In the race to tackle spiralling energy bills and curtail carbon emissions, energy efficiency is today top of the agenda for anyone concerned about the future of the planet. And many companies, both well-established and start-ups, are trying to carve out a niche for themselves in this crowded space. One such is Acrobat Carbon Services Limited, another new member of the Social Stock Exchange. Jayesh Mistry, Acrobat’s Chief Investment Officer, spoke to me recently to help me find my way through the tangle knots of Government policy concerning energy efficiency measures.
“The key driver of Acrobat, which was established in 2010, is that it acts as a supply-chain partner to most of the large energy companies in the UK,” says Mistry. “The energy companies have an obligation, called the Energy Company Obligation or ECO, imposed on them by Government. The idea of this is that the energy companies are obliged to install energy efficiency measures, with a specific focus on low income families. It’s a means-tested benefit, and there are quite strict compliance requirements. If the energy companies install such measures, then they are deemed to have saved an amount of CO2 emissions against the UK’s overall CO2 emissions’ target. If these energy companies don’t meet their targets, up to 10% of their global turnover could be subject to a financial penalty. So there’s a strong incentive for these energy companies to do this. Acrobat’s role is to deliver this on behalf of the energy companies.” By delivery, Mistry means all the vital tasks of doing the paperwork, finding reliable installers, arranging installation and ensuring that by the end of the process everyone is happy. It’s the kind of task that big energy companies just don’t have the capacity to carry out.
How does Acrobat market its services? “We have a lot of household data information, pinpointing the areas where we believe people will qualify for this service. We also look at the type of property as well. This kind of information enables us to have a targeted campaign. We also work with strategic organisations, such as a local authority, because they have a specific responsibility to make sure that people are getting what they are due. We have to engage with consumers, explain the proposition – people can be quite suspicious and will often ask ‘why are you giving me this for free?’ – and make sure that they qualify for this. Acrobat then manage the installation, verify that it’s been done correctly and put all the paperwork together to give to the regulator, who then signs it off, and the energy company gets the carbon ‘points’ against its target. The energy company pays Acrobat to carry out all this process.”
ECO was supported financially by all of us paying a little extra on our fuel bills – a form of financial redistribution that was barely noticed and yet which helped many people get much needed energy efficiency measures installed. At the same time the privately-owned Acrobat has enjoyed significant growth and awards thanks to the ECO scheme. However, as its name suggests, Acrobat are flexible and are looking to apply their skills and talents in different ways. As Mistry says, “we believe we have a unique blend of skills and experience allied with sophisticated IT infrastructure and risk management procedures which can move with agility to deliver different propositions. It’s what we call our Operational Engine. We know that Government policy can and does shift and that means that Acrobat need to apply our Operational Engine to a different landscape.”
According to Mistry, Acrobat is intent on evolving its business model to keep abreast of the new policy landscape, in which subsidies for energy efficiency measures will be increasingly difficult to obtain: “We want to create a new arm to the business, based around the fact that there will in future be no government subsidy. However, energy efficiency measures – if you install them in the right type of household – will ultimately pay for themselves. So we are looking to create a new business, centred round this ‘Pay-As-You-Save’ (PAYS) principle, and we are looking for investors to come into a fund that would be used to deploy capital, initially in the form of gas boilers, into a number of properties. And that’s why we are looking to the Social Stock Exchange. Because there is a tremendous amount of social and ethical value here – we are targeting people who don’t feel comfortable, for various reasons, to pay several thousands of pounds for a boiler, yet who stand to save the cost of that initial outlay in better fuel efficiency.”
Mistry tells me that Acrobat is seeking around £12.5 million in investment for its first fund, to prove the concept, and then the intention is to scale it up. The initial fund will be sufficient to deliver around 6,000 gas A-rated boiler installations, over a three-year period. At an average cost of slightly less than £3,000 per boiler (which includes market leading product warranties and three-year servicing built in), that seems highly competitive to me. Adds Mistry: “We believe there are roughly 250,000 households per annum that could use this service. We’re being very conservative, by just looking to do less than 1% of the overall market. The take-up of energy efficiency measures through the PAYS principle is desired by Government; they have created the legislative framework to make it happen and to facilitate the flow of private investment capital. In effect, we are creating a consumer loan book, as well as extending the Government’s mission, taking it more into the private sector. The truly exciting part is that the PAYS principle offers a scalable platform to penetrate UK households with different technologies to make a real difference to energy bills. We are currently trialling PV arrays with domestic battery technology; we believe this technology could result in up to a 20% reduction in a consumer’s annual electricity bill over 20 years. All- in-all PAYS has the potential to a real game changer in terms of social impact; ethical value, and technology.”
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