Can co-operation reduce energy costs?

By Gerard Couper and Andrew Shadrake (CAG Consultants)

We have just been through a wave of enthusiasm for energy switching schemes, but these have generally failed to provide help where it is most needed – for people in fuel poverty and older or vulnerable people generally.  There are effective alternatives, including helping set up community-owned energy co-operatives.  As well as helping those most in need, they can also support the local economy, and create local ownership of energy generation.

Our recent study, which can be viewed here, reviews the national experience of collective switching, including surveys of why people did not switch, and provides a case study of Plymouth Energy Community.  It points the way to a new approach for local authorities.

The study starts by examining the success of the many collective switching schemes which have been undertaken over the past twenty months.  A review of those funded by DECC in 2013 showed that they had very limited success in helping households using prepayment meters, who are often the most vulnerable.[1]  This was a disappointing result, since many councils had gone to considerable lengths to reach vulnerable customers.

This lack of success appears to be down to a combination of factors. Firstly, the switching schemes were not able to offer significant savings to a significant proportion of all customers, and even more prepayment meter customers.  One London scheme was not able to offer any saving for 29% of households registered.  Where there was a saving for people on prepayment meters, this was low, averaging between £27 (for dual fuel) and £31 (for electricity only), compared with an average saving over the whole scheme of £114.[2]  Energy suppliers are generally very reluctant to provide special prepayment tariffs.

Even if better tariffs could be obtained, a range of other issues make people reluctant to switch.  Our Plymouth survey, supported by data from elsewhere, suggests that  the complexity of the switching process, lack of trust in the  proposed new supplier, being in energy debt, and delays in the collective switching process all contribute to the problem.

Our study shows that any further interventions to help people switch need to address their individual issues, as well as offer a worthwhile saving. There are effective ways to deliver this.   For example, energy debt can be addressed by having dedicated energy debt advisers, working with energy foundations and credit unions.  Once the debt is discharged, a person may switch supplier – and may also be able to ask their present supplier to install a credit meter.  This would give access to cheaper tariffs.[3]

The real question though is how to fund and provide these interventions. The Community Energy Strategy appears to offer some of the answers. The Strategy’s main implication for local authorities is that they are urged to work with community organisations to deliver four strands of energy activity: generating, reducing use, managing demand and energy purchasing.

The Strategy gives several reasons why community energy action could be particularly effective.  One is that people are generally motivated to become involved in community energy as a way to reduce bills.[4]  Another is that the Government is supporting the Big Energy Saving Network, which is putting in place a large number of trained volunteers able to advise householders on tariffs, switching and energy efficiency (which can deliver far greater savings than switching, and over a longer term).  Those volunteers are members of the communities they work in, and so would respond to leadership by a community co-operative.  Thirdly, the Government is discussing with the Community Energy Coalition[5] how community organisations can assist the fuel poor.

All of these can help councils deliver lower bills for residents.  For example, the trained volunteers could provide the face to face support needed to promote individual switching among vulnerable groups.

There are persuasive reasons for working with energy co-operatives in particular.  One concerns renewable energy generation.  Energy co-operatives can generate renewable energy, financed by a community share issue, reducing costs for schools and other community buildings.  They can access tax breaks for investors which are not open to any other organisations, and so can raise capital quickly and comparatively cheaply.  As well as increasing local incomes and creating jobs, the renewable installations can make a profit which can be used to pay for individual switching initiatives, and energy efficiency schemes.  Plymouth Energy Community shows what can be achieved.

Notes

[1]  London Councils (February 2014) p.1.
[2]  Figures are for the first year. Energy Saving Trust (October 2013) p. 19.
[3]  Some suppliers will require a fee for the installation of a credit meter, which might be funded from a community energy pot (see later discussion regarding energy co-operatives).
[4]  DECC (January 2014) p.16
[5]  http://ukcec.org/

Andrew Shadrake and Gerard Couper work for CAG Consultants, a co-operative that is one of the UK’s leading sustainability, climate change and community engagement consultancies. They were commissioned by Plymouth City Council to lead the feasibility and community engagement work which created Plymouth Energy Community. 

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