Table of Contents
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, 2014 and 2018
- A third of UK electricity came from renewable sources in 2018
- UK clean energy investment hampered by lack of policy clarity
- Record numbers switch energy supplier
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- Figure 2: Number of supplier switches in the domestic gas and electricity markets, Great Britain, Q1 2013-Q1 2019
- Companies and brands
- Over one in four energy customers now use small or medium suppliers
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- Figure 3: Domestic electricity supply market shares in Great Britain, by company, 2014-18
- Proposed merger of Npower and SSE called off due to adverse market developments
- The consumer
- Four in 10 consumers 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 2019
- One in three find the option to buy bundles of services from energy suppliers appealing
- Just under half find the option to buy renewable energy products from energy suppliers appealing
- What we think
Issues and Insights
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- UK clean energy investment hampered by lack of policy clarity
- The facts
- The implications
- Electrification of transport creates new diversification opportunities for suppliers
- 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
- A third of UK electricity came from renewable sources in 2018
- UK aims to deliver 30GW of offshore wind capacity by 2030
- Record numbers switch energy supplier
- Over one in four energy customers now use small or medium suppliers
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, 2014-18
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- Figure 6: Analysis of electricity supply in the UK, 2014-18
- Electricity generation by type of fuel
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- Figure 7: Analysis of electricity generation the UK, by type of fuel used, 2014-18
- Figure 8: Proportional importance of fuel source in UK electricity generation, 2014 and 2018
- 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, 2011-18
- Gas/CCGT generation
- Government scales back forecasts for new gas-fired power stations
- 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, 2011-18
- Figure 11: Analysis of electricity supplied from gas-fired power stations in the UK, 2011-18
- Nuclear power generation
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- Figure 12: UK nuclear sites’ planned closure dates, as of July 2019
- Government’s nuclear new build plans in disarray following suspension of projects
- Hinkley Point C only new nuclear plant under construction
- 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, 2011-18
- Renewables generation
- The government remains committed to carbon emission reduction targets despite Brexit vote
- UK clean energy investment hampered by lack of policy clarity
- A third of UK’s electricity generation in 2018 came from renewable sources
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- Figure 14: Renewable electricity generation in the UK, 2014-18
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- Figure 15: Electricity generation from on- and offshore wind, 2014-18
- Onshore wind
- Offshore wind
- Solar power
- Hydro electricity
- Bioenergy
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- Figure 16: Bioenergy electricity generation capacity, by type of plant, 2014-18
- Renewable electricity capacity development pipeline
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- Figure 17: Renewable energy projects in pipeline, by technology, as of March 2019
Gas Demand and Supply
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- UK’s increased dependence on gas imports
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- Figure 18: Total UK gas supply, 2014-18
- Figure 19: Total UK gas supply, 2014-18
- Government push for shale gas exploration to reduce reliance on imports
- Wholesale gas prices
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- Figure 20: Average wholesale gas prices, 2007-18
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, 2018-50
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- Figure 22: Annual power demand in Great Britain, 2018-50
- Future potential energy mix
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- Figure 23: Forecast power generation installed capacity under “Community Renewables” scenario, by source, 2018-50
- Figure 24: Future potential energy mix in “Community Renewables” Scenario in 2040
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- Figure 25: Forecast power generation installed capacity under “Two Degrees” scenario, by source, 2018-50
- 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, 2018-50
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- Figure 28: Future potential energy mix in “Steady Progression” Scenario in 2040
- Figure 29: Forecast power generation installed capacity under “Consumer Evolution” scenario, by source, 2018-50
- 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, 2018-50
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, Q4 2000 and Q4 2019
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- Figure 33: Proportion of domestic gas customers of British Gas Trading and other suppliers, by region, March 2019
