Table of Contents
Executive Summary
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- Electricity distribution market
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- Figure 1: UK gross capital expenditure by the electricity distribution network operators, 2012/13-2016/17
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- Figure 2: Total expenditure allowance for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
- Electricity supply market
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- Figure 3: Breakdown of average domestic electricity household bill, 2016
- Market factors
- DNOs subject to price controls set by industry regulator Ofgem
- Decarbonisation of UK economy increases loads placed on distribution network
- CMA energy market investigation
- Energy retail market facing further government intervention, including price cap on SVTs
- What we think
Key Insights
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- What challenges does the rapid rise in distributed generation pose for distribution network operators?
- What is the outlook for the emerging electricity storage market?
- Key decisions relating to energy storage contained in the report include:
- What opportunities are offered by the widespread adoption of smart meters?
Introduction
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- Definitions
- Methodology
- Abbreviations
Market Positioning
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- Great Britain
- Northern Ireland
UK Economy
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- Overview
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- Figure 4: Forecast GDP development 2017-21
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- Figure 5: UK GDP quarterly development, 2004-17
- Inflation
- Interest rates
- House prices
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- Figure 6: UK House price changes, 2006-17
- Consumer spending
- Manufacturing
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- Figure 7: UK manufacturing, 2014-17
- Business investment
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- Figure 8: UK GFCF, chained volume measures, seasonally adjusted, 2004-17
- Imports
- Exports
Market Factors
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- Distribution networks price controls
- UK Energy Policy
- The government remains committed to tackling climate change despite Brexit vote
- New government policies urgently needed to achieve long-term emission reduction goals
- Government publishes long-awaited Clean Growth Plan in October 2017
- Levy Control Framework
- Renewable Energy Obligation (RO)
- Feed-in-Tariffs (FITs)
- Government commits to fresh FIT review before end of 2017
- The Renewable Heat Incentive
- Contracts for Difference (CfDs)
- First CfD auction concludes in February 2015
- Second CfD auction winning bids dominated by offshore wind, which has seen a dramatic fall in costs
- Next CFD auction scheduled for Spring 2019
- Energy Company Obligation (ECO)
- Electricity retail market reforms to promote increased competition
- CMA energy market investigation
Distribution Industry Structure
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- Key points
- Industry overview
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- Figure 9: Ownership of the distribution network operators in the UK, as of October 2017
- Regional Electricity Demand
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- Figure 10: Electricity sales and customers by region, Great Britain, 2015
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- Figure 11: Regional proportional importance of electricity consumed in Great Britain, 2015
- Electricity consumption by end-use sector
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- Figure 12: Analysis of electricity usage, by type of industry, UK, 2011-16
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- Figure 13: Analysis of electricity usage, by the commercial sector, 2011-16
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- Figure 14: Analysis of electricity usage by the commercial sector, 2016
- Scotland
- Northern Ireland
Electricity Distribution Sector Overview
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- Key points
- Overview
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- Figure 15: Distribution network operators in Great Britain, by region, 2017
- Size of UK distribution networks
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- Figure 16: UK distribution networks, 2016/17
Electricity Distribution Market Trends
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- Key points
- Introduction of competition in network connections
- Trends in UK electricity supply
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- Figure 17: Analysis of electricity supply in the UK, 2012-16
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- Figure 18: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2011-16
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- Figure 19: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2016
- Annual Capacity Market auctions are held to help secure the UK’s energy supply
- Renewables account for a quarter of UK electricity generation in 2016, following rapid expansion in generation capacity
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- Figure 20: Renewable electricity generation in the UK, 2011-16
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- Figure 21: UK renewable electricity generation, 2011-16
- Figure 22: UK renewable energy market shares, by installed capacity, 2012 and 2017
- Renewables capacity development pipeline
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- Figure 23: Renewables capacity development pipeline, as of September 2017
- Distribution price control review
- Smart grid development to support low carbon economy
- UK energy storage market set to take-off
- BEIS and Ofgem set out plans for major upgrade of the UK’s energy systems, including the removal of barriers to storage.
