Consolidation in the energy market predicted to continue

It has been a turbulent time for the retail energy market, experiencing a period of consolidation with mergers and supplier exits. This supplier consolidation is expected to continue in the near term. If suppliers fail to shift their business models for the new world it is likely to continue, according to a new insight paper from Cornwall Insight and UK law firm Shoosmiths – Consolidation in the domestic energy market.

The report features a detailed analysis of the supply market and includes views and predictions from leading stakeholders across the industry.

Key findings of the insight paper:

  • Suppliers that do not diversify their revenue streams will not be sustainable in the long term.
  • The role of prosumers in a future energy system is increasingly important as the heat and transport sectors are electrified.
  • Further market exits are expected through both Ofgem’s Supplier of Last Resort (SoLR) mechanism and mergers and acquisitions.

The report found that the energy supply market has contracted significantly, with the number of fully licensed suppliers falling to under 50 from a high of 62 in 2018. Discussing the report, Emma Bill, Lead Research Analyst, said, “The UK energy retail market is undergoing significant restructuring, and with the current landscape of rising energy costs and looming supply payment deadlines, there is a real possibility of further supplier exits later this year.

However, suppliers that can move beyond the commodity/price paradigm and engage consumers on a broader service platform will be well placed to succeed in the new market. According to Emma, “There is a changing of the guard occurring in the supplier market, and for those that remain in the sector, it is critical to differentiate on more than just price. In particular, those who engage and empower consumers through technology are likely to thrive.  Therefore, suppliers who make this transition early to support a high-quality consumer engagement and reach net zero targets will benefit.”

This change in the market will require substantial risk and capital upfront. This could result in fewer players winning overall, with earlier adopters/movers acting as magnets for the significant yet finite number of investors, seeing the market reduce further.

“This is a dramatic shift from relatively frictionless and cheap “price and volume” market entry models we saw from the middle of the last decade, with the competitive pressure in the market now seeing these companies most vulnerable to failure.”, said Emma.

Commenting on the insight paper Tim Jackson-Smith, Corporate Partner at Shoosmtihs with expertise within the infrastructure and energy sector, said: “The fact that suppliers are operating within legally enshrined climate change targets means that they, along with everyone else, are going to need to play their part to achieve net zero by 2050. This will undoubtedly shape how suppliers anticipate and respond to the continuing evolution in the market now and in the future, and this market insight will help Shoosmiths better understand how to serve those changing client needs.”

To download to the report please click here. For more information on the supply and services market please contact Richard on r.wetherall@cornwall-insight.com.

Related thinking

Net zero corporates and ESG

Data critical for sustainable investments

On 24 June, attendees to our 'Financing net zero forum' tuned in to hear the expert panel discussions on the role of data in sustainable investment. Joining the meeting chairs, Cornwall Insight's Daniel Atzori and Emma Bill were our guest panellists from Mercatus and Victory Hill Capital Group LLP. For investors to make...

Business supply and services

Power prices for SME’s reach record highs

According to our latest Pricing in the SME power market report, Small and Medium Enterprises (SME) power prices have continued to rise in Q221, reaching the highest level since our records began in Q212. On average, prices have increased by 24.8% year-on-year at the PC3-6MWh and PC3-15MWh consumption points and...

Announcement

Introducing Energy Spectrum Europe

Cornwall Insight is pleased to announce the launch of Energy Spectrum Europe. This new addition to the Energy Spectrum stable will provide the authoritative, independent insight and analysis of energy markets for which its peers covering Great Britain, Ireland and Australia are rightly renowned. Every month Energy Spectrum Europe will...

Commercial and market outlook

A look back at 2020 part 4

As we take our first steps into 2021, we take our final look back at the biggest developments in the UK energy markets in 2020, setting us up for the significant year ahead. Ofgem issued its decarbonisation Action Plan on 3 February as Jonathan Brearley became Ofgem CEO, setting out...

Business supply and services

Plus ça change, plus c’est la même chose: the RO late payment deadline

Today (11 November 2020) Ofgem has confirmed that there will be mutualisation of the 2019-20 Renewables Obligation. On Monday, in our 'Energy Spectrum' Perspective, we explained to customer’s why this was important and likely and what it means for the energy industry. Find out more about a free trial to Energy...

Power and gas networks

Understanding the backdrop of the UK hydrogen economy

We are delighted to publish our research note on the hydrogen sector: 'Understanding the backdrop of the UK hydrogen economy'. Serving as a primer for our upcoming series of hydrogen insight papers, we chart the UK’s progress in developing a hydrogen industry. In our paper, we cover essential developments in...

Commercial and market outlook

A new playbook for the GB wholesale markets

With the effects of COVID-19 permeating all parts of the energy value chain, in this week’s Energy Perspective our Wholesale Manager, James Brabben, takes a look at how it is impacting wholesale pricing and the electricity generation fleet, both now and, potentially, in the long term. Order of play We...

Home supply and services

Editor’s Pick | All Hallow’s Eve in the retail market

This article was originally published in Energy Spectrum Issue 689 on 4 November 2019. Whether by accident or design last week’s last payment date for the 2018-19 Renewables Obligation (RO) followed nine days after Ofgem issued its proposals and impact assessment for ongoing monitoring of energy retailers. Halloween was always going to...

This site is registered on wpml.org as a development site.