Table of Contents
Overview
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- What you need to know
- Covered in this Report
Executive Summary
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- The market
- Shift from coal-fired electricity generation to gas-fired and renewables
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- Figure 1: Proportional importance of fuel source in UK electricity generation, 2013 and 2017
- Onshore wind and solar generation capacity growth slows due to government policy cuts
- UK clean energy investment has slowed considerably since 2015
- Energy supplier switching rates at record high
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- Figure 2: Number of supplier switches in the domestic gas and electricity markets, Great Britain, 2012-18
- Companies and brands
- UK energy supply market continues to be dominated by ‘big six’
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- Figure 3: Domestic electricity supply market shares in Great Britain, by company 2013-17
- Proposed merger of Npower and SSE would create second largest supplier
- Energy suppliers are branching out into multi-utility market
- Suppliers moving into home services and emerging connected homes market
- The consumer
- 40% of respondents plan to switch tariff and/or supplier
- Just under half of consumers regularly check price comparison sites for energy tariffs
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- Figure 4: Customer engagement in energy market, May 2018
- Most people satisfied with customer service received from energy supplier
- Two out of five people also find the option to buy bundles of services from an energy supplier appealing
- What we think
Issues and Insights
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- Government policy changes dampen UK clean energy investment
- The facts
- The implications
- Energy suppliers diversify in intensely competitive market
- The facts
- The implications
- Electrification of transport creates new opportunities
- The facts
- The implications
The Market – What You Need to Know
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- Shift from coal-fired electricity generation to gas-fired and renewables
- 20% of UK electricity is sourced from nuclear plants
- Wind accounts for around half of electricity generation from renewable sources
- Onshore wind and solar generation capacity growth slows due to government policy cuts
- Energy supplier switching rates at record high
- Over one in five energy customers now use small or medium suppliers
- More than half of households remain on more expensive variable tariffs
Electricity Demand and Generation
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- Trends in electricity supply
- Total electricity supply
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- Figure 5: Analysis of electricity supply in the UK, 2013-17
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- Figure 6: Analysis of electricity supply in the UK, 2013-17
- Electricity generation by type of fuel
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- Figure 7: Analysis of electricity generation the UK, by type of fuel used, 2013-17
- Figure 8: Proportional importance of fuel source in UK electricity generation, 2013 and 2017
- Coal generation
- Remaining coal fired power stations set to close by 2025
- Conversion of coal-fired stations to biomass plants
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- Figure 9: Analysis of electricity generated in coal-fired power stations in the UK, 2009-16
- Gas/CCGT generation
- Government scales back forecasts for new gas-fired power stations
- Few new gas-fired station being built due to poor financial incentives and success of renewables
- 40% of UK electricity generation is sourced from gas-fired plants
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- Figure 10: Analysis of electricity generated in gas-fired power stations in the UK, 2010-17
- Figure 11: Analysis of electricity supplied from gas-fired power stations in the UK
- Nuclear power generation
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- Figure 12: UK nuclear sites planned closure dates, as of July 2018
- Nuclear new build policy
- Nuclear new build projects
- Around 20% of electricity is sourced from nuclear power plant
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- Figure 13: Analysis of electricity generated in nuclear power stations in the UK, 2010-17
- Renewables generation
- The government remains committed to renewables target despite Brexit vote
- UK clean energy investment has slowed considerably since 2015
- Trends in renewable electricity generation by source
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- Figure 14: Renewable electricity generation in the UK, 2013-17
- Figure 15: Electricity generation from on- and offshore wind, 2013-17
- Onshore Wind
- Offshore Wind
- Solar power
- Hydro electricity
- Bioenergy
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- Figure 16: Bioenergy electricity generation capacity, by type of plant, 2012-16
- Renewable electricity capacity development pipeline
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- Figure 17: Renewable energy projects in pipeline, by technology, as of April 2018
Gas Demand and Supply
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- UK increasingly dependent on gas imports
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- Figure 18: Total UK gas supply, 2013-17
- Figure 19: Total UK gas supply, 2013-17
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- Figure 20: Average wholesale gas prices, 2006-17
Future Energy Mix and Demand
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- Future energy demand under National Grid’s Future Energy Scenarios
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- Figure 21: Annual power demand in Great Britain, 2017-50
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- Figure 22: Annual power demand in Great Britain, 2017-50
- Future potential energy mix
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- Figure 23: Forecast power generation installed capacity under “Community Renewables” scenario, by source, 2017-50
- Figure 24: Future potential energy mix in Community Renewables Scenario in 2040
- Figure 25: Forecast power generation installed capacity under “two degrees” scenario, by source, 2017-50
