By Jarek Czechowicz
Alternative energy company Energin has big plans to supply Australia with ‘green’ power. Now it is directing its own energy at selling the idea.
Energin is a forward-looking power company that plans to become Australia’s number one supplier and retailer of renewable energy. The company has been lobbying state governments to legislate in favor of renewable energy sources such as hydro plants, solar power, wind farms and methane extraction from sewage plants and waste dumps.
National deregulation and restructuring has made this a slow process. Now new participants, not usually involved in supplying power, will become involved in the running of formerly publicly owned utilities, predominantly coal-fired power stations.
According to Energin’s vision the power grid, rather than being a rooted trunk and branch system, will become a fluid system, comprising numerous nodes that act as integrated control centres. Eventually this will allow Energin to increase its production and capacity with the subscription of every new business or household.
The company is building five 500-kilowatt photovoltaic (PV) installations around Australia at an estimated cost of $30 million. These will constitute the largest grid-connected PV system on the planet.
Christopher Gordon, CEO of the Energin Power Company, is bringing his morning media conference to a close. He answers a final question: “There are more than 60,000 residential and 2500 commercial consumers of renewable energy in Australia, but we still have a long way to go before we can generate enough renewable energy to satisfy demand.
“Our long-term goal is to help create the necessary infrastructure to provide more than 50% of demand through renewable energy by 2020, the year that Germany plans to eliminate all of its nuclear power plants.”
Finished with the media for the day, Gordon is on his way to a meeting with senior marketing managers, in conversation with his PR guru, Michael Morris, and senior technical adviser Steve Haskin.
Gordon says: “Peak demand will become a substantial problem in the near future. Many suppliers are already struggling with this problem. And even if peak demands can be met, there is still the problem of upgrading existing transmission lines. Increasing the capacity of large plants or building new plants is too cumbersome and too costly. That’s why we’ve been seeing a steady growth in uptake of smaller power-generating units. This is the market’s way of regulating itself, virtually saying ‘this is the way we have to go’.”
Haskin says: “We have the capacity to handle ‘add-ons’ to the power grid. If people want to add distributed energy systems, then we should just leave it to them or third parties to take care of. I’m not convinced we need to get too involved in those things.”
Gordon goes on: “Whether or not you subscribe to a ‘central-station distribution model’, the future of power generation and supply is in distributed energy systems. These systems are small, clean and highly efficient. They will soon create a more competitive market and they are already providing consumers with greater choice. We would be missing a great opportunity if we didn’t get involved in integrating them into the infrastructure.”
Morris interjects: “You’ll need to find a way of paying for the long-term transitional costs.” Gordon answers: “If it’s handled correctly, the costs could easily go down. Think of the big power plants of today as being analogous to mainframe computers of the past. The move towards local and personal power generation is similar to the move from mainframes to personal computers. Within a few years a personal power generator could be as common as the personal computer. Our job will be to create and manage the flow of power across the network.”
Looking a bit cautious, Haskin says: “That’s technically beyond our reach at this time. We would need to develop a dispersed control system, something like the internet. But I do think the beauty of distributed energy technologies is that, in combination with energy-management systems and storage systems, they enhance the overall delivery of power.”
Gordon recalls seeing some estimates indicating that the demand would continue to increase substantially in hi-tech areas such as telecommunications, data storage and the internet sector. In the United States these areas already require more power than the steel and paper industries. He wonders whether technological advances in equipment design will soon lead to even lower power consumption.
The rest of the team is waiting. “Here’s the situation,” Gordon says. “At this stage our customers are paying up to five dollars a week more for their renewable energy supply. We expect that figure to drop as more customers come on board and as governments do more to support the development and consumption of ‘green’ energy.
“I’d like to get your thoughts on whether we should market these products more aggressively now or whether we should wait until some new players enter the market – or until we have more consistent legislative support across the state governments.”
Marketing adviser Barbara Bailey responds first: “If we push these products too hard now we might find ourselves in a situation in which we can’t meet demand.
“But if you want to start a campaign now, then perhaps we should start by applying some of the principles of ‘social marketing’ to change existing consumption habits and constitute part of the move towards renewable energy.”
