Chief executive’s view: Stephen Fitzpatrick

Ovo Communities will enable and support anyone who wants to become an energy services provider – from supply and generation, to smart technology and energy efficiency.

All industries evolve. If they don’t, they die out or are supplanted by something different. Evolution can take many forms – value for money, customer service, product innovation, operational efficiency. But one way or another, change means survival and growth.

The evolution of our energy market is an interesting story. It started locally [Ovo is based in Bristol] in 1881, with the world’s first electricity supplier a community-based scheme powered by a water wheel on a nearby river.

By 1915 there were 600 electricity suppliers across the UK, before nationalisation effectively reduced them to just one. Today, 25 years after privatisation, we have six large, vertically integrated incumbents, controlling 95 per cent of the market between them.

Today’s market is now in the headlines every day: it is opaque and illiquid, with high barriers to entry and very little real competition. Prices have risen, and levels of trust have plummeted to the point where the vast majority of consumers have simply ­disengaged with the market altogether.

This is the opposite of evolution. It’s a destructive status quo, fundamentally weighted against the customer. It’s also the reason we set up Ovo Energy five years ago – because we firmly believed we could do better. Our commitment to our customers has always been simpler, fairer, cheaper energy. Now we want to go further than that. We see an energy market on the cusp of a major step change and we don’t intend to just shout about it from the sidelines – we want to drive it.

The platform we launched at the end of April is designed to trigger a seismic shift in the power balance between consumers and the energy companies who are supposed to serve them. At its heart is a move away from the centralised model back to a decentralised one; but we’re talking about far more than just community energy generation. Ovo Communities is an out of the box solution, enabling and supporting anyone who wants to cut out the middle man and become an energy services provider – from supply and generation, to smart technology and energy efficiency.

Ovo will offer every local authority, housing association and community group access to our expertise, infrastructure, highly efficient systems and ongoing support. We will provide the comprehensive toolkit and guidance to establish these community energy programmes across the country, so that communities can reap the benefits of cheaper prices, local generation, reduced usage and, crucially, greater trust that they are getting a fair deal. After nearly 100 years, we want to return power to the people.

There is a lot of interest from local councils to provide more services, and energy in particular. They are realising that there are real benefits to their community in having a local energy strategy that addresses not just generation but also efficiency, smart grids and even fuel poverty.

Germany is a great example of how successful community energy can be. There are now more than 1,000 community schemes in place, with local municipalities supplying more than half of Germany’s electricity. Despite very high energy prices, customer satisfaction with their local Stadtwerke far outstrips that of the big four. Germany is not a perfect model, but at least customers like their suppliers!

I believe that there is real economic rationale behind supporting councils who want to sell energy. Councils already send a bill to every home in their area every month, housing associations collect rent every month, even every week. Both organisations also have a genuine interest in trying to help local residents to become more energy efficient.

What local community groups don’t have is energy expertise. But that is where Ovo can help. By opening up our technology to partners, we can dramatically reduce the start-up and running costs for anyone who wants to run their own energy service company. We have already built the tools needed to buy and sell gas and electricity, to manage micro generation, to bill customers and manage smart meter data. We have built market-leading demand forecasting tools that can match the big six’s trading capabilities at a fraction of the cost, and all of these systems have been built to be scalable and sharable.

The main question I can hear you ask is: why on earth would we help create more competition for ourselves? The simple answer is that I think change is inevitable. I think that whatever is best for the customer, and made possible by technology, will happen sooner or later. Since more competition, more genuine choice and lower prices is what’s best for customers, we expect this to happen and we want to make sure we are there first.

Ovo launched in 2009 with a simple idea. If you were to design an energy company from scratch, around what was best for the customer, what would it look like? We thought it should be low cost, simple to understand, transparent, and designed to treat people fairly.

Today we employ hundreds of people; we supply just over 1 per cent of UK households, and are growing faster than any other new entrant in the past 15 years. Building your business around what is best for the customer works.

One of the great myths of today’s energy industry is that we need large, centralised energy suppliers, because energy is too complex, too high risk, for mere amateurs. Our experience over the past five years (and we had very little when we started) has shown that it is perfectly possible to start from scratch and run a more efficient business, with happier customers and lower prices.

We are now going to take what we’ve learned and use it to demystify the industry and level the playing field for good. Companies that rely on business models that harm their customers will not survive this evolution. But those which adapt, so that what is best for their customers is also best for their businesses, will thrive.

One energy company can’t change the whole system, but together we can.

Stephen Fitzpatrick, founder and managing director, Ovo Energy