- Government unveils £246 million battery investment strategy in July 2017
- The Low Carbon Network Fund (LCN) and Electricity Network Innovation Competition (NIC)
Electricity Supply Sector Overview
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- Key points
- Market background
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- Figure 24: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2017
- Supplier switching trends
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- Figure 25: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2011-Q2 2017
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- Figure 26: Number of supplier switches in the domestic gas and electricity markets, Great Britain, January 2012-July 2017
Electricity Supply Market Issues & Trends
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- Key points
- Ofgem implemented market reforms in 2014 to promote increased competition and supplier switching
- Further market reforms on the way following CMA Energy Market Investigation
- Energy retail market facing further government intervention, including price cap on SVTs
- Breakdown of average gas and electricity bill
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- Figure 27: Breakdown of average large supplier dual fuel household bill, 2016
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- Figure 28: Breakdown of average domestic electricity bill, 2016
- Figure 29: Breakdown of average domestic gas bill, 2016
- ...but many suppliers hike prices in early 2017, citing rising wholesale costs and the cost of delivering government policies
- Competition largely focused on cheap fixed tariffs...
- ...but majority of households remain on more expensive standard variable tariff - reflecting a two-tier energy market
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- Figure 30: Average annual bill on SVT versus supplier’s cheapest fixed tariff, by major supplier, July-September 2017
- Independent suppliers are rapidly gaining market share
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- Figure 31: Domestic gas supply market shares in Great Britain, by company 2013-17
- Figure 32: Domestic electricity supply market shares in Great Britain, by company 2013-17
- Innovation in tariffs offerings
- Suppliers focus on differentiating their offerings to stay ahead
- Energy suppliers are branching out into multi-utility and home services markets
- Customer service is a key driver of customer loyalty
- Smart Meter Roll-out programme
- First-generation (SMETS1) smart meters will need to be upgraded or replaced, as they can revert to being ‘dumb’ if consumers switch supplier
- Potential benefits and opportunities offered by smart meters
- Widespread adoption of smart meters will attract new market entrants, including tech firms
- Smart meters and rise in small scale renewables and storage to open up opportunities for peer-to-peer trading, which would see consumers bypassing suppliers
- Non-domestic retail market trends
Distribution Network Capital Expenditure
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- Key points
- Capital expenditure
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- Figure 33: Breakdown of total expenditure by DNOs during DPCR5, by area 2011-15
- Gross capital expenditure
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- Figure 34: UK gross capital expenditure by electricity distribution network operators, 2011/12-2016/17
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- Figure 35: UK gross capital expenditure by the electricity distribution network operators, 2012/13-2016/17
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- Figure 36: UK gross capital expenditure by the electricity distribution network operators, by company, 2012/13-2016/17
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- Figure 37: Total expenditure by electricity distribution network operators in Great Britain, by type, 2015/16
- DPCR5 witnesses launch of Low Carbon Networks Fund
- Recent years have seen rapid increase in distributed generation connected to DNOs’ networks
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- Figure 38: Distributed Generation connected to the distribution network during DPCR5, 2011-15
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- Figure 39: Distributed Generation connected to the distribution network, 2015/16
- Forecast expenditure
- New price control framework based on Revenue = Incentives + Innovation + Outputs effective from April 2015
- Forecast total expenditure
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- Figure 40: Actual total expenditure in 2015/16, totex allowance and forecasts for RIIO-ED1, by company
- Ofgem slashes £200 million from RIIO-ED1 DNO spending allowances in September 2017
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- Figure 41: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
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- Figure 42: Forecast network investment of the electricity distribution network operators in Great Britain, by company, 2015/16-2022/23
Company Profiles Introduction
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- Key points
Western Power Distribution
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- Western Power Distribution (East Midlands)
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- Figure 43: Financial analysis of Western Power Distribution (East Midlands), 2013-17
- Western Power Distribution (West Midlands)
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- Figure 44: Financial analysis of Western Power Distribution (West Midlands), 2013-17
- Western Power Distribution (South West)
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- Figure 45: Financial analysis of Western Power Distribution (South West) 2013-17
- Western Power Distribution (South Wales)
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- Figure 46: Financial analysis of Western Power Distribution (South Wales) 2013-17
UK Power Networks
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- UK Power Networks: Eastern Power Networks
