The UK Electricity Market

1
The UK Electricity Market
Stuart Senior Chief Executive,
ELEXON stuart.senior_at_elexon.co.uk
2
Agenda

• A brief history of the electricity market in
  Great Britain
• Who is ELEXON?
• Is the market working?
• a technical view
• a consumer view
• What about the future?

3
A brief history

• 1990 - privatisation of the industry and
  competition in generation and supply gt1MW
• 1994 competition in supply gt100kW
• 1998 full competition in supply
• 2001 replacement of the Pool with the current
  trading arrangements - bilateral contracts and
  imbalance settlement

4
Who is ELEXON?

• ELEXON manages the operation and governance of
  the wholesale market as set out in the Balancing
  and Settlement Code (BSC).

5
Is the market working?A technical view - 1
6
Is the market working?A technical view - 2
7
Is the market working?A technical view - 3
96
95
94
93
Percentage of non-half hourly energy settled on
actual vs. estimated consumption
92
8
Is the market working?A consumer view
NO
YES
The Regulator (ofgem)
The Consumer Watchdog (energywatch)
9
Ofgems view

• Vigorous competition on price
• Tariff innovation to win customers
• fixed, capped and index-linked
• online and green
• Customers switching suppliers (4m households in
  2006)
• Competition in service (fewer complaints)

Source Britains competitive energy market,
ofgem fact sheet 69, 04.07.07
10
energywatchs view

• Concentrated regional markets (incumbents retain
  55 share)
• Price matching by the big verticals to avoid
  damaging price wars
• Switching driven in part by customer confusion
  and mis-selling, and the same people chasing
  early (late) movers
• Barriers to entry and expansion

Source An assessment of competition in the
energy market, Prof. Stephen Davies University of
East Anglia, 11 July 2007
11
Electricity market shares
lt1
12
21
British Gas
Powergen
Npower
18
EDF Energy
SSE
19
Scottish Power
14
Others
16
Source Domestic Retail Market Report - June 2007
, ofgem, 4 July 2007
12
What about the future?
http//www.elexon.co.uk/documents/Consultations/Co
nsultation_on_Evolution_Steering_Group/ESG_Consult
ation.pdf
13
Sources of change
Simplification
Europe
Climate Change
Security of Supply
Energy Costs
Nuclear
Distributed generation
Renewables
Micro-generation
Smart meters
14
ESG Conclusions
High
Simplification
Impact on the market
Smart metering
Timescale - years
Low
0
10
5
15
Overall conclusions

• The GB electricity market is now gt6 years old and
  works well . but we continue to fine tune.
• Over the next few years, better data quality,
  through smart metering, will speed up settlement
  but no major system changes will be required.
• The next BIG market re-design will probably be a
  consequence of the climate change agenda.