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Energy Makes the World Go Round: Why UK Energy Suppliers Should Adopt Bitcoin

Posted 14 August 2017 Energy Makes the World Go Round: Why UK Energy Suppliers Should Adopt Bitcoin
Written by Jon Gulson
Energy prices are not just any consumer price: they determine the prosperity of an entire economy.

Industrially, commercially and domestically; the UK has some of the highest energy prices in the world, which may seem like an anomaly for the birthplace of the Industrial Revolution.

The good news is a simple solution may be at hand. Let us walk you through it.

What is an Energy Supplier?

The core function of an energy supplier is keeping a ledger of payments against recorded usage. Some larger suppliers are also involved in other functions like energy generation.

A new independent sector has grown in the UK energy industry thanks to computer software which has created challenger (or ‘Supplier in a Box’) companies providing metering services, which has reduced the market share of the so called ‘big six’.

Whilst this has created competition, some of the new suppliers have grown too quickly and suffer with customer service demands. They also operate on thinner margins (than the larger suppliers), which makes them more susceptible to the fundamental forces driving higher bills.

Why are Energy Bills Rising?

The UK is now a net importer of energy and since Brexit, sterling has become one the world’s worst performing currencies – with an obvious and pernicious effect on energy prices.

The big six suppliers (owned by shareholders) then pass on these costs in higher bills. Suppliers will also add costs incurred from environmental initiatives, which all becomes political and emotive when the Government starts talking about price caps on rip-off energy companies.

Blockchain and the Digitisation of Energy

New technology provides an existential threat to the traditional utility business model and the ubiquity and hype of blockchain has reached the energy industry like most others. Potential uses that have been considered include customer billing, energy certificates and energy trading.

Energy Supplier Blockchain

Yet for an energy supplier in the UK, the most obvious and immediate need for a blockchain solution is adopting bitcoin as a payment option for customers. The reason for this is strikingly simple: whilst the UK is disadvantaged by weak sterling, it can benefit from strong energy-proofed cryptocurrency.

The purchasing power of bitcoin has increased c. 700% over the last 12 months (at time of writing). If adopted by energy suppliers, this would have effectively created free energy for customers. It would also have increased supplier margins and their cash positions, removing the need for higher bills and improving their popularity with shareholders and the general public.

Bitcoin as Reward Points

Adoption of bitcoin will face the same obstacles with energy companies as it does elsewhere. This is partly due to larger suppliers especially being slow to adopt new technologies and slow in adapting to the new energy environment.

Another hurdle is customers struggling with energy bills are the least likely to have surplus income to afford bitcoin purchases.

Yet turning this on its head, there is an opportunity if UK energy suppliers see the attraction of allowing customer’s to benefit from bitcoin: that is to gift it as part of a loyalty reward scheme, just as they do with shopping vouchers or other retail points. In this way, the bottom line benefit should gradually become clearer to all.

The UK energy industry faces many challenges and many suppliers, especially the larger ones, may have to change their business models as they re-organise themselves to find bolder solutions. This can all start by realising that money doesn’t make the world go round – energy does.
Written by Jon Gulson
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