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Electricity Industry - UK - November 2017

Published By :

Mintel

Published Date : Nov 2017

Category :

Utilities

No. of Pages : N/A

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.

Table of Contents

EXECUTIVE SUMMARY
Electricity distribution market
Figure 1: UK gross capital expenditure by the electricity distribution network operators, 2012/13-2016/17
Figure 2: Total expenditure allowance for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
Electricity supply market
Figure 3: Breakdown of average domestic electricity household bill, 2016
Market factors
DNOs subject to price controls set by industry regulator Ofgem
Decarbonisation of UK economy increases loads placed on distribution network
CMA energy market investigation
Energy retail market facing further government intervention, including price cap on SVTs
What we think
KEY INSIGHTS
What challenges does the rapid rise in distributed generation pose for distribution network operators?
What is the outlook for the emerging electricity storage market?
Key decisions relating to energy storage contained in the report include:
What opportunities are offered by the widespread adoption of smart meters?
INTRODUCTION
Definitions
Methodology
Abbreviations
MARKET POSITIONING
Great Britain
Northern Ireland
UK ECONOMY
Overview
Figure 4: Forecast GDP development 2017-21
Figure 5: UK GDP quarterly development, 2004-17
Inflation
Interest rates
House prices
Figure 6: UK House price changes, 2006-17
Consumer spending
Manufacturing
Figure 7: UK manufacturing, 2014-17
Business investment
Figure 8: UK GFCF, chained volume measures, seasonally adjusted, 2004-17
Imports
Exports
MARKET FACTORS
Distribution networks price controls
UK Energy Policy
The government remains committed to tackling climate change despite Brexit vote
New government policies urgently needed to achieve long-term emission reduction goals
Government publishes long-awaited Clean Growth Plan in October 2017
Levy Control Framework
Renewable Energy Obligation (RO)
Feed-in-Tariffs (FITs)
Government commits to fresh FIT review before end of 2017
The Renewable Heat Incentive
Contracts for Difference (CfDs)
First CfD auction concludes in February 2015
Second CfD auction winning bids dominated by offshore wind, which has seen a dramatic fall in costs
Next CFD auction scheduled for Spring 2019
Energy Company Obligation (ECO)
Electricity retail market reforms to promote increased competition
CMA energy market investigation
DISTRIBUTION INDUSTRY STRUCTURE
Key points
Industry overview
Figure 9: Ownership of the distribution network operators in the UK, as of October 2017
Regional Electricity Demand
Figure 10: Electricity sales and customers by region, Great Britain, 2015
Figure 11: Regional proportional importance of electricity consumed in Great Britain, 2015
Electricity consumption by end-use sector
Figure 12: Analysis of electricity usage, by type of industry, UK, 2011-16
Figure 13: Analysis of electricity usage, by the commercial sector, 2011-16
Figure 14: Analysis of electricity usage by the commercial sector, 2016
Scotland
Northern Ireland
ELECTRICITY DISTRIBUTION SECTOR OVERVIEW
Key points
Overview
Figure 15: Distribution network operators in Great Britain, by region, 2017
Size of UK distribution networks
Figure 16: UK distribution networks, 2016/17
ELECTRICITY DISTRIBUTION MARKET TRENDS
Key points
Introduction of competition in network connections
Trends in UK electricity supply
Figure 17: Analysis of electricity supply in the UK, 2012-16
Figure 18: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2011-16
Figure 19: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2016
Annual Capacity Market auctions are held to help secure the UK’s energy supply
Renewables account for a quarter of UK electricity generation in 2016, following rapid expansion in generation capacity
Figure 20: Renewable electricity generation in the UK, 2011-16
Figure 21: UK renewable electricity generation, 2011-16
Figure 22: UK renewable energy market shares, by installed capacity, 2012 and 2017
Renewables capacity development pipeline
