Renewable Energy Business Act 2008

Renewable Energy Business Act 2008 (proposal)

The power utility companies control current market of consumer electrical sales.
The business model is such that a consumer requests power service, the utility company runs a power line from the grid to a step down transformer, which then supplies power to the consumers home.
A meter, which is read monthly, monitors the power consumption and the usage of power is billed to the consumer.

If the consumer desires to utilize renewable energy on site by way of wind power, solar power or hydropower the consumer is required to install a switching circuit between the meter and the house sub-panel. Any power generated on site is introduced to the house sub-panel and reduces the flow of electricity from the grid, thereby reducing the rate of usage recorded by the meter. In other words, the meter slows down. If a surplus of power is generated the excess is fed back to the grid causing the power meter runs backward. The power company is required by law to pay the consumer for the surplus power at the “embedded cost” of power production. This means the power company is only required to pay the wholesale rate of power production (usually less than 50% of the retail rate).

New energy bills are being reviewed and legislated, the status of small scale energy production is not clearly addressed. Problems with the current model does not allow for free enterprise and entrepreneurs to fully appreciate profit as do other industries operating with different models.

For example: The telecommunication companies which once operated with the same model as the power utility companies on a local or regional level. The telcoms enjoyed a monopoly from competitors under the infrastructure rights they installed and maintained. Once the telecommunications act was passed the entrepreneur was able to sell his own service to the end consumer using the infrastructure installed by the telcoms. However, the telcoms still enjoy a large portion of the revenue as they grant these usage rights as a lease or service to the entrepreneur. In some cases, the entrepreneur actually resells the telcoms service to the consumer simply rebranded.
In short, the telecommunications act allowed for a wholesale market to emerge. The success of the entrepreneur is owed mainly to the fact that he is legally allowed the right to claim “first in-line” for collection of moneys due for services rendered, and further cloak the association established with the telcom.

Another example: The network broadcast companies not only collect revenue from advertisers but they collect revenue from the local cable providers. The cable provider is “first in-line” to collect money from the consumer and cloak the relationship with the network broadcasters. Could you imagine getting a bill from NBC, ESPN, HBO, and so on? This age old business model exists in many industries like the entertainment industry. It allows us to go to the theater and watch a movie paying the theater and not the movie studio. Or going to the supermarket and purchase an apple without having to directly pay the farmer.

A recent market that utilizes the essence of free enterprise is the satellite dish industry. When a consumer subscribes to the service, the satellite dish company provides the receiver, dish, and installation of the equipment free of charge. They can do this because the service agreement has been structured to allow a long-term commitment providing the satellite company the assured dispersement of profit and revenue to cover the cost of the equipment and installation. The wholesale relationship with the programming providers is cloaked and the satellite dish company is “first in-line” to collect revenue.

These are just a few examples of successful business models currently in act which could be migrated to the power utility industry. In allowing a wholesale relationship between the power utilities and renewable energy entrepreneurs, the consumer will benefit from competitive power costs yet maintain the reliability of the current infrastructure provided by the utility. The utility industry will benefit as the growing energy demands will be met by the entrepreneur. The entrepreneur will benefit as he will be “first in-line” to collect profits generated by supplying surplus power to the grid and cloaking his wholesale relationship with the power utility.

As with the satellite dish industry, the renewable energy industry could provide the equipment and installation to the consumer free of charge with properly structure long-term service agreement. This would allow consumers to further enjoy technologies which would not be obtainable or justified if the renewable energy entrepreneur were to rely soley on the profits generated by the one-time sale and installation of a power producing system.
It is in my opinion, that power utility companies need to allow for wholesale relationship be granted to entrepreneurs. If the power utility companies are reluctant (history tells me they will fight tooth and nail), then legislation needs to be passed forcing them to allow such relationships to exist. Furthermore, the power utilities need to pay more than the embedded cost. They need to pay the difference in saving it would cost them to beef up their capabilities to meet the growing demand.