What would happen
if renewable electricity
was cheap and reliable?
In Australia, electricity production accounts for around half of all greenhouse gas emissions.
Moving to a renewable electricity supply is the easiest and most effective thing we can do to reduce Australia's emissions and help limit anthropogenic climate change.
This is the Liddell Power Station in New South Wales.
In the last year, Liddell produced approximately 7.13 million tonnes of CO2-equivalent emissions.
By comparison, all of the vehicles in Queensland produce around 15.6 million tonnes of CO2-equivalent emissions per year.
That's right: replacing this one power station with renewable generation is the emissions equivalent of removing half of the cars in Queensland from the road.
Find a recent bill from your electricity retailer. On the back you'll find a price for kWh units. There may be more than one price, for peak and off-peak use, or for usage based on thresholds (perhaps called Step 1 and Step 2, or something similar).
This is an extract from an actual bill issued in Victoria in September 2014. The price is 29.41¢/kWh.
Introducing the Building Block
We can supply you electricity at an incredibly low rate if you buy that electricity up front.
We can fix the rate for 25 years if you buy 25 years worth of electricity up front.
That's a lot of electricity! To make it easier, we invented what we call a Building Block.
A Building Block costs $1000, and gives you 1kWh of electricity for free, every single day for 25 years.
25 years = 9,131 days → 1kWh per day = 9,131 kWh → $1000 for 9,131kWh = 10.95¢/kWh
Building blocks are a long term investment: a bit like buying solar panels, but without needing to install anything at your house. In fact, they were invented to act like solar panels for all those people who for one reason or another cannot get solar panels of their own.
How much can I save?
The average Australian family uses around 10kWh of electricity every day.
If the price of electricity is 25¢/kWh, that's $2.50 per day.
Over the 9,131 days in a 25 year period, and if prices never rise in that time, the total cost is $22,827.50.
If prices rise by 2.5% per year, the total cost rises to $31,168.
With Open Air, if that family spends $10,000 to buy 10 Building Blocks, they'll enjoy a net saving of $21,168.
At our place, we use kWh per day
Our retailer charges ¢ per kWh
I think prices will rise by an average of % each year
I do not have a solar system installed.
I intend to buy building blocks for
$5,000 up front
Savings over 25 years
Our savings calculator provides an estimate of amounts you may save by purchasing Open Air building blocks. This estimate incorporates a view of what may happen in the future, which is necessarily uncertain. Most importantly, we don't know how the electricity supply industry will evolve over the long term, or what our competitors may do over that time. You should consider the savings outcome shown here as a "ballpark" or "order of magnitude" value, and be aware that it does not constitute a guarantee in any way.
We've made efforts to keep this calculator simple while still including all of the information we think is important to showing the value of our building blocks. Simplicity means that some variables are not considered, and some of these variables may turn out to be important, depending on how events in the future unfold. For example:
If you have a solar system, we do not calculate the effect of feed-in tariffs for surplus generation, since it does not affect the savings produced by Building Blocks.
Why so long?
Asking you to pay for 25 years of electricity up front may seem strange, but the key lies in what we do with the money you spend on building blocks: we build a renewable power station.
25 years is how long that power station will last before needing a major (and costly) overhaul.
A lot can happen in 25 years, and there are circumstances where you may not be able to claim the benefit of your Building Blocks.
We can't sell you electricity if you move overseas. If you move into an aged care facility or any other place where you're not billed specifically for electricity, you won't be able to benefit from your Building Blocks.
Don't worry: unlike a stuck-to-your-roof solar system, Building Blocks are transferrable. We will operate an online trading hub where you can buy or sell Building Blocks at any time. You can even give them away if you like.
Protecting each other
We build a renewable power station because it eliminates much of the risk of running a retail electricity business.
It makes Open Air sustainable in the long term in a way that a fossil-fuelled power station, which must always be buying fuel, cannot duplicate.
In return, you get to buy renewably-sourced electricity at rates not seen since last century, and contribute to removing fossil-fuelled generation from the grid.
There are two kinds of cost associated with generating electricity: the initial outlay to build the power station, then the ongoing costs to keep it running. Some people say that renewable generation is expensive, but they're really only looking at the initial outlay side of the problem - they're not thinking long-term.
Let's take the example of a couple of power stations built recently: the Snowtown II wind farm, completed in 2014, and the Mortlake Power Station, completed in 2012.