- More than half of households still on more expensive default tariffs
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- Figure 34: Number of non-prepayment domestic gas customer accounts, by type of tariff, by supplier, April 2019
- Figure 35: Number of non-prepayment domestic electricity customer accounts, by type of tariff, by supplier, April 2019
- Price differential between average SVTs and cheapest market deals remains considerable, despite introduction of Default Tariffs cap
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- Figure 36: Average annual bill on SVT versus supplier’s cheapest fixed tariff, by major supplier, April-June 2019
- Record numbers switch energy supplier
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- Figure 37: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2014-Q1 2019
- Figure 38: Number of supplier switches in the domestic gas and electricity markets, Great Britain, Q1 2013-Q1 2019
- Over one in four energy customers now use small or medium suppliers
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- Figure 39: Domestic gas supply market shares in Great Britain, by company, 2014-18
- Figure 40: Domestic electricity supply market shares in Great Britain, by company, 2014-18
Energy Policy and Legislative Environment
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- Government commitment to reduce carbon emissions
- UK makes good process in reducing CO2 emissions to date, but on track to miss 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 introduces temporary price cap on SVTs
Market Drivers
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- Drivers for investment in energy system and infrastructure
- Decarbonisation of UK energy system
- Government ambition to achieve net zero emissions by 2050 will push up electricity demand
- Smart grid development to support low-carbon economy
- Rise in distributed generation requires more active management of distribution network
- 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 41: Breakdown of average large supplier dual-fuel household bill, 2017
- Figure 42: Breakdown of average domestic electricity bill, 2017
- Figure 43: Breakdown of average domestic gas bill, 2017
- Customer service is a key driver of loyalty
- Smart Meter rollout programme
Companies and Brands – What You Need to Know
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- First Utility becomes Shell Energy following acquisition by Shell
- Proposed merger of Npower and SSE called off due to adverse market developments
- Bundled tariffs to add customer value
- Focus on green tariffs
- Suppliers moving into home services and emerging connect homes market
Competitive Strategies
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- Recent acquisition activity
- First Utility becomes Shell Energy following acquisition by Shell
- Proposed merger of Npower and SSE called off due to adverse market developments
- Mitsubishi takes 20% stake in OVO Energy
- Innovation in tariffs offerings
- Bundled tariffs to add customer value
- Focus on green tariffs
- Smart meters allow suppliers to offer more tailored tariffs
- Next-day switching to be introduced in 2021, increasing competitive pressures
- Emergence of electric vehicle tariffs
- Suppliers offer reward schemes to build customer loyalty
- Some suppliers are moving into home services and the emerging connected homes market
- A number of supplier enter solar and energy storage market
- Emergence of automatic switching services
Company Profiles
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- Centrica
- Recent acquisitions and disposals
- Centrica’s main focus is on energy supply and the customer-facing side of business while reducing exposure to generation
- Centrica enters on-demand services market in 2017
- Centrica to cut 4,000 UK staff by 2020 to manage challenges in retail energy market
- Financial performance
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- Figure 44: Financial analysis of Centrica, 2014-18
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- Figure 45: Centrica revenue segmental analysis, 2018
- British Gas Trading
- British Gas scraps SVTs to new customers and expands range of tariff offers and bundles
- Focus on innovative Connected Homes products
- Company review and outlook
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- Figure 46: Financial analysis of British Gas Trading, 2014-18
- EDF Energy
- Planned new nuclear power stations
- Development of renewable assets
- Intense competition sees EDF Energy lose more customers in 2018
- EDF Energy moves into home services market
- Company strategy
- Financial performance
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- Figure 47: Financial analysis of EDF Energy, 2013-17
- Figure 48: EDF Energy revenue segmental analysis, 2018
- E.ON Energy Solutions
- E.ON enters UK solar and storage market
- E.ON scraps SVTs for customers on fixed deal
- E.ON moves all of its electricity customers onto 100% renewable electricity
- Company strategy
- Financial performance
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- Figure 49: Financial analysis of E.ON Energy Solutions, 2014-18
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- Figure 50: E.ON revenue segmental analysis, 2018
- Npower
- Npower rolls out two-year recovery plan