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- Figure 26: Future potential energy mix in Two Degrees Scenario in 2040
- Figure 27: Forecast power generation installed capacity under “steady Progression” scenario, by source, 2017-50
- Figure 28: future potential energy mix in Steady Progression Scenario in 2040
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- Figure 29: Forecast power generation installed capacity under “Consumer Evolution” scenario, by source, 2017-50
- Figure 30: Future potential energy mix in Consumer Evolution Scenario in 2040
- Gas demand forecast
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- Figure 31: Forecast UK gas demand, 2017-50
Retail Energy Market
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- Market development
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- Figure 32: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2017
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- Figure 33: Proportion of domestic gas customers of British Gas Trading and other suppliers, by region, March 2018
- Competition in retail market focused on fixed tariffs
- But more than half of households remain on more expensive variable tariffs
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- Figure 34: Number of non-prepayment domestic customer accounts by type of tariff, by supplier, October 2017
- Ofgem introduces measures to help those on poor value tariffs
- Price differential between fixed and variable tariffs shows switching can offer considerable savings
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- Figure 35: Average annual bill on SVT versus supplier’s cheapest fixed tariff, by major supplier, January-March 2018
- Some suppliers are scrapping standard variable tariffs
- Energy supplier switching rates at record high
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- Figure 36: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2012-Q1 2018
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- Figure 37: Number of supplier switches in the domestic gas and electricity markets, Great Britain, 2013-17
- Over one in five energy customers now use small or medium suppliers
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- Figure 38: Domestic gas supply market shares in Great Britain, by company 2013-17
- Figure 39: Domestic electricity supply market shares in Great Britain, by company 2013-17
Energy Policy and Legislative Environment
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- UK committed to reducing carbon emissions by 80% below 1990 levels by 2050
- UK currently on track to miss emission reduction targets between 2023 and 2032
- Policies to decarbonise electricity
- Renewables Obligation
- Feed-in Tariffs
- Carbon Price Floor
- Contracts for Difference
- Capacity Market
- The Renewable Heat Incentive
- Energy supplier obligation to improve energy efficiency of homes
Regulatory Environment and Changes
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- Industry Regulation
- Market reforms introduced in 2014 to encourage competition and supplier switching
- Ofgem introduces further market reforms following CMA Energy Market investigation
- Ofgem set to introduce temporary price cap on SVTs by end of 2018
Market Drivers
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- Drivers for investment in energy system and infrastructure
- Decarbonisation of UK energy system
- Smart grid development to support low-carbon economy
- Rapid increase in distributed generation
- Growth in decentralised and renewable electricity generation will increase the complexity of operating a secure and cost-effective energy system
- Energy storage to play key role in transition to clean electricity supply system
- Electrification of transport creates new opportunities
- Market drivers in retail energy market
- Costs making up an average gas and electricity bill
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- Figure 40: Breakdown of average large supplier dual fuel household bill, 2016
- Figure 41: Breakdown of average domestic electricity bill, 2016
- Figure 42: Breakdown of average gas bill, 2016
- Customer service is a key driver of loyalty
- Smart Meter roll-out programme
- First-generation (SMETS1) smart meters 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 could attract new market entrants, including tech firms
- Peer-to-peer trading could allow consumers to bypass energy suppliers
Companies and Brands – What You Need to Know
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- UK energy supply market continues to be dominated by ‘big six’
- Shell enters energy retail market through acquisition of First Utility
- Proposed merger of Npower and SSE would create second largest supplier
- Energy suppliers are branching out into multi-utility market
- Suppliers moving into home services and emerging connect homes market
Competitive Strategies
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- Consolidation/Acquisition
- Shell acquires First Utility
- Proposed merger of Npower and SSE
- Centrica acquires technology firms to support Connected Homes
- OVO Energy acquires CORGI Home Plan in transition to truly integrated energy services company
- Innovation in tariffs offerings
- Bundled tariffs to add customer value
- Focus on green tariffs
- Emergence of electric vehicle tariffs
- Some major suppliers scrap SVTs in 2018
- Suppliers offer reward schemes to build customer loyalty
- Energy suppliers branch out into multi-utility market to add value and differentiate offerings
- Some suppliers are moving into home services and the emerging connected homes market
- E.ON enters UK solar and storage market
Company Profiles
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- Centrica
- Recent acquisitions and disposals
- Centrica adopts new strategy to focus on energy supply and the customer-facing side of business
- Financial performance
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- Figure 43: Financial analysis of Centrica, 2013-17
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- Figure 44: Centrica revenue segmental analysis, 2017
- British Gas Trading
- British Gas scraps standard variable tariffs to new customers
- Focus on innovative Connected Homes products
- Recent acquisition will support Connected Homes
- Company review and outlook
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- Figure 45: Financial analysis of British Gas Trading, 2012-16