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- Figure 47: Financial analysis of Eastern Power Networks, 2012-17
- UK Power Networks: London Power Networks
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- Figure 48: Financial analysis of London Power Networks, 2012-17
- UK Power Networks: South Eastern Power Networks
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- Figure 49: Financial Analysis of South Eastern Power Networks, 2012-17
Northern Powergrid
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- Northern Powergrid (Northeast)
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- Figure 50: Financial analysis of Northern Powergrid (Northeast), 2012-16
- Northern Powergrid (Yorkshire)
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- Figure 51: Financial analysis of Northern Powergrid (Yorkshire), 2012-16
SP Distribution
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- SP Manweb
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- Figure 52: Financial analysis of SP Manweb, 2012-16
- SP Distribution (South & Central Scotland)
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- Figure 53: Financial analysis of SP Distribution, 2012-16
SSE
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- Recent reductions in gas prices for SSE customers
- But SSE hikes electricity prices from April 2017
- Company Strategy and Outlook
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- Figure 54: Financial analysis of SSE, 2012-16
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- Figure 55: SSE revenue segmental analysis, 2017
- Southern Electric Power Distribution
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- Figure 56: Financial analysis of Southern Electric Power Distribution, 2013-17
- Scottish Hydro Electric Power Distribution
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- Figure 57: Financial analysis of Scottish Hydro Electric Power Distribution, 2013-17
Electricity North West
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- Figure 58: Financial analysis of Electricity North West, 2013-17
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Northern Ireland Electricity Networks
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- Figure 59: Financial analysis of Northern Ireland Electricity Networks, 2012-16
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Centrica/British Gas Trading
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- Recent acquisitions and disposals
- Company strategy
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- Figure 60: Financial analysis of Centrica, 2012-16
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- Figure 61: Centrica revenue segmental analysis, 2016
- Following a price freeze in the first half of 2017, British Gas hikes electricity prices by 12.5% from September 2017
- Focus on innovative Connected Homes Products
- Company review and outlook
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- Figure 62: Financial analysis of British Gas Trading, 2012-16
EDF Energy
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- Planned new UK power stations
- Smart metering programme
- Recent price cuts and hikes
- Intense competition sees EDF Energy lose more customers in 2016
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- Figure 63: Financial analysis of EDF Energy, 2012-16
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- Figure 64: EDF Energy revenue segmental analysis, 2016
Npower
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- Price cuts announced in early 2016...
- ...followed by price hike in March 2017
- Meridian Energy and Npower launch online energy supplier
- Company strategy and outlook
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- Figure 65: Financial analysis of Npower, 2012-16
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- Figure 66: RWE - UK Generation & Supply revenue segmental analysis, 2016
E.ON Energy
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- E.ON cuts gas price in early 2016...
- ...but announces a price hike in March 2017, the first in more than three years
- Company strategy
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- Figure 67: Financial analysis of E.ON Energy Solutions, 2012-16
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- Figure 68: E.ON revenue segmental analysis, 2016
ScottishPower Energy Retail
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- Gas prices cut in early 2016, but dual tariff raised in early 2017
- Company performance & strategy
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- Figure 69: Financial analysis of ScottishPower Energy Retail, 2012-16
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- Figure 70: ScottishPower revenue segmental analysis, 2016
Ecotricity Group
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- Ecotricity raises energy prices towards the end of 2016
- Company strategy
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- Figure 71: Financial analysis of Ecotricity Group, 2012-16
First Utility
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- First Utility diversifies to become multi-utility brand
- Company strategy
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- Figure 72: Financial analysis of First Utility, 2011-15
Good Energy Group
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- Company strategy
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- Figure 73: Financial analysis of Good Energy Group, 2012-16
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- Figure 74: Turnover analysis of Good Energy Group, by segment, 2012-16
Further Sources & Contacts
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- Trade associations & regulatory bodies
- Energy UK
- Energy Networks Association
- Energy Industries Council
- Office of Gas and Electricity Markets (Ofgem)
- Office of Gas and Electricity Markets - Scotland (Ofgem Scotland)
- Office of Gas and Electricity Markets - Wales (Ofgem Wales)
- Trade magazines
- Energy Now
- Modern Power Systems
- Utility Week
- Trade exhibitions
- Energy4PowerLive
- All-Energy Exhibition & Conference 2018
- edie live 2018
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