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Energy Industry (Industrial Report) - UK - October 2014

“Although the UK electricity and gas supply market continues to be dominated by the ‘big six’ energy firms, smaller suppliers have gained market share - reaching an estimated 8% in mid-2014. Smaller competitors have been successful in attracting customers from the larger players by offering better value prices tariffs or by stressing their green credentials or community involvement. They have also been able to take advantage of consumers’ continued mistrust of the ‘big six’.”
– Claudia Preedy - Industrial Analyst

This report addresses the following key questions concerning the UK energy market:

• How do UK and EU policies affect the development of the energy sector?
• What are the key market issues facing gas and electricity suppliers?
• What are the key reasons for consumers switching energy supplier?
• How have major energy suppliers performed over the last five years?
• What is the potential future energy mix?

The terms of reference for this report concern the UK energy market, specifically:

  • Electricity generation and demand
  • Gas supply and demand
  • Retail energy market

Electricity generation refers to companies producing electricity in power stations that operate under generation licences.

The report covers the following:

  • Coal generation
  • Gas nuclear
  • Renewables (wind, solar, hydro, bioenergy, etc.)

The UK gas market can be separated into two sections: upstream (gas supply) and downstream (gas demand). The report covers gas supply (production, imports, exports) and the downstream activities of supply to the industrial, commercial, power generation and domestic sectors.

The retail energy market covers home energy providers in the UK, including:

  • Electricity suppliers
  • Gas suppliers
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Table of contents

  1. Executive Summary

      • The market
        • Electricity supplied from coal-fired stations down in 2013
          • Total renewable electricity generation has more than doubled between 2009 and 2013
            • Figure 1: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2013
          • UK dependent on imported natural gas
            • Figure 2: UK Gas Supply, 2009-13
          • Average dual fuel bills more than doubled over the last 10 years
            • Figure 3: Breakdown of average domestic dual fuel bill, 2013
          • More people switching to smaller energy suppliers
            • Market factors
              • Electricity Market Reform (EMR) to ensure investment in UK’s low-carbon electricity infrastructure
                • Government sending mixed signals to wind generation sector
                  • Subsidies for large solar farms to be scrapped from April 2015
                    • Old coal-fired power stations to be faced out
                      • First new UK nuclear power station in a generation receives official go-ahead by European Commission
                        • Government supports new generation of gas-fired power stations
                          • Competition and Markets Authority (CMA) investigating big six suppliers
                            • Roll-out of smart meters at centre of key changes to energy supply market over the next few years
                              • The industry
                                • What we think
                                • Introduction

                                    • Definitions
                                      • Methodology
                                        • Abbreviations
                                          • Market positioning
                                          • UK Economy

                                            • Overview
                                              • Inflation
                                                • Interest rates
                                                  • Consumer spending
                                                    • Manufacturing
                                                      • Business investment
                                                      • Market Factors

                                                        • Key points
                                                          • Industry regulation
                                                            • Legislative environment
                                                              • Large Combustion Plant Directive (LCPD)
                                                                • EU Renewables Directives
                                                                  • UK renewables policy
                                                                    • Renewables Obligation (RO)
                                                                      • FeedIn Tariffs (FITs)
                                                                        • The Renewable Heat Incentive
                                                                          • Electricity Market Reform
                                                                            • Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP)
                                                                              • Energy Company Obligation (ECO)
                                                                                • Key analysis
                                                                                • Electricity Demand and Generation

                                                                                  • Key points
                                                                                    • Overview
                                                                                      • UK facing power capacity crunch
                                                                                        • Electricity supply
                                                                                          • Figure 4: Analysis of electricity supply in the UK, 2009-13(Gwh)
                                                                                          • Figure 5: Analysis of electricity supply in the UK, 2009-13
                                                                                          • Figure 6: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2009-13 (Twh)
                                                                                        • Electricity consumption by end-use sector
                                                                                          • Figure 7: Analysis of electricity usage, by type of industry, UK, 2007-13 (Gwh)
                                                                                          • Figure 8: Analysis of electricity usage, by the commercial sector, 200913 (Gwh)
                                                                                          • Figure 9: Analysis of electricity usage by the commercial sector, 2013
                                                                                        • Coal generation
                                                                                          • Key analysis
                                                                                            • Figure 10: Analysis of electricity supplied from coal-fired power stations in the UK, 2009-13 (Twh)
                                                                                          • Nuclear Power generation
                                                                                            • Figure 11: UK Nuclear Sites Planned Closure Dates, as of September 2014 (Year)
                                                                                            • Figure 12: Analysis of electricity supplied from nuclear power stations in the UK, 2009-13 (Twh)
                                                                                          • Gas/CCGT generation
                                                                                              • Figure 13: Analysis of electricity supplied from gas-fired power stations in the UK, 2009-13 (Twh)
                                                                                              • Figure 14: Analysis of electricity supplied from gas-fired power stations in the UK, 2009-13
                                                                                            • Renewables generation
                                                                                              • Key analysis
                                                                                                  • Figure 15: Renewable electricity generation in the UK, 2009-13 (Gwh)
                                                                                                  • Figure 16: Electricity generation from on- and offshore wind, 2009-13
                                                                                                  • Figure 17: Renewable electricity generation capacity awaiting/under construction, as of August 2014
                                                                                              • Gas Demand and Supply

