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Gas Supply and Distribution - UK - March 2016

Published By :

Mintel

Published Date : Mar 2016

Category :

Natural Gas

No. of Pages : N/A

During the current control period RIIO-GD1 from 2013 to 2021, asset management and demand-side responses (working with consumers to reduce demand rather than increase generation) are likely to be the most significant areas of innovation, with smart technology expected to play a key role. Increased collaboration between network operators is also anticipated to be key to innovation across the sector. The industry is also increasingly adopting a

Table of Content

Executive Summary

The market
UK gas demand in long-term decline
Demand for gas from the domestic sector strongly influenced by changing weather patterns
Figure 1: Gas consumption by key end use sectors, 2010-14
Total capital expenditure across the gas transmission and distribution network picks up in 2014/15
Figure 2: Total gas transmission and distribution capital expenditure, 2010/11-2014/15
Gas network operators report lower capital spending than the allowances set by Ofgem in the first two years of RIIO-GD1
Market factors
UK increasingly dependent on natural gas imports
Figure 3: UK Gas Supply, 2011-15
Iron Mains Replacement Programme (IMRP) drives replacement expenditure by gas distribution network operators
Plummeting wholesale gas prices prompt major energy suppliers to cut prices
New regulatory framework introduced for current control period
Companies
Transmission and distribution industry structure
Gas supply industry continues to be dominated by ‘big six’ energy firms...
But independent energy suppliers are rapidly gaining market share
What we think

Key Insights

How does Ofgem’s new regulatory framework, the RIIO model, impact distribution network operators’ approach to infrastructure management and investment?
What are the key challenges faced by the UK’s gas network operators? How are companies innovating to address these challenges?
What are the key drivers for replacement expenditure by gas distribution network operators?
What are the key findings to date by the ongoing CMA inquiry into the energy market?

Introduction

Definitions
Methodology
Abbreviations

Market Positioning

Key points
Overview
Ofgem regulates gas network operators via price controls
Customers
Suppliers

UK Economy

Overview
Figure 4: UK GDP quarterly development, 2003-15
Figure 5: UK GDP in economic downturns and recoveries since 1979
Inflation
Interest rates
Consumer spending
Business investment
Figure 6: UK GFCF 2003-15

Market Factors

Key points
Social factors
Economic factors
The UK’s increased reliance on gas imports
Potential for shale gas extraction
Wholesale gas prices
Figure 7: Average wholesale gas prices, 2002-15
Figure 8: Average wholesale gas prices, 2002-15
Environmental and Legislative Factors

UK Gas Demand and Supply

Key points
Overview
UK gas demand in decline
Figure 9: Segmentation of industrial gas consumption, by end use industries, UK, 2010-14
Figure 10: Segmentation of gas consumption, by non-industrial sectors, UK, 201014
Figure 11: Segmentation of gas consumption, by non-industrial sectors, 2014
Power generation
Figure 12: Gas supplied for electricity generation, UK, 2011-15
Figure 13: Gas supplied for electricity generation, UK, 2011-15
Interruptible
Industrial
Figure 14: Gas supplied to the industrial sector, UK, 2011-15
Figure 15: Gas supplied to the industrial sector, UK, 2011-15
Commercial
Figure 16: Gas supplied to the UK commercial sector, 2010-14
Figure 17: Gas supplied to the commercial sector, UK, 2010-14
Domestic
Figure 18: Analysis of the development of gas supplied to the UK domestic sector, 2011-15
Figure 19: Gas supplied to the UK domestic sector, 2011-15
Figure 20: UK installed base of central heating systems, by type of fuel, 1970-2012
Regional demand
Figure 21: Gas sales and customers by region, Great Britain, 2014
Northern Ireland gas market
Gas supply
Figure 22: Total gas supply, UK, 2011-15
Figure 23: Development of the UK gas supply, 2011-15

Gas Transmission & Distribution Capital Expenditure

Key points
Capital expenditure
The Market 2011-15
Figure 24: Total gas transmission and distribution capital expenditure, 2010/11-2014/15
Figure 25: Total gas transmission capital expenditure, 2010/11-14/15
Figure 26: Total gas distribution capital expenditure, 2010/11-2014/15
Figure 27: Total gas transmission and distribution capital expenditure, 2010/112014/15
Replacement expenditure (Repex)
Figure 28: Length of gas mains replaced, by distribution network operator, 2009-13
Figure 29: Cumulative replacement expenditure during GDPRC1 2008-13, by GDN and type
Individual companies
Figure 30: Gas transmission and distribution capital expenditure by National Grid Gas, 20010/11-2014/15
Figure 31: Gas Distribution Capital Expenditure by Northern Gas Networks, 2010/11-2014/15
Figure 32: Gas Distribution Capital Expenditure by Scottish Gas Networks, 2010/11-2014/15
Figure 33: Gas distribution capital expenditure by Southern Gas Networks, 2010/11-2014/15
Figure 34: Gas Distribution Capital Expenditure by Wales and West Utilities, 2010/11-2014/15

