With the New Zealand electricity market experiencing flat demand over the past five years, utility company Meridian Energy is looking at a number of strategies to grow its sales. All of these focus on its commitment to being a sustainable business that generates only renewable energy, mostly hydro with some wind energy in both New Zealand and Australia.
One strategy is supporting its customers who want to adopt new technologies, including solar energy. Although New Zealand is not renowned for having a lot of sun, there are many New Zealanders who want to contribute to the global push for clean energy.
Meridian says it has identified commercial customers and networks where solar is a viable option and it has begun negotiating the installation of solar arrays at their facilities. These will be owned by Meridian and if successful would be a model for other customers with similar usage profiles.
Meridian is also encouraging the use of electric vehicles. Although New Zealand has over 80 per cent renewable electricity, its transport fuels are still fossil based. Meridian offers a special pricing plan for customers with electric vehicles that enables them to charge their cars overnight on tariffs lower than they would otherwise pay. The tariffs start from 9pm instead of 11pm as offered by other retailers, it said.
As the number of electric vehicles grows they will increase peak demand and the need for infrastructure upgrades, so delaying charging after the working day to later in the evening and the early hours of the morning makes good use of a time of day when there is ample electricity supply and lines capacity in the system, it said.
Meridian is also increasing the use of electric vehicles in its own business and reducing the number of vehicles it owns. Its passenger car fleet is currently 30 per cent electric and it is increasing this to 50 per cent by June 2018. For 2017-18 it is also planning to trial electric vans for some maintenance activities.
Meridian’s growth plans include Australia and the UK.
Meridian said its Australian business currently represents less than 10 per cent of its annual revenue, but Australia has more growth potential than its retail business in New Zealand as there is a desire by Australian consumers for renewables. The challenge of transitioning to a low-carbon future is putting pressure on incumbent retailers, and creating consumer demand for green electricity that suits Powershop Australia. Meridian said this is a “significant opportunity”. Powershop Australia’s customer numbers have grown significantly in Victoria and New South Wales, and in January 2017 it entered the southeast Queensland market.
Powershop Australia has introduced ‘Your Neighbourhood Solar’, which it says is the first at-scale, peer-to-peer energy product in Australia. This allows customers to buy the excess energy produced by solar panels owned by others in their community, encouraging more uptake of solar.
If the Finkel review provides a framework for policy certainty, Meridian may be willing to commit further capital to a new, large-scale renewable energy development in Australia.
Powershop Australia is servicing the community energy sector and provides maintenance and market service expertise to Hepburn Wind, Australia’s first community-owned wind farm.
On the social side, the ‘Your Community Energy’ program has raised more than $200,000 from customer contributions for seven community green energy projects in Australia.
The software development business of Powershop New Zealand has been separated into a new entity called Flux Federation (Flux). In the UK the Powershop platform has been franchised as a ‘software as a service’ to nPower. Flux is now working on delivering gas retailing functionality to nPower, which will go live in early 2018. Meridian said the ability to deliver the Powershop platform to nPower has given it the confidence to investigate supplying the Powershop software platform to electricity retailers in other international markets including Europe.
The New Zealand Aluminium Smelter at Tiwai Point is Meridian’s largest customer and is essential to maintain demand in the NZ grid. Although its future is in doubt, Meridian’s annual report says the key factors in the smelter’s profitability on balance moved in its favour in 2016-17: international aluminium prices are up 16 per cent, the NZD/ USD cross rate is up 3 per cent, and the smelter’s relative position to Australian smelters improved given the security of supply issues and price volatility experienced in Australia. Meridian said it is confident of the smelter’s future.
Another point is that aluminium smelters are seen as polluting in Australia due to the high coal and gas power in the grid. In contrast, Meridian said “We look forward to the time when aluminium manufactured at Tiwai Point enjoys a price premium for being ‘green metal’ because it is manufactured with such a high percentage of electricity supplied from renewable sources.”
How much these growth options will add to Meridian’s business in still not clear, but several have significant potential and it is good to see management working the opportunities it has. (ASX: MEZ)