                                                                                                • Key points
                                                                                                  • Overview
                                                                                                      • Figure 18: Total UK gas supply, 2009-13 (Gwh)
                                                                                                    • Potential for shale gas extraction
                                                                                                      • Wholesale gas prices
                                                                                                        • Figure 19: Average wholesales gas prices, 2002-13 (£/therm)
                                                                                                        • Figure 20: Average wholesale gas prices, 200913
                                                                                                      • Gas demand by end-user
                                                                                                        • Figure 21: Segmentation of industrial gas consumption, by end use industries, UK, 2009-13 (GWh)
                                                                                                        • Figure 22: Segmentation of gas consumption, by non-industrial sectors, UK, 200913 (GWh)
                                                                                                        • Figure 23: Segmentation of gas consumption, by non-industrial sectors, 2013
                                                                                                      • Power generation
                                                                                                        • Figure 24: Gas supplied for electricity generation, UK, 2009-13 (Gwh)
                                                                                                      • Interruptible
                                                                                                        • Industrial
                                                                                                          • Figure 25: Gas supplied to the industrial sector, UK, 2009-13 (Gwh)
                                                                                                        • Commercial
                                                                                                          • Figure 26: Gas supplied to the UK commercial sector, 2009-13 (Gwh)
                                                                                                        • Domestic
                                                                                                          • Figure 27: Analysis of the development of gas supplied to the UK domestic sector, 2009-13 (Gwh)
                                                                                                      • Retail Energy Market

                                                                                                        • Key points
                                                                                                          • Market background
                                                                                                              • Figure 28: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2013 (%)
                                                                                                            • Key analysis:
                                                                                                              • Figure 29: Proportion of domestic gas customers of British Gas Trading and other suppliers, by region, 2013(%)
                                                                                                              • Figure 30: Number of supplier switches in the domestic gas and electricity markets, Great Britain, Q1 2010 - Q2 2014 (number 000s)
                                                                                                              • Figure 31: Number of supplier switches in the domestic gas and electricity markets, Great Britain, Q1 2010 - Q2 2014
                                                                                                            • Regional demand
                                                                                                              • Figure 32: Gas sales and customers by region, Great Britain, 2012 (000's and Gwh)
                                                                                                              • Figure 33: Electricity sales and customers by region, Great Britain, 2012 (000's and Gwh)
                                                                                                            • Market issues
                                                                                                              • Rise in energy bills and dominance of the ‘big six’ suppliers
                                                                                                                  • Figure 34: Breakdown of average domestic electricity& gas household bill, 2013
                                                                                                                  • Figure 35: Breakdown of average domestic dual fuel bill, 2013
                                                                                                                • Innovative smaller suppliers gaining market share
                                                                                                                  • Poor customer complaints handling remains an industry-wide issue
                                                                                                                    • Retail market review
                                                                                                                      • Key analysis
                                                                                                                        • Smart meter roll-out
                                                                                                                          • Smart meters aim to give consumers the following benefits:
                                                                                                                          • The Consumer – Current Supplier

                                                                                                                            • Key points
                                                                                                                              • British Gas named as top supplier of gas and electricity
                                                                                                                                • Figure 36: Current gas supplier, July 2014
                                                                                                                                • Figure 37: Current electricity supplier, July 2014
                                                                                                                              • A quarter of people have changed energy supplier in past 12 months
                                                                                                                                • Figure 38: Change of gas/electricity supplier in the last 12 months, July 2014
                                                                                                                            • The Consumer – Reasons For Switching and Future Intentions

                                                                                                                              • Key points
                                                                                                                                • Finding a cheaper tariff on price comparison site key reason for switching
                                                                                                                                  • Figure 39: Reasons for changing gas/electricity supplier in the last 12 months, July 2014
                                                                                                                                  • Figure 40: Plans to change gas/electricity supplier in the next 12 months, July 2014
                                                                                                                                  • Figure 41: Possible reasons for wanting to change gas/electricity supplier, July 2014
                                                                                                                              • Company Profiles

