Chief executive’s view: Riding the perfect storm

The energy market was designed 25 years ago to deliver energy at the lowest cost, regardless of the environmental impact. Today, it’s time to stop tinkering with that market and adopt a fresh approach.
We couldn’t be facing a more “perfect” storm. Rising energy costs, plummeting consumer confidence and energy bills are splashed over the headlines of every newspaper in the country. And all of this is taking place while the government is pushing through the most major reform of the energy market since privatisation, only 18 months from a general election.
The reality is that neither a price freeze, nor a windfall tax, or even cutting the cost of policy is going to get to the nub of the issues our market faces. It’s going to take more than a short-term fix. We still need to decarbonise our power sector and we still need to reduce our exposure to volatile international fossil fuel markets.
While there is a short-term cost to meeting those challenges, we all know there is a longer-term cost attached to not meeting them in terms of climate change, in terms of energy insecurity and in terms of our economy.
In the midst of all the noise about energy, some important questions have been drowned out. What hasn’t been discussed or considered nearly enough is how the design of the market can benefit those who are paying for it: consumers. The answer lies in the fact that the consumer is both a solution and a cause of this problem. Power, literally and metaphorically, remains highly centralised, out of the hands of the people who use and pay for it. And that will continue to be the case unless we change our approach. People, not energy companies, should be at the heart of our energy market.
This requires fresh thinking and compels us to reconsider the way our energy market operates. The current debate dissuades this.
First, we need to better use customer demand to stimulate investment in green technologies. If customers can see a tangible benefit to buying green electricity, it will make it easier for renewable generators to attract the investment they need.
What is policy doing to recognise and reward those people who choose environmentally superior green energy over traditional brown energy when it comes to picking their energy supplier?
Second, we need to attract the widest possible range of new entrants to the market as part of the decarbonisation process. The accessibility of renewable technology is key to that. This is not just about unlocking new sources of investment. It’s about taking advantage of the technology to boost competition in the long run.
How are investment incentives being structured, through things like Electricity Market Reform, so that they encourage competition?
Third, the retail market has to provide positive incentives for suppliers to deliver and consumers to take up energy efficiency measures. Instead of placing punitive obligations on suppliers to deliver energy efficiency standards, we need a market-based approach that provides incentives to deliver new savings to consumers, through drivers like smarter tariffs linked to the times of the day when renewables are generating electricity.
What is being done to ensure that the decarbonised market creates new opportunities for consumers to have more control of their energy use to save money?
The problem is that these fundamental questions about how the architecture of our energy market could help consumers are simply not being asked loudly enough at a time when they matter the most.
Instead, the focus is on adapting the existing market as best we can to achieve our decarbonisation objectives. We are trying to fit a square peg in a round hole.
It is time for a fresh approach that demonstrates the same kind of depth of thinking that took place 25 years ago when the market was first privatised.
Back then, the objective was to deliver consumers the cheapest possible energy supplies regardless of the environmental cost. But until we reassess that aim and replace it with a new one – to ensure the decarbonisation process provides a lasting benefit to the consumer – then the terms of the energy debate will not change.
And there is appetite for change. Consumers are no longer passive purchasers of energy. They’re ready for renewables, and Good Energy has always been about creating new opportunities for people to be involved in their energy future. This was evidenced when, in October, we launched our first corporate bond. Our goal was to broaden the way we funded our new developments, providing our customers with a means by which they could invest directly in our plans… and their own energy future.
We not only exceeded our base target of £5 million but also – three weeks ahead of schedule – reached our maximum of £15 million, meaning we had to close the offer early. Importantly (and encouragingly) around 80 per cent of the applications we received were from our customers. What better testament to the desire of consumers to actively participate in the shape of our future energy world?
There’s a blossoming of diversity, not only in sources of investment but also in energy generation and energy ownership.
Interest in community renewable energy schemes, large and small, for example, has been sweeping through the UK. For example, Wedmore Power Co-operative in Somerset recently saw its community solar farm switched on, and more than 120 investors from the local area bought shares in the scheme.
The government has been promising to increase competition and put customers in control. Renewables are uniquely placed to deliver both these aims. It’s time to acknowledge the role the sector can play and to re-frame the debate now before we miss the opportunity.
Addressing the challenges properly with long-term energy security in mind, and with a focus on creating a consumer-centric energy market, will ensure that the UK is fit to weather the storm.

Juliet Davenport, chief executive and founder of Good Energy