As the world lurches towards an energy mix that is more reliant on renewable power than ever before, there are considerable uncertainties and insecurities in countries where decades-old energy supplies are being disrupted. This was at its most extreme in Texas earlier this year, but the UK, too, has experienced significant energy disruption in recent years, with the price of energy notably volatile.
Figures from Statista show that the price of energy per kilowatt-hour in the UK increased from around £0.12 in the first half of 2010 to around £0.19 a decade later, with a separate peak in 2015 and a separate trough in 2017.
This uncertainty has made it difficult for some consumers to maintain a consistent supply of power and presented even greater challenges for small business owners. These smaller operations need a reliable source of energy for both domestic and commercial needs, yet lack the financial muscle of larger companies to ensure an uninterrupted supply.
Aiming to address this uncertainty is Tickd, a company that looks to digitise the energy supply process for small businesses, bringing elements of automation and ease of access often seen for private customers to small-scale companies. We speak to Richard Price, managing director at Tickd, about how this approach could help deliver a secure energy supply to a group often left behind amid the energy transition.
JP Casey (JPC): What problems do small and medium businesses (SMEs) face with regard to energy prices and supply?
Richard Price (RP): There are six million SMEs in the UK and they sit in limbo in the energy market. Business energy requires so much human touch points during the switching process that small businesses often get a ‘rough deal’ in order to cover these costs.
What tends to happen when, for instance, a small cafe owner calls an energy broker is one of two things. If they’re spending £5,000 a year on their energy, as an example, either an energy broker will uplift the prices by enough in order to cover the humans involved because it can be three or four phone calls that get the contract set up and processed and obviously those energy brokers have a sunk cost effectively with the people that they’re employing to do those switches.
So some energy brokers will take that £5,000 and uplift that by enough to cover the costs of the human intervention, which then results in the small cafe owner having an uncompetitive end user price, so they end up paying more than what they actually need to.
The other option is energy brokers might turn around and say: “Actually, as a small cafe owner, we can’t process this economically, and by adding on a small amount to your £5,000 and us making £100 for this switch, that’s going to be loss-making for us so actually, we don’t want to do it.”
So it kind of leaves the small businesses in a bit of limbo whereby they can either switch using an energy broker and overpay, or they get turned away and have to contract directly with their energy suppliers themselves, which is difficult to navigate. So it’s those small, independent business owners really, that stand to lose out the most by how difficult it is to engage with the energy market at the moment.
JPC: How does Tickd aim to alleviate these problems?
RP: We want to be leading the way in terms of changing this market and help small businesses be better served and get a better deal. But even if it’s not us I want as many people as possible to start riding this wave really, they’ve got the rough end of the stick anyway at the moment with everything that’s going on.
The only way of doing this, is either, digitalising the process and relying on technology, which is what we’re doing at Tickd, [or] by people selling multiple services to those small businesses. Rather than selling to a small business and needing to make £500 from their energy in order to pay for the bums on the seats processing the order, they can make £100 from their energy, £100 from the card reader, £100 from the insurer etc, and cover the £500 in that way.
Therefore I think the only ways of serving this part of the market properly is either selling multiple services to them or digitalizing it so that the costs involved in switching are lower, or both. Tickd are focusing on the digitalisiation of the process. Using integrations with key energy suppliers, small businesses can get quotes and switch completely online in 90 seconds.
What I’m keen to be clear on is that I don’t see Tickd as replacing energy brokers in any shape or form. Energy brokers have a key role to play for businesses when they’re spending a significant amount on energy, or if you have multiple sites.
But it’s these small businesses, who have got one site, perhaps two sites and small consuming units that we’re working to provide a simple more transparent user journey, providing more competitive costs. We’re often working in partnership with energy brokers rather than against them in any way.
JPC: How has consumer energy supply changed, and could this be brought to SME energy supply?
RP: Domestic energy has changed over the last 15, 20 years, it is now very automated; you can go on Uswitch amongst others, you can compare quotes really easily, you can switch your energy in 90 seconds and it’s really simple to do that.
Business energy is a lot slower to change. There are a lot fewer digital options out there, and you’re not able to be digitally savvy and go in and compare energy costs simply. There’s always a need for some kind of human intervention.
What you tend to find is that small businesses are a hell of a lot less engaged in the energy market than the domestic consumers, so switching happens a lot less. People stay with the same supplier for years and years and years, and effectively what that results in is people overpaying, because suppliers know that if you’re unlikely to leave it means that they don’t necessarily give the most competitive rates.
Just because you own a cafe, doesn’t mean you know any more about energy than somebody who owns a house. And yet, Ofgem treat those two people, even though often they’re the same person, completely differently just because you’re contracting as a limited company.
We’re fully integrated with some of the leading energy suppliers, [which] involves two things. One, whereby the energy suppliers effectively don’t have to deal with multiple people and process different contracts; [and two] we remove the need for humans at the energy suppliers, as well as processing all the orders, which allows the energy suppliers to offer competitive rates.
But also, we remove that for the energy brokers as well. We’re looking to change the energy market at the small end of the business scale, so that it’s completely digital, and we’re bringing the journey closer to what it is in consumer energy.
JPC: Do you think the culture around energy in the UK is in need of changing too?
RP: Humans act in a habitual way, and because the only way of switching your business energy in the past has been human interaction and speaking to people, then we’re trying to change the habits of a lifetime to a certain extent and trying to change things for the better. As the next generation of business owners are millennials, they will be a bit more digitally minded.
JPC: Do you anticipate broader changes to the UK’s energy structure?
RP: There are changes on the horizon. There’s the micro business reform, which is coming, and they’ve announced changes that they expect to make. [There are] regulation changes on the horizon which will effectively move the small business energy market towards a consumer journey, giving small businesses similar rights to domestic customers.
This could fast forward the much needed changes. So what I think we’ll see is a move from the business section of the market towards a more consumer-led journey. Transparent commission, amongst other things will prevent companies putting on a silly uplift in order to cover the cost of the human interaction and it will speed up different and more economical ways of switching.