What does it mean to create an electricity retailer?

Being an electricity retailer allows you to buy and sell electricity in your community.

Creating your own electricity retailer is the most ambitious retailing option but it does give your community complete control over the retailing process.

Electricity retailers purchase all the electricity their customers need, and manage the sales and billing process. If you create your own electricity retailer you will need a retailing licence and will need to report regularly to show that you are meeting public obligations.

Benefits of creating an electricity retailer

• You can decide where you buy electricity, so can support local electricity generators.

• You can enjoy bulk purchasing power.

• You can employ local staff for the retailing functions.

• You can create incentives for customers to use energy well.

• You can create relationships with your customers.

• You can use profits in your community or to reduce costs for customers.

• You can support or deliver collective projects like community batteries or community generators.

• You can innovate to speed up the energy transition.

In short, creating your own electricity retailer could be a powerful enabler of many community energy activities and provides a core organisation for governance of energy assets and partnerships with important stakeholders like local government and electricity networks.

Some challenges of creating an electricity retailer

• You will need in excess of $2m start up funds for staff and billing platforms.
• Margins are very tight, with an average of less than $100 per customer per year.
• Selling electricity is highly regulated. You will need to be licensed, and to do an enormous amount of paperwork.

When is creating an electricity retailer a good choice?

• You are confident you can build to a sustainable scale which might mean a customer base of over 20,000 customers.

• You are willing to build an organisation with appropriate governance structures.

• You are willing to fundraise to cover your startup costs.

• You are familiar with the way electricity retailing works and the associated regulatory requirements.

• You are confident you can source expertise to form your startup team.

• If you've considered other retail linked options and know they won't meet your goals, for example:

  • Creating a white label retailer.
  • Partnering with a retailer to create bespoke tariffs or control batteries and energy uses.
  • Promoting green power or virtual power plants.

Project examples for creating an electricity retailer

Enova, Power Club and DC Power have all gone into administration but provide useful examples. It is worth noting that the electricity market has changed and more retailing options have emerged since Enova started in 2016.

Enova:

• Organisation - democratised by ensuring all shareholders had a maximum of 3 votes regardless of shareholding.
• Profits - 50% guaranteed to support not-for-profit Enova Community.
• Fundraising - share offer (before crowdfunding for shareholdings became available).
• Business Model - estimated that it could generate $80m for its local economy if everyone bought electricity from a locally-based retailer and if that retailer also supported local electricity generators (in a region that spent $300m per year on electricity).

Power Club:

• Organisation - member based cooperative.
• Profits - aiming to provide competitive electricity prices.
• Fundraising - philanthropic support to become established.
• Business Model - a simple model based on passing through wholesale energy prices directly to customers. Communicating prices through an App was an important key to helping customers manage energy costs.

DC Power:

• Organisation - private company with a nod to customer participation by appointing a shareholder representative to the Board.
• Profits - to be determined by the Board.
• Fundraising - ARENA funding to help it do the energy market’s first equity crowdfund and raised over $2m. Shares were $50 each. Equity crowdfunding became legal in 2017 and a number of online platforms support this approach to fundraising.
• Business Model - DC Power wanted to be the electricity retailer of choice for solar owners. It had over 17,000 shareholders but it is not clear how many of those it was able to convert into customers.

Other guides and resources

Create a white label retailer.

Our explainer on how electricity is bought and sold.

Our explainer on what electricity bills pay for

AEMC retail regulatory framework- An explanation of the regulatory framework for retailers by the Australian Energy Market Commission

How to register as a retailer- An explanation by AEMO on how to register to purchase electricity from the wholesale energy market.