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“Diversity of players could boost electricity wholesale”
News this week of First Utility’s ten-fold customer increase over the past three years has been universally welcomed as a sign that the retail market is edging closer to something we could all agree is “healthy”.
And while increased retail competition and consumer choice are reason enough to celebrate, the shift towards a greater diversity of players could prove to be a shot in the arm for the electricity wholesale markets too.
The Competition and Markets Authority has made no bones about differentiating between the energy market behemoth that is the UK’s national balancing point gas market (pleasing), and its poorer electricity market cousin (worrying). While one enjoys strong interest from a wide range of energy players across Europe, the power market shows a worrying dominance of vertically integrated players motivated by the same fundamental drivers.
How do smaller players help? In short: they’re different. They will have different requirements on different scales and therefore trade in different ways. They also bring in large trading houses that might otherwise remain on the periphery. The likes of Dong Energy, Danske Commodities and Shell might see little reason to bother with UK power trade if not for the fact they are trading on behalf of First Utility, Ovo and others.
The unintended consequences of recent energy policy decisions aren’t usually the sort that regulators are happy to draw attention to, but perhaps this time they should.
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