Australian Carbon Credit prices plummet in wake of European crisis.

Australian Carbon Credit Units have fallen for the first time in more than a year due to the uncertainty of the global energy markets. ​

On Wednesday 2nd March, the market closed for ACCUs at $47 per tonne. This is an almost 20% drop after ACCU's reached their all time high this past January.​

Graph showing an intense drop in European carbon prices. Source: BarChart

Leading carbon market experts suggest there were signs the Australian carbon credit market was starting to respond to the recent surge in offset prices in 2021, where they more than tripled.

We have also seen growing demand for locally generated carbon credits, as many corporations are searching for affordable means of offsetting their emissions as they work towards their Net Zero.​

In 2021, the general sentiment was that the market was falling short. We are now seeing increasing issuance to projects that are coming off ERF contracts and optional delivery contracts. ​

The significant uncertainty of today's global market has been triggered by the Russian invasion of Ukraine. This has seen energy prices spike around the world. It also means European emissions units have lost 30% of their value over the past two weeks. Market analysts speculate this is due to traders being forced to sell off their holdings in carbon units to cover the increased costs in energy.

What does this mean for the Australian market?

Although the fall in Australian carbon credit units has not been as pronounced as the fall in the European market, the facts are there. We are evidently seeing the lowest prices for ACCU's that we have seen in over a year.​

Now is the time to be purchasing Carbon Credits to take advantage of these low prices. The energy market is volatile and can change overnight, as we've seen with NEM wholesale prices due to the Eraring Closure last month. ​

Please get in touch with your Account Manager today to make the most of this sharp fall in Carbon Credits and reach your Net Zero goal at least cost.

Open Energy Data

Let the sun shine in.

How new rules will open energy data to customers.

If there’s one thing more illuminating than the electrons delivered by energy companies – it’s the household usage data stored on their servers. Energy companies know how and when customers use energy, deliberately designing prices to make people pay more, while running processes designed to frustrate competition.

It is possible for customers to get and share their data, but the process is long-winded and off-putting. So most people give in at the thought of trying to understand and manage their energy better. In effect, the energy industry enjoys a monopoly over data, and this has allowed them to give lousy service while fending off new entrants offering brighter services. For Australia, that’s all about to change.

Change is in the air

Twenty years ago, energy companies effectively achieved self-regulation by writing the rules they’d be regulated by. They then went on to staff the working groups that designed and implemented any changes to those rules. The result has been to protect their revenues by plugging consumers into twenty years of glacial change.

What’s sparking this desire for change is the Customer Data Right (CDR) movement extending into energy. Open energy data, regulated by the ACCC, with rules written by Treasury, will shift the data ownership from energy companies to customers. From November 2022, energy companies will be compelled to share data with customer-nominated certified third parties.

Energy companies are blowing a fuse – maintaining that the data is irrelevant to customers and that the new mandate will impose unnecessary costs. Their lobbying of Treasury to exclude certain customers and data, and to delay the process, is unsurprising – and in [my/our] view, wrong.

Why open energy data is good

Energy Action believes that opening up energy data is good for customers and for competition – allowing the market to offer innovation. For individuals, energy data could connect children to their grandparents, letting them know the morning kettle boiled or the dinnertime lights turned on. For businesses, technology can aggregate energy data in one place, allowing companies to drive down their costs or find the best way to get to Net Zero emissions. The new rules compel energy companies to share data within tight timeframes – something they’ve never had to do before.

Ensuring data access is secure

CDR is intended to make it easy for customers to access their own data so they can use it how they want. Energy companies’ concerns about sharing customer details with third parties –creating barely believable scare stories –are disconnected from the real world.

The reality is, third parties that want to access energy data will need to be ACCC accredited. They will need to demonstrate that their data defences are robust, and submit to annual audits. And they will need to clearly explain how data might be used – as consent to share is easily revocable. It’s arguable that many online energy data managers will actually become more secure, because of the security standards that have to be met.

Open energy data will drag reluctant energy companies into the internet age, requiring them to accept customer click-through consent, rather than the quaint forms they demand today.

