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Description

Description

“A key focus for distribution network operators is the development and roll-out of innovative smart grid technologies to support the growing clean energy capacity coming onto the grid and to help the transition to a more flexible energy system. According to government estimates, smart grids could also reduce the cost of additional distribution reinforcement between £2.5 billion and £12 billion by 2050.”
– Claudia Preedy, B2B Analyst

This Report looks at the following areas:

  • A key focus for electricity distribution network operators (DNOs) is the development and roll-out of innovative smart grid technologies to enable the transition to a smarter and more flexible energy system
  • The potential boom in electric vehicles (EVs) may pose serious network management challenges for DNOs

What's included

What's included

Table of contents

Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
      • Executive Summary

          • The market
            • New RIIO model for electricity network regulation sees shift in focus from capital expenditure to total expenditure
              • DNOs are incentivised to outperform their cost allowance under RIIO framework
                • Figure 1: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
              • Energy supplier switching rates at record high
                • Figure 2: Number of supplier switches in the domestic gas and electricity markets, Great Britain, 2012-18
              • Companies and brands
                • UK electricity supply market continues to be dominated by ‘big six’
                  • Figure 3: Domestic electricity supply market shares in Great Britain, by company 2013-17
                • Proposed merger of Npower and SSE to create second largest energy supplier in UK
                  • Shell enters energy retail market through acquisition of First Utility
                    • Energy suppliers are branching out into multi-utility market
                      • UK Power Networks backs small-scale electricity and fast-tracks battery connections to network
                        • What we think
                        • Issues and Insights

                          • A key focus for electricity distribution network operators (DNOs) is the development and roll-out of innovative smart grid technologies to enable the transition to a smarter and more flexible energy system
                            • The facts
                              • The implications
                                • The potential boom in electric vehicles (EVs) may pose serious network management challenges for DNOs
                                  • The facts
                                    • The implications
                                    • The Market – What You Need to Know

                                      • New RIIO model for electricity network regulation sees shift in focus from capital expenditure to total expenditure
                                        • DNOs are incentivised to outperform their cost allowance under RIIO framework
                                          • One in four domestic energy customers now use small or medium suppliers
                                            • Energy supplier switching rates at record high
                                            • Electricity Distribution Sector Overview

                                              • Distribution Network Operators
                                                  • Figure 4: Distribution network operators in Great Britain, by region, 2018
                                                • Size of UK distribution networks
                                                  • Figure 5: UK distribution networks, 2016/17
                                                • Distribution Networks Price Controls
                                                  • Introduction of Competition in Network Connections
                                                  • Distribution Network Capital Expenditure

                                                    • Introduction
                                                      • DNOs spent a record £4 billion on asset replacement in last five-year price control period DPCR5 (2010-15)
                                                          • Figure 6: Breakdown of total expenditure by DNOs during DPCR5, by area, 2010-15
                                                        • Current price control period RIIO-ED1 runs for eight years from April 2015 to March 2023
                                                            • Figure 7: Total expenditure versus allowance, by DNO, 2015/16-2016/17
                                                            • Figure 8: Total expenditure by electricity distribution network operators in Great Britain, by type, 2015/16 and 2016/17 cumulative total
                                                          • Capital expenditure expected to be lower in current price control
                                                            • Figure 9: UK gross capital expenditure by electricity distribution network operators, 2012/13-2017/18
                                                            • Figure 10: UK gross capital expenditure by electricity distribution network operators, 2012/13-2017/18
                                                            • Figure 11: UK gross capital expenditure by the electricity distribution network operators, by company, 2013/14-2017/18
                                                        • Forecast Electricity Distribution Expenditure

                                                          • Forecast Total Expenditure in RIIO-ED1 (2015-23)
                                                              • Figure 12: Actual total expenditure in 2015/16 and 2016/17, totex allowance and forecasts for RIIO-ED1, by company
                                                            • Ofgem slashes £200 million from RIIO-ED1 DNO spending allowances in September 2017
                                                              • Figure 13: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
                                                          • Drivers for Investment in Energy System and Electricity Distribution Infrastructure

                                                            • Decarbonisation of UK energy system
                                                              • Smart grid development to support low-carbon economy and aid transition to a more flexible energy system
                                                                • Ofgem supported innovation schemes to drive smart grid market and transition to low carbon economy
                                                                  • Rapid increase in distributed generation
                                                                      • Figure 14: Distributed generation connected to the distribution network during DPCR5, 2012-17
                                                                      • Figure 15: Distributed generation connected to the distribution network, 2016/17, (MW)
                                                                    • Renewables capacity development pipeline
                                                                        • Figure 16: Renewable energy projects in pipeline, by technology, as of August 2018
                                                                      • 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
                                                                          • BEIS and Ofgem unveil plans for major upgrade of the UK’s energy systems, including the removal of barriers to storage
                                                                            • Government unveils £246 million battery investment strategy in July 2017
                                                                              • Electrification of transport creates new opportunities
                                                                              • Retail Electricity Supply Market

