Within the last decade the vertically integrated (VI) model, whereby companies own generation and supply businesses, has fallen away.
In 2008 the traditional VI model was at its height – the Big Six owned over two-thirds of the generation fleet, and supplied over 90% of electricity by volume (99% in the domestic market). This approach helped mitigate the risk associated with volatile commodity markets and imbalance prices by routing power to a largely ‘sticky’ customer base within the retail arm. In essence, the customer base provided a stable and long-term offtake route.
Our chart this week shows that although the percentage of generation owned by integrated companies has fallen. Investors in renewables also have a position in the retail market, bucking the trend to restructure and sell generation assets.