Customers are the winners

As the regulator, the ACCC will need to become more ruthless to ensure that energy companies comply with CDR timelines. Already delayed once, energy companies are continuing to say that CDR is complicated and time consuming. Yet energy companies have been communicating for 20 years using B2B technology, so the technology infrastructure to support CDR is already in place – it just needs minor enhancements.

Energy companies are fighting to minimise losing control over what they view as their own customer data. They’re trying to exclude business customers from CDR, even though it’s businesses that will benefit the most financially.

It’s imperative that the ACCC holds its nerve in response to energy company lobbying. Open energy data will give energy techs the opportunity to build new and better businesses and push energy companies to improve their services. In both cases, the ultimate winners are the customers.

For more information on this subject, register for our free webinar "Open Energy Data - What it means for Australian Businesses" on Tuesday 29th March at 11:00am AEDT.

What can an Energy Consultant do for you?

Smart businesses understand the value of a consultant. Consultants work from a unique perspective.  It’s an outsider’s perspective initially, which allows them to consider issues and opportunities objectively. When you add in years of experience and industry-specific expertise, along with technology that can uncover invaluable insights, a consultant’s value is clear.

That’s why over 7,000 clients have trusted the energy consultancy services of Energy Action. We take a look at some of the key areas that an Energy Action consultant can add value to your business.

Use data to your advantage.

Let’s face it, energy bills can be extremely complex. Whether it’s trying to understand the different network tariffs or getting a handle on which area of your business is the most power-hungry, it’s things you and your team don’t have time for. But it’s meat and drink to an Energy Action consultant. Using our smart Energy Management technology, our consultants can identify energy inefficiencies and unnecessary costs in a business – to both lower usage and reduce spend. In short, our consultants can ensure you:

Make the most of market knowledge.

Like the stock market, the energy market is in a constant state of flux. Through regular monitoring, Energy Action consultants have an in-depth understanding of the pricing trends and can recommend the best time to go to market. Such timely advice recently netted one client a 26.85% saving for its Victoria operation and 22.49% for its NSW site. Market monitoring can help your business:

Procure a more cost-effective energy deal.

Central to Energy Action’s 20 years of independent energy consultancy is our energy buying service: in particular, our Reverse Energy Auction. Through this, we invite multiple retailers to bid for your energy business. It’s generally a short 10 minute auction that you can watch live. It’s fascinating to watch on as retailers battle to win your energy contract, often resulting in a 20% reduction from the first to last bid.

Negotiate across multiple metrics.

There is more than one way to negotiate a better energy deal. Beyond the competitive bids of a Reverse Energy Auction or Request for Proposals, our consultants can also negotiate around different criteria, such as length of contract – anything from 12 to 36-months – discounts on usage, discounts on usage and supply charges, plus a lot more. Even the Terms & Conditions are negotiable. It can all add up to a better energy deal.

Help you move to Net Zero.

If, like many businesses and local councils, moving to Net Zero is a priority, our consultants can help you make the transition. Quickly, if necessary, through our Green Auction. Electricity procured in this way is 100% renewable energy and meets all Net Zero reporting standards.

Our business is saving your business unnecessary energy expense and emissions. So our consultants are always just a phone call away, ready with data-driven analytics and other tools to help you minimise your energy costs. They’re not just energy consultants – they’re your energy partner.

The Reverse Auction: 7 Ways to Reduce Your Costs

Auctions were once the preserve of the grand, the formal, the stuffy, selling items like fine art, antiques and jewellery. Then the internet came along and put a new spin on things. Now, smart businesses are using online auctions to reduce costs – not inflate them – through eProcurement.

Energy Action has been at the forefront of this reverse auction revolution. So just how does a reverse energy auction drive costs down? Here are 7 amazing ways.

#1. Accelerates contract award.

Traditional offline tender processes can take weeks or months, depending on the complexity of the tender. A reverse energy auction, however, can be set up in next to no time and takes only 10 minutes (or up to 15 minutes in some circumstances) from start to finish. This drastically reduces tender preparation time while vastly accelerating the time to contract award.

#2. Ensures real market pricing.

