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Energy Industry - UK - October 2015

"Widespread smart meter deployment should offer significant opportunities for energy suppliers - allowing them to offer more innovative and tailored tariffs and products. For example, the technology will make it possible for suppliers to offer "time of use tariffs" to customers, charging a lower price for power at off peak times, such as the weekend, and higher prices on high demand weekdays. Thus, smart meters have the potential to increase competition between suppliers, enabling them to provide better service quality and new products and services."
– Claudia Preedy - B2B analyst

This report covers the following areas:

  • Why is the outlook for the renewables sector becoming more uncertain?
  • How have smaller energy suppliers managed to gain market share from the 'big six' in recent years?
  • Why does poor customer service and complaints handling remain an issues across the energy supply industry?
  • What opportunities do smart meters offer for energy suppliers?

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Table of contents

  1. Executive Summary

      • The market
        • Coal-fired power generation drops in 2014 due to plant closures
          • Power generation from renewable sources accounts for almost a fifth of total electricity supply
            • Figure 1: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2014
          • Government push for shale gas exploration in bid to reduce reliance on imports
            • Figure 2: UK Gas Supply, 2010-14
          • Energy suppliers cut prices in 2014 and early 2015, reflecting falling wholesale costs, cuts to green levies and increased competition
            • Fixed tariffs increasingly popular
              • Figure 3: Breakdown of average domestic dual fuel bill, 2013
            • Market share of small suppliers reaches 11% in mid-2015
              • Market factors
                • Electricity Market Reform (EMR) to ensure investment in UK’s low-carbon electricity infrastructure
                  • Large Combustion Plant Directive drives increased closure rate of coal-fired power stations
                    • UK facing power capacity crunch
                      • Investor confidence in renewables sector falls due to government subsidies cuts
                        • The Industry
                          • What we think
                          • Key Insights

                              • Why is the outlook for the renewables sector becoming more uncertain?
                                • How have smaller energy suppliers managed to gain market share from the ‘big six’ in recent years?
                                  • Why does poor customer service and complaints handling remain an issues across the energy supply industry?
                                    • What opportunities do smart meters offer for energy suppliers?
                                    • Introduction

                                        • Definitions
                                          • Methodology
                                            • Abbreviations
                                              • Market Positioning
                                              • UK Economy

                                                • Overview
                                                  • Figure 4: UK GDP quarterly development, 2003-15
                                                  • Figure 5: UK GDP in economic downturns and recoveries since 1979
                                                • Inflation
                                                  • Interest Rates
                                                    • House prices
                                                      • Consumer spending
                                                        • Manufacturing
                                                          • Business Investment
                                                            • Figure 6: UK GFCF 2003-15
                                                          • Imports
                                                            • Exports
                                                            • 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
                                                                                • There are two parts to the RHI:
                                                                                  • Electricity Market Reform
                                                                                    • Contracts for Difference (CfDs)
                                                                                      • Capacity Market (CM)
                                                                                        • Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP)
                                                                                          • Energy Company Obligation (ECO)
                                                                                          • Electricity Demand & Generation

                                                                                            • Key points
                                                                                              • Overview
                                                                                                • UK facing power capacity crunch
                                                                                                  • Electricity supply
                                                                                                    • Figure 7: Analysis of electricity supply in the UK, 2010-14
                                                                                                    • Figure 8: Analysis of electricity supply in the UK, 2010-14
                                                                                                    • Figure 9: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2010-14
                                                                                                  • Electricity consumption by end-use sector
                                                                                                    • Figure 10: Analysis of electricity usage, by type of industry, UK, 2009-14
                                                                                                    • Figure 11: Analysis of electricity usage, by the commercial sector, 200914
                                                                                                    • Figure 12: Analysis of electricity usage by the commercial sector, 2014
                                                                                                  • Coal generation
                                                                                                    • Increased closure rate of coal-fired plants
                                                                                                      • New coal-fired plants must be fitted with CCS technology
                                                                                                        • Conversion of coal-fired stations to biomass plants
                                                                                                            • Figure 13: Analysis of electricity supplied from coal-fired power stations in the UK, 2007-14
                                                                                                          • Nuclear Power generation
                                                                                                            • Figure 14: UK Nuclear Sites Planned Closure Dates, as of September 2015
                                                                                                            • Figure 15: Analysis of electricity supplied from nuclear power stations in the UK, 2007-14
                                                                                                          • Gas/CCGT generation
                                                                                                              • Figure 16: Analysis of electricity supplied from gas-fired power stations in the UK, 2007-14
                                                                                                              • Figure 17: Analysis of electricity supplied from gas-fired power stations in the UK, 2010-14
                                                                                                            • Renewables generation
                                                                                                              • Contracts for Difference to replace Renewable Obligation Certificates from March 2017
                                                                                                                • Government subsidy cuts are raising uncertainties for renewables industry
                                                                                                                  • Green Investment Bank drive to boost investment in offshore wind
                                                                                                                    • Solar Power
                                                                                                                      • Proposed cuts to solar power subsides to prove hugely damaging to industry, according to trade association
                                                                                                                        • Hydro Electricity
                                                                                                                          • Bioenergy
                                                                                                                              • Figure 18: Bioenergy electricity generation capacity, by type of plant, 2010-14
                                                                                                                              • Figure 19: Renewable electricity generation in the UK, 2010-14
                                                                                                                              • Figure 20: Electricity generation from on- and offshore wind, 201014
                                                                                                                              • Figure 21: Renewable Energy Projects in Pipeline, by Technology, as of July 2015
                                                                                                                          • Gas Demand & Supply