- EDF Energy
- Planned new nuclear power stations
- Development of renewable assets
- Intense competition sees EDF Energy lose more customers in 2017
- But innovative tariffs secure sales
- EDF Energy eyes move into home services market
- Company strategy
- Financial performance
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- Figure 46: Financial analysis of EDF Energy, 2013-17
- Figure 47: EDF Energy revenue segmental analysis, 2017
- E.ON Energy Solutions
- E.ON enters UK solar and storage market
- E.ON to scrap SVTs for customers on fixed deal
- Company strategy
- Financial performance
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- Figure 48: Financial analysis of E.ON Energy Solutions, 2013-17
- Figure 49: E.ON revenue segmental analysis, 2017
- Npower
- Npower rolls out two-year recovery plan
- Npower continued to lose customer accounts in 2017
- Meridian Energy and Npower launch online energy supplier Powershop
- SSE and Npower in merger talks
- Financial performance
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- Figure 50: Financial analysis of Npower, 2012-16
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- Figure 51: RWE – UK revenue segmental analysis, 2017
- ScottishPower Energy Retail
- Scottish Power to ditch standard tariffs
- Customer numbers down in 2017
- Company Performance & Strategy
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- Figure 52: Financial analysis of ScottishPower Energy Retail, 2012-16
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- Figure 53: ScottishPower revenue segmental analysis, 2017
- SSE
- SSE and Npower in talks to merge retail businesses
- Renewable generation accounts for 28% of electricity output in 2017/18
- SSE loses more customers in 2017/18
- Company strategy
- Financial performance
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- Figure 54: Financial analysis of SSE, 2014-18
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- Figure 55: SSE revenue segmental analysis, 2018
- First Utility
- First Utility acquired by Shell
- First Utility diversifies to become multi-utility brand
- Financial performance
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- Figure 56: Financial analysis of First Utility, 2012-16
- OVO Energy
- OVO launches BOOST –A standalone brand for the prepayment sector
- Recent acquisitions
- OVO launches the world’s first widely available domestic vehicle-to-grid charger
- Company strategy
- Financial performance
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- Figure 57: Financial analysis of OVO Energy, 2012-16
The Consumer – What You Need to Know
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- ‘Big six’ continue to dominate gas and electricity supply market
- Two in five people have switched supplier in the last two years
- 40% of respondents plan to switch tariff and/or supplier
- Just under half of consumers regularly check price comparison sites for energy tariffs
- Most people satisfied with customer service from energy supplier
- Most people would like to see energy suppliers provide “greener energy”
Current Supplier
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- British Gas remains largest supplier in gas and electricity supply market
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- Figure 58: Current gas supplier, May 2018
- Figure 59: Current electricity supplier, May 2018
- British Gas boasts a particularly high gas market share in Inner & Greater London
Energy Consumer Engagement and Behaviour
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- 41% have switched supplier in last two years
- Older people and households on lower income are less likely to switch
- Renters are considerably less engaged in market than home owners
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- Figure 60: Customer engagement in energy market, May 2018
- Two-thirds are on a fixed-rate tariff
- 40% of respondents plan to switch tariff and/or supplier
- Just under half of consumers regularly check price comparison sites for energy tariffs
- Over a third of respondents have directly contacted suppliers to ask to be moved onto cheaper tariff
- Majority of consumers do not have smart meter installed
Reasons for not Switching Supplier
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- Over half of energy consumers have not switched supplier because they are happy with current supplier
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- Figure 61: Reasons for not switching gas and/or electricity supplier in the last two years, May 2018
- 20% believe potential savings are not worth the hassle of switching
- 11% are put off switching because cheapest deals are offered by firms they’ve never heard off
- 1 in 10 stick with their current supplier because of good reward scheme
Customer Satisfaction and Attitudes towards Supplier Selection
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- 85% are satisfied with customer service they receive from energy supplier
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- Figure 62: satisfaction with current supplier and attitudes towards supplier selection, May 2018
- Most people are happy to switch supplier frequently to get cheapest deal
- The government’s proposed price cap may deter people from switching
Attitudes towards Energy Suppliers
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- Most people would like to see energy suppliers provide “greener energy”
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- Figure 63: Attitudes towards energy suppliers, May 2018
- Only a third agree that a firm’s reputation is more important than price
- 41% of people find the option to buy energy-saving devices from energy suppliers appealing
- Two out of five people find the option to buy bundles of services from energy suppliers appealing
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations & regulatory bodies
- Energy Networks Association
- Energy Industries Council
- Energy UK
- 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)
- Renewable Energy Association
- Solar Trade Association
- Trade magazines
- Modern Power Systems
- Utility Week
- Energy Now
- Renewable Energy Focus
- Resource
- Solar UK
- Smart Solar
- Wind Energy Network
- Wind Power Monthly
- Trade events
- Offshore Europe
- RWM 2018
- edie live 2018
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