Independent energy provider Ovo have today unveiled a new scheme which will see local community organisations given the power to acquire low cost energy provisions, which they will then be able to redistribute to local residents.
The Ovo Communities scheme was created in order to enable local community organisations to manage their own energy by granting them the infrastructure to do so, and will provide a challenge to the countryís ëbig sixí, who currently supply energy to over 95% of UK households.
Under the scheme, communal organisations and local authorities will be able to acquire their own energy provisions, sell them at lower rates to local residents, and put some of the proceeds towards local renewable development and energy efficiency schemes.
Ovo have identified that they were compelled to instigate the scheme after a independent study conducted by itself with YouGov found that the majority of people believe a small, local provider would provide fairer energy prices than the countryís larger organisations.
Initially the scheme will apply to large community support groups and local authorities, but Ovo have revealed that when it begins to gather momentum, that smaller groups and village support organisations will be able to sign up as well.
Unlike the countryís biggest providers, the local authorities will not be inhibited to external factors such as the privatised element of the energy industry and the compulsory renewable investment schemes, which both contribute heavily toward the persistent price hikes instigated by the ëbig sixí.
Ovo have set a target of getting 5 million consumers onto the scheme by 2020, by which time they hope that a monumental 500 local energy providers would have been established all over the UK.
The scheme is thought to be compounding on the UKís recent move toward renewable sources of fuel, such as wind, hydro and solar powered energy.
Local authorities and community organisations will be able to purchase energy from independent suppliers, such as from solar panel owners or wind farm owners, and then pass on these energy provisions to local residents at a lower rate.
If local authorities cannot afford to subsidise the costs of providing energy for its entire dominion, then Ovo will top up their provisions at their own lower rate.
Ovoís prominent role in the scheme is compelling considering that it is a small independent energy provider itself, and is essentially playing a direct part in the creation of a plethora of competitors to itself.
However, Ovo Chief Stephen Fitzpatrick has argued that the era of ëbig energyí monopoly is coming to an end, and has identified that Ovoís conduct is simply consistent with the direction in which the market is moving.
ëThe era of big energy is coming to an end,í he said. ëWe think change is inevitable, and we want to be firstí.
ëEnergy types such as coal benefit from economies of scale,í Mr Fitzpatrick highlighted.
ëIt pays to buy in bulk. But wind and solar lose efficiency with scale ñ it actually makes more sense to be closer to the point of demand.í
Secretary of State for Energy and Climate Change Ed Davey has praised the scheme, arguing that whilst he is unsure whether it will be a success that nevertheless it will contribute toward raising the level of competition within the energy industry, which is an organic way to keep prices in check.
ëItís important we see more players in the energy market to ensure better value and so big companies know they canít take customers for granted.’
He added: ‘I canít predict if itís going to work ñ itís your money on the line to take that risk. I wish you every success.í
Ovo have argued that the initiative will soar in popularity as consumers will be more prepared to get their energy from a trusted local authority, rather than a privately owned bigger supplier.
A similar scheme is already running in Germany, where a sizeable 41% of the population currently purchase their energy from a local authority.
Mr Fitzpatrick also outlined that the new scheme is ëopen for businessí, and urged any consumer groups and community organisations to register their interest on the Ovo website in order to increase the pressure on their local authority to join the Ovo Communities scheme.
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