There can be a great deal of uncertainty for energy retailers in a traditional tender. So it’s not unusual to see inflated prices with tender-cost-of-sale margins. Online live energy auctions deliver transparent prices from other suppliers, so it’s clear to all bidding retailers where the market is. The result? Greater certainty for retailers and prices that truly reflect market pricing for the customer.

#3. Increases competition.

The catalyst for competition in the energy market was, of course, deregulation. In the past 15 years or so, as state governments have allowed private companies to compete in the energy market, multiple energy retailers have emerged. Now there are over 30 retailers. Energy auctions have driven competition further as they not only allow retailers to compete on price but also get a clear understanding of how competitive they are in the market.

#4. Standardises offer comparisons.

Before the auction, Energy Action gathers the customer’s energy data and information so bidding retailers know precisely what the energy requirements are. For the reverse auction, retailers submit their offers in a common format, through a single platform. This means the offers are standardised so comparisons are accurate.

#5. Validates retailers.

Another benefit of retailers understanding the customer’s energy requirements before the auction is that it ensures their offer matches those requirements. In fact, best practice reverse auctions incorporate processes that ask retailers to check their offers as well as confirm them in any re-bidding. For retailers, it minimises costly errors and extra work, while for customers it validates the retailers as being able to deliver on their energy needs.

#6. Improves processes.

Reverse Auctions improve the process of energy buying immeasurably. They help procurement professionals establish comprehensive category plans, and, by their nature, reverse auctions standardise RFP preparation, publication and evaluation. In short, energy auctions are more efficient, more streamlined, and more cost-effective.

#7. Reduces costs for retailers and customers.

Ultimately, everyone benefits from online reverse auctions. Retailers: through smarter, more streamlined processes; better understanding of how competitive they are; and knowing that a customer has committed to a contract. Customers: through being able to choose from multiple retailers; accelerating the contract award; knowing that their requirements are met; and above all, achieving a competitive rate.

Smarter, faster and more price-competitive, a reverse energy auction through Energy Action gives your organisation the opportunity to substantially reduce your energy costs and lock in long-term pricing. Perhaps it’s time you said… “Bring on the auctioneer!” 

Pitching in for Movember

It’s hard to believe that it’s 18 years since Movember began its annual crusade in support of men’s health. 2003 was the year Movember first launched with the idea of “growing a mo for a bro” to raise awareness and money for men’s health issues, and in that time this ground-breaking charity has funded more than 1,250 men’s health projects globally. It’s gone from 30 moustaches to 5 million and been embraced by Mo Bros and Mo Sisters around the world. Now, as they say: “We’re taking them all on.” That is: men’s mental health and suicide prevention, prostate cancer and testicular cancer.

CEO shows the way.

One of those supporting the charity this year by growing the mo is Energy Action’s CEO, Bruce Macfarlane. Why is he getting involved? “I guess it’s not so much for me but for the people that it really means everything to: the fathers, brothers, friends who are dealing with some of these health issues. Good health – whether that’s mental or physical – is something we all want, so it’s great to get involved and raise money for this worthy cause. It’s also a bit of fun for everyone at Energy Action as they can see that I’m not enjoying having facial hair on the top of my upper lip!”

Many ways to get involved.

At the heart of Movember is the desire to help men live happier, healthier and longer lives. In order to achieve this, the charity has, over the years, expanded the ways people can get involved. In 2021, amongst the many ways to raise funds, you can grow a moustache (of course), take part in “Move for Movember” –  a 60km run or walk for the 60 men lost to suicide across the world every hour –“Host a Mo-Ment” – create and host your own event – and even “Mo your own way”. It’s all about putting these very serious issues to the front of our minds whilst raising money for those having to deal with them.

Putting energy into our actions.

Also taking part in Movember is Edwin Rogers, General Manager – Sales at Energy Action. Edwin said, “When I first bumped across the Movember concept, I fondly loved the quote “Grow a Mo to Save a Bro”. I decided not only to grow a Mo, but to add a beard as well, as a sign of commitment to this great cause. My wife and kids do not like it at all, but hey, it’s fun annoying them for all they put me through (only joking, family!). 

