UK Electricity – What happens next?
Robert Groves, CEO SmartestEnergy
The Balance of the Energy Challenge
Institute of Water Event
Worthing, 14th April 2016
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
2
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
3
Introduction to SmartestEnergy
The UK’s leading generation aggregator of renewabledistribution connected generators
SmartestEnergy is the largest purchaser of renewable power from distribution
connected renewable generators in Great Britain:
A market share of 13%* versus the capacity in the available market;
2.5GW of contracted installed capacity;
Generators participating in all schemes as well as merchant;
Generators ranging in size from 50kW to 90MW;
300+ generation customers in the UK; and
550+ generation sites in the UK.
The portfolio includes all mainstream renewable technologies and good quality
CHP with 43% of Smartest’s generation portfolio now from wind or solar.
4
* Figures from Cornwall Energy Consulting and quoted correct at 11th January 2016
UK Renewable Market figures sourced from Ofgem
Introduction to SmartestEnergy
A new entrant suppliers (2008) to the large business consumer
supplying making Smartest #10 by volume (2015)
A retail business launched in 2008 supplying large industrial and commercial
consumers and now supplying 3.4% of the UK’s business electricity volumes:
7 TWh delivered supply per annum;
1000+ business customers supplied and 7,000+ sites supplied.
In our targeted large business user market, Smartest now has a bigger market share
(5% and #7 by volume) than Scottish Power (3.2%) and British Gas (2.6%) with the
offering targeting :
Large business users with a preference for a renewable power supply;
A customised contract offering with bespoke terms the norm and competitively
priced offer.
Market leading customer service and ranked #1 for UK customer satisfaction amongst
UK business consumers in 2010, 2011, 2012, 2013 and 2014 and voted ‘Supplier of the
Year’ in 2012*.
5
* All figures quoted correct at 19th January 2015 and business user customer satisfaction as
per the Datamonitor Major Energy Users Survey 2010-2014 incl (discontinued in 2015)
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
6
Current UK wholesale energy markets
The UK wholesale electricity markets are not pricing a supply crunch even
though there may be one in winter 2016/17, volatility or higher prices
Spare electricity capacity in the National Grid during winter
Chronology of National Grid Actions - Year to date
7
Sources:
BBC - Electricity blackouts risk up, says National Grid - http://www.bbc.co.uk/news/business-33527967
Argus European Electricity, Issue 16-057, p1 (12th March)
EMR Delivery Body - https://www.emrdeliverybody.com/Lists/Latest News
Average of front two season on the Spectron end of day price
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
8
Political and regulatory change coming in the UK
Just as we thought Electricity Market reform was settled, comes more
regulatory uncertainty for the UK electricity industry
Recent regulatory
outcomes
Current regulatory
concerns
What does the future
hold?
Single cash-out and
more marginal pricing
Increasing marginality
in pricing
Greater volatility
CMA – T-losses
embedded benefit
going
Ofgem review of all
embedded benefits
Reduced Triad/BSUoS
embedded benefit
Reduced subsidies for
renewables
CM – no behind the
meter generation
Greater incentives for
storage
Half hourly metering
for all sites
Europe – 15 minute
settlement periods
Greater price
granularity
9
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
10
Using Germany as an example, what might happen
in the UK?
Germany provides a benchmark for how the UK electricity market may behave in the
future with lower wholesale prices but higher volatility and higher end consumer bills
11
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
12
What does the UK water industry need to consider?
UK water companies will increasingly have to consider more active
participation of their energy supply decisions
13
UK water companies will also need to be aware of pending tariff
increases of £10.45/MWh effective April 2017 that will increase
end user prices by 10%
Tariff
Change
When
Impact
CfD
Energy Intensive Industry
Exemption for RO and FiT
costs and scheme
growth
April 2017
~ + £2.95 / MWh
Capacity
Market
Brought forward to 2017
April 2017
~ + £3.00/£5.00 / MWh
RO
Scheme Growth and EII
Exemption
April 2017 (may be
partially delayed to
2018)
~ + £2.60 / MWh
FiT
Scheme Growth and EII
Exemption
April 2017 (may be
delayed to 2018)
~ + £0.45 / MWh
DUoS
Regulated rise
April 2018
TNUoS
Regulated rise
April 2017 annually
Amalgamation with CRC
April 2019
CCL
14
*Assumes an end user price of £125.57
~ + £0.80 / MWh
~ + £0.45 / MWh
~ + £2.65 / MWh
Agenda
Introduction to SmartestEnergy;
The state of play in the current UK wholesale energy markets;
Political and regulatory change coming in the UK;
Using Germany as an example, what might happen in the UK?
What does the UK water industry need to consider?
And what does this all mean for what your electricity supplier will be
thinking?
15
And what does this all mean for what your
electricity supplier will be thinking?
The incumbent electricity suppliers will be focused on internal transformation
with the energy supply market likely to look very different in the future
EDF
Transformation for DNOs
to DSOs;
Active balance
management;
RWE
Growing importance of
distribution connected
generation;
Avoidance of nonenergy related costs;
Centrica
Demise of vertically
integrated energy cos;
Rise of the 1 stop shop
supplier;
E.ON
Impact of renewable
generation and
consumption patterns;
Renewable
consumption as a USP
for end users;
SSE
Other purchasing
platforms.
16
Source: Google Finance - Yahoo Finance – Reuters, 31st March –
5 year period
The age of big data and
the eBay of energy.
UK Electricity – What happens next?
Robert Groves, CEO SmartestEnergy
The Balance of the Energy Challenge
Institute of Water Event
Worthing, 14th April 2016