Modern Utility Management

Summer 2010

Amazing sources

Douglas Stewart founded Green Energy UK on an initial investment of just £50,000. In this Q&A, he gives more details of his fascinating approach to both business and energy

Can you tell me a bit more about how you got where you are today, and your career progression?

My move into the green electricity world came as a surprise to many. For the best part of my career I had been involved in the motor industry. But in 2001 a one year old’s birthday party and a chance conversation would change everything. I spoke with someone who was doing a PhD in photovoltaic physics, a subject I knew nothing about at the time; in fact I asked him to speak English as it was my first language. When he assured me he was, we ended up talking for three hours about solar energy; I was absolutely fascinated by its potential. As soon as I got home, I researched all I could about solar and I knew immediately that I wanted to be involved with clean energy. The timing was perfect; I had sold my car dealership and was thinking about what to do next, and the UK energy industry had recently been deregulated, making way for new suppliers to come to market and offer greater choice to customers. What’s more, I now had a young family to think about, and this really brought home to me how important it was to do something that was more than just about me. The idea for Green Energy UK, a supplier of clean, green electricity, started to take shape.

I quickly realised that solar alone was not going to be enough to sustain a business at that time, and that’s when my research turned up all the other ways electricity can be created. This wasn’t just about wind and hydro power, which were already quite well known, but less conventional sources too, such as biomass, energy from waste, anaerobic digestion and combined heat and power. When I discovered that I could actually buy electricity and sell it through the grid (with a few hurdles in between) I realised the business idea could work. When someone I floated my idea past told me that energy was a big boy’s business and that I’d never be able to do it, it was the red rag to my bull; it only made me more determined to succeed.

We started Green Energy UK in 2001, with £50,000, some from the sale of my car business, and the rest I borrowed from family. A website was set up and we began by supplying electricity to friends and former colleagues, growing the business from there.

Today Green Energy UK is a 14-strong team supplying thousands of homes and businesses across the UK. Our turnover last year was over £5m and we have grown year on year since we began.

Can anyone switch to your service?

Yes, any domestic customer or business customer can move to Green Energy UK. We have a choice of two tariffs - Deep Green and Pale Green. Deep Green is made up of 100 per cent renewable sources - solar, wind, hydro and biomass, and Pale Green is 100 per cent combined heat and power (CHP) from accredited green generators. Pale Green is price-matched to other suppliers’ tariffs - completely green energy for the same price as the other suppliers’ brown energy. We were the first of the utilities companies to offer a hybrid tariff as well as a pure renewable one because we recognise that while some customers can afford less than others, every difference is worthwhile.

Please explain further about the unusual business model that Green Energy operates?

One of the first decisions I made was to give up to half my company away to my customers. This might sound extreme, but I wanted to reward consumers who took active steps to be greener. The first 100,000 customers to join Green Energy UK receive 400 shares in the company. This promotes customer loyalty, but it also makes us totally accountable to each and every customer. Customers can make suggestions at any time to improve the business and help us grow, and they can come to our AGM and put questions to the board. Customers can become Green Energy UK ambassadors and earn extra shares by referring friends and family, which is another way our existing customers help us grow. Our customers share our objective of greening up energy consumption and in return we share our business with them.

Consumers are always urged to switch energy suppliers to save themselves money. This is a challenge for us because we have a premium product. Green electricity is in short supply and attracts government certification that comes at a price. We have found that a choice of tariffs as well as our share offer goes a long way to overcoming this pricing challenge.

How do you find competing in a market with such large players?

Our industry is notorious for its competition and red tape, and we are competing both with companies hundreds of times our size and smaller independents from whom we need to differentiate ourselves.

Our approach to electricity generation helps our financial agility by buying and not building our energy supply. We have found that facilitating energy to market is an equally valuable market skill. It is not a lack of investment money that has held back the green agenda in recent years. Most of the technologies we are involved with are small scale and emerging. Of necessity this often tends to involve small, pioneering businesses; our size and scale mean that we can empathise with their problems and as a small business ourselves we understand their requirements. We have been both active and successful in the sub 5MW category, and in many instances energy production has been a by-product of other processes our generators are involved in.

One of the biggest issues in the utilities industry is estimated billing and the confusion this causes consumers. We work very hard in credit control to ensure the company’s finances run smoothly and that customers do not have a negative or positive balance, because in our experience, customers do not like owing or being owed money, and we share this view.

How have the company and the market changed since 2001?

The green economy and its agenda has moved forward a lot since we started but there are many drivers - economic, environmental, legislative, regulatory and public opinion - that suggest we are in a market that is set to grow.

