UK energy in 2021
Last update: January 2021
Those infrastructures are maintained, managed and overseen by many different players in the UK energy industry. Some are quasi-autonomous organisations linked to the UK government (Quangos) others are private companies.
The UK energy market has grown increasingly complicated since the dawn of privatisation in the early ‘90s. In this post, we’ll do our best to make it simple for you.
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Getting to know the UK energy industry’s major players
In getting to know the UK Energy industry’s major players and how they interact with one another, it’s probably beneficial to start with the one you have the most contact with… the UK’s energy suppliers. In the age of the free market, there has been an explosion in competition within the UK market. Which is beneficial for consumers, as it means that they have more choice than ever in finding a supplier who meets their needs.
However, as there seem to be new suppliers popping up all over the place, it can be difficult to keep track of them. At present there are a staggering 57 active energy suppliers bringing hundreds of tariffs to the market.
Here, we’ve divided them into 3 categories.
The “Big 6”
The Big 6 are the 6 biggest energy suppliers in the UK. Between them they account for around 70% of the UK’s energy market, supplying 70% of the country’s electricity and 69% of our gas.
Yet, even a cursory price comparison reveals that they are rarely the best value for money. And even in terms of customer service they are often found wanting. An independent consumer survey last year revealed that even the highest rated of the Big 6 (SSE) came joint 24th out of 33 suppliers.
The Big 6 suppliers are:
Why do people continue to choose these 6 suppliers when they have so many others to choose from? Reliability, brand recognition, a ubiquitous marketing presence and a simple lack of awareness of just how many suppliers there are among energy consumers all play a part.
The age of privatisation has given rise to a huge array of smaller independent suppliers to rival the Big 6. These companies, unlike most of the Big 6, do not generate their own energy. Instead they purchase it wholesale and sell it to end-customers. These smaller suppliers may lack the marketing power of their larger counterparts, but they can invariably offer better tariffs and (in many cases) a greener energy mix too.
Some prominent Independent Suppliers with a growing presence in today’s market include:
- Octopus Energy
- Spark Energy
- Together Energy
- Ovo Energy (which owns several smaller suppliers and recently acquired SSE)
- And many, many more
So, why do so few of us gravitate towards these smaller companies. In some cases, it may be because we don’t know they exist. In others, it may be because we are worried that they won’t be able to provide good customer service. However, while some independent suppliers rank the worst in terms of Trustpilot reviews, others rank among the highest. It’s just a case of doing your homework before committing to a supplier.
Another potential reason why consumers are slow to trust smaller suppliers is the rate at which they go under. Many believe that they will experience a loss of supply if their supplier goes out of business. But rest assured that this is never the case. Either your supplier is bought out by a bigger supplier, in which case nothing changes. Or the regulatory body (Ofgem) will assign you to a new supplier who will get in touch within 14 days.
In short, you have nothing to lose by giving one of the smaller suppliers a try.
There are also a number of small to medium sized suppliers whose focus is on providing more renewable energy in their mix. These suppliers get their energy mix from renewable and / or carbon-neutral sources rather than the burning of fossil fuels.
Renewable electricity, for instance is usually generated by wind farming or hydroelectricity that harnesses the power of water motion. Many companies, even the Big 6, use up to 100% renewable electricity in their tariffs.
This is also supplemented by green, renewable or carbon-neutral gas sources. These generate natural gas (methane) from renewable sources like farm waste, crop by-products and even human waste. Alternatively, suppliers may offer carbon-neutral gas. This means that the carbon created from generating gas is offset elsewhere in the company’s operations. For example, conserving forests and planting or protecting trees that absorb and store the carbon in our atmosphere.
An energy supplier may offer renewable energy, green gas, carbon-neutral gas or a combination of both in their energy mix.
Popular renewable suppliers include:
Business Energy Rates: How are they different?
Most UK Energy Suppliers also provide tariffs for business customers. These typically have a different kind of meter to domestic customers and have more cheaper energy rates because they use so much more energy. The bigger the company, the more extensive their usage and therefore the more lucrative they are for the supplier. So energy companies are likely to give them better rates.
