When two tribes go to war

18th Jun 2018

 

Spending time with Dieter Helm, discussing energy matters is never dull. Along with a number of key thinkers, I spent a lunchtime engrossed in discussion last week. There were no conclusions, that wasn’t the purpose, but we left our meeting knowing more than when we started.

Reflecting upon the discussions, with new thinking emerging around heating homes, it is clear that two distinct approaches are beginning to emerge. There are those who see the rise of big data, enabling new hi-tech solutions to help deliver lower bills and decarbonise. They approach the challenge from the “producer perspective”, offering a solution that they will give to the consumer. The other tribe, see consumer choice as key. The current government, broadly speaking, fit into this group. They want to encourage switching as a means to reduce bills; smart meters for them are a tool to increase the competitiveness of the market, making switching easy and giving consumers the information which enables them to alter their behaviour. They recognise there are flaws in the market and offer legislation on a price freeze for standard variable tariffs to protect the less-engaged consumer.

At some point these two approaches will clash. Emerging approaches to treat heat as a “service” that is paid for (including the kit not just the fuel) will tie consumers into long-term deals with reduced competition and more limited protections. It puts producer interest ahead of the consumer, which will raise concerns.

If the energy industry is going to take this approach it needs to anticipate the consumer choice argument first; building safeguards around fuel poverty and affordability from the outset not as an afterthought. Combining the merits from both sides of this philosophical debate, adopting a third-way, will deliver a better result than allowing the two tribes to go to war.