                                                                                • Market development
                                                                                    • Figure 17: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2018
                                                                                  • Competition in retail market focused on fixed tariffs
                                                                                    • But more than half of households remain on more expensive variable tariffs
                                                                                      • Figure 18: Number of non-prepayment domestic customer accounts by type of tariff, by supplier, April 2018
                                                                                    • Ofgem introduces measures to help those on poor value tariffs
                                                                                      • Price differential between fixed and variable tariffs shows switching can offer considerable savings
                                                                                          • Figure 19: Average annual bill on SVT versus supplier’s cheapest fixed tariff, by major supplier, March-June 2018
                                                                                        • Some suppliers are scrapping standard variable tariffs
                                                                                          • Energy supplier switching rates at record high
                                                                                              • Figure 20: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2012-Q2 2018
                                                                                              • Figure 21: Number of supplier switches in the domestic gas and electricity markets, Great Britain, 2012-18
                                                                                            • One in four energy customers now use small or medium suppliers
                                                                                                • Figure 22: Domestic electricity supply market shares in Great Britain, by company 2013-17
                                                                                            • Market Drivers in Electricity Supply Market

                                                                                              • Costs making up an average gas and electricity bill
                                                                                                  • Figure 23: Breakdown of average large supplier dual fuel household bill, 2017
                                                                                                  • Figure 24: Breakdown of average domestic electricity bill, 2017
                                                                                                • Customer service is a key driver of loyalty
                                                                                                  • Smart Meter roll-out programme
                                                                                                    • But programme has been plagued by cost increases and repeated delays
                                                                                                      • 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
                                                                                                            • Energy Policy and Legislative Environment

                                                                                                              • 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

                                                                                                                                  • 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
                                                                                                                                        • Companies and Brands – What You Need to Know

                                                                                                                                          • UK Power Networks backs small-scale electricity and fast-tracks battery connections to network
                                                                                                                                            • UK electricity supply market continues to be dominated by ‘big six’
                                                                                                                                              • Proposed merger of Npower and SSE to create second largest energy supplier in UK
                                                                                                                                                • Shell enters energy retail market through acquisition of First Utility
                                                                                                                                                  • Energy suppliers are branching out into multi-utility market
                                                                                                                                                  • Competitive Strategies

                                                                                                                                                    • UK Power Networks is industry leader in electricity storage
                                                                                                                                                      • Consolidation and acquisitions in electricity supply sector
                                                                                                                                                        • Proposed merger of Npower and SSE gets CMA clearance
                                                                                                                                                          • Shell acquires First Utility
                                                                                                                                                            • 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
                                                                                                                                                                      • Smart meters allow suppliers to offer more tailored tariffs
                                                                                                                                                                        • Emergence of electric vehicle tariffs
                                                                                                                                                                          • New online energy supplier Powershop offers different way to buy electricity
                                                                                                                                                                            • 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
                                                                                                                                                                                  • Company Profiles

