Cast your mind back to 2017, when just under 70% of UK households remained on standard variable tariffs (SVTs) with the ‘big six’ energy retailers. Theresa May declared the UK energy market ‘broken’, political parties on both sides of the coin campaigned for its review, and a plan to introduce price caps in the winter of 2018-19 was unveiled. Energy retailers were left with nearly two years to implement a solution for the new, managed tariff environment. What followed the launch of the price cap was two years of biannual price cap drops and millions of pounds in collective savings for those UK households on SVTs. But in April 2021, the government is, for the first time, set to lift the price cap, citing a steady rise in the market price of gas and electricity. In a country already stricken by the economic impact of COVID-19, this could mean an estimated £80 pound lift in annual gas and electricity bills for those same households on SVTs. But what will this mean for energy retailers? And is the price cap achieving what it set out to way back in 2017?
It’s not breaking news that our industry is staring down the path of revolution. Mix lofty climate goals with new technologies and prosumers poised for the energy transition, and ‘disruption’ is too light a word for the imminent shift. Engaging consumers in the future of energy may be the key to both accelerating the transition and helping to solve the inadequacies of the current energy market, but with a remaining 53% of UK households still on SVTs by 2019, we can make the assumption that the majority remain agnostic.
At the time of launch, opponents of the price cap declared it a historical solution in a quickly evolving industry, and feared it would do the opposite to what it set out to by stifling competition and de-incentivising consumers to engage with their energy purchase. The introduction of the price cap in early 2019 in fact preceded a year of the highest switch rates since 2003 at 21% for electricity and gas, arguably because the debate around its introduction drew attention to the situation. But it does beg the question - with all these new technologies at arms’ reach, could we be doing more as an industry to engage and excite consumers in their energy purchase?
Distributed energy, solar generation, home battery, electric vehicles, smart homes and the Internet of Things (IoT) - concepts once isolated to the imagined world of The Jetsons are quickly becoming a reality for some. As access restraints like cost and usability slowly peel away, these technologies will become increasingly commonplace in households in the UK and abroad, likely engaging and exciting a previously disinterested consumer base. But accessibility issues will inevitably remain, notably for more vulnerable members of society, such as those on lower incomes or the elderly. It is these groups that disproportionately remain on SVTs, and we must consider that fact when ideating solutions for a fair and just market.
As an energy retailer, whether you agree or not with the price cap, a biannual review of pricing management and budget strategy on top of the operational challenges of remaining competitive in an evolving industry is a lot. Having a core operating system that enables you to efficiently and accurately test, introduce and bill new or adjusted tariffs is critical to making required changes with as little disruption to business, and customers, as possible. With a digitised, flexible and extensible operating system, you’re free to explore the solutions that you believe might truly shift consumers toward the energy future, or solve the issue of SVT stagnation, without limitation.
Here at Flux, we believe the solution for all energy retailers lies in digital transformation. We’ve designed our retail solution around the belief that in order for an energy retailer to remain relevant in a quickly and drastically evolving environment, they need a core operating system capable of adapting to their changing business needs. Flux is built for a digital world, with a focus on speed, flexibility, extensibility and seamless integration with a future-focused energy retailer’s optimised tech stack. The Flux app allows a retailer to reprice across multiple ICP connections within a network in less than ten minutes, supporting our clients to expend their time and effort on strategic initiatives that might truly shift the dial. To enable your business to capitalise on new technologies, regulation and consumer demands, you need a digital transformation partner that enables you to design, test and implement your solution without the technical constraints that plague innovation.
The time for transformation has never been more paramount. Macro factors such as increasingly urgent climate action, the economic impacts of COVID-19 and the smart meter rollout due for completion in June 2021 will shape and transform the industry over the coming years. Those that win will be those with the capability to respond with speed and agility; those that are operationally ready to capitalise on the data and automation opportunities of a smart meter world; those that can engage consumers with inspiring tech and energy solutions; and those ready to compete for growth as rising bills from the lift in price cap piques interest in consumer switching.
Any way you look at it, digital transformation should be top of the strategy list for any energy retailer wishing to remain competitive throughout the energy transition. The price cap was introduced as a temporary measure to protect the almost 70% of UK households stagnated on SVTs, but now at more than halfway to its use by date of 2023, more will need to be done to inspire or carry the remaining consumers to a fairer, more suitable tariff, particularly for our vulnerable customers. We know the solution lies beyond government policy alone, and we believe it requires digital transformation. We’re here to enable you to implement the solutions that your current tech stack inhibits, and to help shift our industry to a greener, more customer-focused and tech optimised future. From the core of your business out, your digital transformation journey must start today.