Many a time, as fathers, we are so conscious of providing the best for our families that we often tend not take care of ourselves. I am doing this to increase the awareness that men, as stoic they tend to be, are vulnerable, especially to mental health and prostate cancer among others. It is a great month of the year to remember that what we do in raising funds will touch not only the lives of our fellow men but in turn all humankind. It is not just about having this Mo but a chance to do More for a Bro.”

From its humble beginnings in Melbourne in 2003 to a global phenomenon in 2021, this visionary charity has made an invaluable contribution to men’s health around the world. If you would like to get involved, check out the website: au.movember.com

5 ways to sell energy consultancy to your CFO

Your company’s CFO is not the only one in the business concerned about the bottom line; but they’re usually the most obsessed. And rightly so. Because no matter what size of business – from SME’s to large multi-state organisations – any efficiencies that can be found, across any aspect of the business, can make a big difference to profitability. So it should come as no surprise that over 7,000 clients – and hundreds of CFOs – have engaged the energy consultancy services of Energy Action. Here are 5 ways that you can convince your CFO to add their name to that list.  

#1. Get energy retailers competing for your energy business.

There’s nothing like a bit of competition to drive down prices. So rather than see your energy bill as an unnegotiable cost, tied to one retailer, see it as an area of your business that, to an energy retailer, is worth competing for. With Energy Buying services like our Reverse Auction or Request for Proposals, we engage multiple energy retailers to put forward pricing options. The result? In most cases, a bottom line saving of 20%+ on costs.

#2. Enjoy certainty, with locked-in prices.

One of the many benefits of our Reverse Auction process is that we ask energy retailers to provide quotes for multiple terms; the most common being 24 and 36 months. The incentive for the retailer to win the business over that timescale – and potentially beyond – is clear, but for your CFO, one of the most important benefits is that the price achieved will be locked-in for the term of the contract. In other words, it provides them with certainty around future energy costs, and all the benefits that entails for forward planning and budgeting.

#3. Add another expert to your team – our expert.

Just as you and your team are experts in your industry, so the Energy Action team of business consultants and account managers are experts in theirs. They have their fingers on the pulse of the energy market, with a range of resources and analytics tools ensuring they have an in-depth knowledge of the market at any given time. As such, they’re always on hand to offer timely advice – for example, if there’s an opportunity to take advantage of lower prices. Partner with us and see how  our team becomes one of your team.

#4. Reduce costs, lower emissions.

With our Energy Management technology you can turn confusing energy data into a positive. Just as your CFO will analyse every aspect of your business, we analyse every element of your energy bill to ensure you only pay for what you use. More than that, we can also show you the energy-hungry areas of your business, to help you uncover potential cost savings. And if your network tariffs change, we’ll review the charges to make sure you still get the most cost-effective tariff for your business. Lowering costs while lowering emissions has to be a win win.

#5. Save time and energy.

Your CFO already has their day filled with their day job. Why would they waste precious time and energy (pun intended), or any team member’s energy, running around – and ringing around – multiple retailers to get quotes that may save you a small percentage on your energy bill? In short, they don’t have to. Let us run around on your behalf.

These are just five of the many ways that an energy consultant like Energy Action can add real value to your business. Are you ready to put the case to your CFO?

What is a Reverse Energy Auction?

We’re all familiar with the idea of an auction, particularly a property auction. You know, where people stand around with a group of strangers and nervously place their bids in the hope of securing their dream home. These auctions are, of course, designed to secure the highest possible bid. So it stands to reason that a reverse auction is designed to achieve the exact opposite: the lowest possible bid.

When there’s competitive friction, the customer always wins.

Energy Action is an independent energy partner for over 7,000 clients; a pioneer in reverse energy auctions. For over 20 years, we’ve used our smart technology and data-led insights to drive down prices and deliver substantial energy cost savings for businesses across Australia and beyond. As in any other area of business, competition is the core driver of price. So how does a reverse auction work? Here’s a quick overview.

1. Competing on a level playing field.

To ensure we’re comparing apples with apples, Energy Action first gathers your organisation’s energy data and information – across all your sites if you have multiple NMIs – to ensure the bidding retailers know precisely what your energy needs are. It’s so much easier, faster and less time consuming that sending out traditional RFPs.

