New Zealand’s First Electricity Auction

21 November 2016

New Zealand’s First Electricity Auction

Dunedin company Energy Link launched the Energy Exchange web site (http://www.energyexchange.co.nz) in July of this year, and last Thursday 17th November it ran New Zealand’s first live internet reverse auction for electricity supply[1]. The auction has similarities to auctions held on popular web sites that most people will be familiar with, but the winning bid is the lowest rather than the highest.

The auction was held on behalf of Southern Hemisphere Proving Ground (http://www.shpg.co.nz/) which is an award winning automotive proving ground located on the slopes of the Pisa Range near Wanaka, offering facilities for winter testing, from June to September, for automotive, component and tyre manufacturers. SPHG has substantial electricity demand, especially over winter, and has a longer term goal of using 100% renewable energy.

SPHG’s auction ran on Thursday morning for 30 minutes then auto-extended three times as bids were submitted in the closing minutes. Six retailers chose to participate and submit bids into the auction.

SPHG’s CFO Paul Merriman said that he was very pleased with the outcome of the auction, which will reduce electricity costs substantially over the next two years: “The entire process was easy to work through and means that we have very favourable electricity rates contracted for the next two years. It really was simple, required very little input from me, and watching the auction run through was actually quite exciting.” Mr Merriman also said “I’ve worked with Energy Link before and I was confident they would run a secure, robust process and deal with any issues that might arise.”

The Energy Exchange works for electricity consumers who are large enough to get non-standard rates from retailers for fixed term contracts for up to three years, either because of their total energy spend (typically $75k or more) or because they have many sites to supply.

The Energy Exchange can handle thousands of sites in a single procurement. Since its beta launch late last year the Energy Exchange has run procurement processes for over 100 government and private sector organisations covering more than 7,000 sites consuming a total in excess of 900 million kWh per annum, equivalent to over 2% of New Zealand’s total annual energy consumption.

The electricity market is complex and most larger consumers lack the knowledge and resources to contract for electricity supply at the best prices. Most larger consumers also don’t realise there are ten or more retailers that are active in this sector – the Energy Exchange currently has ten retailers participating at various levels.

The new auction process potentially has benefits for retailers, as under the manual RFP approach (request for proposals – like a tender) currently in wide use, there is often no opportunity to submit additional pricing after the RFP closes: whereas this is part and parcel of an auction, leading to more efficient outcomes for customers and retailers.

The Energy Exchange provides users with complete flexibility, from the simplest case of running one auction for one site, all the way up to running a mix of auctions and paperless RFPs for thousands of sites.

www.energyexchange.co.nz

[1] To be clear, we understand from a couple of electricity retailers that they have participated in auctions for NZ sites where the auction has run in Australia on behalf of an Australian parent company. Ours is the first live auction to run in NZ, on a locally developed auction and paperless RFP platform.

ends

© Scoop Media