                                                                                                                                                                                    • Western Power Distribution
                                                                                                                                                                                      • Group long-term strategy
                                                                                                                                                                                        • Western Power Distribution (East Midlands)
                                                                                                                                                                                          • Figure 25: Financial analysis of Western Power Distribution (East Midlands), 2014-18
                                                                                                                                                                                        • Western Power Distribution (West Midlands)
                                                                                                                                                                                          • Figure 26: Financial analysis of Western Power Distribution (West Midlands), 2014-18
                                                                                                                                                                                        • Western Power Distribution (South West)
                                                                                                                                                                                          • Figure 27: Financial analysis of Western Power Distribution (South West), 2014-18
                                                                                                                                                                                        • Western Power Distribution (South Wales)
                                                                                                                                                                                          • Figure 28: Financial analysis of Western Power Distribution (South Wales), 2014-18
                                                                                                                                                                                        • UK Power Networks
                                                                                                                                                                                          • Strategy
                                                                                                                                                                                            • UK Power Networks is industry leader in electricity storage
                                                                                                                                                                                              • UK Power Networks: Eastern Power Networks
                                                                                                                                                                                                • Figure 29: Financial analysis of Eastern Power Networks, 2013-18
                                                                                                                                                                                              • UK Power Networks: London Power Networks
                                                                                                                                                                                                • Figure 30: Financial analysis of London Power Networks, 2013-18
                                                                                                                                                                                              • UK Power Networks: South Eastern Power Networks
                                                                                                                                                                                                • Figure 31: Financial analysis of South Eastern Power Networks, 2013-18
                                                                                                                                                                                              • Northern Powergrid
                                                                                                                                                                                                • Northern Powergrid (Northeast)
                                                                                                                                                                                                  • Figure 32: Financial analysis of Northern Powergrid (Northeast), 2013-17
                                                                                                                                                                                                • Northern Powergrid (Yorkshire)
                                                                                                                                                                                                  • Figure 33: Financial analysis of Northern Powergrid (Yorkshire), 2013-17
                                                                                                                                                                                                • SP Distribution
                                                                                                                                                                                                  • SP Manweb
                                                                                                                                                                                                    • Figure 34: Financial analysis of SP Manweb, 2013-17
                                                                                                                                                                                                  • SP Distribution (South & Central Scotland)
                                                                                                                                                                                                    • Figure 35: Financial analysis of SP Distribution, 2013-17
                                                                                                                                                                                                  • Southern Electric Power Distribution
                                                                                                                                                                                                    • Figure 36: Financial analysis of Southern Electric Power Distribution, 2014-18
                                                                                                                                                                                                  • Scottish Hydro Electric Power Distribution
                                                                                                                                                                                                    • Figure 37: Financial analysis of Scottish Hydro Electric Power Distribution, 2014-18
                                                                                                                                                                                                  • Electricity North West
                                                                                                                                                                                                      • Figure 38: Financial analysis of Electricity North West, 2014-18
                                                                                                                                                                                                    • Northern Ireland Electricity Networks
                                                                                                                                                                                                        • Figure 39: Financial analysis of Northern Ireland Electricity Networks, 2013-17
                                                                                                                                                                                                      • Centrica
                                                                                                                                                                                                        • Recent acquisitions and disposals
                                                                                                                                                                                                          • Centrica adopts new strategy to focus on energy supply and the customer-facing side of business
                                                                                                                                                                                                            • Financial performance
                                                                                                                                                                                                              • Figure 40: Financial analysis of Centrica, 2013-17
                                                                                                                                                                                                              • Figure 41: 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
                                                                                                                                                                                                                      • Figure 42: 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
                                                                                                                                                                                                                                    • Figure 43: Financial analysis of EDF Energy, 2013-17
                                                                                                                                                                                                                                    • Figure 44: 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
                                                                                                                                                                                                                                            • Figure 45: Financial analysis of E.ON Energy Solutions, 2013-17
                                                                                                                                                                                                                                            • Figure 46: 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
                                                                                                                                                                                                                                                      • Figure 47: Financial analysis of Npower, 2013-17
                                                                                                                                                                                                                                                      • Figure 48: RWE – UK revenue segmental analysis, 2017
                                                                                                                                                                                                                                                    • ScottishPower Energy Retail
                                                                                                                                                                                                                                                      • Scottish Power to ditch standard tariffs
                                                                                                                                                                                                                                                        • Customer numbers down in 2017
                                                                                                                                                                                                                                                          • Company performance & strategy
                                                                                                                                                                                                                                                            • Figure 49: Financial analysis of ScottishPower Energy Retail, 2013-17
                                                                                                                                                                                                                                                            • Figure 50: 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
                                                                                                                                                                                                                                                                      • Figure 51: Financial analysis of SSE, 2014-18
                                                                                                                                                                                                                                                                      • Figure 52: SSE revenue segmental analysis, 2018
                                                                                                                                                                                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                                                                                      • Abbreviations
                                                                                                                                                                                                                                                                        • Methodology
                                                                                                                                                                                                                                                                        • Further Sources and Contacts

                                                                                                                                                                                                                                                                          • Trade associations
                                                                                                                                                                                                                                                                            • 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)
                                                                                                                                                                                                                                                                                        • Trade magazines
                                                                                                                                                                                                                                                                                          • Energy Now
                                                                                                                                                                                                                                                                                            • Modern Power Systems
                                                                                                                                                                                                                                                                                              • Utility Week
                                                                                                                                                                                                                                                                                                • Trade events
                                                                                                                                                                                                                                                                                                  • edie live 2019
                                                                                                                                                                                                                                                                                                    • All-Energy Exhibition & Conference Aberdeen

                                                                                                                                                                                                                                                                                                    About the report

                                                                                                                                                                                                                                                                                                    This report will give you a complete 360-degree view of your market. Not only is it rooted in robust proprietary and high-quality third-party data, but our industry experts put that data into context and you’ll quickly understand:

                                                                                                                                                                                                                                                                                                    • The Consumer

                                                                                                                                                                                                                                                                                                      What They Want. Why They Want It.

                                                                                                                                                                                                                                                                                                    • The Competitors

                                                                                                                                                                                                                                                                                                      Who’s Winning. How To Stay Ahead.

                                                                                                                                                                                                                                                                                                    • The Market

                                                                                                                                                                                                                                                                                                      Size, Segments, Shares And Forecasts: How It All Adds Up.

                                                                                                                                                                                                                                                                                                    • The Innovations

                                                                                                                                                                                                                                                                                                      New Ideas. New Products. New Potential.

                                                                                                                                                                                                                                                                                                    • The Opportunities

                                                                                                                                                                                                                                                                                                      Where The White Space Is. How To Make It Yours.

                                                                                                                                                                                                                                                                                                    • The Trends

                                                                                                                                                                                                                                                                                                      What’s Shaping Demand – Today And Tomorrow.

                                                                                                                                                                                                                                                                                                    Please Note: This is a sample report. All of the figures, graphs, and tables have been redacted.

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