Extended Expert View: UK Energy Market Competitive Intensity

Publication Date	August 2005
Publisher	Datamonitor
Product Type	Report
Pages	20
ISBN Number	not applicable
Product Code	DAT00540

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Summary

Introduction

A recent report by Datamonitor analyses the market competitiveness across key EU power and gas marketplaces by tracking nine market metrics. The UK, as the most liberalised market by a wide margin, leads this index, however there are metrics that have not scored as highly as they could and hold back the overall market rating.

Scope

Reporting of the market competiveness of the UK power and gas markets
Explanation of the metrics that prevent the UK from achieving top scores all the way across the board.

Highlights

Ofgem, the UK regulator has been criticized by some parties for failing to investigate thoroughly enough the reasons behind the wholesale gas price spikes of late 2004.

The high level of competition in the UK energy market means that few opportunities for new entrants to undercut high incumbent profit margins still exist.

The low levels of fragmentation in the UK energy market give the large utilities with existing market share greater power to prevent new entrants from gaining a foothold in the market.

Reasons to Purchase

understand the contributing factors to the overall high scoring of the UK Energy market competitiveness
gain insight into how the Datamonitor Market Competitiveness Index scores relate to real market activity.
Assess the barriers for new entrants to both the power and gas markets and how the high level of competiveness effects them

Content

Chapter 1 Executive Summary
- Datamonitor's recent MCI report confirms that the UK energy market is the most liberalised in the EU, though regulatory effectiveness and retail market fragmentation constrain the total score
- Criteria that restrict additional competitiveness
Chapter 2 Introduction
- This brief is based upon Datamonitor's recent MCI report which assesses the competitive environments in 10 key European gas and power markets and forecasts switching behaviour
- The MCI Index, on which this analysis is based, shows how attractive a particular market is to new entrants in terms of competitive environment
- The MCI Index is calculated by deriving a weighted average of scores over 9 key metrics
Chapter 3 Uk Mci Scoring
Chapter 4 Impediments To Greater Competitiveness
- Despite scoring highly relative to other European markets, the UK MCI score is constrained by the effectiveness of the regulator and the retail fragmentation metrics
- Ofgem has been widely criticized both for its lack of jurisdiction and inconclusive investigation into wholesale supply issues despite the overall high level of competition in the UK energy market
- In the UK power market the largest 4 suppliers account for 72% of total retail volume, largely as a result of extensive historical M&A activity
- Commercial opportunities do exist in the UK power market, though the high level of competitive intensity means that they are more difficult to capitalise on than in other less advanced markets
- There are more choices of supplier in the gas market, however there is much stronger dominance from the historical national incumbent, Centrica
- The strong level of competitive intensity in the UK gas market means that the market place is in many ways crowded
- Declining UK gas production will lead to greater price spike potential between 2005 and 2007
Chapter 5 Appendix
- SPP writing team
- How to contact experts in your industry
List Of Figures
- Figure 1: UK Gas Market Competitiveness Index
- Figure 2: UK Power Market Competitiveness Index
- Figure 3: Explanation of the MCI Scoring
- Figure 4: The Datamonitor MCI scoring metrics
- Figure 5: UK MCI summary for gas and power
- Figure 6: UK Retail Power Market Fragmentation May 05
- Figure 7: UK Retail Gas Market Fragmentation May 05
- Figure 8: UK Supply/Demand Balance, 2005-10