We are at a crossroads in the energy market.
The public is dissatisfied with the status quo. The relentless political and media focus on consumer bills attest to an urgent need for a new model that provides greater transparency and can rebuild trust. Recently the industry has been referred to the Competition and Markets Authority.
Whilst it’s clear that the market needs a new direction, the range of factors that must steer that change forward is greater and more complex than ever before. We outline the key drivers that should guide the market and outline what we believe should be the essential features of the new model.
In this video Steve Jennings, UK Power & Utilities Leader, takes a look at where the UK energy retail market has come from over the past decade and outlines the pathway to the future to rebuild trust; help consumers reduce energy usage; price competitively, create a low carbon future and ensure a fair return.
Looking back since retail competition was introduced in the 1990s, the UK energy market has evolved through distinct phases. Initially we saw early scepticism but this was followed quickly by innovation – with many suppliers diversifying into other non-energy services.
When this did not deliver the expected returns, suppliers went ‘back to basics’ and re-focused on core energy and related services. We saw market consolidation and the success was often measured by the levels of customer switching.
We would characterise the current phase, as declining confidence with a significant breakdown of trust.
In our opinion the industry is moving towards a new phase and at its core will be moving the debate to reducing consumption.
Increases in energy prices are unpopular but there are many cost components outside the control of the suppliers and costs are rising.
Transparency is key, and the industry needs to continue to work with all stakeholders to help understand what makes up a bill and the reasons for price rises.
The energy trilemma drives the balance between affordability, security of supply and meeting the UK’s carbon reduction targets. We need to ensure we get this balance right as prices continue rise.
Switching between suppliers has increased recently and an easy and effective switching process will remain critical although not only the measure of an effective market.
Energy efficiency will be at the heart of the new model with more focus on changing the way we use our energy. To change behaviours we need to rebuild trust so consumers know they're not being ripped off with high bills or poor customer service.
In this new model, suppliers will do this by creating a market based on helping consumers minimise their energy bills by accessing the lowest prices and reducing consumption whilst delivering a fair return for all.
The first step is to focus on outcomes. Customers want warm, bright homes at a price they can afford.
By better analysing customer data we can help shift patterns of consumption.
The adoption of new technologies has been slow in the energy industry and customers are now creating demand for it in their homes.
Time is ripe for a new model of energy supply which changes the nature of their dialogue with consumers, which provides tailored propositions to help us reduce our energy costs and be rewarded for active demand side management and by doing so, rebuilds trust between the industry and their consumers.