Gordon says: “Do you mean something like trying to get consumers to use equipment at night rather than during peak periods?” .
Bailey explains: “That’s one application of social marketing. It’s basically about applying commercial marketing principles to influence the behavior of audiences, to improve their welfare and, in turn, the welfare of society. The concept was originally used in the early 1970s in relation to health issues and preventive medicine.”
The marketing director, Mark Mathers interjects: “Other than force of habit, I can’t see any reason why many automated tasks shouldn’t be done off-peak. We could certainly look at the marketing potential, however a change in that direction could have a domino effect on pricing.”
Gordon replies: “I think we can manage that. But it’s easier to get a man on Mars than to change people’s habits.”
Haskin notes: “The majority of the Australian population already has access to renewable energy, but most still can’t see the immediate benefit. We may be expecting a bit much to start changing their habits and trying to sell them on the benefits of distributed energy systems.”
Morris says: “I think the two will eventually need to be marketed together, but it could be too soon for all of this.”
Gordon says: “We need to act on these things now because they need years of preparation. This isn’t like marketing telecommunications toys that can be marketed a few weeks in advance of availability, with almost immediate uptake. If the average consumer could understand the benefits of reduced greenhouse emissions then they would be more likely to accept a distributed energy system or a personal power generation unit as readily as they accept a washing machine or a computer.”
Gordon’s personal assistant interrupts the meeting. Somewhat flustered, he announces: “Some reporter continued recording after this morning’s press conference and they’ve put it on the radio. Listen.”
Gordon hears himself saying, “… now in April in Japan, the world’s largest private power utility, the Tokyo Electric Power Company (TEPCO), shut down all 17 of its nuclear reactors after admitting to long-term falsification of safety records. As a result, TEPCO lost 30% of its power-generating capacity. Despite the potentially disastrous problem, the Japanese Government wants nuclear power plants to provide 42% of the nation’s power by 2010. Do we really need or want this type of thing happening here?”
Gordon’s views are well known in the industry, but he has been avoiding public discussion of the topic, preferring instead to focus on the push towards renewable energy. He wonders whether his public relations and marketing teams can turn this situation into an advantage, a possible vehicle for launching the social marketing campaign under discussion…
Fuel for Thought
1. Market deregulation could see communication companies becoming electricity suppliers. In light of this, is Energin trying to take on too many roles?
2. Is Gordon pushing his vision too hard at the expense of other viable, short-term approaches?
3. Is the idea of ‘social marketing’ realistic in this context?
4. Is it time for Gordon to publicly air his views on nuclear plants and how might this harm or benefit Energin?
Proposed Solution #1
Andrew Seaton is regional manager of Kyocera Solar. More words to come to come to come to come to come to come to come to come to come to come to come to come to come to come to come to come to come.
Christopher Gordon has recognised the need to evaluate and restructure Energin’s business practices based on changing market demands and environmental issues. With peak demand in electricity supply increasing, companies such as Energin are looking to where their future is in the industry.
For Energin to consider what steps, if any, it needs to take in response to market demand is, in itself, a step in the right direction. Older energy companies have to look at different ways of supplying a necessity that is fast becoming a commodity. Factors including costly upgrades, increased maintenance schedules and existing energy suppliers vying for market share as a result of deregulation can only help in the decision process.
Gordon’s vision to move towards local and personal power generation is beyond Energin’s present technical ability, but it is by no means out of reach for the company to pursue.
Steve Haskin, senior technical adviser, admits that at present the company could not technically handle such a move. This is not necessarily a bad thing; it would only help in cementing the need to investigate all avenues, and certainly makes the decision to look into the future seem beneficial.
There are many short-term approaches that require attention, though. For example, legislative effect. One of the obstacles that has to be overcome is obtaining a commitment from government to use the full backing of federal resources to help in changing infrastructure.
Gordon’s vision is part of the short-term process. Without his long-term forethought, some of the steps along the way may become somewhat lost. The vision itself is the key for the future success of the project whether or not Energin decides to move forward or wait, and regardless of its present technical ability.
