flow Power has put a lot of effort into making the process easy to follow.
“There were regulatory issues and billing issues and also technology issues,” van der Linden said. “We’ve actually put a huge effort into developing our kWatch Intelligent Controllers that can go onsite and provide signals about when to pump, or when to start the generator, or when to shut down, or when to shed load.”
Companies can cash in on the high prices, too. If you have a generator, you can make money during those high-use times by generating electricity and putting it back onto the grid.
“If you’re generating power and putting it back into the grid then you will be earning $14 KW hour,” van der Linden said. “It is a very good market for anybody who has a generator.”
Van der Linden said another benefit of the spot market is that it can help alleviate outages similar to those have occurred in South Australia.
“The power market is one of those markets where you have to generate enough power to meet consumer needs,” he said. “The mechanism the market has designed to fix that was to allow the price to go through the roof for very short periods of time.
“This is done to encourage consumers to reduce their load. However, traditional retailers have shielded consumers from this price signal. [Consumers] don’t see it.
“You sign up a fixed contract and nobody cares what’s going on. Essentially what happens is SA gets blacked out. Fixed price electricity means inefficiency in the market and they stop it working effectively. What we are doing is creating a connection between the two.”
He goes one step further to reiterate the point, using the South Australian blackout as an example.
“In February, the AEMO intervened and cut power to homes,” he said. “We estimated that if we had had 500 industrial customers responding to market signals at that point in time there would have been no shedding. It would have enabled the system to cope more easily.
We did have customers in South Australia at the time, but not enough to make a difference. The [types of companies that could make a difference] are relatively small industrial customers who spend about $100,000 per year on electricity.”
Then there is the Mastery package. This follows the more traditional route taken by business. “[Mastery] is more like what most people are used to.
It puts a ceiling on the price you can be charged but means you get access to the low points of the market,” van der Linden said. “You have some enterprises out there that have to have assurance about their energy supply.”
However, van der Linden reiterated that both products are popular with industries.
“Historically, most are on the Freedom product,” he said. “It really is industry specific. In most industries you will have a mixture of both.
“They actually work very well together. You might even have some sites that need Mastery and some sites that need Freedom. We can do both without any issues at all. You can come up with a solution easily. It depends on the customer.”
While Flow Power is a champion of both types of deals it is continuing to find new ways for customers to reduce their energy costs.
The company is giving customers direct access to power from solar plants through solar power purchase agreements (PPAs). It makes sense with Australia being one of the sunniest places in the world. This model offers not only fixed prices but fixed contract lengths, too. And it is the length of the contracts that might surprise some consumers.
“If you put solar panels on your land or roof, it can be complicated and expensive,” van der Linden said. “Alternatively, the solar plants can be built where the sun shines best and any commercial customer in that state can sign up.
“Because it’s a large solar farm, it is quite cost effective. It fully competes with onsite solar as far as price. You sign a 10-year contract and you get your energy fixed for 10 years. This allows companies to budget accordingly.”
However, consumers have to realise that solar will only cover part of a company’s energy requirements.
“Solar doesn’t cover all needs,” van der Linden said. “If you are a 24-hour operation like some companies are, you’ll still need to deal with the other methods.”
Van der Linden is adamant that Flow Power is on the right track and using the right formulas to make sure Australia’s energy needs are not only streamlined and dependable, but transparent to the consumer.
He doesn’t expect to make too many friends in the energy market, but has no regrets about Flow Power’s approach. To him, Australia’s manufacturing and energy sectors can have a complementary relationship – one that has been a long time coming.