An accelerating demand for electric vehicles (EVs), driven by the decarbonisation of transport, represents an opportunity for energy companies of all sizes.
Retailers are increasingly coming up with new strategies to tailor their tariffs to attract EV pioneers who have taken the plunge and bought an alternatively-fuelled vehicle.
There’s still a long way to go on the road to zero-carbon emissions, yet the number of EVs is fast heading towards 200,000. It may be early days in this shift in consumer behaviour, but mass take-up is edging ever closer.
The UK government has already said it will ban the sale of all petrol and diesel-fuelled vehicles by 2040. Meanwhile recent calls by MPs on the Business, Energy and Industrial Strategy (BEIS) committee have urged this be brought forward by eight years to 2032, in line with Scottish government targets.
Figures from the Society of Motor Manufacturers and Traders show that the number of registered EVs is increasing year-on-year. Demand for hybrid and plug-in cars has surged 88.7 per cent, and they now represent eight per cent of the market – its highest ever level, with a record one in 12 buyers going electric. The figures also reveal nearly 7,500 hybrid, plug-in hybrid and pure electric cars were registered during August – an 89 per cent increase on the same period last year.
Filling station to charging point
For energy retailers, stung by the controversial price cap, the electrification of transport offers a welcome potential revenue stream. Indeed, speaking at Utility Week Congress in Birmingham recently, Eon’s Michael Lewis called for the proposed ban on petrol and diesel cars to be brought forward from 2040 to 2030.
Referencing a new report from the Intergovernmental Panel on Climate Change (IPPC), which warned energy systems will require “far-reaching” changes to prevent increases in global temperatures leading to runaway climate change, he said: “If we’re to deliver the carbon reductions we need, we need to electrify transport, we need to electrify heating and we need to bring demand customers into the system and value that flexibility. It’s critically important that the government really starts to drive that ambition so that we [the industry] can respond with our investment.”
Eon is one big six supplier that offers a domestic EV tariff. Eon Fix and Drive is a 100 per cent matched renewable electricity tariff set at a fixed rate over two years. The company says it differentiates itself from other suppliers by offering customers a fixed reward of £30 per year, paid to their electricity account – equivalent to 850 free miles.
Lewis adds Eon’s tariff was designed for customers with higher electricity bills in mind. “Drivers need to be able to charge their cars quickly and conveniently, and for many that means plugging in at home. Our new Fix and Drive tariff has been specifically designed with these customers in mind, who are likely have higher electricity bills, to provide competitive pricing, a rebate and clean energy to supply their homes and power their vehicles.”
Yet it is not just the bigger players who are set to benefit from the opportunities ahead.
In fact, according to one industry commentator, EV tariffs are one of the few areas where the larger suppliers do not have a significant advantage – where there is more of a level playing field for smaller mid-tier retailers.
“[The EV market] is a pretty small market at the moment because, even with those increased sales figures, they still only account for a small fraction of vehicles on the road,” says Oliver Rix, a partner at Baringa business and technology consultancy.
“What that means is it’s a market you can experiment in with less risk because it’s small. That probably allows the smaller players to do things that they don’t have to worry too much about in terms of scale-up initially and hence there is more room for experimentation. Also, those mid-tier or smaller suppliers are always on the lookout for being able to differentiate, and again, this is an area they can differentiate in.
“It also aligns with a number of them, at least in terms of the sustainability brand often with links to say 100 per cent renewable supply tariffs, and so that would sit alongside it from a branding point of view.”
Race to market
Rix adds that the size of bigger companies means implementing systems updates to deal with new tariff structures can be a challenge, but smaller and more nimble firms can achieve systems changes more swiftly, allowing them to get their products on the markets faster.
Octopus Energy launched its Octopus Energy Go tariff, a “100 per cent green tariff” specifically for EV owners, in June this year. Octopus says this tariff allows car charging at a tariff that is 70 per cent lower than a typical big six tariff. Fiona Howarth, CEO of Octopus Electric Vehicles, says having EV experts ready and willing to talk to interested customers, as well as hosting test-drive days, is key to attracting potential EV customers.
“We found that, when we are doing our test-drive events, 84 per cent were more likely to transition to electric having come along to our event, spoken to our experts and having driven a car. The other 16 per cent were neutral – because actually they were quite keen when they first turned up and just wanted to be reassured that the cars were as good as they thought. No-one was less likely to buy having come to one of our events.”
Howarth adds there is also something of an online “EV community” among those who have bought the vehicles. Many will discuss various tariffs and vehicles in Facebook groups, showing there is a real passion for the subject. “The message is being spread among the EV community. A lot of the first-movers in EVs are really passionate about them. They are passionate about renewable energy, they are passionate about the tech. They are a really excited group that will talk amongst themselves and share these points of conversation.”
Ovo Energy is another mid-tier supplier vying for EV customers. Tom Pakenham, director of EVs at Ovo, says the company recognises the “electric revolution” is still in its infancy and there is more to discover about their consumers. “We are at the start of the learning curve, looking to learn more about what our customers want and how electric vehicles will interact with the energy system. Our first offering – EV Everywhere – is a bundle that combines a suite of benefits for customers.”
He adds that Ovo will be adding smart-charging and vehicle-to-grid propositions to the tariff in the coming months. These, he says, are crucial if EVs are to be integrated into the energy system in the future.
Like Octopus, Ovo ensures its customers are kept up to date with the latest information on EVs to reassure those who may have concerns about taking up this new type of technology. Pakenham says that although there are still far more diesel and petrol cars on the road, it’s projected that there will be one million electric vehicles in the UK by 2020-22.
But the idea of charging a car rather than filling it up raises a lot of questions. “Since the launch of EV Everywhere, we’ve seen customers question, engage and debate electric vehicles on the Ovo Forum,” says Pakenham. “There are lots of myths such as charging, range and expense, which could put off customers from buying an electric vehicle and taking up an EV bundle. However, by providing our customers with the right information and products we’re hopefully dispelling the perceived challenges to electric vehicles and continuing to attract customers.”
Despite the plethora of information available to potential EV drivers. Pakenham concedes: “In terms of smart-charging tariffs, there are many steps needed to link energy system benefits to customer propositions. Whether technological, commercial or customer, Ovo is increasing its understanding of all components at high speed. This understanding can be used to constantly improve our offerings and thereby support the rollout of electric vehicles.”