What is Open Energy and how could your business benefit from it?
'Open Energy' is a report created by the Federation of Small Business and Fingle Associates, outlining recommendations to government around delivering simplicity, efficiency and innovation in the British energy market. Make It Cheaper lobbies to support Open Energy and were described as a market disruptor at the launch event at Westminster.
You can download the full report here, or read our summary below.
Do we need a more Open Energy market?
There is a growing sense within the UK that the energy market is broken. Customers feel they are being ripped off by the big suppliers, and that their loyalty is being punished rather than rewarded. This lack of confidence in the energy market leads to a demand for greater regulation which, if not done properly, could make the problem worse, creating a stagnant industry with no reward for innovation.
Small businesses often face the worst aspects of the energy market as it is. The business energy market is rife with overcharging and emergency tariffs, with customers facing uphill battles to gain access to the best deals. Recent evidence from Ofgem indicates that provision of information is a substantial barrier to switching for many SMEs (1 “Eight times as many people get a better deal in Ofgem’s collective switch trial”, Ofgem (August 2018)).
Improving the energy market therefore isn’t just about saving money. It’s about ease and enabling choice as the main driver of competition in the market. Choice that can be led by value, innovation or service, for example. If choice in the energy market can be made open and easy, customers’ perceptions may still be rescued.
What is Open Energy?
“Open Energy” shares some of the benefits and recommendations of Open Banking and could well be the solution that gives home and business energy customers more control over their own data and far easier access to the best prices and most innovative products on the market, by outsourcing some of their energy decisions to others.
What are the benefits of Open Energy?
- Easy switching to better deals. Energy customers are more likely to escape expensive default tariffs and can find the best tariffs without having to provide large amounts of information.
- Greater billing and pricing clarity. According to the CMA this has been a key cause of less than half of UK SMEs switching since 2016.
- Greater access to renewable energy sources. Time-of-use-pricing and data accessible by ‘smart’ demand-management products and software means that SMEs and domestic customers have greater say in when and where they source their energy from.
- Tariff accuracy and energy management. ‘Open Energy’ gives business and home energy customers the power to securely authorise other parties to access their usage data. This would enable accurate comparisons of diﬀerent tariﬀs, particularly useful for time-of-use tariﬀs, and allowing third party services to use this data for other purposes such as demand management and better monitoring of energy use.
- Effortless switching to better deals. By formalising ‘Letter of Authority’ powers so that energy customers can authorise third party switching services to act on their behalf in a standardised way. This enables automatic switching to remove the hassle for people who would like to switch but find the current process inconvenient.
- Introducing these reforms would make switching less difficult and time-consuming, enabling much more frequent and widespread switching between tariﬀs. In the longer-term, it would create the opportunity for additional services that allow energy customers to consume energy more efficiently and at lower costs for them, and could enable a shift towards a less centralised model of energy supply.
Open Energy seeks to shift power over data from incumbent suppliers to their customers, empowering those customers to re-bundle energy market services to their own benefit. Empowering businesses and domestic customers to delegate their switching to a third party would make the process of shopping around virtually costless, and rich data could make the savings that switching could provide much more certain for dubious customers. Opening meter and contract data up to third parties, including smart home technology, would allow businesses and households to take serious advantage of data analytics and time-of-use pricing to shift and change their energy use in order to lower costs, perhaps substantially. It could also allow a step forward in the innovation that has been so long anticipated in energy use.
The wider benefits of these changes would be to make renewables much more economically viable by overcoming the intermittency problem, and to drive much stronger levels of competition in the energy market on fundamental efficiency grounds.
If Open Energy is a success in Britain, it could follow Open Banking in being adopted around the world, helping to build the UK’s reputation as a world leader in efficient regulation. It could also, along with Open Banking, form the cornerstone of a suite of demand-side reforms designed to drive competition and innovation in a broad range of markets that are currently over-complex and not optimised to customer needs.
What Open Energy services are available now?
Products like Make It Cheaper’s exclusive Do It For You service are leading the way in providing hassle-free ways for business customers to save time and money finding the best tariffs available. It’s why the government has recently referred to them as a ‘disruptor in the industry’. You can find out more about the Do It For You service or sign up, for free, here.