Others will experience our pain, Zen Energy says

Renewables player Zen Energy suffered a loss of more than $50m in 2024 after an aggressive expansion into renewables, conceding it was a challenging year.

Economist Ross Garnaut advised the Rudd and Gillard governments and then launched Zen Energy. Picture: Izhar Khan/Getty Images

Zen Energy has conceded 2024 was a challenging year and has made changes in the wake of a $50m annual loss, warning others will experience the same problems as Australia’s transition away from coal accelerates.

The Australian on Monday reported how Zen Energy – founded by renewable energy advocate and fierce critic of fossil fuels, economist Ross Garnaut – had developed a trading position that was eventually unravelled by a “wind drought”, which drove the substantial loss.

Zen’s chief executive Anthony Garnaut, the founder’s son, said the company had made substantial changes to bolster its capacity to withstand periods when renewable energy generation was curtailed, which ultimately strengthened the position of the company.

Broadening his defence, Mr Garnaut said Zen would not be the last company to experience similar issues.

“We are facing up to the challenges of the energy transition and the increasing importance of having a flexible generation base,” Mr Garnaut told The Australian. “Established energy retailers will have to face up to the same challenge in a few years, but on a much larger scale as they roll off coal.”

Mr Garnaut said Zen would continue to pursue a similar strategy of offering customers – predominantly commercial and industrial clients – firmed contracts linked to renewables.

“We continue working with like-minded partners who are committed to make the energy transition work. We are expanding our portfolio of firmed renewables, driving our asset program and delivering a high level of service to existing and new customers” he said.

While Zen insists it has emerged from the crisis in better shape, industry sources continue to question the long-term viability of the company, though they acknowledge its progress in developing a suite of batteries which will give the Melbourne-based firm greater capacity to back-up its contracted renewable position.

Sources said that while the batteries would undoubtedly help, Zen has long-dated positions that could be tested by further market volatility.

Australia’s energy market in recent years has been plagued by unusual events that have caused widespread disruption.

One industry figure said the wind drought that derailed 2024 for Zen was almost impossible to predict. Picture: Gabriel Bouys/AFP

Australia’s largest energy companies in 2023 experienced serious losses as a result of the global energy crisis triggered by Russia’s invasion of Ukraine, while wind generation slumped for periods last year.

Industry figures expressed sympathy for Zen.

“We are talking about a one-in-50-year or more event. Wind generation is hard to predict but few people would have been able to predict the lull we got last year,” one executive, who declined to be named, told The Australian.

However, another source ­familiar with the details of Zen’s trading strategy said the company needed to be better prepared.

“They had an interesting approach to risk management,” said one former employee. While the industry will debate the scope of Zen’s risk management plan, there is broad agreement Australia’s energy transition will test everyone.

The federal Labor government has set an aggressive target of having renewables produce 82 per cent of the country’s electricity by 2030.

The influx of zero emission sources is taking an increasing financial toll on many coal power plants.

The Australian Energy Market Operator expects all of the country’s coal power plants to have been retired by 2037. The loss of coal will be cheered by environmentalists, but will unsettle Australia’s National Electricity Market.

Renewables are inherently less predictable than coal and periods of constrained generation will increase the market’s reliance on batteries and gas.

“The Zen story is a microcosm of the bumpy broader energy transition,” one industry source told The Australian.

“It is a tough business, typically one that requires a lot of money to play.

“With the rollout of renewables, it may be even more money is needed.”

Originally published as Others will experience our pain, Zen Energy says