Why we backed Amber Electric
Black Sheep Capital
As venture investors, we see opportunities to invest in great businesses every day. However, not every day do you meet the ones tackling areas within the United Nations Sustainable Development Goals such as: poverty, gender equality, peace or even climate change. Then, we met Amber Electric — the newest addition to the Black Sheep Capital Portfolio.
Amber has developed a direct to consumer, technology enabled, renewable electricity service, providing customers with the option to offset their energy consumption with renewable sources at almost the same price point a typical energy retailer would service them with dirty energy. A pretty compelling proposition if you ask us.
The vision: a world intelligently powered by low cost renewable energy, and together we are on a mission to make that a reality — starting with Australia.
Before going any further on why we love this company, let’s take a quick look at the industry.
The National Energy Market — let’s be real, it’s a bit of a mess!
A recent publication by the ACCC stated, “Australia is facing its most challenging time in electricity markets. High prices and bills have placed enormous strain on household budgets and business viability. The current situation is unacceptable and unsustainable”.
The sentiment above is supported by several investigative reports into the National Energy Market (NEM) and consumer satisfaction with regard to energy price movements. A late 2017 Choice Consumer Pulse survey, indicated 81% of high income Australian households across every state and territory (except WA, where electricity price regulation still exists), felt electricity prices were the number one area of concern for them.
Another statistic, which came as a surprise, in the 2017 Newgate Retail Competition Review, when asking consumers whether they were currently on ‘any kind of contract or plan’ for their energy service, nearly half of the residential consumers surveyed believed they were not on a contract (42% electricity, 44% gas). Given that technically speaking, all consumers are on some form of contract or payment plan for their electricity, this suggests somewhat of a colloquial understanding of retail contracts, which certainly wouldn’t be helping with any of the aforementioned expectations around pricing.
Without going to the nth level of detail on the electricity industry, it seems pretty clear Australians consumers are itching for a trusted, reliable, transparent and simple energy retailer.
Let’s talk about Climate Change.
Several global climate change investigations conducted recently now predict, with a high degree of confidence, that human influence and its associated anthropogenic forcings — most notably increasing levels of (carbon-dioxide CO2) in the atmosphere, are contributing to continuing climate change. A rather terrible, yet very important, insight for us all.
Paul Osborne (Co-founder of Black Sheep Capital) feels very passionately about the topic having spent a large period of his time while studying investigating the risks of climate change and movements to clean energy and solar. Paul's prior research very astutely observed the need for government bodies to proactively evaluate the risks of climate change for all Australians, and more so, accept the need to invest in new technologies or to quote his words “languish on old ones”.
Paul commented, “We are in dire need for new, evolutionary technologies and companies tackling the issue. Any new company in this area is not only making progress toward a cleaner future, but also creating new jobs, innovation and ideas, which is just fantastic for our national efforts toward climate change intervention”. Paul also noted “On the other hand, this doesn’t mean the need for the end of coal. Coal is very useful outside of power, it’s an outstanding filter, you need it when you smelt iron ore and for purification, however we just need to get smarter as a nation around how we use it”.
If you aren’t overly familiar with any of the more recent work in this area, the Fifth Intergovernmental Panel on Climate Change (IPCC) reports are a good place to start. Around 2013–2014 the reports concluded with a high degree of confidence that human influence has been the dominant cause of the observed warming since the mid-20th century. Here are some of the key take-aways from their findings:
- Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia.
- The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, sea level has risen, and the concentrations of greenhouse gases have increased;
- Atmospheric concentrations of carbon dioxide, methane, and nitrous oxide have increased to levels unprecedented in at least the last 800,000 years; and
- Carbon dioxide concentrations have increased by 40% since pre-industrial times, primarily from fossil fuel emissions and secondarily from net land use change emissions.
One of the reports summarised its findings as follows: “Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems”. You might ask, so where does that leave us?
The sad part of all of this is that a large portion of the damage done as a result of human contribution, is largely irreversible, at least within the time frames required in order for us to observe meaningful reverse on the warming cycle. To add to it, the average Australian CO2 emissions per capita is still climbing and approximately 4x higher than the global average! (Not good fellow Aussies!)
The reports conclude “limiting climate change will require substantial and sustained reductions of greenhouse gas emissions”.
So here’s what has us excited. What if you combined a focus on providing a transparent, reliable and technology driven energy retailer, with one that was focused on supporting renewable energy production and the green power scheme? You guessed it — Amber Electric.
As investors we see there are two major components that will help make our collective vision become a reality for Amber:
- Maintaining a relentless focus on empowering consumers to make smarter energy consumption decisions — using both technology and data as the leavers to help drive savings in electricity bills; and
- By providing consumers with the ability to see and feel their contribution to developing renewable energy sources, while being economically minded in the process.
Obviously this is no easy feat, but it helps knowing the business is co-founded by two of the smartest guys we have spoken to within this sector: Chris Thompson and Dan Adams. The co-founders make an impressive combo having worked within the top echelons of both the corporate and energy ecosystem with strong capabilities in energy solutions and technology development. Chris as CEO, in combination with a fantastic tech team behind the scenes, has helped Amber develop a launch ready product that can help you, the consumer, start making some nifty savings on your electricity bill from the get go.
Interested to know more? Below is the 30,000ft summary of the product at launch.
Intelligent Pricing +
In contrast to the traditional hedged retailer, Amber passes wholesale prices directly through to its customers. This means no longer is the customer paying inflated fixed prices per kilowatt hour within a hedged position, rather, they receive the benefits of off-peak demand price reductions. Consequently if the consumer is not highly engaged with their usage, they may also pay increased prices for consumption during peak demand periods. The outcome — significantly lower electricity prices for intelligent users.
You might be thinking, well how do I become an intelligent user? Well, this is where part two of the equation comes in.
Intelligent Data Consumption =
In order to get the best savings on your electricity bill under an unhedged contract, you have to be smart, i.e., you have to make better decision around consumption and when you do common things like: running the washing machine or running your pool pump. Amber makes being smart easy with its intelligent technology platform that combines the necessary hardware, software and data analytics to ensure that as an Amber customer you are equipped to make better consumption decisions from day one. The best part, the Amber platform does the technical heavy lifting for you.
Lets imagine a hot summer day in Sydney: Amber can help its customers use more power during the day when excess solar energy is driving down prices, and then use less during the peak window at 6pm when everyone else is turning on their air conditioners. By aligning the customer price to the wholesale price, amber can help customers save money by using power when renewables are running — great for them and for the environment.
A greener, cheaper world for all of us.
By combining smarts in the two areas above, Amber customers can buy carbon neutral electricity and save over $1000 a year, or choose to purchase 100% renewable production certificates to offset their usage and still keep their energy bill at the same amount they would have paid with dirty retailers, and this is just the beginning.
To wrap it all up, the great news is that Amber will continue to focus on relentless innovation to make the underlying platform and technology even smarter, which will in turn provide an improved energy retail experience for all customers.
We are excited to be on this journey with Amber Electric!
If you are interested in asking any further questions on our investment approach, or would like an introduction to Amber, feel free to reach out to me directly Dan Winter, or the GP Daniel Gavel.
If you are interested in joining us on this journey as a customer of Amber Electric, visit: amberelectric.com.au. Alternatively, you can contact Chris directly @ chris.thompson@amberelectric.com.au
For more information on what it means to offset your energy consumption with renewable certificates, visit: greenpower.gov.au
Some interesting readings:
Publishers Note: I am an investment associate at Black Sheep Capital and Full Circle VC, former management consultant, strategist and lover of all things tech. For the record, any and all opinions contained represent me and not Black Sheep or Full Circle.
