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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?
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A brief history
1990 - privatisation of the industry and competition in generation and supply >1MW
1994 – competition in supply >100kW
1998 – full competition in supply
2001 – replacement of the Pool with the current trading arrangements - bilateral contracts and imbalance settlement
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Who is ELEXON?
ELEXON manages the operation and governance of the wholesale market as set out in the Balancing
and Settlement Code (BSC).
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Is the market working?A technical view - 1
10
5
02001 2002 2003 2004 2005 2006 2007
Total number of modifications
per month
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Is the market working?A technical view - 2
5
02001 2002 2003 2004 2005 2006 2007
Number of pricing modifications
per month
7
Is the market working?A technical view - 3
96%
92%
2001 2002 2003 2004 2005 2006 2007
Percentage of non-half hourly energy settled on
actual vs. estimated consumption
95%
94%
93%
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Is the market working?A consumer view
The Regulator(ofgem)
The Consumer Watchdog(energywatch)
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Ofgem’s 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: Britain’s competitive energy market, ofgem fact sheet 69, 04.07.07
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energywatch’s 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 DaviesUniversity of East Anglia, 11 July 2007
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Electricity market shares
21%
19%
16%
14%
18%
12% <1%
British GasPowergenNpowerEDF EnergySSE
Scottish PowerOthers
Source: Domestic Retail Market Report - June 2007 , ofgem, 4 July 2007
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What about the future?
Evolution Steering Group (ESG)
http://www.elexon.co.uk/documents/Consultations/Consultation_on_Evolution_Steering_Group/ESG_Consultation.pdf
Sources of changeSources of change
Annual Review
Impact onthe market
Likelihoodof change
http://www.elexon.co.uk/documents/Consultations/Consultation_on_Evolution_Steering_Group/ESG_Consultation.pdf
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Sources of change
Climate Change
Nuclear
Simplification Europe
Security of Supply Energy Costs
Renewables Distributed generation
Smart metersMicro-generation
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ESG Conclusions
Impact on the market
Low
High
Timescale - years0 105
Climate change
Micro generation
Smart metering
Simplification
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Overall conclusions
• The GB electricity market is now >6 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.