Snowtown II was reported to have cost $450 million, and can provide 270 MW at full capacity - that's $1.67 per Watt. Mortlake is a gas-fired power station that was reported to have cost $800 million, and can provide 550 MW at full capacity, or $1.45 per Watt. In this case, the initial outlay for the wind farm is around 15% higher than the fossil-fuelled power station.
Both power stations are expected to operate for around 25 years.
A wind farm like Snowtown II undergoes constant maintenance to keep it in tip-top shape. That maintenance costs around $25 for every megawatt-hour it produces. Likewise, a gas-fired power station like Mortlake needs maintenance. It will cost around $20 per megawatt-hour to maintain.
On top of maintenance, however, Mortlake must also purchase gas fuel. At prevailing rates of around $6 per GJ, Mortlake can produce 1 megawatt-hour of electricity for around $58 in fuel, bringing its total cost to $78 per megawatt-hour.
As long as wholesale electricity prices stay above $25 per megawatt-hour, Snowtown II can earn more than it spends by generating electricity and selling it to the market. Mortlake, however, must wait until prices go above $78 per megawatt hour before it can earn more than it spends.
Shown above is a typical day of electricity consumption, generation and prices in Victoria and South Australia.
Victoria's electricity consumption (demand) is shown as a red line. South Australia's electricity consumption is the pink line. The scale, at left, is in megawatts (MW). Each megawatt is 1,000 kilowatts, and your kettle likely uses around 2 kilowatts to boil water. So Victoria's peak demand - 6,556MW at 6pm - is equivalent to around 3.25 million kettles all being boiled at once. South Australia's demand peaks at 1,845MW at 6:25pm. Just to confuse things, the time is Sydney time, so it's really 5:55pm in South Australia at the peak time.
In grey is the amount of electricity generation that's occurring in each state every 5 minutes. Victoria is dark grey and South Australia is light grey. Generation does not match demand in either state: large transmission lines between states mean that generation in one can be used to meet demand in another.
Highlighted in each generation chart is a power station of interest: in Victoria, the orange generation comes from the Mortlake power station. In South Australia the light blue generation comes from the Snowtown wind farm.
The flat green line is the average price for the day in Victoria, The spiky green line is the price as it changes every 5 minutes. Prices in South Australia at the time were about the same.
Snowtown generates fairly steadily all day. It ignores the ups and downs of price and earns around about the average price of $40. This is enough to cover its maintenance costs of around $25.
We can see Mortlake responding to a price signal. About 120MW of additional demand comes online between 4:55pm and 5:00pm in Victoria. The price spikes from $51 to $118. The operators of Mortlake see the price rise and start up their generator. They're hoping the price will stay high through the peak. It takes the power station around 20 minutes to warm up and get up to full output of around 265MW. Unfortunately for the operators of Mortlake, the operators of the Bogong hydroelectric generator also saw the price rise and also came online - adding 280MW of generation by 5:15pm.
Generators jostling for position on the stack causes the price to fluctuate wildly until 6:05pm when it becomes clear that the peak has passed. Over the next half an hour, demand falls steadily by 200MW and the price falls from $61 to $42 in response. Bogong shuts off at 8:05pm and Mortlake shuts off at 9:00pm, again taking about 25 minutes to cool down.
The operators of Mortlake thought there might be an opportunity to make some money out of their $800 million power station. Having started up, though, competition with other power stations caused the price to fall again.
The risk to a power station is that prices will fall: if the station does not generate, it cannot earn income and pay for its maintenance or repay the original cost of its construction. Even if both power stations are purchased with cash, requiring no finance repayments, the fossil-fuelled power station cannot avoid fuel costs, and this introduces a second risk: if the price of fuel goes up, the "break-even" price for selling electricity also goes up. At $9/GJ, for example, Mortlake's fuel costs would raise its breakeven price to $107.50 per megawatt-hour.
This example shows that Snowtown is "safe" over a much larger range of prices compared to Mortlake, is not exposed to the externality of changing fuel prices, and is consequently a lower-risk investment.
Risk costs: banks charge higher rates for high risk investments, like cars or personal loans, compared to low risk investments, like property. It is normal for businesses to incorporate their cost of risk into the price of their products.
A renewable generator really only has two risks: that finance repayments for the initial outlay cannot be met, and that wholesale electricity prices are too low to recover the cost of maintenance. Open Air's Building Blocks allow us to build the generator with cash, eliminating one of those risks. It's a rarely seen level of cooperation between a business and its customers: the customer provides the funds to reduce the business's risk, and the business passes the savings from reduced risk back to its customers.
What power does an ordinary person have to kick polluting multinational corporations off the grid?
