Energy Industry - UK - August 2017


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Mintel

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The recent rise in switches reflects the growing number of new suppliers entering the market, increased price competition, a quicker and simpler switching process, as well as increased public awareness about the potential savings offered by switching suppliers. However, despite the uptick in switching rates, around two-thirds of consumers are still stuck on more expensive standard variable tariffs, suggesting that competition is not yet working to the benefit of all consumers. The market is likely to face further interventions from the government, which is looking to bring forward measures to help tackle unfair practices in the energy market to help reduce energy bills.
Table of contents

EXECUTIVE SUMMARY
The market
Coal-fired power plants to be phased out by 2025
Share of gas-fired power generation increases from 29% in 2015 to 41% in 2016
Life of a number of existing nuclear power stations extended
New Hinkley Point C nuclear power plant beset by delays
Nearly a quarter of UK electricity generated from renewable sources in 2016
Figure 1: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2016
Government push for shale gas exploration to reduce reliance on imports
Figure 2: UK Gas Supply, 2012-16
Energy supplier switching up by nearly 30% in 2016
Cheap fixed tariffs have become focal point of competition...
Suppliers looking to differentiate themselves in an ever more competitive market
Figure 3: Breakdown of average domestic dual fuel bill, 2016
Market factors
Significant investment in UK energy infrastructure required to ensure security of supply and meet renewables targets
Electricity Market Reform (EMR) to ensure investment in UKs low-carbon electricity infrastructure
Large Combustion Plant Directive drives increased closure rate of coal-fired power stations
Further reforms on the way for retail energy market following CMA market investigation
The industry
What we think
KEY INSIGHTS
What is the potential impact of Brexit on the UKs renewable energy policy?
Are energy suppliers branching out into other services or utilities?
First Utility plans to add more diversified services to its portfolio.
What opportunities do smart meters offer for energy suppliers?
INTRODUCTION
Definitions
Methodology
Abbreviations
Market positioning
UK ECONOMY
Overview
Figure 4: Forecast GDP development 2017-21
Figure 5: UK GDP quarterly development, 2004-17
Figure 6: UK GDP in economic downturns and recoveries since 1979
Inflation
Interest rates
House prices
Figure 7: UK house price changes, 2006-2017
Consumer spending
Manufacturing
Figure 8: UK manufacturing, 2014-17
Business investment
Figure 9: UK GFCF 2003-17
Imports
Exports
MARKET FACTORS
Key points
Industry regulation
CMA energy market investigation
Legislative environment
Large Combustion Plant Directive (LCPD)
EU Renewables Directives
UK renewables policy
Renewables Obligation (RO)
Feed-In Tariffs (FITs)
The Renewable Heat Incentive
Electricity Market Reform
Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP)
Energy Company Obligation (ECO)
ELECTRICITY DEMAND & GENERATION
Key points
Overview
Despite Brexit uncertainty, interconnector capacity between Britain and Europe is set to increase
Figure 10: Existing and planned interconnectors, as of June 2017
Electricity supply
Figure 11: Analysis of electricity supply in the UK, 2012-16
Figure 12: Analysis of electricity supply in the UK, 2012-16
Figure 13: Analysis of electricity supplied in the UK, by type of fuel used in generation, 2011-16
Electricity consumption by end-use sector
Figure 14: Analysis of electricity usage, by type of industry, UK, 2010-15
Figure 15: Analysis of electricity usage, by the commercial sector, 2010-15
Figure 16: Analysis of electricity usage by the commercial sector, 2015
Coal generation
Remaining coal fired power stations likely to close by 2025
Conversion of coal-fired stations to biomass plants
Figure 17: Analysis of electricity supplied from coal-fired power stations in the UK, 2009-16
Gas/CCGT generation
Government to prioritise new gas-fired power stations
