A business case for energy retailers to help decarbonise the C&I sector

All eyes are on the commercial and industrial (C&I) sector, and the importance of decarbonising the third of total electricity demand that it collectively makes on the grid.

The Victorian Government today announced an initiative to consult with the sector on the potential benefits of a Market Facilitation Platform, to help businesses access renewable power purchase agreements (PPAs).

Jessica Venning-Bryan, Chief Customer Officer of Flux Federation, a software-as-a-service provider serving the energy-retail sector, approaches the challenges from a different perspective. She believes that however C&I customers approach their transition to renewable energy, they will need the services of energy retailers, and that retailers must provide new, tailored and flexible services that bridge the gap between businesses’ decarbonisation commitments and achieving a reliable renewable energy supply.

She spoke with pv magazine Australia about the need for technology that enables innovative tariff design and accurate billing across all of a C&I customer’s energy requirements — including reverse flows from their own renewable generation.

pv magazine: What are the pain points, the C&I industry is facing in relation to energy supply?

Jessica Venning-Bryan: Anyone with some commercial volume load is really starting to turn their thinking to how they’re going to decarbonise. Australia has seen a lot of really promising commitments from some big companies, like Coca Cola Amatil and Coles supermarkets that have committed to 100% renewables within certain time timeframes. 

They’re good examples of companies that have taken a public stand, but they really only have two ways to achieve that: they either do it via a power purchase agreement PPA with a renewable generator, or they need to do it behind the meter themselves — or a combination of behind-the-meter and purchased green energy.

It can be hard to make progress around getting the right sort of commercial construct for a PPA in place.

Going behind the meter, the investment required to build a plant big enough to meet the load that many C&I customers have is quite significant, and that plant requires maintenance. So the mixed model is probably the most realistic — where you do some of that behind-the-meter generation yourself and then you’re purchasing some of it in the market. 

So these big companies are at an interesting juncture where there’s a lot of public pressure, and their license to operate more broadly is tied up with making a commitment to decarbonise, but the question becomes, “How are we actually going to do it? What makes the most sense?” 

Inevitably, whichever option you take, you still have to have a billing relationship with a retailer of some sort. Most billing software currently used by retailers is not sophisticated enough to accommodate this new world. C&I has always been the poor cousin when it comes to investments in software by the energy sector. 

Why is that, when they can be such a big portion of a retailer’s revenue?

Mainly because they are largely account managed, so they’re very relationship-oriented customers. Mass market customers are much more likely to switch if they have a bad customer experience that can’t be smoothed over; and residential consumers also have different expectations around what service looks like, how they engage with their utility, what their app does. Those services have kind of been put to one side in the CNI sector, but it can no longer work like that. 

The C&I sector now, because of the public commitments they’ve made, are having to come up with ways to both meet their own energy needs, and do it in a way that’s commercially viable, which means they’ll be asking and expecting more from their retailers. Then we come back to this conundrum that exists right across the sector, which is, how does the software that we use to manage our customer relationships, including billing, how does it adapt to these new technologies.

What do you see as the low hanging fruit — industries that could provide great demonstration points for innovative tariffs and perhaps flexible billing?

Any business that has high cooling needs. So, groceries, for example, cold storage, anything dairy, anything that has a very high refrigeration load, because that has to run 24/7. So, there are other industries that are high load but only during the main working hours of the day. Manufacturing is a good example; although some manufacturing plants run 24/7, lots of them just kind of work, either 16/7, or 16/5. Refrigeration is the big one, then manufacturers that do run 24/7, and big data-processing warehouses. Data processing is becoming more and more relevant as technology businesses move into Australasia from other parts of the world and as Australasian technology businesses grow. And of course, you have to address all the companies that have really started to fly the flag for looking at their own energy consumption and their carbon footprint.

When we start thinking about climate change, it’s super important that people are doing their bit at the household level, but huge gains are going to come when these big companies start to decarbonise, and it’s in everybody’s interest to support them to do this. A third of energy demand in Australia comes from the commercial and industrial sector. That’s why Flux Federation and our parent company Meridien Energy [New Zealand’s largest gentailer]  are really interested in this sector because we know it’s been underserved from a technology point of view, and we know that globally humankind has most to gain from making it easy for them to decarbonise.

So, what’s missing in the retailer-C&I-consumer relationship? 

From the retailer point of view, when they have customers that are doing some things behind the meter, but they also have to top up their load, how do you actually juggle those two things? In order for the retailer to have a commercial relationship with the customer that makes sense for both parties, it requires a bit of innovation around how that tariff is designed. If a company has perhaps invested in PV and a battery, there are still challenges around the intermittency of renewables. Bbatteries make that a bit easier to manage, but it doesn’t completely go away, which means in that commercial relationship between the retailer and the customer they need to design a tariff that isn’t time bound but more load oriented. There are lots of different ways you can do that, but you’re automatically into some quite complicated tariff structures.

Our FlexiBill product is a truly flexible interface for retailers to design those tariffs— they can almost have client-based tariffs tailored to the specific needs of a site, which is super important. You’re not going to show up at Coca Cola factory and a Unilever factory, for example and see exactly the same setup with exactly the same demand. They could be in different states, where the weather conditions are different, which means the generation environment is different. 

So really the sector is going to find itself having to be far more bespoke to particular client needs, and they warrant it because they are big consumers, so they’re profitable for retailers. But operationalising a highly bespoke suite of tariffs … it might be fine to do it once for one customer but how do you do it for 1,000 or 3,000 or 5,000 customers. Being able to offer those very bespoke tariffs that are very much designed around the generation portfolio of a particular C&I business, and very much tailored around their particular consumption needs, is where the market needs to go, but they have to have software that enables them to do that and that’s what we offer. 

How can flexible software at the retail level enable more renewable energy uptake?

It’s all around creating a commercial environment that works for everybody who’s participating. We’re not going to see more commercial and industrial grade customers invest in those renewable technologies behind the meter unless they can actually make a business case add up, and being able to make a business case add up depends on what you’re going to be paying for the times when you’re not producing your own energy, and also potentially your ability to export that as well, at a competitive rate. PV-to-grid or EV-to-grid or battery-to-grid; those sorts of flows have to be commercially negotiated between the retailer and the client as well. So, until the retailer can innovate around a particular customer, the customer is very unlikely to find a business case that makes sense for them to invest in renewables, so they’re not going to do it. All the things in the system have to come together in order to get the customers who are consuming energy to invest in renewable technologies.

What level of awareness do you encounter at the energy retail level? 

I’m not sure whether they’re joining the dots between these commitments that are being made in the C&I customer space, and how they can enable them while achieving a commercial outcome for their businesses.

Nobody needs to become a charity [in the name of mitigating climate change]. The system has to make sense for everybody, and retailers provide an important set of services that they should be able to charge for, but they do need to keep up with these emerging changes, and the willingness of some of these big customers to invest, and be able to accommodate that, but also create good outcomes for themselves. 

We see time and again, retailers doing very manual, very labour intensive things to make parts of their operations work with a more modern system. But you just don’t have to do that anymore. There are lots of aspects to the value of investing in a more modern software stack to run your business. I think the thinking is there but I still don’t know that people are really understanding the operational reality for their teams of serving this emerging C&I customer, and some of the bigger questions around decarbonisation, and actually how simple it would be to bridge that gap.