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UK Electricity Industry market report

Everything you need to make the right decisions

Providing the most comprehensive and up-to-date information and analysis of the Electricity Industry market, and the behaviours, preferences and habits of the consumer.

Mintel has the answers you’re looking for

What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?

Key areas covered

  • What are the key drivers for network investment in the electricity distribution sector?
  • How do legislative changes affect the industry?
  • What challenges does the transition to a low-carbon economy present to DNOs?
  • What are the expenditure plans of individual DNOs for the current price control period RIIO-ED1?
  • What are the current market trends and issues in the electricity supply sector?

Sectors covered

  • Distribution Industry
  • Electricity Distribution Sector
  • Electricity Supply Sector

Company profiles

  • Western Power Distribution
  • UK Power Networks
  • Northern Powergrid
  • SP Distribution
  • SSE
  • Electricity North West
  • Northern Ireland Electricity Networks
  • Centrica/British Gas Trading
  • EDF Energy
  • Npower
  • E.ON Energy
  • ScottishPower Energy Retail
  • Ecotricity Group
  • First Utility
  • Good Energy Group

Expert analysis from a specialist in the field

Written by Claudia Preedy, a leading analyst in the B2B sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

Suppliers have sought to differentiate tariffs in a number of ways, including by offering discounts for online account management and rewards such as gift cards. Recently, there has been an increase in tariffs that track wholesale price changes, and tariffs that allow energy to be purchased in bundles. Suppliers are also increasingly offering tariffs that include non-energy services, such as boiler maintenance and technology that helps people control their energy usage remotely via the internet. This trend is set to rise with more energy suppliers moving into the emerging ‘home services’ and ‘connected homes’ markets, as profit margins in the retail energy market become increasingly squeezed and with suppliers scrambling to differentiate their offerings to stay ahead." Claudia Preedy
B2B Analyst

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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