Saving energy by co-operation

Posted on October 2, 2011 · Posted in Co-operative News

The Energy Saving Co-operative has very big ideas. Its co-founder and would-be chief executive Ewan Jones says: “There is a £10bn annual market for retro-fitting homes and the co-op is aiming for at least 10% of this market. The demise of the Energy Saving Trust leaves a gap for the co-op. “

The concept for the co-op is pretty simple – it will do what it says on the tin, as it were. It is a co-op (already registered as an industrial and provident society) and it will enable homeowners to save energy. The route towards achieving that is to ‘retro-fit’ homes with insulation, latest generation efficient water heating boilers and improved heating systems. This is the basic type of energy saving home improvement, which will earn the homeowner a reasonable return on investment – eschewing what Ewan refers to as the more expensive, everything is included, ‘Rolls-Royce’ approach.

Bob Burlton – former chair of the Co-operative Group, in case anyone doesn’t know – is the other co-founder, giving the enterprise a sense of sector gravitas and credibility. Ewan’s credibility lies elsewhere: he has been a consulting partner in branding and retailing for one of the largest brand image advisors in the UK. “The task [to convince people to adopt sustainable energy practices] is a behavioural change problem, not a technical problem,” he says about his non-energy background.

The pair launched at this year’s Co-operative Congress to much sector publicity and since then have been doing public consultation events, not least with the assistance of the Midlands Co-operative Society. “We have been working on this for 18 months,” Jones explains. The co-op intends to begin trading either later this year or early next year, initially via pilot schemes.

Providing agreements can be finalised those pilots will be in Birmingham (targeted because of what is perceived to be a strong co-op ethos in the city), Lambeth (declared as the first ‘co-op council’), Brighton (a centre of co-op and environmental activity) and Belfast (where energy costs are higher than in Great Britain). As well as working with individual homeowners, the co-op wants to work with social housing providers and local co-op societies – though the Co-operative Group is not, as yet, partnering with the project.

But the selling proposition is not based around principle so much as pragmatism. “If we talk about saving the planet, we will not get mass market support,” says Ewan. “The focus is on improvement that makes sense at today’s prices. And for us to do things that encourage people to come back for more.”

The co-op wants to do this in a way that is simple for the consumer, akin, as Ewan puts it, to going into a mobile phone shop and taking out a new smartphone. The co-op will not merely advise on energy saving improvements in the home, but will arrange the finance at rates that are better than ordinary personal loans. It is hoped that these loans will be provided via mutuals – building societies, credit unions and, if it can persuade them on board, The Co-operative Bank.

“I don’t want to go into detail on the finance discussions we are having,” Ewan says, though. “Ideally we would like it to be ethical finance and it will be from mutual-type sources.”

While the co-op is registered with the Financial Services Authority as a society, it will eventually also be registered with the FSA (or, more likely, with its successor body) to provide financial advice to consumers. Loans are likely to be repayable over a 15 year term, possibly – if the energy supply companies are willing to participate – integrated with the normal energy bills. Reductions in the cost of energy will more than cover the repayments for improvements, if the co-op’s financial assumptions are correct.

There is, though, the challenge that the energy supply companies are also likely to enter this market. Ewan suggests that those supply businesses will be unable to compete either on price or ethos. “My belief is that this could never be achieved by organisations that are focused on selling energy,” he says. “It cannot be achieved by organisations that are structured to make money by selling energy. I believe the co-operative is the best way to do it.”

Nor is an individual likely to obtain similar terms operating in isolation. The co-op expects to obtain preferential terms both from finance suppliers and product suppliers. “If it is left to the financial market, it would lead to a lot of money going out [of homeowners’ pockets],” says Jones. “This way will save a lot of money. It is about combining the best of the large, with the best of the small.”

The co-op will offer the complete project management package, overseeing installation and signing-off on quality. As far as possible the co-op will sub-contract delivery to other parts of the co-op sector, including the Renewable Energy Co-op and local workers’ co-ops. Indeed, the co-op’s structure will be as a hybrid, enabling consumers and employees to be members.

Timing has been pinned on the launch of the Government’s New Green Deal, which is being introduced in the Energy Bill currently going through Parliament and is intended to revolutionise the energy efficiency of British properties. It does not apply in Northern Ireland, where the CBI and the voluntary sector are together – and rather confusingly – introducing with all-party support a Green New Deal. In both cases the intention is to establish a framework to enable providers to improve energy efficiency in their homes, at no upfront cost, with payment recovered through their energy bills.

But while the UK Government’s clear intention is to create a framework to be used by the private sector – including energy suppliers – to undertake the refurbishments, Jones is sceptical about this approach. “The problem cannot be solved by the market. “ Not least, he suggests, because the work is unlikely to be cost-effective working on the type of margins that some private sector players are intending to impose.”

He adds: “The Green Deal is likely to be a very bad deal for consumers because you will be tied into 25 year loans at interest rates higher than mortgage interest rates. I don’t see why anyone would take out a loan on these terms [expected to be about 7%].”

Jones is bullish both about the prospects for success and the impact the Energy Savings Co-op can have for the wider movement. “This could have a transformational effect on the co-operative movement itself,” he says. “If you think about how people form positive impressions, it’s largely about their experience. This would give people a positive experience of co-operatives and give them a positive impression of co-operatives in general.”