Figure 23: Renewables capacity development pipeline, as of September 2017
Distribution price control review
Smart grid development to support low carbon economy
UK energy storage market set to take-off
BEIS and Ofgem set out 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
The Low Carbon Network Fund (LCN) and Electricity Network Innovation Competition (NIC)
ELECTRICITY SUPPLY SECTOR OVERVIEW
Key points
Market background
Figure 24: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2017
Supplier switching trends
Figure 25: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2011-Q2 2017
Figure 26: Number of supplier switches in the domestic gas and electricity markets, Great Britain, January 2012-July 2017
ELECTRICITY SUPPLY MARKET ISSUES & TRENDS
Key points
Ofgem implemented market reforms in 2014 to promote increased competition and supplier switching
Further market reforms on the way following CMA Energy Market Investigation
Energy retail market facing further government intervention, including price cap on SVTs
Breakdown of average gas and electricity bill
Figure 27: Breakdown of average large supplier dual fuel household bill, 2016
Figure 28: Breakdown of average domestic electricity bill, 2016
Figure 29: Breakdown of average domestic gas bill, 2016
...but many suppliers hike prices in early 2017, citing rising wholesale costs and the cost of delivering government policies
Competition largely focused on cheap fixed tariffs...
...but majority of households remain on more expensive standard variable tariff - reflecting a two-tier energy market
Figure 30: Average annual bill on SVT versus supplier’s cheapest fixed tariff, by major supplier, July-September 2017
Independent suppliers are rapidly gaining market share
Figure 31: Domestic gas supply market shares in Great Britain, by company 2013-17
Figure 32: Domestic electricity supply market shares in Great Britain, by company 2013-17
Innovation in tariffs offerings
Suppliers focus on differentiating their offerings to stay ahead
Energy suppliers are branching out into multi-utility and home services markets
Customer service is a key driver of customer loyalty
Smart Meter Roll-out programme
First-generation (SMETS1) smart meters will 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 will attract new market entrants, including tech firms
Smart meters and rise in small scale renewables and storage to open up opportunities for peer-to-peer trading, which would see consumers bypassing suppliers
Non-domestic retail market trends
DISTRIBUTION NETWORK CAPITAL EXPENDITURE
Key points
Capital expenditure
Figure 33: Breakdown of total expenditure by DNOs during DPCR5, by area 2011-15
Gross capital expenditure
Figure 34: UK gross capital expenditure by electricity distribution network operators, 2011/12-2016/17
Figure 35: UK gross capital expenditure by the electricity distribution network operators, 2012/13-2016/17
Figure 36: UK gross capital expenditure by the electricity distribution network operators, by company, 2012/13-2016/17
Figure 37: Total expenditure by electricity distribution network operators in Great Britain, by type, 2015/16
DPCR5 witnesses launch of Low Carbon Networks Fund
Recent years have seen rapid increase in distributed generation connected to DNOs’ networks
Figure 38: Distributed Generation connected to the distribution network during DPCR5, 2011-15
Figure 39: Distributed Generation connected to the distribution network, 2015/16
Forecast expenditure
New price control framework based on Revenue = Incentives + Innovation + Outputs effective from April 2015
Forecast total expenditure
Figure 40: Actual total expenditure in 2015/16, totex allowance and forecasts for RIIO-ED1, by company
Ofgem slashes £200 million from RIIO-ED1 DNO spending allowances in September 2017
Figure 41: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
Figure 42: Forecast network investment of the electricity distribution network operators in Great Britain, by company, 2015/16-2022/23
COMPANY PROFILES INTRODUCTION
Key points
WESTERN POWER DISTRIBUTION
Western Power Distribution (East Midlands)
