The role of EVs in reinventing energy retail

Electric vehicles offer energy suppliers a chance to step out of the shadows and have an entirely different relationship with consumers, Ovo Drive managing director Chris Russell tells Utility Week. He believes the winners in this expanding market will be companies that can take all of the complexity away from the consumer.

“I think EVs are a huge opportunity for suppliers to reinvent themselves and bring themselves closer to something that is frankly exciting and more of a visible day to day asset.”

Simplifying Ovo’s electric vehicle (EV) proposition for consumers is the name of the game for Chris Russell, who earlier this year took up his role as head of the supplier’s new dedicated EV division.

Russell co-founded Tonik Energy in 2015. The challenger brand had acquired around 130,000 customers when it ceased trading in October last year.

Ovo has established itself as one of the largest players in the market since launching in 2009. Following its acquisition of the retail arm of SSE in 2019 the group serves almost 5 million customers and employs 7,300 people.

A core aspect of the business is Kaluza, an energy platform that introduces flexibility into the energy system by optimising individual devices, including smart EV charging.

The latest figures from the Society of Motor Manufacturers and Traders show plug-in electric vehicles account for almost 14 per cent of new car registrations so far this year. For comparison, 2020 was the best-ever year for electric cars, with battery and plugin-hybrid vehicles having a 10.7 per cent market share.

For his part, Russell believes in ensuring a simple consumer proposition which he hopes to achieve with Ovo Drive and its new tariff Drive Anytime.

“They are based on the principle that we should be doing the hard work for customers, not the other way round,” he tells Utility Week.

“We don’t want to have propositions where people are worrying if they leave their car plugged in overnight they’ll get charged too much or, equally, they can’t charge until evening because it’s not the best time for them to do it.

“The whole principle of Drive and Drive Anytime is you plug it in, we make it dead easy from your perspective, you get a single rate, and then we’ll do all of the balancing in the background and we’ll share some of that benefit back to you. So it’s got to be simple otherwise we’ll put people off, certainly from a mass market perspective.”

Both Russell and Ovo want the company to have relevant offerings for customers at each stage of their journey. An ideal scenario, he says, is ensuring Ovo is seen as providing a single solution which is connected to the various divisions of its business.

He explains: “From our perspective, success looks like customers being able to join those products and take up those propositions at the right point in time for them. Equally, we need to make sure that they’re aware we do those things when we think that is relevant to them. The journey element and the way we campaign will adapt over time.

“For example, we know 95 per cent of our base doesn’t have an EV right now so we shouldn’t flood them with information on what you do if you get an EV and ‘here’s how you get on the best EV tariff’ because it’s not relevant for everybody right now.

“What we are looking at doing is making sure we can identify those people who are thinking about it, help educate them and help take them on that journey such that we can provide services to them all the way through that lifecycle and when they’ve got to the point of taking up an EV we are there to service and provide it.”

There is also the issue of accessibility.

“Clearly the EV market today has been driven forward by early adopters, enthusiasts and then typically people who are financially better off just because the costs of the vehicles themselves and the channels that can get them through don’t work on a mass scale for your average person.

“So bringing down, not just the costs of the vehicle from a total costs perspective, but also the charger and the hassle associated with getting onto those propositions is super important.

“Accessibility also includes access to charging. We know from the work we have done with our own fleet, a significant portion of people haven’t got driveways. They might be renting a property. It’s a well understood problem and we’ve got to find a way of solving that.”

Additionally, he says, there needs to be the technological infrastructure in place to allow charging flexibility as well as the right policy underpinning the system.

Breaking down barriers

Despite worries associated with accessibility, Russell observes that more people are making the switch because it has become increasingly financially feasible. Some of the old barriers, he says, are beginning to break down.

“As range has improved, we are definitely seeing a wider audience start to come to the EV sector. We split it out into a couple of different categories. There’s private buyers and then there’s business users.”

He adds: “The early adopters definitely were more excited about the experience of the EV, about the role that it plays in carbon reduction and the environment or excited by technology associated with the vehicle. Obviously Tesla has played a massive role in that third category.

“We are now seeing people making the change because it makes financial sense and because the range is now acceptable for their lifestyle. We have started to cross some of those barriers that existed even two years ago around cost, accessibility and range.”

An EV retail strategy

Recently, discussions in the sector have centred on what the forthcoming energy retail strategy will entail. What then does Russell want to see from the government in terms of how EVs will fit into the strategy?

He believes EVs present a unique opportunity for suppliers to “reinvent themselves” and offer a product that is a more visible and exciting day-to-day than pure energy supply. That said, education will play a key role in encouraging uptake.

“The vehicle itself is super exciting. It drives differently, it’s cleaner and it’s smoother. Suppliers can very quickly move away from being something in the background that sends you a bill each month to something that’s genuinely enabling you on a day-to-day basis.”

He adds: “It’s critical that from a regulatory perspective, and no doubt this will be addressed in some way, certain consumers aren’t left behind. There’s got to be that fairness element and that can be ensuring consumers are educated on the differences that an EV will drive in their bill.

“If you found yourself on a high electricity rate because you’ve historically been a very low user, your consumption is going to go up and people need to understand how to address that.”

Further to this, the right market mechanisms need to be in place such as the correct weighting of policy costs on gas and electricity bills to encourage EV use. Additionally, the sector needs to ensure retailers can innovate in the EV space.

“With the way the sector has been set up historically, it’s very hard to move away from anything other than a very basic tariff structure that only really serves the price comparison services and that is not good for anybody in the sector. It’s not good for innovation, it’s not good for customers or for the market.

“I am sure there’s lots of good progress that’s been made around the charging reviews, around the wider market stuff and consumer protections, but I really need to see some more frameworks around how those things come together to enable EVs. It could be such a great opportunity to drive a change for good in the sector and also make it better from both a consumer and business perspective.”