Amber Electric Review – A new electricity proposition
We review Amber Electric which was founded in 2017 with a novel approach to selling electricity. It has only one direct competitor, PowerClub.
Electricity providers have traditionally had 2 main jobs:
- To bill customers, and
- To manage the risks of the volatile spot market so that customers pay a fixed price.
Amber Electric have largely, but not entirely, decided not to undertake the second job. PowerClub only performs the first job. Exposure to the spot market means you can get highly variable bills as we explain below.
They claim to sell all the services they acquire on the customer’s behalf at cost, and just charge a monthly fee to cover their costs and profit.
Amber Electric claims – Review
Amber claims to make electricity ‘cheaper and greener’
Are Amber Cheaper?
The claim to be cheaper relies on being able to access wholesale prices directly and using power at times when the spot market is cheaper and less when it’s more expensive.
- This is a stretch for most customers who don’t have much discretion in their use of power.
- Carbon offsets are added to the standard offering which adds nearly 3 c/kWh to the cost of the service.
- Price protection insurance is added to the standard offering. We have seen rates of 1 c/kWh.
The cheapest Energy Companies essentially pass through the wholesale contract price to customers at any point in time (as distinct from the spot) with a minimal premium. The cost premium for avoiding the spot risk is minimal (estimated at 0.4c/kWh).
As a result, customers are generally better off getting the cheapest fixed price and moving suppliers when there is a cheaper price. Find out how do that here.
We therefore reject the claim that Amber Electric are cheaper.
Are Amber Greener?
The claim to be greener relies on
- The basic Amber product incorporates carbon offsets. This is a definite tick for ‘greener’ although other companies are also offering carbon offsets. If you take the GreenPower option, then they offer exactly the same ‘green-ness’ as any other supplier of GreenPower.
- They claim that using energy when it’s cheaper is also greener. There may be some merit in this, but it relies on customers being able to manage their usage, and particularly reducing their usage on extreme weather days. For most customers this will have a minimal effect as they can’t manage their usage in this way. In effect Amber are saying you can be greener by using green energy paid for by others – it’s a form of double counting.
- Amber is not often a good choice if you have solar panels because you get the lower spot price for your exports and/or using less when solar panels are operating.
Their claim to be ‘greener’ is dubious at best. Their claim to offer “the fastest way to shift Australia to 100% renewables” is absolutely false. The fastest way is to subscribe for GreenPower, which costs only minimally more than carbon offsets and supports the adding of new renewable energy to the grid.
What does exposure to the spot market mean for customers?
- Amber do not offer a fixed price plan, unlike all the others in the market (except PowerClub, which is similar).
- With Amber you are fully exposed to the highly volatile wholesale spot market, whereby prices vary every 5 minutes and at times of scarcity can rise to 100 times the typical fixed price offer i.e. $15,100/MWh or $15/kWh. Since 2016 annual spot prices in SA and Vic have varied by a factor of 3-4 times. In NSW and QLD annual spot prices have varied by 40-80%.
- They do provide warning text messages when spot prices are high.
- Amber (unlike PowerClub) do include price protection in their plans, although as explained below, this offers limited and low quality protection.
Review of price protection of Amber Electric. How good is it?
On the bills that we have seen, Amber charge 0.5c/kWh or 1 c/kWh for price protection. They publish the maximum prices that you will pay for each distribution area. These prices correspond to the Default Market Offer in NSW, QLD and SA and the Victorian Default Offer in Vic. It’s a single rate plan for homes. It’s unclear how it applies to time of use or to demand tariffs or to business customers.
It appears that after a year, if you have paid more than the published price cap, Amber Electric will give you a credit for the difference.
It sounds good, till you think about it.
- What if there is a bad month or two, say 10 times the Default Offer? Sound ridiculous? It’s not. You would just have to pay up for that month, and the next if it repeated. If you leave you would not get the benefit of price protection. There is no practical limit on what you might pay in a month.
- At the end of a year, you get a credit, and then you have to wait till the credit is used up to leave. Price protection? Or enforced loyalty?
Annual price protection is not worthless, but it’s a poor way to manage extreme price events. Some form of price protection that settles monthly is needed, and the credit should be applied before you pay the bill.
In some exceptional cases and with some changes, Amber could possibly be a good option.
- When the customer has a high degree of discretion about when power is used, and can automatically use minimal electricity when the spot price is high, and use more when the spot price is low.
- This could apply in the future when customers have their own battery or electric vehicle, if it can automatically reduce the draw from the grid at times of high prices and increase usage at times of low prices.
- If Amber instituted price protection that settled monthly, it could be much more attractive.
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