Last Thursday 17th November our new Energy Exchange web site ran New Zealand’s first live internet reverse auction for electricity supply for the Southern Hemisphere Proving Ground, attracting bids from six retailers.
Southern Hemisphere Proving Ground 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.
To be perfectly 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 ours locally developed platform which can run small and large auctions, and complex paperless RFPs (tenders).
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.”
Sitting around our terminal at Energy Link during the auction, it was very exciting to see our new platform working in real-time, the result of a number of years of development work, testing, refinement and more testing.
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.
Greg Sise, Managing Director