So yes, we believe you should use a marketplace to build your onsite energy system. But the reasons why might surprise you…
Onsite energy systems today have long service lives. Whether we look to more traditional diesel and gas generators, or to newer renewable generation and battery storage systems, the expected service life of a system is typically measured in decades. With the right business case, investing in these kinds of assets also pays dividends over those decades.
Making great decisions today is impactful for a long time to come. This is part of what makes onsite power so exciting, businesses can enjoy better reliability, lower prices, and reduced emissions!
The flip-side of this opportunity for some energy users is a fear: “what if I make a mistake today. Will I be paying for it for years to come?” It is a wise question to ask, and the good news is the risk can be planned for and mitigated by using the right tools.
At VECKTA we see the echoes of this fear of mistakes often. Approaches to deploying energy projects that don’t address it often stall, leaving opportunities for value creation unrealized. Energy users feel frustrated and overwhelmed, while project developers pull out their hair wondering why clients won’t act on a good business case.
So why does this happen? We help with a lot of energy projects, from big to small and everything in between. In all of those projects the most common frustrations people experience are rooted in information asymmetry.
What is information asymmetry and why is it important?
Buyers know too Little
Suppliers have to deliver proposals that claim their new system will be better than what the energy user has today. Otherwise, why build it?
Energy users know there are other options out there. They need to know their new energy system is good relative to two targets; what they pay today and what they can get from other project developers!
If we were talking about a new flavor of toothpaste, or a subscription to the latest new Netflix competitor, it doesn’t matter too much. If you don’t like it, just unsubscribe. Or go back to the minty Colgate next shop. With energy systems it isn’t quite so easy; they last 10+ years, and contracts are typically on similar time scales.
Sellers know too much
Most energy users source their energy from a utility. As long as they pay the monthly bill the lights turn on and the business keeps running. Beyond that the average utility user does not need to know about distributed generation, microgrids, solar arrays, or interconnection agreements.
But suppliers live and breathe the world of energy every day and are much better informed as a result. Buyers know this, and it feeds into their fear of making a bad deal.
How Can a Technology Enabled Marketplace Help You Make a Better Decision About Your Energy System?
It’s no wonder onsite energy deals stall. Every buyer is faced with making a long-term commitment to an energy system they don’t understand as well as the seller, with no easy way to compare alternatives.
This is where market forces help, and marketplaces really come into their own
Going out to the market is common practice. Energy users seek proposals, run RFPs and expressions of interest, and receive bids from suppliers. Energy users gain a coupe of key things:
- Market intelligence – what is possible and who has the best track record
- Different options – and validation that the option they are considering is reasonable
Market forces alone are useful, but…
They are often not enough. Sometimes the solution creates as many problems as it solves! The energy user is expanding their choices, and now to get their project built they need to:
- Figure out who to approach – which is a chicken-and-egg problem in itself. How do you know who to approach if you don’t know what you want?
- Convince suppliers that this is an opportunity worth their time and effort
- Gather their data and provide it to suppliers in an easy to understand format
- Get apples-to-apples proposals, that are all built on the same foundations and assumptions
- Understand their options, and compare between them
- Negotiate effectively to reach a favorable outcome
Better solutions are needed…and have arrived in the form of tech-enabled marketplaces.
Well run marketplaces outperform self-managed market engagements:
- The suppliers are already there, so energy users get a thorough profile of the options available to them, not just a comparison against grid power
- Energy users are guided through data-gathering in an easy to follow manner and are able to provide complete and concise information to potential suppliers
- Suppliers’ costs are low. They can quickly and cheaply screen opportunities to find the ones that fit their portfolio, reducing cost-of-sale. Suppliers then aggressively pursue the projects they like and have all the information they need to do so.
- Supplier proposals are organized well. Proposals must be bespoke to the needs of the energy user, and marketplaces add value by making them easy to read, easy to understand, and easy to compare.
Marketplaces facilitate communication between buyers and sellers to negotiate an outcome that is agreeable to both parties.
So, should you use a marketplace to build your onsite energy system?
We think you know our answer, but be sure to check out some of our most recent client spotlight on Anderson Valley Brewing Company To understand how VECKTA is helping clients make the right decisions about their energy systems.