Figure 18: Analysis of electricity supplied from gas-fired power stations in the UK, 2009-16
Figure 19: Analysis of electricity supplied from gas-fired power stations in the UK, 2009-16
Nuclear power generation
Figure 20: UK nuclear sites planned closure dates, as of June 2017
Planned new nuclear power development marred by major delays
Figure 21: Analysis of electricity supplied from nuclear power stations in the UK, 2009-16
Renewables generation
Potential impact of Brexit on UKs renewable energy policy
Offshore wind
Offshore wind costs falling fast
Green Investment Bank drive to boost investment in offshore wind
Solar power
Large-scale and small-scale solar PV installations see subsidies slashed
Hydro electricity
Bioenergy
Figure 22: Bioenergy electricity generation capacity, by type of plant, 2012-16
Figure 23: Renewable electricity generation in the UK, 2011-16
Figure 24: Electricity generation from on- and offshore wind, 2012-16
Figure 25: Renewable energy projects in pipeline, by technology, as of October 2016
GAS DEMAND & SUPPLY
Key points
Overview
Figure 26: Total gas supply, UK, 2012-16
Risks to UK gas supply
Potential for shale gas extraction
Wholesale gas prices
Figure 27: Average wholesale gas prices, 2002-16
Figure 28: Average wholesale gas prices, 2002-16
Gas demand by end user
Figure 29: Segmentation of industrial gas consumption, by end use industries, UK, 2011-15
Figure 30: Segmentation of gas consumption, by non-industrial sectors, UK, 2011-15
Figure 31: Segmentation of gas consumption, by non-industrial sectors, 2015
Power Generation
Figure 32: Gas supplied for electricity generation, UK, 2012-16
Figure 33: Gas supplied for electricity generation, UK, 2012-16
Interruptible
Industrial
Figure 34: Gas supplied to the industrial sector, UK, 2012-16
Figure 35: Gas supplied to the industrial sector, UK, 2012-16
Commercial
Figure 36: Gas supplied to the UK commercial sector, 2011-15
Figure 37: Gas supplied to the commercial sector, UK, 2011-15
Domestic
Figure 38: Analysis of the development of gas supplied to the UK domestic sector, 2012-16
Figure 39: Gas supplied to the UK domestic sector, 2012-16
RETAIL ENERGY MARKET
Key points
Market background
Figure 40: Proportion of domestic electricity customers by supplier type, by region, 2000 and 2017
Figure 41: Proportion of domestic gas customers of British Gas Trading and other suppliers, by region, 2017
Regional demand
Figure 42: Gas sales and customers by region, Great Britain, 2015
Figure 43: Electricity sales and customers by region, Great Britain, 2015
Market issues and recent developments
Further market reforms on the way following CMA Energy Market Investigation
Energy market likely to face further government intervention
Breakdown of average gas and electricity bill
Figure 44: Breakdown of average large supplier dual fuel household bill, 2016
Figure 45: Breakdown of average domestic electricity bill, 2016
Figure 46: Breakdown of average domestic gas bill, 2016
Price competition intensified between 2014 and 2016, reflecting falling wholesale costs and more industry players
...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 most households remain on more expensive standard variable tariff
Switching trends
Figure 47: Number of supplier switches in the domestic gas and electricity markets and share of small suppliers, Great Britain, Q1 2011 - Q1 2017
Figure 48: Number of supplier switches in the domestic gas and electricity markets, Great Britain, Q1 2011 - Q1 2017
Independent suppliers are rapidly gaining market share
Figure 49: Domestic gas supply market shares in Great Britain, by company 2012-16
Figure 50: Domestic electricity supply market shares in Great Britain, by company 2012-16
Lower prices and differentiation strategies drive growth of independent suppliers
Energy suppliers are branching out into multi-utility market
Customer service is 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
Switching rates in the SME sector also set to increase
THE CONSUMER - CURRENT SUPPLIER AND RECENT SWITCHES
Key points
British Gas remains top supplier of gas and electricity
Figure 51: Current gas and electricity supplier(s), May 2017
Over a quarter of people have changed energy supplier in past 12 months