But we also have to manage our green business like any other; you can make losses until the cows come home but you can only run out of cash once! So cash is king in our business. We manage it closely.

A defining moment was in 2005/6 when we had just taken on a significant corporate account ahead of our own timetable of back-to-backing the supply with a contract because they were in penalties. I remember the internal meeting well when we decided to go ahead and I said: ‘what can possibly go wrong?’ The Ukrainian gas crisis for one! An unforeseen and, I insist, unforeseeable event. It cost us dear. Having reported a small profit at our AGM in October 2005, we reported a loss of 500K in April 2006. The company needed careful management and support in the form of directors’ loans, but we knew we had a good business and supported it.

We survived, paid down the debt and achieved a positive balance sheet.

But most importantly we learned from the experience and have not only tightened our sign-up procedures but re-evaluated our risk strategy to make sure that we are always bought forward and are not at the mercy of volatile market movements.

We have hedged the company against unforeseen events and are always bought forward for 100 per cent of our customers for the next quarter. This planning cushions us against unforeseen events in the market and ensures that if there is a temporary glitch, such as there was in 2006, we have a 90 day window in which to assess the impact of any external influences on the world energy markets and take whatever action we deem necessary.

Customer service is often a stumbling block for utilities providers – how do you handle this difficult area?

We’ve found if we just do what we say we’re going to, at the price we say we’ll do it, and in the time frame we suggest, we exceed our customers’ expectations. We aim to under-promise and over-deliver. It makes for happy customers and happy staff.

Something that works very well for our customer service is regular ‘health checks’ where we contact customers to encourage them to send us regular meter readings.

Our customers appreciate this proactive approach. To make it as flexible as possible for them, they can even text us their meter reading or take a picture of it on their phone and MMS it to us. By working on prevention rather than cure we are always looking to spot the problem on a customer’s account before they do. And by concentrating resources on metering, we reduce the load on customer service.

Our online customer area enables customers to view their meter readings and current and previous bills. One facility shows them how much energy they have used this year compared to last, and another gives a target to use ten per cent less next year and save money, and charts progress towards that reduction. We also put useful parts of our marketing website into this backend section, recognising that existing customers may want to know our latest news, energy saving tips and generator stories, encouraging a closer bond with our brand.

We make it a priority that when our customers call they always speak with a real person, and if the customer needs us to call them back for any reason, the member of staff calling knows exactly who the customer is and what their query is. As a result, we find that our customers stay with us and recommend us. As one customer recently wrote, ‘it’s so refreshing to be treated with friendly, easy-going politeness and as an individual.’

We formally survey our customers every two years but encourage feedback on a regular basis through customer newsletters and our AGM. Some wanted to know more about where our energy comes from, so we have created a section on our website that tells customers all about our generators (the people who create our electricity), and we include a profile in each newsletter. We also provide business customers with a certificate to show their customers they are green-powered, and we provide homeowners with ‘making a difference’ stickers. A big part of the strategic direction of our business is about helping people make a difference and introducing them to new and innovative ways of generating electricity. Our customers share our vision and ultimately share the business. We are about to provide a loyalty bonus to every customer who has been with us for three years or more.

When the business started we outsourced functions like customer service, and now it is in-house. We have four core teams: customer services, accounts, metering and generation. If metering does its job, customer services have less to do, and vice versa. By anticipating problems we find we deal with happy customers who have happy concerns like installing a new supply or generating their own electricity, instead of customers unhappy about their bill.

Tell me more about your small energy providers and how you have helped them to develop?

It is incredibly important to us that we supply our customers with a quality product. We have no brown electricity, nuclear or electricity from energy crops in our tariffs. To support this, we have continually introduced new technologies to the market through our partnership with generators. Our generators include a construction and building waste management plant, people who collect waste vegetable oil from catering outlets, and farmers who have diversified their businesses by recycling their waste into electricity - it is very satisfying to generate energy and money out of the back end of a pig; we are turning effluent into energy affluence.

Only a few of Green Energy UK’s 150 generators were making electricity before Green Energy UK was set up, so we have been able to help all these people build income streams through our business. It means a lot to us to help them come to market - they are leading the green energy revolution and giving our customers energy from some amazing sources, not to mention helping to change the national landscape of energy generation by reducing reliance on fossil fuels and therefore cutting carbon emissions.

As well as our larger generators, we have a number of people generating electricity from home by installing solar panels or turbines and selling us their surplus electricity, even being paid for the electricity they are using. We treat generators as customers, and when they call for the first time saying they are thinking about installing green technology and want to know how to become a generator, we help them through it, including advising on Ofgem accreditation. Generators say it is refreshing to speak with helpful staff that know the process clearly and make it less daunting.