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Disrupting the status quo

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Sanjeev Gupta Chairman of SIMEC ZEN Energy with SACOME CEO Rebecca Knol.

The South Australian Chamber of Mines and Energy (SACOME) has awarded an eight-year supply contract to renewable energy retailer SIMEC ZEN Energy, part of Sanjeev Gupta’s GFG Alliance, to significantly bring down the cost of electricity for their members.

The contract represents a successful outcome for the bulk-buying consortium masterminded by SACOME for its members in 2016, in the face of soaring energy costs and supply reliability concerns in the state.

Sanjeev Gupta, Chairman of SIMEC ZEN Energy, said “This outcome demonstrates what can be achieved when businesses decide as a collective that the status quo is not acceptable.

“Ultimately what is needed to fix the energy market in this state is more competition in wholesale generation and retailing – this result delivers both.

“While delivering SACOME members with electricity at a price below what could be achieved through a standard market tender, this contract also allows SIMEC ZEN Energy to fast track plans to replace the capacity lost when the Northern Power Station closed two years ago.

“This capacity will be a mix of generation assets suited to the new energy landscape, such as the Cultana Solar Power Station and our other projects in the Upper Spencer Gulf.

“The contract also continues the recent successes of SIMEC ZEN Energy – adding to the South Australian Government awarding us its electricity supply contract in late 2017 – as we continue to look for other large energy users to add to our portfolio.” Mr Gupta said.

South Australia has the most volatile and expensive wholesale electricity market in Australia and is one of the most expensive electricity markets in the developed world. This agreement brings electricity prices down significantly for members of the SACOME group. This is a landmark deal – a first of its kind- and is expected to inspire a host of similar initiatives across the country.

The SACOME bulk buying consortium arose out of discussions amongst its members on how to respond to the doubling in electricity costs experienced after the closure of the Northern Power Station. This consortia approach made sense; by aggregating load, members improved their individual bargaining position. The platform provided an aggregated and definite load, enabling SIMEC ZEN to back this demand with its anticipated new renewable power generation, hence making it possible to offer lower pricing.

With electricity representing up to 40% of input costs for members of the group, the redistribution of these savings will flow through to new investment opportunities for the South Australian economy.

SACOME CEO Rebecca Knol said, “this cross-sectoral collaboration has delivered affordable power to some of South Australia’s largest energy users and underpinned the development of new supply for the collective benefit of State.

“Following the ACCC’s green light, SACOME’s flagship joint-purchasing electricity group banded together to leverage their strength in numbers and bring down electricity prices for their businesses.

“The group’s approach to this complex commercial negotiation in a fast-changing electricity environment has been inspirational. The outcome is a credit to the stamina and commitment of our participating members who represent a diverse slice of SA business,” said Mrs Knol.

Speaking shortly after the announcement of the signing, Mr Gupta added: “Although this initial contract may not seem overly significant in its own right, it is a hugely important step that marks the turning of the tide.

“It’s not only a disruption to the market by slashing prices and for the first time providing a long-term pricing mechanism to all sizes of buyers, it’s also proving that renewables are the future of energy in South Australia.

“It firmly places SIMEC ZEN as the new trailblazing retailer, bringing sustainable and competitive energy once again to South Australia. Such an energy environment will incubate new industries in South Australia, including GFG’s plans to set up a copper smelter in Whyalla.

“I would like to sincerely thank the ACCC’s Rod Sims for his efforts in this initiative. Through his work with SACOME, he’s demonstrated the vital role of the ACCC in promoting competitive disruption in the Australian market – it’s enabled new competitive forces to come into play and start the disruption of the exorbitantly-priced Australian energy market.

“My thanks also to Rebecca and her team at SACOME for their tireless work to bring this to fruition, while demonstrating the importance of their group to South Australian business, including even those outside of their traditional mining and energy portfolio.”

This story was first published in The Fence magazine.

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