Table of Contents
- DATAMONITOR VIEW
- ANALYSIS
- In an increasingly competitive environment, retail energy utilities must
sell energy in an environmentally friendly way or face losing market share
as they address a shifting set of strategy drivers
- Faced with falling margins and rising wholesale prices, European
energy retailers must take new initiatives to preserve margins
- Retail prices are rising and converging: UK case study
- In an otherwise commoditized environment, differentiation can be
achieved either in the manner of sale or additional service
- With record levels of renewables in their generation portfolios,
utilities must now deliver equally robust renewable retail strategies
- Green' energy must bridge the gap between aggressive renewable
strategies and much-needed utility innovation
- Utilities should think of ' green' energy as a differentiator which is
gaining acceptance as a more sound basis of competition than simply price or
even service
- In the UK, the disjuncture between wholesale and supply is caused by
the Renewables Obligation subsidy
- In the UK, the disjuncture between wholesale and supply is caused by
the Renewables Obligation subsidy
- None of the UK ' big six' have truly leveraged their green offering as
a non-price differentiator in the domestic retail market Of the five
different varieties of ' green' tariffs currently offered by suppliers in
the UK, some are much ' greener' than others Of the five different
varieties of ' green' tariffs currently available in the UK, some are much
' greener' than others
- Most ' green' energy tariffs suffer from a lack of transparency and
clarity
- Ofgem has called for an end to ' hollow' green tariffs paid for by
existing subsidies that provide little extra environmental benefit
- The success of green power programs has varied significantly due to
the variability of marketing programs and pricing strategies
- Most UK retail suppliers are not marketing their fuel mix to their
full commercial advantage
- Different UK suppliers offer varying degrees of voluntary guarantees
to back up their green tariffs
- Non-UK European utilities have successfully engaged with ' green'
tariffs by favoring the clear-cut 100% green source variety
- Residential ' green' energy tariffs are competing with other voluntary
carbon offsetting vehicles available to consumers
- The voluntary carbon offset market is taking the ' green dollar' away
from domestic retail customers signing up for green tariffs
- UK Climate Change Levy legislation created overnight demand for
renewable power from businesses. The proposed Carbon Reduction Commitment
scheme should sustain that demand.
- Levy Exemption Certificates create industrial and commercial demand
for renewable power
- New UK carbon reduction commitments will further incentivize suppliers
to market the bulk of renewable power to I&C customers
- BT has the largest publicly stated green contract, being supplied by
npower and British Gas with three-year contracts
- APPENDIX
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Figures
- Figure 1: UK energy retailers are under pressure from rising wholesale
prices in the established wholesale power market
- Figure 2: Correlated gas prices in the UK have also been on an upward
trend as European supply fundamentals tighten, a situation which is
exacerbated by the indirect impact of record oil prices
- Figure 3: UK case study of domestic switching rates - Residential
customers are struggling to find enough price benefit in switching suppliers
- Figure 4: Rising wholesale energy prices will force suppliers to adopt
innovative strategies in order to compete
- Figure 5: The major European utilities are adding renewables to their
generation portfolios far in excess of 2010 EU legislative requirements
- Figure 6: Green is gaining acceptance as a more sound basis for
competition than simply price or service
- Figure 7: In this illustration of the relationship between the wholesale
and supply markets, the supplier can either ' absorb' or ' pass on' the inputs
from the wholesale market to the supply market
- Figure 8: Under the Renewable Obligation, licensed electricity suppliers
in the UK must source and increasing proportion of electricity from
renewable sources
- Figure 9: Some ' green' tariffs are such that part - or even all - of the
supplied electricity may actually come from non-renewable sources
- Figure 10: Green energy programs are niche programs and they must be
marketed to customers correctly if they are to gain acceptance
- Figure 11: Good Energy is the only utility to offer truly ' green' power
tariffs and zero CO2 emissions per kWh of generated power
- Figure 12: Currently, only four suppliers are committed to retiring a
small percentage of ROCs
- Figure 13: A sample of current German, French and Spanish residential
' green' offerings shows that some of the largest European suppliers have
opted for the ' greenest' green tariffs
- Figure 14: Carbon offsetting as part of a ' carbon neutral' lifestyle has
gained some appeal and momentum, mainly among consumers in western countries
- Figure 15: In 2007, the global voluntary markets, supporting activities
to reduce emissions not mandated by policymakers, saw transacted volumes
doubling to 42 MtCO2e and value tripling to $265m
- Figure 16: Renewable energy targets are increasingly being met by
industrial and commercial buyers
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