2. Prepping the bidders.

Before your auction day, retailers are invited to register their interest. We ask those that do to prepare a “bidding plan”. Through this, they can see the prices they have to beat on auction day – a great incentive for them to go lower. Invariably, a range of energy retailers will bid, and may include well-known brands such as AGL, Energy Australia, Origin Energy and Shell Energy.  

3. Reducing energy bills in 10 minutes.

Reverse auctions are fast – just 10 minutes, in fact. (The only exception being if a bid is received in the final 3 minutes, which triggers an extra 5 minutes.) The great thing is, you get to watch live as the energy retailers bid for your business. On average, we usually see a 20% decrease between the first and final bids.

4. Future-proofing energy costs.

Reverse auctions provide energy quotes across different timescales. Usually 24 or 36 months, but it can be as much as 48 months, depending on our specialist’s recommendation. As Energy Action has a complete and up-to-the-minute view of the market, the timing of your auction can be driven by our energy professional’s expert advice. Whatever the auction outcome, locking-in your energy costs over the long-term will be invaluable to your bottom line.

5. Making the decision.

When the auction has concluded we’ll prepare a detailed comparison report for you. The report will contain pricing and commercial information, and a recommendation from our Account Manager. Ultimately though, the choice of energy retailer is down to you. Once you’ve made your choice we’ll help you to transfer to your new retailer.

Smarter, faster and more price-competitive, a reverse energy auction gives your organisation the opportunity to substantially reduce your energy costs and lock-in long-term pricing. That can only be good for business.

COP26 and the European Energy Crisis - Lessons and Implications for the Australian Energy Transition

You can date the change in the politics of climate change in Australia to the bushfires that swept the country in the summer of 2019/2020. In the wake of fires larger than medium-sized European countries burning for weeks, the Australian public decided that it was ready to act on climate change. The rain came. We got lucky this time.

Surveys of businesses across the country consistently reflect the importance of this issue. They show that everyone from Board members down to the employees want to change.

 This month the Australian Retailers Association has released research indicating that 63% of their members agree that urgent action is needed to mitigate the impacts of climate change. This strength of this finding prompted ARA CEO Paul Zahra to call on the government to heed the message and get serious about climate action.

The ARA research is corroborated by research from Energy Action, an energy management business that has been helping Australian businesses simplify, clean and lower the cost of their energy spending for more than 20 years. Energy Action released research in August this year revealing that 85% of employees of Australian businesses believe that regardless of what the government does, businesses need to act on climate change.

As we hurtle towards the last chance saloon of COP26 in Glasgow in November, we are watching the spectacle of the minority coalition party hold sway over the Federal Government as our Prime Minister belatedly fixes a binding - but not legislated- target of net zero emissions by 2050.

Based on reports from the National Party room this week, it appears that a strengthening of the existing 2030 commitment of a 26-28% reduction on 2005 emission levels has been taken off the table. This will be problematic for the Australian delegation in Glasgow. It conflicts with the widely accepted projections that Australia will deliver a 35% reduction by 2030. It also conflicts with the emerging consensus across business leaders that the next 10 years will shape Australia's opportunity to become a renewable energy powerhouse.

To be fair, however, the past 14 years of federal politics in Australia leaves us with no doubt that selling the vision of a cleaner world with a clear pathway to get there, is more difficult than you might think.

The politics are contentious: big changes create uncertainty, which amounts to uneven distribution of costs and benefits. The proposed changes mean new engineering solutions are required, as are social and demographic changes.

The sweep of changes is immense, from closing mines and generation assets that bring benefit to communities and the nation, threatening both regional towns and the GDP, to driving change in the skills mix that powers the workforce. The stakes are high: the process of change in our 21st-century economy inevitably creates winners and losers, which may take years or generations to unwind.

Looking beyond the politics, we have the science. Scientists have anticipated the possible increase in temperatures that carbon emissions will cause. It's been articulated time after time that these temperature changes will and are impacting people’s lives. The 2019 bushfires that wreaked havoc in Australia came from years of drought and poor forestry management. This was predictable; however, the scale and ferocity of the fires were not.

