Current scenario of Energy Retail utilities market in UK
1. Current scenario of Energy Retail
utilities market in UK
OVERVIEW, KEY TRENDS, CHALLENGES, AND FUTURE OUTLOOK SHAPING THE
INDUSTRY LANDSCAPE
Presented by:
Paras Gupta
2. Overview
The UK energy retail market is characterized by a diverse mix of players, including major incumbents like
British Gas and EON, as well as newer entrants such as Octopus Energy and Bulb.
• According to Ofgem, the UK's Office
of Gas and Electricity Markets, there
were 20 active suppliers in the
domestic gas and electricity retail
markets as of December 2023.
• This consisted of 18 suppliers active
in both gas and electricity, 1 in gas
and 1 in electricity only.
• A continuous decline in number of
players from the peak Jul’2018 (70)
• In December 2023, Shell was
acquired by Octopus
Source:
https://www.ofgem.gov.uk/retail-market-indicators
Category Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23
Gas 5 5 5 2 2 2 2 1 1 1 1 1
Electricity 3 4 3 1 1 1 1 1 1 1 1 1
Gas and electricity 41 40 36 23 21 21 20 20 19 19 19 18
Total 49 49 44 26 24 24 23 22 21 21 21 20
3. Overview (Market Share)
The combined market share of the large legacy suppliers was 70% in electricity and 69% in gas. Other large,
medium and small suppliers accounted for the remaining 30% and 31% for electricity and gas respectively.
• In electric supply market as of Q3 2023,Octopus
Energy has 22% market share followed by British Gas
(20%) and E.ON (17%)
Source:
https://www.ofgem.gov.uk/retail-market-indicators
• In gas supply market as of Q3 2023, British Gas has a
share of 28%, followed by Octopus Energy (22%) and
E.ON (14%)
The market share of Octopus in both electricity and gas has experienced an increase from 11% in Q4 2022 to 17% in Q1
2023 and from 17% in Q3 2023 to 22% in Q4 2023 following its acquisitions of Bulb and Shell respectively.
4. Market Size and Growth
•The energy market in the UK has
been steadily growing in last few
years.
•According to Statista, the retail sale
of electricity in the UK amounted to
approximately £60B (36% increase)
in 2022 from £44B in 2021.
•Similarly, the retail sale of gas in the
UK reached around £47B (80%
increase) in 2022 from £26B in 2021.
The selling value of electricity for all sectors in the United Kingdom (UK) has historically been higher compared to the
selling value of gas.
Source:
https://www.statista.com/statistics/545396/value-electricity-gas-all-consumers-united-kingdom-uk/#:~:text=In%202022%2C%20the%20selling%20value,to%2046.8%20billion%20British%20pounds.
5. Market Trends
•Increasing focus on sustainability and decarbonization is driving demand for renewable energy
solutions, with wind and solar power gaining prominence.
•Since 2000 there has been a substantial increase in the number and capacity of renewable
sites and the technology has also been advancing and increasing its capabilities
•Advancements in technology are reshaping the energy retail sector, with digital platforms
enabling enhanced customer engagement, personalized offerings, and energy management
solutions.
•According to a report by Mckinsey, more energy retailers are transforming their digital
platforms to cut costs and to stay competitive
•Consumers expect their energy provider to offer digital services such as online account
management and smart home solutions.
•Companies like Octopus Energy have embraced digital platforms, offering innovative services
like smart meters and real-time energy usage insights.
The major market trends are inspired by the shift towards Renewable Energy and the Digital Transformation of the
Energy Retail sector
Shift towards
Renewable Energy
Digital
Transformation
Source:
https://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/digital-transformations-in-energy-retail-a-shift-toward-advanced-platforms
6. Renewable Energy Adoption
•Renewable generation totalled a record
high 39.9 TWh in Quarter 4 2023, an
increase of 4.9 per cent compared to the
same period the previous year
•Renewable generation reached 135 TWh
contributing to a record 47.3 share of total
generation, driven by record offshore wind
generation Wind generation increase 1.5
per cent to 26.4 TWh, the highest quarterly
generation in the recorded time series
•Renewables’ share of total generation
achieved both an annual record (47.3 per
cent) and a quarterly record, which at 51.5
per cent
Source:
https://assets.publishing.service.gov.uk/media/6604334f91a320001182b0de/Energy_Trends_March_2024.pdf
Renewable energy adoption is gaining momentum in the UK. According to the Statistical Release of Mar’24 by the
Department for Energy Security & Net Zero, the production from renewable technologies is at record high
Electricity generated by fuel type
7. Regulatory Environment
The UK energy retail market operates under the oversight of regulatory bodies such as Ofgem, which oversee market
competition, consumer protection, and energy policy
License conditions
Regulation set by Ofgem
which sets out the
standards across many
different areas from
operations to customer
service, that suppliers
must adhere to, to
continue to operate.
