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How can skyrocketing prices drive a "green energy" retailer out of a market grappling with a mix of renewable power sources?
Key points:
- Byron Bay-based "green" energy retailer Enova was placed into voluntary administration on Tuesday
- Co-founder Alison Crook says the market structure is "flawed" because "gentailers" benefit from volatility
- Climate Change and Energy Minister Chris Bowen says the Enova situation is "disappointing"
That is a question some of Enova's 13,000 customers might be asking after Australia's first community-owned energy retailer was placed into voluntary administration.
The move was announced on Tuesday, less than two weeks after the company was named the winner of the Finder AU Green Energy Retailer of the Year award for 2022.
The situation highlights an anomaly — even when smaller retailers do their best to buy energy from renewable sources, it all goes into the national grid.
Former chair Alison Crook, who helped to found the Byron Bay-based company in 2016, said retailers had to buy supplies from a market that was "spot priced" every five minutes.
"Solar and wind [generators] are not allowed to bid, they just say how much they can put in," she said.
"But they're not allowed to bid because they're regarded as unstable sources, so they never get to set the price.
"As it happens, we've hit winter — the demand is higher, there's never been quite enough wind and solar to fill the grid.
'Flawed' structure?
Ms Crook said the structure of the energy market allowed some companies to thrive when prices jumped from $70-80 per megawatt hour to $300-400.
She said the system favoured "gentailers" like AGL, Origin and EnergyAustralia.
"Gentailers are organisations that own both generation and retail … so that they benefit when there is market volatility," Ms Crook said.
"They benefit when they can get high prices for wholesale.
"Even if a retailer is buying in a market at a higher price, they can make super profits on the generation end.
"So the point is that it's a flawed market structure — it should never have been allowed to be created and it needs to be broken up.
"If the government doesn't step in to protect small retailers, then there will not be any competition left."
'Difficult period'
Federal Minister for Climate Change and Energy Chris Bowen was asked about the situation at a media conference on Wednesday.
"I know that Enova energy entered a very difficult period over the last 24 hours, which is disappointing for them and for all their customers," he said.
"They're a good company, but we continue to monitor the situation very, very carefully and closely.
"Ultimately we need more transmission, more storage and more generation of electricity.
Enova customers will be automatically transferred to a new retailer, but any bills issued by Enova before the transfer will need to be paid.
A creditors' meeting will be held on June 30.
With few assets to liquidate, it is not known how much value will be returned to shareholders or whether a buyer for the renewable retailer will be found.