Forecast Capital Expenditure

Key points
Overview
Figure 35: Ofgem’s required expansion of the number of properties to alleviate fuel poverty, 2013-21
Innovation at centre of new price control model for gas distribution and transmission network
Transmission network
Figure 36: Capital Expenditure Plans by National Grid Gas Under RIIO-T1, by Category, 2014-2021
Figure 37: Annual capital expenditure plans by National Grid Gas Under RIIO-T1, by Category, 2014-2021
Distribution network
Figure 38: Controllable Cost Allowances for Gas Distribution Companies Under (RIIOGD1), 2014-2021
Figure 39: Annual capex plans under RIIO-GD1, by GDN, 2014-2021
Figure 40: Annual repex plans under RIIO-GD1, by GDN, 2014-2021
Figure 41: Forecast total capex and repex during RIIOGD1, 2013/142020/21
Individual companies
Figure 42: Northern Gas Networks Capex & Repex, 2014- 15 (Actual) and 2016-21 (Planned)
Figure 43: Northern Gas Networks Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 44: Scotland Gas Networks Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 45: Scotland Gas Networks Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 46: Southern Gas Networks Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 47: Southern Gas Networks Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 48: WWU Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 49: WWU Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 50: NGG East of England Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 51: NGG East of England Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 52: NGG London Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 53: NGG London Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 54: NGG North West Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 55: NGG North West Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)
Figure 56: NGG West Midlands Capex & Repex, 2014-15 (Actual) and 2016-21 (Planned)
Figure 57: NGG West Midlands Capex & Repex Workload, 2014-15 (Actual) and 2016-21 (Planned)

Structure of the Gas Distribution Industry

Key points
Industry structure
Industry development
Figure 58: Structure of the Distribution Network Operators, as of February 2016
Competition in Network Connections

National Grid Gas

National Grid looking to sell its UK gas distribution businesses
National Grid gas’ innovation strategy
Figure 59: Financial analysis of National Grid Gas, 2011-15

Northern Gas Networks

NGN’ spending plans
Innovation
Figure 60: Financial analysis of Northern Gas Networks, 2010-15

Scotland Gas Networks

Innovation
Figure 61: Financial analysis of Scotland Gas Networks, 2011-15

Southern Gas Networks

Figure 62: Financial analysis of Southern Gas Networks, 2011-15

Wales and West Utilities

Figure 63: Financial analysis of Wales & West Utilities, 2011-14

Gas Supply Industry

Key points
Recent retail market and industry developments
Reforms promoting increased competition and supplier switching in retail energy market
‘Big six’ suppliers come under fire for charging high prices in 2013
Suppliers have announced numerous gas price cuts since 2014 , reflecting falling wholesale costs, cuts to green levies, and increased competition
Breakdown of average gas and electricity bill
Figure 64: Breakdown of average domestic electricity& gas household bill, 2014
Figure 65: Breakdown of average domestic gas bill, 2014
Smaller suppliers gaining market share
Figure 66: Domestic gas supply market shares in Great Britain, by company 20102015
Lower prices, customer dissatisfaction with the ‘big six’, and differentiation strategies are driving the growth of small suppliers
Poor customer service and complaints handling remains an industry-wide issue
CMA Energy Market Investigation
Smart Meter Roll-out programme
Switching rates in the SME sector also set to increase

Centrica/British Gas Trading

Company strategy and outlook
Figure 67: Financial analysis of Centrica, 2010-14
Figure 68: Centrica revenue segmental analysis, 2014
Focus on innovative Connected Homes Products
Figure 69: Financial analysis of British Gas Trading, 2010-14

EDF Energy

Figure 70: Financial analysis of EDF Energy, 2010-14
Figure 71: EDF Energy revenue segmental analysis, 2014

NPower

Company strategy and outlook
Figure 72: Financial analysis of Npower, 2010-14
Figure 73: RWE - UK revenue segmental analysis, 2014

E.ON Energy

Ecotricity Group

Company strategy
Figure 74: Financial analysis of Ecotricity Group, 2011-15
Company strategy
Figure 75: Financial analysis of E.ON Energy Solutions, 2010-14
Figure 76: E.ON revenue segmental analysis, 2014

First Utility

Company strategy and outlook
Figure 77: Financial analysis of First Utility, 2010-14

Future Gas Demand

Key points
The market
Figure 78: Forecast UK gas demand, 2016-35
Figure 79: Forecast UK gas demand, 2016-35
Figure 80: Forecast gas demand, by sector, 2016-35
Figure 81: Forecast UK gas demand by sector under “slow progression” scenario, 2016-35
Figure 82: Forecast UK gas demand by sector under “gone green” scenario, 2016-35
Figure 83: Forecast UK gas demand by sector under “no progression” scenario, 2016-35
Figure 84: Forecast UK gas demand by sector under “consumer power” scenario, 2016-35
Domestic demand
Industrial/commercial demand
Power generation demand
Figure 85: Forecast power generation installed capacity under “slow progression” scenario, by source, 2015-36
Figure 86: Forecast power generation installed capacity under “gone green” scenario, by source, 2015-36
Figure 87: Forecast power generation installed capacity under “no progression” scenario, by source, 2015-36
Figure 88: Forecast power generation installed capacity under “consumer power” scenario, by source, 2015-36
Imports
Figure 89: Existing UK gas import infrastructure, as of November 2015
Figure 90: Proposed UK import projects, as of November 2015
Exports

Good Energy Group

Company strategy
Figure 91: Financial analysis of Good Energy Group, 2010-14
Figure 92: Turnover analysis of Good Energy Group, by segment, 2012-14

ScottishPower Energy Retail

Company strategy & outlook
Figure 93: Financial analysis of ScottishPower Energy Retail, 2010-14
Figure 94: ScottishPower revenue segmental analysis, 2014

SSE

Company strategy and outlook
Figure 95: Financial analysis of SSE, 2011-15
Figure 96: SSE revenue segmental analysis, 2015

Further Sources & Contacts

Trade associations & regulatory bodies
Trade exhibitions
Trade magazines

List of Table

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