In The Midst Of Chaos

These are dangerous times for Britain’s energy entrepreneurs but according to one newcomer to the sector, there is an opportunity to challenge the premise that gas and electricity supply has to be a low-margin industry.   

First the bad news. Thanks to a spike in wholesale gas prices, Britain’s retail energy sector is in an advanced state of chaos.  Two energy suppliers – serving a combined 830,000 customers – went out of business this week and the industry is expecting more – perhaps many more – to follow.  

Why does this matter? Well, it’s been a slow process but ever since the government of Margaret Thatcher set about privatising previously publicly owned utilities back in the 1980s, Britain’s retail energy market has become not only increasingly competitive but also a hotbed of entrepreneurial activity. Today – for the time being at least – consumers can choose from around 70 suppliers, ranging from large corporate incumbents to small newcomers. Often the key differentiator is price.  

The Price Problem

And that’s a big part of the problem. The steep rise in wholesale prices has made the cheap prices offered by many suppliers unstainable. In the absence of government help – which has been ruled out – there are likely to be considerable numbers of casualties.  

So is this a good business to be in? Well, price isn’t necessarily the only differentiator and what we’ve already seen is the rise of companies, such as Octopus Energy and Ovo that put renewable power generation sources at the heart of their offer. But the fact remains that this still – for a very large part – a market characterized by consumers looking for cheaper deals.     

So this week marked an interesting time to speak to Stefan Cooksammy and Neil Cockerill, the co-founders of Rainbow Energy.  

Styled as both an energy supplier and a tech company,  Rainbow is on the verge of coming to the market with a green energy offer. To be more precise it is offering customers electricity sourced 100 percent from renewable generation while also promising to offset the gas it supplies. This is not new – there are other specialist green suppliers- but in addition, it is incentivising customers to stay loyal. This will be done through a system of loyalty points that will convert into shares.  Ultimately, customers will own 25 percent of the company. 

Diverse Thinking (Or The Lack Of It)

Cooksammy sees real opportunities in the energy supply sector. But there is a caveat. “There is a real lack of diversity of thinking in the sector,” he says. 

Price is important but Rainbow is seeking to create a broader offer. Green power is an attraction to many consumers and this – coupled with the share scheme – should be an aid to retention. The founders have also been paying attention to customer service. Cockerill cites call-center practice….