Figure 52: Change of gas/electricity supplier in the last 12 months, May 2017
THE CONSUMER - REASONS FOR SWITCHING
Key points
22% switched supplier in the past 12 months because their tariff expired
Figure 53: Reasons for changing gas/electricity supplier in the last 12 months, May 2017
THE CONSUMER ATTITUDES TOWARDS GAS AND ELECTRICITY SUPPLIERS
Key points
Most people (84%) satisfied with the customer service received from their current supplier
Figure 54: Attitudes towards gas and electricity suppliers, May 2017
Figure 55: Agreement with statements relating to electricity and gas suppliers, May 2017
First Utility receives highest customer satisfaction rating of top seven suppliers
Figure 56: I am satisfied with the customer service I receive from my current supplier, by current gas and/or electricity supplier, May 2017
COMPANY PROFILES
Key points
Company profiles
CENTRICA/BRITISH GAS TRADING
Recent acquisitions and disposals
Company strategy
Figure 57: Financial analysis of Centrica, 2012-16
Figure 58: 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 59: Financial analysis of British Gas Trading, 2012-16
EDF ENERGY
Planed new UK power stations
Smart metering programme
Recent price cuts and hikes
Intense competition sees EDF Energy lose more customers in 2016
Figure 60: Financial analysis of EDF Energy, 2012-16
Figure 61: EDF Energy revenue segmental analysis, 2016
RWE NPOWER
Price cuts announced in early 2016...
... followed by price hike in March 2017
Company strategy and outlook
Figure 62: Financial analysis of Npower, 2011-15
Figure 63: RWE - UK 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 64: Financial analysis of E.ON Energy Solutions, 2012-16
Figure 65: 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 66: Financial analysis of ScottishPower Energy Retail, 2012-16
Figure 67: ScottishPower revenue segmental analysis, 2016
SSE
Recent reductions in gas prices for SSE customers
But SSE hikes electricity prices from April 2017
Company strategy and outlook
Figure 68: Financial analysis of SSE, 2012-16
Figure 69: SSE revenue segmental analysis, 2016
ECOTRICITY GROUP
Ecotricity raises energy prices towards the end of 2016
Company strategy
Figure 70: Financial analysis of Ecotricity Group, 2012-16
FIRST UTILITY
First Utility diversifies in a bid to become multi-utility brand
Figure 71: Financial analysis of First Utility, 2011-15
GOOD ENERGY GROUP
Company strategy
Figure 72: Financial analysis of Good Energy Group, 2012-16
Figure 73: Turnover analysis of Good Energy Group, by segment, 2012-16
FUTURE ENERGY DEMAND
Key points
Electricity generation forecast
National Grids Future Energy Scenarios
Figure 74: Annual power demand in Great Britain, 2017-42
Figure 75: Annual power demand in Great Britain, 2017-42
Electric cars could fuel huge demand for power over the next 30 years
Electricity storage to increase, but at a more moderate levels than National Grid previously predicted
Government unveils 246 million battery investment strategy in July 2017
Future potential energy mix
Renewables
Nuclear
Thermal plants
Interconnectors
Figure 76: Forecast power generation installed capacity under slow progression scenario, by source, 2017-42
Figure 77: Forecast power generation installed capacity under two degrees scenario, by source, 2017-42
Figure 78: Forecast power generation installed capacity under steady state scenario, by source, 2017-42
Figure 79: Forecast power generation installed capacity under consumer power scenario, by source, 2017-42
Figure 80: Future potential energy mix in 2037, by scenario
Gas demand forecast
Figure 81: Forecast UK gas demand, 2017-42
FURTHER SOURCES & CONTACTS
Trade associations & regulatory bodies
Association of Electricity Producers
Energy Networks Association
Energy Industries Council
Energy Retail Association
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)
Renewable Energy Association
Solar Trade Association
Trade magazines
Modern Power Systems
Modern Utility Management
Utility Week
Energy Now
Real Power
Renewable Energy Focus
Renewable Energy Installer
Resource
Solar Business Focus
Solar UK
Solar International
Wind Energy Network
Wind Power Monthly
Trade Exhibitions
Energy4PowerLive 2017
Offshore Europe 2017
RWM 2017
edie live 2017