The sharing economy is coming to the power industry. In the future, we may buy energy from each other, just as we now rent homes from each other on Airbnb.
Think that’s fanciful? Look at Vandebron, a startup from the Netherlands. Through its web site, it arranges for consumers to buy electricity directly from independent producers, such as farmers with wind turbines in their fields. Utilities are never part of the transaction.
“We had a really simple idea and that was ‘why can’t I buy energy from a farmer who has wind?,'” says Remco Wilcke, one of four founders. “We started investigating this and we found that it was a simple idea, but a rather complex project.”
Customers go to the site, say what type of contract they want (one year, three years), and how much power they need (Vandebron also sells natural gas, though it doesn’t come from independent producers). They can then choose among producers, who each get a page to describe themselves and their production set-up.
For example, farmers Bernard and Karin Kadijk live in northern Holland. They have a single wind turbine and produce enough power for 600 households. Their current price is about 28 cents per kilowatt hour. If you like the deal, you give your name and details, and the deal is done in two minutes.
Vandebron says consumers and producers both benefit. Producers can get a higher price per unit because they’re no longer forced to accept what the utility offers. Consumers save because they don’t have to swallow the mark-up utilities charge for passing on that power. Individuals pay exactly what producers price their product at. Vandebron doesn’t add anything in the middle. However, it does charge a flat subscription fee to each side–about $12 a month.
“It means there is a better price for sustainable energy and also that the business case for investing in sustainable production is better,” says Aart van Veller, another of the founders. One farmer on the site says he can make $12,700 more revenue this year than he would have otherwise.
Wilcke argues that utilities are fundamentally unsuited to providing renewable energy because they have legacy investments in fossil fuels, which they need to recover. They also have an interest in selling more units, which isn’t good from an efficiency point of view. By contrast, Vandebron’s interests are aligned with its customers. When customers save energy, it can sign up more customers for each producer, which increases its subscription fees.
“We are moving from being a trader to being a service provider,” says Van Veller.
There are currently 12 producers on the site, providing enough power for about 20,000 households. Van Veller says Holland’s independent producers generate enough power for up to 1 million customers potentially.
There’s also a social side to the Vandebron model. Customers get to know who they are buying their energy from. The Kadijks recently organized an open day at their farm, complete with lunch; about 100 of their customers turned up. It’s a bit like getting to know where your fruit and vegetables come from.
Can Vandebron (which means “from the source”) be copied elsewhere? It is very likely much easier to pull off in Holland, which has a fully deregulated energy market. But it’s surely possible. If it’s cheaper for customers and more lucrative for producers, then why shouldn’t the idea catch on?