If that ordinary person has the power and inclination to assist in building renewable generation, the answer is "quite a lot".
The magic happens in something called the "merit order effect". In the National Electricity Market (NEM), generators bid to generate on a five-minute basis. A computer program at the Australian Energy Market Operator (AEMO), called the NEM Dispatch Engine (NEMDE) determines where demand is occurring, and how to dispatch the cheapest generation it can without blowing up the grid.
NEMDE has no friends. Cheap is all that NEMDE cares about. Each generator states the price it's willing to generate at. Among all generators, NEMDE creates a stack from cheapest to most expensive. The position of each generator on the stack is called the merit order, with cheap at the bottom and expensive at the top. It turns out that since most of the cost of operating a renewable generator is fixed, a renewable generator will bid to generate at a price near zero. This puts all renewable generators at the bottom of the merit order.
You can see it working in the picture at the left. Generators are arranged into a stack from cheapest to most expensive: here we have a wind farm in blue at the bottom, two coal generators in brown and two gas generators in orange. The wind and coal generators are turned on to meet demand. One of the gas generators is going at less than full capacity to meet the balance. The other gas generator is turned off.
Generators at the top of the merit order won't be required most of the time, so won't be dispatched, won't generate, and won't get paid. The more renewable generation that is added to the bottom of the stack, the less frequently generators at the top earn an income.
Now look what happens on the right when a new wind generator is added to the mix with a price of $30. Both gas generators are off, and one of the coal generators is running at less than full capacity.
All generators have fixed costs. That is, the generator continues to pay out money even if it is not generating. To cover their fixed costs, generators must run for a certain amount of time. As new generators are added to the bottom of the merit order, those higher up run less and less often. Eventually, it's not worth it to continue paying their fixed costs, and they shut down.
The effect was played out in mid-2015 at the Anglesea power station in Victoria. The power station was owned by Alcoa, who also owned the aluminium smelter at Point Henry in Geelong. Anglesea was selling most of its power to Point Henry "off-market" at a privately-negotiated price. When Point Henry shut down, Anglesea had to compete with other generators on the grid. Being old and expensive to run, it couldn't find a buyer for its electricity at the price needed to cover its costs, so a decision was made to shut down permanently.
Anglesea Power Station was shut down in mid-2015
An idea whose time has come
For the moment, Open Air's Building Blocks are only an idea - an idea enabled by the maturing of renewable electricity generation and internet-enabled social cohesion and community building.
The path to low-cost long-term electricity is one with five steps.
|We establish an electricity retailer
(so that we can sell you electricity)
|You switch to Open Air as your electricity retailer||You buy Building Blocks||We build a renewable power station||We give you the power station's electricity for free|
We're at the very beginning of our journey. To begin turning this idea into a reality, we need your support.
All you need to do is say that you'll join us.
Did you work out how many Building Blocks you might buy?
If you want to work it out you can use the savings calculator above.
Where do you come from? You answer will help us make sure the people who want to join Open Air are able to do so as soon as possible.
Would you like to record your email address with us? When we launch, we'll be able to get in touch to let you know you can sign up.
No problem. We hope you'll check back here regularly to see how we're progressing.
We take security and privacy seriously: we won't share your email address with anyone, and we use strong encryption to keep your information secure within our own systems.
To check that we got your email address right we have sent you a confirmation email. Please click the link you find there.
Great: we think that the more informed you are, the more Open Air looks like a super idea.
We've prepared a list of Frequently Asked Questions, which you can browse (click here) or just type a word or two into the box to find answers on a specific question.
If none of our suggested questions match your query, you can ask a question on our FAQ page.
We're sorry to hear that.
We think Open Air - and our Building Blocks - are a fantastic way to reduce costs for electricity customers.
Would you mind telling us in a few words why you wouldn't join up?
We're beavering away building all that's required to operate a class A electricity retailer. You can help speed things up by helping us garner more support. The more people behind us, the more resources we can apply to the job.
Tell your friends about Open Air. If you're on Facebook, share a link or give our page a like. If you're on twitter, tweet about how awesome we are.
Once you're done sharing the love, have fun thinking about what you would do with abundant, cheap, guilt-free electricity.
At 80km/h, the Tesla model S 85D can drive approximately 600km on its 85kWh battery. That's 7.06km/kWh. With Open Air electricity purchased at 12c/kWh (including GST), that's 58.8km/$. By comparison, the Lexus ES 350 consumes 9.5L/100km. At current petrol prices of around $1.30/L, that's 8.1km/$.