Utility Week

UTILITY Week 16th October 2015

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

Issue link: https://fhpublishing.uberflip.com/i/585882

Contents of this Issue


Page 23 of 31

24 | 16TH - 22ND OCTOBER 2015 | UTILITY WEEK Customers Country profile A s the UK energy retail market under- goes radical change, what can the UK learn about its future from a country already experiencing many of the scenarios likely to emerge here? If UK energy suppliers want a glimpse into what the future of the UK energy market could look like, the German energy market might be a good place to start. Three of the major themes in the UK are already in play in a big way in Germany; the connected homes market that will follow on from smart meter- ing; the rise of independents; and the move to a decentralised energy supply market. Independents The UK energy supply market has reached 31 suppliers aer a big push from government to encourage new entrants into the market to break up the oligopoly of the big six. This has improved competition and helped lower prices as independents fight to build market share. But prices can only be so low before they become unsustainable, and independ- ents must find other ways to stand out and be the supplier of choice. This could be through great customer ser- vice, offering green energy, or an innovative product like Flow Energy's CHP boiler. The more independents enter the market, the tougher this will become. New suppliers hoping to enter the Ger- man electricity market already have over- come this problem. Germany has a "big four" – RWE, Eon, ENBW and Vattenfall – with a combined market share of 42 per cent. The other 58 per cent is shared by more than 1,500 suppliers, 80 per cent of which supply fewer than 30,000 metering points. Getting a foothold in this market is a chal- lenge, but UK independent supplier First Utility plans to do just that. It has teamed up with energy giant Shell to supply in Germany under the Shell brand, in the hope of distin- guishing itself from the competition, chief executive Ian McCaig tells Utility Week (see Q&A, right). He hopes that First Utility's busi- ness model of fair, transparent pricing will be attractive despite the wealth of choice. The connected homes market The connected homes market has yet to take off in the UK, but is set to explode aer the mass rollout of smart meters by 2020. With such an ambitious programme, the UK is one of the most attractive markets for connected homes businesses. Research firm Strategy Analysts has forecasted the UK market will stand at 7.7 million households, second only to Germany at 11.6 million. However, European telecoms giant Deutsche Telecoms has warned UK suppli- ers to start acting now because the smart meter rollout not only unlocks this market for utilities, but for everyone else too. When the Data and Communications Company net- work goes live in 2016, third parties such as Google will get their hands on energy con- sumption data and could enter the market, leaving traditional energy suppliers as mere energy providers while major retailers clean up on the lucrative connected homes market and all the added services that go with it. (See analysis on connected homes, p16). Community energy Last week at its party conference, Labour's shadow energy secretary Lisa Nandy rowed back on leader Jeremy Corbyn's well-publi- cised desire to renationalise energy in favour of what she called a "more radical option" – democratising it. "With the right support, community-based energy companies and co-operatives could be the new powerhouse, and a path to a more secure future. There should be nothing to stop every community in this country owning its own clean power station," she told the conference. Labour's vision of the UK's future energy market can again be glimpsed in Germany where more than 1,000 co-operatives are in operation. Part of the reason for the high number is that community energy projects can sell their energy directly to a third party, bypassing the national grid. In the UK this is not currently the case, but again last week Open Utility and Good Energy launched a trial of a trading service, Piclo, allowing renewable generators to do just that. A German lesson Lucinda Dann looks at the German energy market and asks whether it foretells the shape of things to come in the UK. NUMBER OF UK SUPPLIERS Gas and electricity: 2 6 Electricity only: 2 Gas only: 3 UK INDEPENDENTS' MARKET SHARE, DOMESTIC DUAL FUEL Big six: 86.6% Independents: 13.4% Domestic electricity market Big six: 89.6% Independents: 10.4% Domestic gas market UK INDEPENDENTS' MARKET SHARE, DOMESTIC GAS AND ELECTRICITY Source: Ofgem Source: Ofgem Source: Cornwall Energy Independents: 10.9% Big six: 89.1%

Articles in this issue

Archives of this issue

view archives of Utility Week - UTILITY Week 16th October 2015