- Npower announces further job cuts in 2019
- Meridian Energy and Npower launch online energy supplier Powershop
- Merger plans with SSE scrapped
- Financial performance
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- Figure 51: Financial analysis of Npower, 2013-17
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- Figure 52: RWE – UK revenue segmental analysis, 2018
- ScottishPower Energy Retail
- ScottishPower ditches standard tariffs
- Focus on improving customer service processes
- ScottishPower Energy Retail expands its Smart Energy Services offerings
- Financial performance
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- Figure 53: Financial analysis of ScottishPower Energy Retail, 2014-18
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- Figure 54: ScottishPower revenue segmental analysis, 2018
- SSE
- SSE and Npower scrap merger plans for their household supply businesses
- SSE Energy Services looks to offer more bespoke, value-adding propositions and bundled services
- Renewables at core of SSE Group’s business strategy
- Financial performance
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- Figure 55: Financial analysis of SSE, 2015-19
- Figure 56: SSE revenue segmental analysis, 2019
- Shell Energy Retail (formerly First Utility)
- First Utility acquired by Shell
- Shell Energy Retail to focus on renewable electricity, alongside gas, broadband and smart home technology
- Financial performance
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- Figure 57: Financial analysis of Shell Energy Retail, 2013-17
- OVO Energy
- OVO invests heavily in technologies such as energy storage and electric vehicle charging
- Mitsubishi takes 20% stake in OVO Energy
- Company Strategy
- Financial performance
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- Figure 58: Financial analysis of OVO Energy, 2013-17
The Consumer – What You Need to Know
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- 44% have switched supplier in last two years
- Four in 10 consumers plan to switch tariff and/or supplier
- Half of energy consumers have not switched supplier because they are happy with current supplier
- Just under half find the option to buy renewable energy products from energy suppliers appealing
- One in three find the option to buy bundles of services from energy suppliers appealing
Current Supplier
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- ‘Big six’ supply gas and/or electricity to around 70% of households
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- Figure 59: Current gas supplier, May 2019
- Figure 60: Current electricity supplier, May 2019
- Regional differences in market shares
Energy Consumer Engagement and Behaviour
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- 44% have switched supplier in last two years
- Younger people and households on higher incomes most engaged in market
- Private and social housing renters much less likely to have switched supplier than homeowners
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- Figure 61: Customer engagement in energy market, May 2019
- Two in three consumers are on a fixed-rate energy tariff
- 48% of consumers regularly check price comparison sites for energy tariffs
- Four in 10 consumers plan to switch tariff and/or supplier
- 44% of consumers have smart meter installed
Reasons for Not Switching Supplier
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- Half of energy consumers have not switched supplier because they are happy with current supplier
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- Figure 62: Reasons for not switching gas and/or electricity supplier in the last two years, May 2019
- One in five believe potential savings are not worth the hassle of switching
- 12% are put off switching because cheapest deals are offered by firms they’ve never heard off
- 9% of consumers stick with their current supplier because of good reward scheme
Customer Satisfaction and Attitudes towards Supplier Selection
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- 84% are satisfied with customer service they receive from energy supplier
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- Figure 63: satisfaction with current supplier and attitudes towards supplier selection, May 2019
- Most people are happy to switch supplier frequently to get cheapest deal
- Value-added home services welcomed by just over half of consumers
- Just over half of consumers prefer to interact with customer services via online live chat or virtual assistance
Attitudes towards Energy Suppliers
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- Just under half find the option to buy renewable energy products from energy suppliers appealing
- 46% of consumers find the option to buy energy-saving devices from energy suppliers appealing
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- Figure 64: Attitudes towards energy suppliers and product offer, May 2019
- One in three find the option to buy bundles of services from energy suppliers appealing
- 39% potentially interested in automatic energy switching service
- Just over a third of consumers agree that greener energy is worth paying more for
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 2019
- edie live 2020
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