Since being set up by the Midcounties Co-operative in 2010, Co-operative Energy has gone from strength to strength, achieving sales of £295m in 2016/2017. In November 2016 it was chosen to take on 156,000 customers from bankrupt GB Energy.
Chief executive David Bird says the business could become the “jewel in the crown” for the co-operative movement – and, in this interview with Co-op News, he looks at the business’s priorities for the coming years.
Mr Bird took over Co-operative Energy in January 2017, joining from E.on, where he was managing director of its UK residential and metering business. Prior to working for E.on, he worked at National Express, Vodafone, Homebase, BUPA and Marks and Spencer.
“For the co-op movement, Co-operative Energy could really demonstrate how things can be done differently compared to other players in the market,” he said. “We are doing something here that other countries want to learn from.”
Over the past 12 months Co-operative Energy has achieved 45% of its energy from renewable sources. This is one area where the business aims to differentiate itself from other providers, having set a 70% target for 2018.
“We are increasing the proportion of renewable energy we get, I would like us to go towards 100%, fairly quickly,” said Mr Bird.
“We are also working with other co-ops and with other community groups, and offering our range of services to them so that we can work together to create new routes to markets and new products. For me Co-op Energy will look very differently in three to five years’ time because it will be working with far greater range of partners.”
Speaking at the Community Energy Conference in Manchester on 24 June, Mr Bird said Midcounties would continue to support the sector and work with various organisations.
And in March, Co-operative Energy launched a new community energy strategy focused on nine areas of action. One of these is power purchase support through power purchase agreements (PPAs). Co-operative Energy has 40 PPAs with community energy projects and it aims to increase the figure to 60 by end of 2019.
Now Mr Bird says the business is also exploring the possibility of investing in community energy assets.
“Midcounties has a strong balance sheet so we could partially invest, underwrite some projects or be partial investor,” he added. “There are new models we need to explore but do that in a co-operative way.”
In terms of legislative changes, Mr Bird wants a change to tax arrangements – in particular, the obligations put on the largest suppliers with more than 250,000 customers.
“They should be part of general taxation because, in effect, you have people in fuel poverty paying tax that then comes back to support them,” he said.
“And the fact that a significant number of smaller suppliers don’t pay those obligations means their customers are paying less tax than others. So, actually, they tend to attract customers who are wealthier and more able to pay.”
Community energy projects are facing a big challenge, with a lack of subsidies for the sector. Mr Bird says these projects tend to be smaller and need to be commercially viable on the long term. Unfortunately there is a “stop-start” approach to investment in community energy, rather than a long-term investment stream.
But there are successful innovations. In 2015 Co-operative Energy launched User Chooser, which allows customers to choose the type of energy they prefer – an initiative which won the EU Sustainable Energy Europe Award.
“One of the roles Co-op Energy can play is joining these elements up,” said Mr Bird. “So we have things like User Chooser, for example, where you can buy energy from your local community energy provider. That works well for Co-op Energy, and also supports those community energy projects.
“We would like to do more of that and we need to look at how digital can join up a lot more, we will be starting to put a lot of investment into digital projects to bring whole communities together.”
He thinks another issue faced by communities looking to start up community energy projects is having the required skill sets to deal with problems around regulations or technology.
“At Co-op Energy, we’ve now built some of that capability – which we would like to share with other community groups if they want to take advantage of it,” said Mr Bird.
But he warned that the UK’s exit from the EU would likely lead to volatility in the wholesale market, which would be a challenge for all energy providers.
“One thing on my agenda is to look at how we support vulnerable customers and fuel poverty customers – they will be disproportionately hit,” he said.
Co-operative Energy’s transition to a new IT system in March 2015 led to problems for over 260,000 customers, who were unable to log in to their online accounts and submit meter readings of pay bills. Mr Bird says the the business has put these troubles behind it, and it now has a platform that most mid-players lack, which will enable it to continue to grow.
“Our biggest challenge is making sure that, as we grow, we stick to the principles that it was set up around – co-operation, providing something different to the other energy big players,” he said. “If my remit was just to make it one of the ‘big seven’ that’s not what I’m here to do, it is about creating something different to other suppliers in the market.
“There is a danger of thinking what we talk about today is marginal. But we should not underestimate the two keywords of our conference – ‘community’ and ‘energy’, both are critically important to our way of life.”