Figure 43: Financial analysis of Western Power Distribution (East Midlands), 2013-17
Western Power Distribution (West Midlands)
Figure 44: Financial analysis of Western Power Distribution (West Midlands), 2013-17
Western Power Distribution (South West)
Figure 45: Financial analysis of Western Power Distribution (South West) 2013-17
Western Power Distribution (South Wales)
Figure 46: Financial analysis of Western Power Distribution (South Wales) 2013-17
UK POWER NETWORKS
UK Power Networks: Eastern Power Networks
Figure 47: Financial analysis of Eastern Power Networks, 2012-17
UK Power Networks: London Power Networks
Figure 48: Financial analysis of London Power Networks, 2012-17
UK Power Networks: South Eastern Power Networks
Figure 49: Financial Analysis of South Eastern Power Networks, 2012-17
NORTHERN POWERGRID
Northern Powergrid (Northeast)
Figure 50: Financial analysis of Northern Powergrid (Northeast), 2012-16
Northern Powergrid (Yorkshire)
Figure 51: Financial analysis of Northern Powergrid (Yorkshire), 2012-16
SP DISTRIBUTION
SP Manweb
Figure 52: Financial analysis of SP Manweb, 2012-16
SP Distribution (South & Central Scotland)
Figure 53: Financial analysis of SP Distribution, 2012-16
SSE
Recent reductions in gas prices for SSE customers
But SSE hikes electricity prices from April 2017
Company Strategy and Outlook
Figure 54: Financial analysis of SSE, 2012-16
Figure 55: SSE revenue segmental analysis, 2017
Southern Electric Power Distribution
Figure 56: Financial analysis of Southern Electric Power Distribution, 2013-17
Scottish Hydro Electric Power Distribution
Figure 57: Financial analysis of Scottish Hydro Electric Power Distribution, 2013-17
ELECTRICITY NORTH WEST
Figure 58: Financial analysis of Electricity North West, 2013-17
NORTHERN IRELAND ELECTRICITY NETWORKS
Figure 59: Financial analysis of Northern Ireland Electricity Networks, 2012-16
CENTRICA/BRITISH GAS TRADING
Recent acquisitions and disposals
Company strategy
Figure 60: Financial analysis of Centrica, 2012-16
Figure 61: Centrica revenue segmental analysis, 2016
Following a price freeze in the first half of 2017, British Gas hikes electricity prices by 12.5% from September 2017
Focus on innovative Connected Homes Products
Company review and outlook
Figure 62: Financial analysis of British Gas Trading, 2012-16
EDF ENERGY
Planned new UK power stations
Smart metering programme
Recent price cuts and hikes
Intense competition sees EDF Energy lose more customers in 2016
Figure 63: Financial analysis of EDF Energy, 2012-16
Figure 64: EDF Energy revenue segmental analysis, 2016
NPOWER
Price cuts announced in early 2016...
...followed by price hike in March 2017
Meridian Energy and Npower launch online energy supplier
Company strategy and outlook
Figure 65: Financial analysis of Npower, 2012-16
Figure 66: RWE - UK Generation & Supply revenue segmental analysis, 2016
E.ON ENERGY
E.ON cuts gas price in early 2016...
...but announces a price hike in March 2017, the first in more than three years
Company strategy
Figure 67: Financial analysis of E.ON Energy Solutions, 2012-16
Figure 68: E.ON revenue segmental analysis, 2016
SCOTTISHPOWER ENERGY RETAIL
Gas prices cut in early 2016, but dual tariff raised in early 2017
Company performance & strategy
Figure 69: Financial analysis of ScottishPower Energy Retail, 2012-16
Figure 70: ScottishPower revenue segmental analysis, 2016
ECOTRICITY GROUP
Ecotricity raises energy prices towards the end of 2016
Company strategy
Figure 71: Financial analysis of Ecotricity Group, 2012-16
FIRST UTILITY
First Utility diversifies to become multi-utility brand
Company strategy
Figure 72: Financial analysis of First Utility, 2011-15
GOOD ENERGY GROUP
Company strategy
Figure 73: Financial analysis of Good Energy Group, 2012-16
Figure 74: Turnover analysis of Good Energy Group, by segment, 2012-16
FURTHER SOURCES & CONTACTS
Trade associations & regulatory bodies
Energy UK
Energy Networks Association
Energy Industries Council
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 exhibitions
Energy4PowerLive
All-Energy Exhibition & Conference 2018
edie live 2018

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