                                                                                                                            • Key points
                                                                                                                              • Overview
                                                                                                                                  • Figure 22: Total gas supply, UK, 2010-14
                                                                                                                                • Potential for shale gas extraction
                                                                                                                                  • Wholesale gas prices
                                                                                                                                    • Figure 23: Average wholesales gas prices, 2002-14
                                                                                                                                    • Figure 24: Average wholesale gas prices, 201014
                                                                                                                                  • Gas demand by end-user
                                                                                                                                    • Figure 25: Segmentation of industrial gas consumption, by end use industries, UK, 2010-14
                                                                                                                                    • Figure 26: Segmentation of gas consumption, by non-industrial sectors, UK, 201014
                                                                                                                                    • Figure 27: Segmentation of gas consumption, by non-industrial sectors, 2014
                                                                                                                                  • Power Generation
                                                                                                                                      • Figure 28: Gas supplied for electricity generation, UK, 2010-14
                                                                                                                                    • Interruptible
                                                                                                                                      • Industrial
                                                                                                                                        • Figure 29: Gas supplied to the industrial sector, UK, 2010-14
                                                                                                                                      • Commercial
                                                                                                                                        • Figure 30: Gas supplied to the UK commercial sector, 2010-14
                                                                                                                                      • Domestic
                                                                                                                                        • Figure 31: Analysis of the development of gas supplied to the UK domestic sector, 2010-14
                                                                                                                                    • Retail Energy Market

                                                                                                                                      • Key points
                                                                                                                                        • Market Background
                                                                                                                                            • Figure 32: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2015
                                                                                                                                            • Figure 33: Proportion of domestic gas customers of British Gas Trading and other suppliers, by region, 2015
                                                                                                                                            • Figure 34: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2010 - Q2 2015
                                                                                                                                            • Figure 35: Number of supplier switches in the domestic gas and electricity markets, Great Britain, January 2010 June 2015
                                                                                                                                          • Regional Demand
                                                                                                                                            • Figure 36: Gas sales and customers by region, Great Britain, 2013
                                                                                                                                            • Figure 37: Electricity sales and customers by region, Great Britain, 2013
                                                                                                                                          • Market Issues and Recent Developments
                                                                                                                                            • Reforms promoting increased competition and supplier switching in retail energy market
                                                                                                                                              • ‘big six’ suppliers come under fire for charging high prices in 2013
                                                                                                                                                • Energy suppliers announce price cuts in 2014 and early 2015, reflecting falling wholesale costs, cuts to green levies and increased competition
                                                                                                                                                  • Breakdown of average gas and electricity bill
                                                                                                                                                    • Figure 38: Breakdown of average domestic electricity& gas household bill, 2014
                                                                                                                                                    • Figure 39: Breakdown of average domestic dual fuel bill, 2014
                                                                                                                                                  • Smaller suppliers gaining market share
                                                                                                                                                      • Figure 40: Domestic gas supply market shares in Great Britain, by company 20102015
                                                                                                                                                      • Figure 41: Domestic electricity supply market shares in Great Britain, by company 20102015
                                                                                                                                                    • Lower prices, customer dissatisfaction with the ‘big six’, and differentiation strategies are driving the growth of small suppliers
                                                                                                                                                      • Poor customer service and complaints handling remains an industry-wide issue
                                                                                                                                                        • CMA Energy Market Investigation
                                                                                                                                                          • Smart Meter Roll-out programme
                                                                                                                                                            • Switching rates in the SME sector also set to increase
                                                                                                                                                            • The Consumer - Current Supplier and Recent Switches

                                                                                                                                                              • Key points
                                                                                                                                                                • British Gas continues to be the top supplier of gas and electricity
                                                                                                                                                                    • Figure 42: Current gas and electricity supplier(s), June 2015
                                                                                                                                                                  • Three-quarters of people have not changed energy supplier in past 12 months
                                                                                                                                                                      • Figure 43: Change of gas/electricity supplier in the last 12 months, July 2015
                                                                                                                                                                  • The Consumer - Reasons for Switching & Future Intentions

                                                                                                                                                                    • Key points
                                                                                                                                                                        • Figure 44: Reasons for changing gas/electricity supplier in the last 12 months, June 2015
                                                                                                                                                                      • More than half of respondents (54%) not planning to switch supplier in the next 12 months
                                                                                                                                                                        • Figure 45: Plans to change gas/electricity supplier in the next 12 months, July 2015
                                                                                                                                                                        • Figure 46: Possible reasons for wanting to change gas/electricity supplier, July 2015
                                                                                                                                                                        • Figure 47: People planning/considering switching supplier if they saw a cheaper tariff on a price comparison site, by current supplier, July 2015
                                                                                                                                                                        • Figure 48: People planning/considering switching supplier if they are not happy with the customer service provided by their current supplier, by current supplier, July 2015
                                                                                                                                                                        • Figure 49: People planning/considering switching supplier because their current supplier is too expensive, by current supplier, July 2015
                                                                                                                                                                    • Company Profiles

