Electricity Industry Profiles—The United Kingdom

Significant Investment Opportunities as the UK Seeks to Transform and Decarbonise its Energy System

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In 2015, electricity demand was primarily supplied through renewable energy, nuclear, and gas, accounting a combined total of 76% of the electricity generated. This indicates two things. First, renewable generation share in the market is increasing and is expected to form a major portion of the generation mix in the coming years. Second, nuclear and gas will be the other major generation source that will be supplementing Renewable Energy Sources (RES) to address demand. Our analysis predicts that this combination will drive the market in the coming years with dirty coal being phased out by 2025, a major historic shift for the nation. In the wholesale generation market, the “big six” have a strong foothold, with 98% of the market share. This number is unlikely to change soon. As the nation strives to move away from fossil fuel coal, investments in renewables especially Wind, Hydro, and Solar PV are expected to reach £30 billion by 2020. A key reason is the support options that currently exist in the market and the emphasis by the UK energy policy makers to make the UK’s energy greener and self-sufficient. With Renewable Obligation Quota Schemes (ROQS) being replaced by Contracts for Difference (CFDs), more certainty and direction in making renewable energy sustainable in the generation mix could be observed. In the retail market, competition has become quite high recently with consistent entry of new participants year on year. Smaller participants are targeting the consumers with attractive price tariffs bolstered by low wholesale prices. As a result, the “big six” are increasingly coming under pressure to preserve their supplier market share. This trend is likely to continue according to OFGEM (Office for Electricity and Gas Markets) that regulates the market. Moving forward, decline in wholesale prices could happen more often as a result of increasing role played by renewable generation as their cost of generation is relatively cheap when compared to other sources of generated power. This is not really surprising, given their cost structure. However, whether the UK electricity market is designed in effective way to accommodate both conventional and unconventional sources of energy is a question to ponder, definitely. The surprising bit is the role of decentralized generation, which according to National Grid will be playing a key role in balancing the overall system. This presents an opportunity to demand side generators and response units. The UK’s electricity transmission network is getting a major upgrade as a result of National Grid’s on-going transmission infrastructure projects. New interconnections with Belgium and Ireland by 2020 could see cross border transmission capacity increase by 2500 megawatts. Significant overall change is taking place in the UK’s electricity industry currently and the industry could see more participants entering the market, putting more pressure on the “big six’s dominance. The UK’s electricity industry is undergoing a progressive transformation, be it in wholesale or the retail arm.

Key Questions this Study will Answer:
• Where do major investment opportunities lie going ahead for the industry which is undergoing a period of transformation?
• Which generation technology is going to drive wholesale generation investments out to 2030?
• What are the key drivers and restraints of this market?
• Which are the major power projects and when are they expected to be commissioned and what impact are they likely to bring?
• Who are the major participants and what are the recent trends in the market?

Table of Contents

Electricity Industry Profiles—The United KingdomExecutive SummaryExecutive SummaryResearch Scope and MethodologyResearch ScopeResearch ProfileForecasting MethodologyThe United KingdomKey FindingsDrivers and RestraintsDrivers and Restraints ExplainedElectricity Market OverviewEnergy PolicyEnergy Policy (continued)Energy Policy (continued)Fuel Mix ForecastInstalled Capacity ForecastPower InvestmentSupport Mechanisms and Major IncentivesSupport Mechanisms and Major Incentives (continued)Electricity Generation—OverviewRetail Market—OverviewElectricity TransmissionElectricity Distribution MarketGrowth Opportunities and Companies to ActionGrowth Opportunity—Business ModelsGrowth Opportunity—Vertical IntegrationStrategic Imperatives for Power and Energy CompaniesLegal DisclaimerThe Frost & Sullivan StoryThe Frost & Sullivan StoryValue Proposition: Future of Your Company & CareerGlobal PerspectiveIndustry Convergence360º Research PerspectiveImplementation ExcellenceOur Blue Ocean Strategy

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