Meanwhile, in Europe and across Asia this week, economies are bracing for severe winter and a real prospect of energy shortages. Short term wholesale LNG prices in London, Amsterdam and Tokyo are tipping $AUD 40/GJ. Windfarms are failing as weather patterns change. There are predictions of people dying and factories halting production. If shortages in energy supply eventuate, they will magnify frustration, fuel inflation and cause decision-makers to turn back to emission-intensive fossil fuels to generate electricity. The politics that have allowed progress to date, may change.

In short, engineering a path of significant social and technological change against a volatile change in climate is more difficult than we all expected. In the next breath, it is obvious that delaying the change is not going to make it easier.

So, with the political and climate stakes so high, what can Australians expect out of COP26?

Australian businesses are well integrated to the global economy. We have our significant supply chain and market exposure to the US, Asia and Europe. This integration, coupled with local exposure to energy costs mean, COP26 is looming for all businesses, and many are not prepared.

The two biggest issues likely to arise from COP26 are:

1. the increased pressure on Australia to announce a plan towards net zero in 2050 (or earlier)

2. the beginning of the establishment of an international Cross Border Adjustment Mechanism (a carbon tariff).

Let’s take a moment to look at what each of these means for Australian businesses:

Pressure to adopt an aggressive trajectory towards net zero.

COP26 comes five years after the 2015 Paris Agreement, at which 190 members of the 197 original signatories to the 1994 United Nations Framework Convention on Climate Change (UNFCCC), agreed to do 2 things:

1. work together to limit global warming to well below 2 degrees and to aim for 1.5 degrees, to adapt to the impacts of a changing climate

2. meet every 5 years to review their commitment to this goal and update their plan to reflect their highest possible ambition at that time.

A recurring issue in Australian politics since the ratification of the Paris Agreement in 2016, is whether our commitment to a reduction in greenhouse gas emissions of 26- 28% below 2005 levels by 2030 is enough to limit global warming to less than a 1.5 degree increase on pre-industrial levels.

As we can see playing out in federal politics in Australia this month, pressure will be required at COP26 to push leaders to do today what can be put off to tomorrow. Collectively setting the bar at the lowest common denominator will not deliver the outcome that the planet needs.

Significant and continuous investment will be required over the coming decades to get us there. The IEA estimates the phenomenal sum of $USD 5 trillion per year will be required by 2030, and ongoing to 2050, to convert global energy systems to low emission systems.

The good news is that IEA thinks that energy systems globally can do this without carbon offsets. The bad news is that this will translate into higher energy input costs globally, and replacement costs for end-use equipment as well. Expect to hear a lot more of the buzz phrase “electrify everything” (and then combust hydrogen for what’s left).

In Australia, there are fewer constraints than some nations to supporting an entirely renewable and zero-emission energy system.. The key question is what is the pace of change that the system (including consumers) can support? On the eastern side of the country, State Governments have initiated renewable energy zones to target upgrades in transmission and distribution systems required to support intermittent power and storage. But gas is likely to be a transition fuel, even if we can wean ourselves off coal faster than predicted. As new energy storage comes online (including Snowy 2.0 in 2026 onwards), and the pace of investment ebbs and flows with access to rare earth minerals and engineering skills

We can expect one constant: international LNG prices will set the price for the firming of electricity supply for at least the next decade.

In the background, we can also see as an outcome of pressure to do more sooner at COP26 that the trade-in carbon offsets will increase in value, as will obligations on businesses to purchase them to acquit their emissions. COP26 is seeking to engage finance and develop carbon markets to further support a transition to a zero-emission global economy. The contentions around the claims of what does and does not constitute a high-quality carbon offset will also increase. This development will go hand in hand with an increase in reporting obligations to increase transparency in carbon reporting globally.

Carbon Pricing: the EU proposal for a Cross Border Adjustment Tariff

A significant proposal that will be discussed in detail at COP26 is the European Union’s proposal to implement a Cross Border Adjustment Mechanism (CBAM): a carbon tariff.

The intent of the CBAM is to reduce carbon leakage by equalising the direct carbon costs embedded in products that are produced in jurisdictions that have implemented a carbon price, with products that are exported from a jurisdiction that has no such cost impost applied.

