Cleantech Market Intelligence
Consumer Choice in the U.K. Energy Market, Part 1
This May, I switched my energy supplier for the second time in the 13 years I have been living in the United Kingdom. The first time I switched, back in 2012, it was a painful process that took over 6 months and involved long calls with three different energy suppliers (my first choice told me they couldn’t offer me their service 2 months into the process), my electricity network operator (UK Power Networks), and my gas network operator (National Grid). It was a frustrating experience, but being that I’m involved with the industry, I followed along until the end.
I wasn’t really looking to change my energy provider for this second switch, but I had used a price comparison site to renew my telephone contract earlier in the year and kept receiving emails with tempting deals.
A Streamlined Process
This time, the process was completely different. Overall, once I had chosen my new provider, the switch took about 5 minutes of my time, mostly to fill out a short form with my details to set up an account and send my meter readings to my new provider through their app. I estimate the whole process took about 2-3 weeks in total, but I don’t really know how long it took as all the dealings were between my old and new providers and did not involve me. I all know is that this June, the bill came from my new provider and it was about 20% cheaper than before.
Apparently I’m not the only one changing energy providers. A recent report on U.K. energy suppliers market showed that the combined market share of the Big Six established players (British Gas, RWE npower, EDF Energy, ScottishPower [Iberdrola], SSE, and E. ON) fell 5% for the second year in a row between June 2015 and June 2016. New players now control 17.4% of the market, up from about 1% in 2012, the year I switched my energy provider the first time.
More Customers Making the Switch
Recent data from U.K. regulator Ofgem shows that 53% of all switches in March 2016 were to independent suppliers, up from 35% a year ago. The total number of switches has also reached a new high, hitting 454,000 in March—16% more than in February.
Switches in March were the second highest for a month since 2010 and only the second time more than 400,000 customers moved companies in any given month. The record was set at a whopping 606,000 in November 2013, when the Big Six were caught in a media storm when they tried to raise retail prices when wholesale prices were falling.
While the number of customers switching in November 2013 is impressive and retrospective, the switch happened in a moment in which consumers realized that the legislation to simplify switching was working. I find the new high more interesting. This time, new providers are convincing people to switch companies even though the United Kingdom had a very mild winter and energy prices are at the lowest they have been since 2009—in other words, retail energy prices are not making headlines.
Players in a new, fragmented, and fiercely competitive market will need to bring new propositions into the market to attract and retain customers. Some of the emerging propositions in the U.K. market will be explored in the second part of this blog series.