To push forward, Energin will have to embark on an extensive, internal infrastructure regrouping. For example, although many comments from key personnel start off in a somewhat negative frame, they end up showing some form of lateral thinking. With this in mind, Energin will have to take all the advice considered and analyse all situations and scenarios put forward.
The first step in the transition will be to continue with the push to change legislation for the mainstream implementation of more renewable energy. With renewable energy still in its infancy, Energin will need to invest time and money in the early stages to enhance social awareness and instigate a campaign of social marketing; pushing for increased education. It will have to lobby government to reward local companies for investing in the development of more energy-efficient equipment, and change the views of the older power suppliers.
In the campaign Energin will need to publicly push the positive benefit of energy over conventional energy supply. This shouldn’t be too difficult, and in fact in the later stages of the campaign it will be much easier, as awareness of renewables starts to outweigh support for the old methods of coal and nuclear power, regardless of how much cheaper they are.
The social marketing will need to continue for some time before any infrastructure is changed at Energin, as the renewable energy industry is still in an early growth stage. As the education campaign advances, social awareness will continue to expand, and inevitably the balance will be in favor of all renewables. This will make the older energy suppliers act in a hasty manner. Starting now would give Energin the upper hand.
Once this public awareness and social acceptance has been received, Energin can push for the next stage: implementing changes to mainstream electricity supply and investing in energy-efficient processes in the commercial sector through government commitments.
Proposed Solution #2
Michael Robinson is the principal and chief executive of The Robinson Partnership, a business management and marketing consultancy. Over the past 30 years, he has worked with multinationals around the world and established five market-oriented organisations of his own.
There are several problems for the management of Energin:
- Although the company plans to become Australia’s premier supplier of renewable energy, the CEO warns it has a way to go before it can satisfy demand.
- Energin has to create, at high cost, the infrastructure to provide more than half the demand by 2020. Enhancing existing facilities is cumbersome and expensive.
- Peak demand will become a substantial problem in the future – and upgrading existing infrastructure will present further headaches. The whole system will need a design rethink.
Gordon is convinced the future of power generation and supply is in distributed energy systems, and if the company doesn’t integrate DES into the infrastructure, it will miss a huge opportunity … and a leadership role in supplying and retailing renewable energy.
The CEO has the following problems:
- Although enthusiastic about the DES concept, his technical people do not think they are capable of delivering – now or in the foreseeable future. Gordon can’t get them to really comprehend that advances in technology and equipment design will reduce power consumption.
- His PR people are worried about the costs of long-term transition.
- His marketing team is reluctant to focus on what he thinks is the key marketing question: market aggressively now, or wait until others enter the market … or until state governments develop more consistent legislative support.
Managerially, Gordon could be held culpable of putting Energin at some risk. His driving vision could see the company take on too many roles or overlook other, more viable, short-term approaches.
So what options should Gordon get the management group to examine? Or should the group put pressure on the CEO, reining him in until the operational, technological and marketing influences are clearer?
Bailey, the marketing adviser, is pushing for ‘social marketing’: educating users to change existing consumption habits, for example, or getting people and companies to use equipment off-peak. Gordon is sceptical about the ability to change user habits that easily. He thinks state governments have a role to play in this critical area.
Other group members (technology, PR and senior marketing) want to come down on the side of a two-pronged marketing effort – a sustained ‘social marketing’ program and the beginnings of a user-benefit sell of DES – but all agree that it’s too soon to tackle now. Gordon warns that the company must act quickly. Lead times for any substantial directional change are notoriously lengthy. He has long argued that if users could be made to really understand the benefits of renewable energy, they would more readily accept a DES or personal power generation unit. Gordon also argues that governments have a role to play in this regard. It can’t all be left to Energin.
1. Energin should begin the ‘social marketing’ program – it is the most realistic option at this time. This will mean a PR-dominated program, with judicious support from advocacy/advertising.
2. Market research should monitor the ‘social marketing’ campaign and pave the way for the habit-changing concepts needed later.
3. Lobbying at state government level is critical if all-state legislation is to be achieved, as is the need to get government to take on its role in educating consumers/ users to adopt off-peak power usage.