Peer-to-peer trading: how it could address the rising cost of electricity for small businesses

Electricity costs

The opportunity for small to medium sized businesses to make the switch to solar and batteries is stronger than it has ever been. Similar to households, small businesses typically pay high electricity rates and unlike big businesses, possess less negotiating power on energy retail costs. Small businesses also tend to have tighter budgets when it comes to managing overheads, which means investing in energy efficiency needs to be considered even more carefully.

In a climate of increasing power prices (as of 1 July, power prices in Sydney rose 16 per cent and in the ACT 19 per cent[1]) – a growing number of small businesses are looking for an alternative to the traditional power supply model. Solar and batteries can now be a cheaper alternative to grid power and therefore offer an increasingly compelling and economical investment. The cost-savings on power bills is significant, with savings of up to 80% to be made when switching to renewables.

For small businesses wanting to reduce energy costs and increase energy efficiency, the renewables proposition is relatively simple but there are factors to consider. Installing an intelligent solar and battery system for example could provide average annual savings on electricity bills of around $2,000 for a one-off investment of $15,000. This is attractive to businesses that can afford the upfront cost, own their premise, and have sufficient roof space in relation to their energy requirements. For small businesses in a rental however, the situation can be trickier, usually because the landlord holds executive decision over the property, but it’s not impossible.

One underlying problem is that Australia’s power network regulations are not set up to allow energy to be traded in local areas cheaply. If regulations were changed to encourage a peer-to peer model, this could offer small businesses – and energy customers generally – the ability to access the benefits of solar and batteries without actually having systems located on their premises.

How do we make renewables more economical for small businesses?

More needs to be done to help small businesses access the economic benefits of solar and batteries and we see peer-to-peer trading as a timely and valuable solution.

Peer-to-peer trading can work in a case where, for example, two small businesses in close proximity to each other can complement or supply the other’s energy needs: one business might have a large energy consumption but lack sufficient roof space to install solar panels and a battery, while the other might have a small energy consumption but a perfect roof space for solar.

Peer-to-peer trading could allow the business with less energy consumption to invest in a solar and battery system and then sell that energy to the business needing it and at a price cheaper than regular grid power. One reason that the price can be cheaper is because the need to rely on a power station to supply energy – and charge customers the cost of the poles and wires needed to transport that energy across the country – is avoided.

Peer-to-peer trading is something my organisation is actively exploring to help Australia’s energy challenges and we are in the process of building the infrastructure to enable customers to do so. A report by the Energy Networks Association and CSIRO further highlights the future opportunity for peer-to-peer trading, forecasting that by 2050, between 30% to 45% of Australia’s power supply will be sourced from customer-owned generators.

Federal Government subsidies for batteries could also go a long way in helping businesses and consumers better afford up-front installation costs. Currently, the ACT has a successful program to subsidise batteries that other states could replicate. This is only a start however, and one piece of the longer-term solution.

Why now?

The renewables conversation is happening now because we have reached a tipping point: power prices are rising and at the same time, innovative and intuitive technology is becoming increasingly accessible to the everyday consumer – at homes and businesses. One of the biggest benefits of intelligent or smart solar and battery technology is that it continuously analyses and optimises energy use and costs, choosing the most efficient source between solar, battery and the grid. The economics and efficiencies present a huge value-add for choosing intelligent renewables.

Shifting Australia’s currently centralised energy model to a decentralised model with peer-to-peer trading is a big transition but one that with progressive, carful implementation presents enormous opportunities for businesses, government and households.

The good news is that regulators are now embracing the vision of a decentralised and optimised grid. The Australian Energy Markets Commission has just released a report examining the requirements for a distributed energy market model, which could be the blueprint for the future. If we can deliver on that model, then Australia won’t just be helping to reduce energy costs for businesses, but will lead the world.

See also: Energy startups have to be ‘very smart’ in how they challenge the big retailers: Evergen’s CEO


About the author

Emlyn Keane is the CEO of Evergen, a new energy services company that sells and manages intelligent home energy systems comprising solar power and batteries. The ‘intelligence’ technology is provided by the CSIRO, which periodically analyses and remotely updates the system to improve over time. AMP Capital is a major investor in the company alongside CSIRO.  Emlyn was previously Head of Business Operations, Property, at AMP Capital and Head of Operations and Environment at AMP Capital Investors. He recently spoke with Dynamic Business about the genesis of Evergen and opportunities to compete against the large energy retailers. 

[1] https://www.choice.com.au/shopping/shopping-for-services/utilities/articles/electricity-prices-to-increase-july-220617