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

                                                                                                                                                                            • British Gas
                                                                                                                                                                              • Direct Energy
                                                                                                                                                                                • Centrica Energy
                                                                                                                                                                                  • Centrica Storage
                                                                                                                                                                                    • Company Strategy and Outlook
                                                                                                                                                                                        • Figure 50: Financial analysis of Centrica, 2010-14
                                                                                                                                                                                        • Figure 51: Centrica revenue segmental analysis, 2014
                                                                                                                                                                                        • Figure 52: Financial analysis of British Gas Trading, 2010-14
                                                                                                                                                                                    • EDF Energy

                                                                                                                                                                                          • Figure 53: Financial analysis of EDF Energy, 2010-14
                                                                                                                                                                                          • Figure 54: EDF Energy revenue segmental analysis, 2014
                                                                                                                                                                                      • RWE NPower

                                                                                                                                                                                          • Company Strategy and Outlook
                                                                                                                                                                                              • Figure 55: Financial analysis of Npower, 2010-14
                                                                                                                                                                                              • Figure 56: RWE - UK revenue segmental analysis, 2014
                                                                                                                                                                                          • E.ON Energy

                                                                                                                                                                                              • Company Strategy
                                                                                                                                                                                                  • Figure 57: Financial analysis of E.ON Energy Solutions, 2010-14
                                                                                                                                                                                                  • Figure 58: E.ON revenue segmental analysis, 2014
                                                                                                                                                                                              • ScottishPower Energy Retail

                                                                                                                                                                                                  • Company Strategy & Outlook
                                                                                                                                                                                                    • Figure 59: Financial analysis of ScottishPower Energy Retail, 2010-14
                                                                                                                                                                                                    • Figure 60: ScottishPower revenue segmental analysis, 2014
                                                                                                                                                                                                • SSE

                                                                                                                                                                                                    • Company Strategy and Outlook
                                                                                                                                                                                                      • Figure 611: Financial analysis of SSE, 2011-15
                                                                                                                                                                                                      • Figure 62: SSE revenue segmental analysis, 2015
                                                                                                                                                                                                  • Ecotricity Group

                                                                                                                                                                                                      • Company Strategy
                                                                                                                                                                                                        • Figure 63: Financial analysis of Ecotricity Group, 2010-14
                                                                                                                                                                                                    • First Utility

                                                                                                                                                                                                        • Company Strategy and Outlook
                                                                                                                                                                                                          • Figure 64: Financial analysis of First Utility, 2010-14
                                                                                                                                                                                                      • Good Energy Group

                                                                                                                                                                                                          • Company Strategy
                                                                                                                                                                                                            • Figure 65: Financial analysis of Good Energy Group, 2010-14
                                                                                                                                                                                                            • Figure 66: Turnover analysis of Good Energy Group, by segment, 2012-14
                                                                                                                                                                                                        • Future Energy Demand

                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                            • Electricity Generation Forecast
                                                                                                                                                                                                              • National Grid’s Future Energy Scenarios
                                                                                                                                                                                                                  • Figure 67: Annual power demand in Great Britain, 2016-36
                                                                                                                                                                                                                  • Figure 68: Annual power demand in Great Britain, 2016-36
                                                                                                                                                                                                                  • Figure 69: Major current and planned transmission network development projects, as of November 2014
                                                                                                                                                                                                                • Future Potential Energy Mix
                                                                                                                                                                                                                    • Figure 70: Forecast power generation installed capacity under “slow progression” scenario, by source, 2015-36
                                                                                                                                                                                                                    • Figure 71: Forecast power generation installed capacity under “gone green” scenario, by source, 2015-36
                                                                                                                                                                                                                    • Figure 72: Forecast power generation installed capacity under “no progression” scenario, by source, 2015-36
                                                                                                                                                                                                                    • Figure 73: Forecast power generation installed capacity under “consumer power” scenario, by source, 2015-36
                                                                                                                                                                                                                    • Figure 74: Future potential energy mix in 2035, by scenario
                                                                                                                                                                                                                  • Interconnectivity between European countries to increase
                                                                                                                                                                                                                    • Figure 75: Existing and planned interconnectors, as of November 2014
                                                                                                                                                                                                                  • Gas Demand Forecast
                                                                                                                                                                                                                    • Figure 76: Forecast UK gas demand, 2015-35
                                                                                                                                                                                                                • Further Sources & Contacts

                                                                                                                                                                                                                  • Trade Associations & Regulatory Bodies
                                                                                                                                                                                                                    • Trade Magazines
                                                                                                                                                                                                                      • Trade Exhibitions

                                                                                                                                                                                                                      Companies Covered

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

                                                                                                                                                                                                                      Energy Industry - UK - October 2015

                                                                                                                                                                                                                      US $1,984.91 (Excl.Tax)