While working as a management consultant at Bain, Hayden Wood was sent to one of Britain’s top six energy suppliers. What he witnessed was “quite a shock”.

“I would come back from a day at work and we would be chatting in the pub and I’d say: ‘You wouldn’t believe what I am seeing . . . some of these software packages are from the early 90s’,” recalls Wood. “I just thought the energy companies could be investing in innovation and new technology and creating better experiences for their customers.”

So he co-founded Bulb Energy, a UK energy supplier, in 2015. It now tops the latest FT-Statista ranking of Europe’s 1,000 fastest-growing companies, with 2019 revenues of £1.7bn and a 2016-19 compound annual growth rate of 1,159 per cent (Statista calculates revenues according to calendar year; Bulb’s year end is March 31).

Wood co-founded the company with Amit Gudka — a friend he first met at a music festival in Croatia, who had spent nearly eight years as an energy trader at Barclays. Gudka became Bulb’s chief energy officer and, although he has since left, he retains a seat on the board.

The pair toyed with creating a software company to serve the “legacy suppliers” — such as British Gas, EDF Energy, Eon, Npower, SSE and ScottishPower, which had dominated the UK market for more than a decade.

“We quickly rejected that idea because we didn’t think the incumbent energy companies would purchase . . . from us,” explains Wood, who remains Bulb’s chief executive. Instead, they decided to enter an industry notorious for its fierce price wars and thin margins.

Competition in energy supply soared in the decade following reforms that made it easier to enter the market: the number of suppliers boomed from just 12 in 2010 to peak at 70 in 2018. A cap on energy bills for 11m households, introduced in 2019 to keep a lid on what the government saw as “runaway” prices, then heaped pressure on the market.

Bulb has been able to use its lower overheads to undercut incumbents, luring customers with claims of simpler pricing structures and 100 per cent renewable electricity. Last year, it expanded internationally, into France, Spain and Texas.

Since its foundation it has expanded to around 1.7m customers. That makes Bulb the sixth-biggest supplier in Britain, with nearly 6 per cent market share, according to data from the energy regulator Ofgem.

But such rapid growth has raised eyebrows in a sector where doubts over competitors’ low prices and the sustainability of their business models are common. Many new entrants and some legacy suppliers are lossmaking, Bulb included.

In addition, the UK government has said it will review how 100 per cent-renewable electricity deals are marketed following concerns from some consumer groups and suppliers about transparency.

Elchin Mammadov, senior utilities analyst at Bloomberg Intelligence, says many of the new, fast-growing energy companies are “are akin to ride-hailing and food delivery companies . . . they are OK with making losses as long as they keep rapidly growing their market share.”

But he adds: “Once the phase of rapid growth ends, many suppliers will have to shift focus to delivering profits. Many could struggle to do so.”

In the year to March 31 2020, Bulb made a loss of £63m, although this was an improvement from £129m the year before. Turnover grew 85 per cent to £1.5bn as customer numbers rose to 1.66m. However, Bulb’s cost of sales came in at £1.3bn, which meant administrative expenses and interest payments pushed it into the red.

Wood admits there have been growing pains. Bulb’s initial business plan aimed to expand the company by 20,000 customers annually.

“By early 2017 . . . we were adding 20,000 customers a week and we didn’t have the money to pay for that,” he says. “We’ve had times when we've been really short staffed . . . or when we’ve had to be building the plane while we are flying.”

Last year, Bulb paid out £1.76m in refunds and compensation for failing to comply with a number of market rules between 2017 and 2020.

Bulb is yet to publish results that cover the effects of the pandemic. But industry numbers suggest lockdown restrictions triggered a sharp decline in energy demand from businesses last year, plus a rise in customers struggling to pay their bills. Judging by Bulb’s latest customer count of 1.7m, against 1.66m a year ago, growth has slowed significantly amid Covid, from the 46 per cent increase in customers seen in the prior year.

Despite the difficulties, Wood says Bulb has not had to tap any loan schemes aimed at helping energy suppliers through the pandemic.

He is more optimistic about the next 12 months, with the UK vaccination programme on track and a government road map to exit lockdown. Even in a market as challenged as energy supply, Wood insists companies can achieve sustainable growth.

“There is opportunity for energy companies to make a small but sustainable profit if they manage their costs carefully . . . if they innovate, if they have something genuinely different that they can offer to customers,” he says.