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Retail market reform not essential for heat-as-a-service model

A trial of heat-as-a-service in the form of the warm homes prescription pilot, run by the Energy Systems Catapult (ESC), has shown that it is possible for suppliers to offer energy-as-a-service under current market rules.

The ESC’s design team lead Edmund Hunt said that while current market rules mean customers are forced to buy their energy in the form of kilowatt hours, the trial was still able to bill participants on the basis of ‘warm hours’.

The ESC’s Warm Home Prescription programme has seen patients in the Gloucestershire area prescribed heating by the NHS to help control respiratory conditions that are exacerbated by cold living conditions.

While the project has been deemed a resounding success by the ESC, Hunt told Utility Week Live that calculating the price of a subscription model in a market based on variable pricing is challenging.

“One tactic might be to think about those consumers that could be lower risk in terms of price, thinking about the building archetype that they are in, such as less leaky homes,” he said.

“Equally with the little information you can get you can start to understand how to price that service over a period of time in history.

“That’s the complicated way of doing it but also one of the least risky ways, and there are many other ways of doing it where you can carefully select which customers to work with and how to price it, but there’s no reason why suppliers and other in the industry can’t do that.”

Although it is possible to do under the current market models, Archie Lasseter, sustainability lead, Utilita said that the shift towards renewables which will produce energy at a fixed constant price will help the transition to a subscription-based model as prices will be more certain for suppliers.

But Naomi Baker, senior policy manager at Energy UK, said that market reform is essential before energy suppliers can really start offering the service subscriptions that are expected to the future of the energy retail market.

She added that the government’s current focus on switching does not foster a deeper connection between suppliers and consumers which may see them switch amongst various products from the same supplier.

Equally, a shift towards obligating suppliers to reduce energy consumption would see a greater focus on offering energy efficiency measures to consumers as part of that subscription model.

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