New Zealand's first Energy Exchange launches - but can it stay charged financially?

Dunedin-based Energy Link has launched a new website that compares energy prices. But with a target audience of businesses that spend $75K and up a year on power, can it survive?

It’s a hard lesson many businesses have learned – anyone who spends $75,000 or more a year on electricity costs can share horror stories on sourcing competitive offers from power providers. But like a proverbial lightbulb being switched on to signify an idea springing to mind, there’s a Kiwi company that reckons it has a solution.

Dunedin company Energy Link has launched the Energy Exchange, a web site where businesses with large electricity bills can contract electricity through a reverse auction or online tender process. The site uses a mathematical algorithm to process and analyse electricity offers across thousands of sites on a single contract, similar to how a price comparison site like Skyscanner can find cheap airfares. All of New Zealand’s major electricity retailers are included on the site, including Mercury NZ, Genesis Energy, Contact Energy and Trustpower.

Energy Link managing director Greg Sise believes the Energy Exchange will especially help businesses spending less than $500,000 a year on electricity. “Over the past 20 years our client base has been limited to very large users, those spending millions a year,” he explains. “Businesses spending under [the] $500,000 bracket just couldn’t justify the time and cost of engaging an energy consultant or tendering with more than a couple of retailers. Our platform removes the barriers to market for businesses spending as little as $75,000. Our belief is that these companies can expect to get savings of five to 10 percent on their electricity contracts relative to doing it themselves.”

One of those companies that may benefit from the site is Scott Technology. Procurement manager Jason Schurmann thinks the site can help drastically cut the amount of time it takes to secure energy contracts for the company. “At Scott Technology we have several sites across the country,” he says. “It takes me at least three to four weeks every year to manage our electricity contracts. It’s a hideously time-consuming process. It’s far too time-consuming to go out to all retailers individually, which means we aren’t 100 percent confident we’ve got the best deal. So the fact that the Energy Exchange has all the retailers in one place is attractive.”

Energy Link's Greg Sise.

Due to its price comparison nature, the Energy Exchange site can also appeal to some large businesses with annual electricity bills in the millions of dollars. With New Zealand’s largest energy consumer, the Tiwai Aluminum Smelter in Southland, among its clients, the Exchange has already helped facilitate power contracts equivalent to more than two percent (849 GWh per annum) of New Zealand’s total electricity usage. The comparison nature of the site naturally creates competition between retailers, which in turn can lead to lower rates.

That’s the hope, anyway. With Sise embarking on a nationwide tour to present the idea to businesses at a series of workshops, it remains to be seen if the concept has enough juice to stay on.

Tiwai Aluminum Smelter.

That could be a tall order. Skyscanner has had declining revenue growth for the past three years after a surge of initial interest. Revenue for the company grew 28 percent to US$183 million in 2015, compared to a 42 percent increase in revenue in 2014 and a 96 percent rise in revenue in 2013. The company still plans on an initial public offering in 2017, but it remains tot be seen if that will go ahead.

But the Energy Exchange considers its position as the only electricity price comparison site of its kind in New Zealand, coupled with two decades of experience in the industry, enough to keep it going. But, of course, it can’t flip the revenue switch on its own.