Over the past year or so we’ve seen a rapid acceleration in the amount of change and growth in energy retail with new entrants joining the market with different propositions and offerings. New technology and solutions have reduced the time and barriers to the market, and low wholesale prices have encouraged entrepreneurs to view energy supply businesses as a valuable investment.
But can it continue forever? Many are commenting that the pace of new entrants joining the market can’t continue. However, here at Utility People we are still seeing strong interest from those entrepreneurs – although they are certainly taking a more nuanced look at their brands and how they can differentiate themselves in what some consider to be a saturated market. There is also a more considered look at funding models, and how to prepare for smart metering – 2018’s new entrants will have put together a strong business case in the face of rising winter prices.
The end of 2017 saw some really interesting moves from the larger, more established players. SSE and Npower greeted news of a potential SVT price cap with their announcement of their merger, and whilst this was probably a very long time in the planning, it just shows how more established businesses are looking at how they can adapt their business models to be better able to cope with the pace of change. There has also been increasing talk of now being the right time for a big established brand name outside of the world of energy, to make a play for value in this space – there are many commentators out there discussing whether Amazon or Google are ready to make their move.
So what will 2018 bring us? Whilst this year has already seen its own influx of new entrants, we think that there will also be a period of ‘trading up’ as companies like Shell make acquisitions to build their own retail brands. We’re also seeing those who are challenging the big six in the mid-size market reacting quickly by launching new digital only propositions – such as Lumo. We’ll see the ‘big six’ finally starting to react to these new and nimble upstarts with truly innovative propositions and business of their own, and we should start to see brands whose businesses are in the world of data start to think about energy as a valid business opportunity – whether that be through acquisition or start-up.
Will we see increased consolidation of brands? That’s the big question – consolidation is hard – with all it’s accompanying issues of rebranding, systems change and people management. I do think new suppliers are looking to scoop up customers from exiting distressed suppliers – although after the big bang implosion of GB Energy early last year – we’ve not seen any other suppliers of size struggle.
So will 2018 be a ‘calmer’ year for energy retail? I think the answer is probably not! The energy revolution will continue apace – and by the end of the year we may see even more names on switching sites, but with the addition of some bigger ‘retail brands’. One thing is for sure, change is a certain in this industry at the moment!