This issues a threat to all Australian exports. The fact that Australia does not have a mandatory carbon price will leave Australian exports at a price disadvantage in those markets. As an obvious, Australian coal exports are vulnerable. If coal buying countries are required to account for the carbon embodied in the products they produce, this puts Australian coal at a price disadvantage compared to the less emissions-intensive energy generation sources.

It is also an opportunity for consideration for all Australian manufacturers. Where previously high energy costs have hampered Australia’s onshore manufacturing industry, a CBAM offers the prospect that energy costs will be equalised around the world, providing Australia with a natural advantage if we can make the leap to a low cost, reliable and renewable energy system.

The matter of carbon leakage is one that COP26 will seek to implement new rules on. However, it is unlikely that the EU CBAM will be accepted at COP26. This is partly because its principle of discriminating between products based on their input costs is at odds with a number of the key principles of the World Trade Organisation (WTO), regardless of how they may have been produced. Indeed, it is unlikely that the EU has proposed the complex set of rules with an expectation that they would be accepted at COP26.

More likely is that the EU has proposed the CBAM system, replete with blank schedules on carbon pricing methods and exempted countries in order to spur negotiation on the issue. Whether this can be achieved over 10 days in Glasgow, remains to be seen.

Find out more as it happens

Join us for an early wrap of COP26 on the 11th of November, as we discuss with Alfa Energy, our partners in the UK, the up-close view of COP26, and also European energy pricing. We will try and dig into the news from Glasgow, and the lessons we can draw from the UK energy transition.  You can register for our free webinar by clicking here.

Long Term Energy Service Agreements; Implications for the Market and Customers

In 2020 the New South Wales (NSW) Government published its Electricity Infrastructure Roadmap as a plan to transform its electricity system through coordination of investment in transmission, renewable generation, storage and firming infrastructure as ageing coal-fired generation plants retire.  Under the Roadmap, the NSW Government is aiming to construct a minimum of 12GW of renewable generation by 2029. A key component of the Roadmap includes running competitive tenders to offer a Long-Term Energy Services Agreement (LTESA) for renewable generation larger than 30MW, long-duration storage and firming.  It is likely that the first LTESA tender would be in 2022.

What are LTESAs?

The specific design of LTESAs is not yet finalised.  In August 2021 the NSW Government released a consultation paper with submissions due early September 2021. 

The LTESA is likely to be a 20-year energy option contract that gives renewable project developers optional access to a competitively set (via a tender process) fixed minimum price for their energy generated.  The LTESAs will bundle energy and renewable certificates.  These agreements are designed to provide longer term revenue assurance to help drive investment in new renewable projects.

The Government is considering the LTESA should include 10 options each of two years in duration granting the renewable project developer the right (but not the obligation) to exercise a swap arrangement (contract for difference) at the agreed fixed price for their energy.  Options would need to be exercised six months in advance of each two year period. 

So in practice, if the market price for energy is low, the developer can exercise the option and receive the fixed price swap for their energy for the two year period.  Conversely, if the market price is high, the developer would not need to exercise the option. 

The LTESAs also intend to include a repayment mechanism that applies in those two year periods when the options are not exercised.  In these periods it is intended that the renewable developer would share a proportion of the higher energy prices with the State and effectively ‘pay money back’ to compensate for money received during those periods where prices are lower.

What are the potential implications of LTESAs?

Some stakeholders have commented on the complexity and risks associated with the LTESAs potential design as well as queries if it will distort the energy markets.

The intention of the LTESA is most certainly to provide protection to renewable developers and investors against low energy prices but it is unclear if this will then necessarily mean consumers may be prevented from benefiting from these same low prices.  The ultimate outcome for NSW electricity consumers is unknown and will be dependent on electricity prices over the 20-year LTESA time horizon.

Given the LTESA is likely to be bundled and include renewable certificates such as Large Scale Generation Certificates (LGCs) they may adversely impact the availability of LGCs for voluntary surrender.  This may result in impacts on the future prices of LGCs and the costs for corporate customers to achieve their net zero ambitions.  Further consequences may also include setting a potential floor price for LGCs based on the fixed prices in the LTESAs.  

