Britain’s retail energy market under the spotlight

The GB government has set out proposed plans to boost competition and innovation in the country’s energy retail market.

The proposals, which are made in the wake of the massive increase in prices sparked by the global energy crisis, are aimed to give consumers more choices of products and services with increased competition among suppliers.

While there has been some innovation in products and business models in the retail market, this has been limited and the uptake of new services has historically been low, according to the government in a new vision document.

Across the market, the vast majority of tariffs only differ by the price charged for using energy and the length of time that price is guaranteed, with the implication for consumers being a very limited set of choices in the market, with little opportunity for finding products or services suited to their individual needs.

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Furthermore, the relative prices of gas and electricity do not accurately reflect their respective carbon intensities, resulting in price signals that are insufficient to incentivise the degree of system-wide electrification required to reach net zero.

Consumers should have access to a far greater range of products and services, better tailored to their individual needs, the document continues. At the same time, retailers that can seize the opportunity to offer greater overall value to their customers should be well-placed to grow and secure sustainable levels of profit.

The document recognises the need to strike the right balance between competition and regulation, with the promise of the removal where possible of regulatory barriers to competition that are not in the interest of consumers.

It also states that a total overhaul of the regulatory framework is not appropriate but instead, a programme of targeted reforms is necessitated.

To this end, a ‘call for evidence’ has been issued in parallel, on aspects of the current retail market framework that act as barriers or enablers for innovation, or that might prevent the retail market from supporting system transformation, as well as on some wider considerations such as consumer protections and arrangements for handling supplier exits among others.

The document notes that by the mid-2020s there should be further expansion of the smart meter rollout, the implementation of market-wide half-hourly settlement, new technical standards for energy smart appliances and tariffs, as well as the continued growth in intermittent renewable generation and electrification of heat and transport.

It concludes: “Smarter technologies, tariffs, and services will empower consumers to take advantage of the new choices they face in the market and enable them to benefit from adjusting their energy usage to better align with the availability of low-carbon electricity. In a well-designed future market, there will be opportunities for all consumers to benefit from these changes, regardless of their level of engagement, energy needs, or income.”

Presenting the proposals, Amanda Solloway, Minister for Energy Consumers and Affordability, said it was about putting power back in the hands of consumers, “giving them greater options to cut their energy bills in a market fit for the future. Today, I’m calling on industry to work with us, and take up the opportunities of investing in low carbon technologies and providing a first-class customer service.”