A new energy platform is encouraging prospective customers to become more environmentally friendly by giving them the ability to become co-owners of wind farms.
The ‘unique business model’ from Ripple Energy will see those signed up supplied by the low cost electricity the wind farms produce.
It is hoped this will protect customers from the volatile wholesale energy market with the cost of electricity reflecting the relatively low operating costs of the wind farm – but it does come with risks, as we explain below.
Ripple Energy lets customers become co-owners of the wind farms that supply their energy
Ripple estimates that customers could save £85 to £175 each year on their electricity bill throughout the wind farm’s 25 year lifespan.
The start-up, which wants to be known as an ownership platform rather than an energy supplier, is paying for the wind farms to be built from scratch and the first one is expected to be built in the coming months.
This means it has not yet launched its first full ‘project’, which will be either a wind farm or solar farm, but is planning to launch its first small project in autumn of this year after the wind farm has been built.
Around 500 people have pre-registered to be customers – and Ripple is expecting that number to increase.
Sarah Merrick, founder and chief executive of Ripple Energy said: ‘Our vision is a clean energy future owned by people not companies.
‘In the future, customers won’t need utilities to own wind farms and solar parks on their behalf – with Ripple’s help they will be able to do it themselves.’
Earlier this year, the provider launched a crowdfunding campaign on an investment platform with a target of receiving £750,000 in exchange for 23.21 per cent of the company.
However, the firm received £100,000 over their target, making a total of £859,787 from over 1,000 individual investors.
How does it work?
Once a customer chooses to receive their energy through Ripple, they will co-own the wind farm, or an alternative renewable source of power, through a Community Benefit Society (CBS), a form of co‑operative, who will own the farm.
Customers will be charged an upfront fee, which will be dependent on how much energy they use and the size of the project, which will be paid directly into a CBS.
Sarah Merrick, the founder and CEO of Ripple Energy, a start-up energy company
Ripple estimate that the typical household, using an average amount of energy, will be charged £1,300 upfront.
If the project is a windfarm, which many will be, it will be measured in megawatts (MW).
One MW is one million watts and the farms will be divided into ten watt blocks.
You can own as many blocks as you need and most people will own as much of the wind farm as they need to meet their electricity demand.
There will be a tool on Ripple’s website to help people decide how many blocks they will need.
Ripple will also be teaming up with licensed energy suppliers who will supply the electricity from the wind farm to your home, via Ripple tariffs, as well as the gas portion of your energy.
They claim this will still be cheaper than being with an energy supplier as standard, however, as the cost will be based on the supplier partner’s tariff minus a discount.
The bill will include grid charges, levies, taxes and maintenance cost of the wind farms as well as the electricity itself.
As the energy supplier buys the electricity from the wind farm at a price which covers its maintenance costs, land rents and business rates, these costs are low and relatively stable throughout the wind farm’s 25 year lifetime.
The wind farm’s owners can reduce their bills because their supplier is buying the electricity from their wind farm at a lower price than the wholesale market price, passing the savings on to the owners.
Some people may also decide they only wish to get half their energy from wind farms and in that case, their energy supplier will make up the shortfall.
Ripple have admitted, however, that if electricity prices fall rather than rise there is a risk you won’t recover the upfront cost – something potential customers will need to consider before registering.
It also says it could take around 12 to 15 months before customers will see low cost electricity, due to the time it takes for the wind farm to be built, another factor to take into consideration.
What are the benefits for Ripple customers?
One of the main benefits for customers is the easy access they will have to green electricity, helping the environment and reducing their carbon footprint.
Co-owners could reduce their carbon footprint by around 950kgCO2/yr – the equivalent to someone going vegan or reducing their car use by over 70 per cent, according to Ripple.
They should also have more stable bills as they will not be reliant on the wholesale energy market.
Ripple hopes to educate its customers more about the benefits of wind power and renewable energy.
They are keen to give people the confidence to make other changes to their lifestyle, for example, upgrading to electric vehicles and switching to using heat pumps rather than traditional boilers.
Sarah Merrick added: ‘Large companies like Google and Ikea have been buying low cost renewable electricity direct for years.
‘I want ordinary people to be able to benefit too, which is why I set up Ripple.
‘During 2018, market power prices increased by 26 per cent, whereas the cost of electricity from a wind farm remains stable throughout its 25 year life.
‘Ripple will help protect consumers from wholesale price increases and provide low cost clean power for generations to come.’
How risky of an investment is it?
Customers face two main risks, power price risk and wind output risk. With regards to power prices, the operating cost of the wind farm is relatively stable, whereas wholesale electricity prices can fluctuate a lot.
However, if wholesale market power prices fall, the level of savings customers would have would fall as well.
The flipside is if wholesale market electricity prices increase, customers savings would increase too.
Owners also face annual wind output risk. The windier it is, the greater the savings and the less windy, the lower the savings. Ripple assumes a customer’s share of the wind farm would produce 4MWh in a year.
But if it was an unusually low wind year, the wind farm might only produce 3.5MWh meaning the saving the customer would make would only be 3.5 x £30 = £105, instead of 4 x £30 = £120 as expected.
Conversely, in a high wind year the customers’ share might produce 4.5MWh, so the saving would be 4.5 x £30 = £135.
The wind farms will be insured and the wind turbines will also have performance warranties.