Centrica’s newly formed British Gas New Energy division has stated that it believes that the potential market for energy efficiency and environmentally beneficial support schemes is worth several billion pounds. As other providers look likely to cash in, however, Centrica must clearly differentiate its new offerings from the rest of the market in order to convince UK consumers of their benefits. The demand for alternative and sustainable energy solutions has been a hot topic recently, and customers are being offered increasingly diverse product ranges as utilities strive to create brand loyalty. However, the extent to which energy consumers will spend money on offerings that do not have easily measurable monetary or environmental benefits remains to be seen. From June 2007, one of British Gas New Energy’s (BGNE) services will be the Energy Performance Certificates that will soon be legally required to sell a domestic property. The unit will deploy its fleet of British Gas engineers to cater to the 1.4 million UK houses sold each year, and this is likely to prove popular if BGNE can correctly market and price this service. However, BGNE will also provide carbon offsetting products that will not necessarily bring any visible benefits, and may only be popular with consumers who believe the offerings are suitably priced and effective enough in the move towards carbon neutrality. Therefore, although utilities are offering increasingly enhanced ranges while new market opportunities arise, tangible products such as efficient boilers and wall insulation may become the real money makers.

BGNE’s diverse business model makes economic sense as, while margins for energy retail remain closely linked to the underlying wholesale prices, diversifying into areas where margins can be higher would insulate the company’s core operations. There will be a small percentage of customers who will invest, albeit without full payback clarity, towards sustainable energy products and services, but the majority will want to see visible financial returns. Strong marketing messages which promote the benefits of each scheme will be invaluable in driving out the misinterpretations created by recent ‘green’ products and will need to be consistent across different providers. At present, BGNE seems to be leading the industry in capitalizing on the new energy efficiency market. If the company is to gain market share, however, its products will need to be clearly identifiable and promote realizable benefits that will allow customers to see environmental benefits, while saving them money along the way.

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