                                                                                                                                • Key points
                                                                                                                                  • Company profiles
                                                                                                                                  • Centrica/British Gas Trading

                                                                                                                                      • British Gas
                                                                                                                                        • Direct Energy
                                                                                                                                          • Centrica Energy
                                                                                                                                            • Centrica Storage – Gas storage in the UK
                                                                                                                                              • Figure 42: Financial analysis of Centrica, 2009-13 (£ million)
                                                                                                                                              • Figure 43: Centrica revenue segmental analysis, 2013 (£ million)
                                                                                                                                              • Figure 44: Financial analysis of British Gas Trading, 2009-13 (£ million)
                                                                                                                                          • EDF Energy

                                                                                                                                                • Figure 45: Financial analysis of EDF Energy, 2009-13 (£ million)
                                                                                                                                                • Figure 46: EDF Energy revenue segmental analysis, 2013 (£ million)
                                                                                                                                            • RWE Npower

                                                                                                                                                  • Figure 47: Financial analysis of Npower, 2009-13 (£ million)
                                                                                                                                                  • Figure 48: RWE - UK revenue segmental analysis, 2013 (£ million)
                                                                                                                                              • E.ON Energy

                                                                                                                                                    • Figure 49: Financial analysis of E.ON Energy Solutions, 2008-12 (£ million)
                                                                                                                                                  • Electricity supply licensees
                                                                                                                                                    • Gas supply licensees
                                                                                                                                                      • Generation licensees
                                                                                                                                                        • Figure 50: E.ON revenue segmental analysis, 2013 (£ million)
                                                                                                                                                    • ScottishPower Energy Retail

                                                                                                                                                        • Figure 51: Financial analysis of ScottishPower Energy Retail, 2009-13 (£ million)
                                                                                                                                                        • Figure 52: ScottishPower revenue segmental analysis, 2013 (£ million)
                                                                                                                                                    • Sse

                                                                                                                                                          • Figure 53: Financial analysis of SSE, 2010-14 (£ million)
                                                                                                                                                          • Figure 54: SSE revenue segmental analysis, 2014 (£ million)
                                                                                                                                                      • Ecotricity Group

                                                                                                                                                            • Figure 55: Financial analysis of Ecotricity Group, 2009-13 (£ 000)
                                                                                                                                                        • First Utility

                                                                                                                                                              • Figure 56: Financial analysis of First Utility, 2009-13 (£ thousand)
                                                                                                                                                          • Good Energy Group

                                                                                                                                                                • Figure 57: Financial analysis of Good Energy Group, 2009-13 (£ 000)
                                                                                                                                                                • Figure 58: Turnover analysis of Good Energy Group, by segment, 2012-13 (£ 000)
                                                                                                                                                            • Future Energy Demand

                                                                                                                                                              • Key points
                                                                                                                                                                • Electricity Generation Forecast
                                                                                                                                                                  • National Grid’s Electricity 10-Year Statement
                                                                                                                                                                      • Figure 59: Annual power demand in Great Britain, 2015-35 (TWh)
                                                                                                                                                                      • Figure 60: Annual power demand in Great Britain, 2015-35
                                                                                                                                                                    • Future Potential Energy Mix
                                                                                                                                                                        • Figure 61: Forecast power generation installed capacity under “slow progression” scenario, by source, 2014-35 (MW)
                                                                                                                                                                        • Figure 62: Forecast power generation installed capacity under “gone green” scenario, by source, 2014-35 (MW)
                                                                                                                                                                        • Figure 63: Forecast power generation installed capacity under “no progression” scenario, by source, 2014-35 (MW)
                                                                                                                                                                        • Figure 64: Forecast power generation installed capacity under “low carbon life” scenario, by source, 2014-35 (GW)
                                                                                                                                                                        • Figure 64: Chart 15: Future potential energy mix in 2035, by scenario
                                                                                                                                                                      • Interconnectivity between European countries to increase
                                                                                                                                                                        • Figure 65: Existing and planned interconnectors, as of November 2013
                                                                                                                                                                      • Gas demand forecast
                                                                                                                                                                        • Figure 66: Forecast UK gas demand, 2014-35 (TWh)
                                                                                                                                                                    • Further Sources and Contacts

                                                                                                                                                                      • Trade associations and regulatory bodies
                                                                                                                                                                        • Trade magazines
                                                                                                                                                                          • Trade exhibitions

                                                                                                                                                                          Companies Covered

                                                                                                                                                                          To learn more about the companies covered in this report please contact us.

                                                                                                                                                                          Energy Industry (Industrial Report) - UK - October 2014

                                                                                                                                                                          £1,495.00 (Excl.Tax)