Price cap
Sets a maximum amount
that energy retail suppliers
can charge domestic
customers on Standard
Variable or Default Tariffs.
Regulatory initiatives
Include the introduction of the
Retail Energy Code (REC) and the
Smart Metering Implementation
Program (SMIP) to drive market
efficiency and innovation.
8. Competitive Landscape
Competition in the UK energy retail market remains intense, with traditional incumbents facing pressure from agile
disruptors. Newer entrants like Octopus Energy has gained traction by offering competitive tariffs, innovative products,
and superior customer service.
British Gas
• Established brand with high market recognition.
• Diverse product offerings including gas, electricity,
and home services.
• Extensive customer base and market presence
across the UK
Octopus Energy
• Reputation for competitive pricing and transparent
tariffs.
• Focus on renewable energy and sustainable
practices.
• Innovative technology platforms for customer
management and energy optimization
NPower
• Reputation for simplicity, transparency, and green
energy.
• Agile and customer-centric approach to business
operations.
• Collaborates with industry partners and stakeholders
to drive innovation and market expansion
E.ON
• Well-known and trusted brand with a strong
reputation for reliability and service.
• Invests in innovative technologies and digital
platforms
• Committed to sustainability and environmental
responsibility
9. Industry Challenges
Energy Affordability, Grid Modernization, and Regulatory complexities
Energy Affordability
Rising energy prices and cost-of-living concerns pose
challenges for consumers, prompting calls for greater
affordability and support measures.
Grid Modernization
The transition to renewable energy sources requires
investment in grid infrastructure and smart
technologies to ensure reliability and efficiency.
Regulatory complexities
Regulatory barriers to competition that are not in consumers' interest will be removed, but energy being an essential
service requires some level of regulation and minimum standards enforcement. While the default tariff cap has been
valuable in limiting household energy bills, its short-term focus could hinder innovation and consumer engagement.
Source:
https://www.techuk.org/resource/energy-retail-market-reform-vision-for-the-future.html#:~:text=The%20energy%20retail%20market%20experienced,continuity%2C%20and%20stabilise%20the%20market.
10. Future Outlook
The targeted reforms should be designed to achieve four main objectives: Empowering Consumers, Transition
to Net Zero, Tackling Fuel Poverty, Strengthening Consumer Protection
The UK energy retail market is expected to witness continued growth, driven by increasing energy demand,
regulatory developments, and technological innovation.
Empowering Consumers:
The reforms seek to enhance consumer choice and
enable suppliers to succeed by leveraging new
technologies and business models.
Transition to Net Zero:
The government aims to incentivise a switch to low
carbon technology, reduce system costs, and
protect vulnerable consumers during the transition
to a greener energy landscape.
Tackling Fuel Poverty:
Targeted support will be provided to those in need,
addressing fuel poverty in a more focused manner.
Strengthening Consumer Protection:
The framework for consumer protection will be
enhanced to accommodate the dynamic and
evolving nature of the future retail market, focusing
on customer service and other aspects beyond
price protections.
Source:
https://www.techuk.org/resource/energy-retail-market-reform-vision-for-the-future.html#:~:text=The%20energy%20retail%20market%20experienced,continuity%2C%20and%20stabilise%20the%20market.
11. Conclusion
The energy suppliers will continue to play a crucial role in the energy system. The current role of licensed suppliers
encompasses various functions, industry transformation programs, and support schemes.
Financial resilience measures will be in place to ensure suppliers can make long-term investments in innovative
technologies. The focus will be on enabling a market where energy companies delivering valuable products and
services can thrive.
Targeted reforms are necessary to achieve the vision for the retail market, supporting consumers through the global
energy crisis and enhancing market resilience.
System wide reforms, including smart meter rollout, energy smart appliances, renewable generation, and flexibility,
will complement targeted retail market reforms, empowering consumers with a range of tailored products and services
aligned with net zero objectives.
By embracing innovation, collaboration, and customer-centric strategies, companies can navigate challenges and
capitalize on emerging opportunities to shape the future of the energy landscape in the UK
13. Thank You
“A transition to clean energy is about making an investment in our future.”
- Gloria Reuben
14. Appendix
Suppliers are classified by size as follows:
• ‘Large legacy’ includes suppliers which have held a market share of at least 5% in either fuel since privatisation of the electricity and gas sectors.
• ‘Other large’ includes suppliers with market share of at least 5% in either fuel, having increased market share from below 5% at the time of
privatisation.
• ‘Medium’ includes suppliers with market share exceeding 1%, but remaining below 5% in both fuels.
• ‘Small’ includes suppliers with market share below 1% in both fuels.