1. Pixie Energy ECO Switch
Tom Andrews
3 April 2019

2. Objectives for ECO Switch
We are proposing a tri-partite trading auction platform, which will create a market for energy efficiency, enabling a simple and cost- effective route to delivering Energy Company Obligation (ECO) license requirements
Enable independent suppliers to deliver ECO cost-effectively and without cross-subsidy, and target delivery on specific localities
Support Local Authorities and social housing providers to secure improvements to existing building stock
Allow a broader range of installation companies access to the ECO market, increasing competition and driving efficiency
Target ECO support more effectively to householders most in need of energy efficiency upgrades
ECO Switch

3. Tri-partite
Independent suppliers obligated to deliver over 25% of ECO but no economies of scale or national reach
Local authorities and social housing groups have goals to reduce carbon emissions and protect the vulnerable
But budgets are increasingly tight and there is no clear route to recoup investment in domestic energy efficiency
Can grant access to a special element of ECO (flexible eligibility), but no simple route to engage with multiple suppliers
Local installation companies have difficulty in accessing ECO, leaving bigger often inefficient players to dominate
This has resulted in poor quality work and excessive costs
Installers often tied to a single supplier, an existential risk to the business if ECO work dries up

4. The State of ECO ECO obligation based on number of customer accounts
Phase 1 saw Bulb, Economy Energy, Green Star gain ECO duties
But supplier exits of Economy, Extra
Phase 2 allocations issued to suppliers last month
We expect to see three or four additional suppliers from 1 April when published
Some have since gone under – Economy Energy, Extra Energy, Flow Energy, Spark Energy

5. Process
LA lists “lots” of measures on auction platform
Review period for installers and suppliers
Solution providers offer prices to deliver (bid down)
Suppliers offer prices to buy bill savings (bid up)
Delivery agreement signed and property details shared
Delivery by solution provider
Supplier nominates measures and pays solution provider
Suppliers kept informed by automatic calculation of lifetime bill savings by Ofgem deemed scores methodology
This will also be used with bid and offer prices to calculate costs in pence per pound of lifetime bill savings (p/£LBS), the standard price metric
Suppliers offered option to bid in p/£LBS
Other parties – social housing, large private landlords, innovation parties – could also list measures for delivery as originators

6. How do we avoid a “race to the bottom”?
A two-way auction
How do we avoid a “race to the bottom”?
Introduce the mechanism
Talk about the clearing of the auction following this -

7. Internal trial Held last week within the team to test functionality
Frenetic bidding activity and some “interesting” prices
But vital learnings on structuring lots and presenting information
Analysis of activity proceeding and platform being revised following feedback
Some have since gone under – Economy Energy, Extra Energy, Flow Energy, Spark Energy

8. Commercials
Legal/ contractual framework to be kept to a minimum during trial, while the platform evolves
Auction T&Cs will set out bidding process and rules, including a requirement for the successful parties to enter into a delivery agreement at the price discovered
Suppler and installers will then enter into a bi-lateral contract for delivery of measures
We propose the following fee structure:
A modest annual membership fee, paid by installers and suppliers
1% commission on successful auctions, paid by suppliers
No direct fees for LAs or social housing
Current thinking is the following fees

9. Current status and timeline
Continuing bi-lateral discussions ahead of first trial in April, based on Norwich and environs – discussions as to whether trial is virtual or actual
Prototype platform is ready but being enhanced to reflect recent learnings
Legal documentation is also being prepared
Once complete, will begin householder recruitment
Wider trial planned for the summer, covering East Anglia
If trials successful, we plan stage regional auctions across GB later in the year

10. Questions?

11. Thank you for listening
Tom Andrews Please get in touch if you’d like to find out more!