Over the longer term, the intention of the Roadmap and the LTESAs is to stimulate growth in renewables and decarbonisation of the electricity grid.  This should eventually reduce prices and diminish the need for voluntary surrender of renewable energy certificates.  However, consumers who currently enter long term obligations for renewable certificates via mechanisms such as corporate power purchase agreements may have unintended risks and consequences.

An alternative approach for consumers that may avoid these risks and consequences would be to consider shorter-term (two to five years) and more flexible products such as our renewable backed Energy Supply Agreement (RESA).  The RESA bundles standard electricity supply with the same flexibility and load as current agreements with voluntary LGCs from a nominated source for a forward term. 

Conclusions

Given the significant scale of the NSW Government’s ambitions, the LTESA will almost certainly have a significant influence on the liquidity and future prices of energy in NSW and potentially broader national energy markets. 

If you have any questions or need advice on procuring renewable energy for your business please contact your Energy Action account manager or contact us by clicking here

Net Zero: How to Move Intentions into Action

As more businesses chart a course towards net zero emissions, we look at some of the steps to actually get there.


Almost a third of Australia’s 300 largest listed companies have now committed to net zero carbon emissions. The rate of business-led net zero commitments has also accelerated in the light of the alarming report delivered by the UN's Intergovernmental Panel on Climate Change (IPCC).


Pledging to net zero emissions is an encouraging step, following up with an action plan is the hard part. We look at five key elements of implementing net zero plans to help businesses take the next steps.


Measure


Achieving net zero emissions by the intended target date starts by understanding your business’ current carbon footprint. This means measuring your energy and emissions data across all sites and energy suppliers.
There is a difference though between energy intensity and emissions intensity. For example, a building may have low energy intensity as measured by the NABERS energy intensity framework and benchmarking tool. However, if the same building is heavily reliant on coal-fired energy sources, it will not have low emissions intensity.


Reduce


As Dr Alan Finkel noted in the July edition of Quarterly Essay that 82% of Australia’s emissions in 2020 are related to fossil fuel combustion. This included electricity (34%), stationary energy (20%), transport (18%) and fugitive emissions in fossil fuel extraction and transport (10%). Businesses must thus examine energy usage, including when and where it is being used. Simple changes like motion-sensing lighting and opting for cost-effective, energy-saving equipment can reduce both emissions and running costs.


Renewable energy


Replacing energy generated by fossil fuels with renewable energy should be a cornerstone of businesses’ net zero plans. Our clients have recently discussed how current low pricing large-scale generation certificates can help them to reach their net zero energy targets ahead of schedule.


Renewable energy options include onsite solar. Because these don’t have standard network supply charges, again, they can reduce both emissions and running costs. Through our Solar Auctions, businesses can have reputable suppliers bid competitively for their required system spec delivering further cost efficiencies.


Procurement


Innovative low emissions procurements options are emerging. For example, we have launched Green Auctions, a cost-effective way for businesses to secure a renewable-backed energy supply agreement (RESA) and speed up their transition to net zero. Businesses can now leverage a standard energy supply agreement to access 50% to 100% firm priced renewable supply.


Some of our clients say that the type of energy they purchase and their upgrades to property and equipment are also opportunities to drive change through their investments and to signal to the energy market that emissions reduction is the intent.


Offsets


Many businesses may have some residual emissions that are either very difficult to eliminate or outside of their control. This is where carbon offsets may help. These involve buying offsets from companies planting trees to absorb carbon or installing renewable energy, for example.


However, the price of carbon offsets remains low due to supply outpacing demand in previous years. This, it is argued, can make offsets more appealing than other more impactful pathways to deeper emissions reduction.
While carbon offsets can also help channel money into new technology, it is important to scrutinise their credentials. For example, would these projects have been financed without an offsets market and therefore do not offer additional environmental benefits?


Stakeholder engagement


Energy Action’s net zero plan also captures waste, paper usage, business travel and catering. Eventually, it will extend to events and conferences and our employees’ commute to work. But to ensure that energy initiatives are ongoing, stakeholder engagement and strong governance are imperatives.


Energy management policies that guide procurement teams through minimum performance or emissions reductions standards are emerging as one way to achieve organisational alignment. If you are considering how to formulate and implement these policies, we encourage you to attend our energy management webinar on 7th October.