On average, businesses can expect to pay something along these lines:
- Micro Businesses: 16.09 p/kWh
- Small Businesses: 13.95 p/kWh
- SMBs: 12.44 p/kWh
- Medium Businesses: 11.51 p/kWh
- Large Businesses: 11.25 p/kWh
- Enterprise Level Businesses: 10.01 p/kWh
An average of roughly 11.66 p/kWh.
Understanding the National Grid
While UK Energy Suppliers are responsible for delivering energy to consumers, they rely on an enormous network of wires, cables and pipes to ensure that this energy gets from the power stations that generate our energy to the UK’s homes and businesses.
Operating and maintaining that network is the responsibility of the National Grid- the network operator in England, Scotland and Wales. Many assume that the National Grid is maintained by the government, but National Grid PLC is a private company formed in 1990 from the split of the Central Electricity Generating Board. As of last year, it has 22,576 employees and an operating income of £3.442 billion. Much of the infrastructure that the National grid maintains has been around since the 1930s.
In its simplest terms, the National Grid’s responsibility is to ensure that the country’s homes and businesses have enough power. Within this network, there are a number of electricity distribution companies known as Distribution Network Operators (DNO). These operators are responsible for getting energy from the grid to local homes and businesses. Your DNO will depend on which region of the country you live or do business within.
Energy companies pay the National Grid to take power from the network and distribute it to their customers. How much they pay depends on their proximity to the centres of highest demand. Charges in Southern England, for instance, may be significantly less than those in Scotland.
On average, these charges account for around 4% of your household energy bill.
Ofgem: Who are they, and what do they do?
Ofgem is the regulatory body for the UK Energy industry. It was established by the UK government in 2000 to ensure that private companies operating within the UK operate in ways that benefit both energy consumers and the national interest.
As well as ensuring that the UK Energy industry is fair to consumers, they are also responsible for encouraging and incentivising energy suppliers to operate in innovative and renewable ways. They are essentially a go-between for the government and the private companies within the UK Energy sector.
Ofgem and energy suppliers
Ofgem expects Energy Suppliers to be profitable. But it also expects them to invest their profits in greater renewability and operational efficiency rather than simply feathering the nests of shareholders. As such, energy suppliers have a responsibility to report their annual profits to Ofgem, and share how they are used. You can find more information about this here.
Ofgem and the National Grid
As well as working with energy suppliers across the UK, Ofgem also works with the National Grid. Ofgem helps to create the most cost-effective deals possible for energy consumers by incentivising the National Grid to create savings and efficiencies within its networks. These reduce operational costs for the energy suppliers that they can pass on as savings to energy consumers.
The UK Energy Price Cap
What’s to stop energy suppliers from charging consumers whatever they like for their energy? Believe it or not, for a long time there was absolutely nothing. And, as you might suspect, this led to an exponential rise in energy prices in the years since privatisation. By the late 2010s Ofgem realised that it needed to intervene on behalf of energy consumers to protect them from potential profiteering.
As such, the Energy Price Cap was established in January of 2019. This places an upward limit on what energy suppliers can charge their customers per year for their energy. This changes every 6 months and is adjusted in line with energy suppliers’ costs and the state of the broader economy. As of 1st of October 2020 this stands at £1,042. You can see historical Energy Price Caps in the table below:
|Date||Energy Price Cap Amount|
The UK Energy Ombudsman Services
Where do you go if you have a complaint about your energy supplier? The UK Energy Ombudsman Services investigate complaints made by energy consumers and work with companies to achieve a satisfactory resolution. The UK Energy Ombudsman Service is an autonomous non-profit government body. Although they are approved by Ofgem, they are not part of it.
You can find out more about the Energy Ombudsman and what they do here.
The UK Energy Mix: Where do our gas and electricity come from?
Up until recently, although great strides have been made in generating more renewable energy in the UK, most of our national supply was still made from burning fossil fuels. In 2020, however, renewables finally eclipsed other UK energy sources. Let’s take a closer look.
Where does our electricity come from?
As of Q1 2020, 44.6% of electricity came from renewables, with a further 29.1% from gas-fired plants. The remaining electricity production came from nuclear (15.3%), imports from overseas (7.3%) and coal plants (3.7%).
The majority of renewable energy in the UK comes from wind farming, although there is also some renewable energy from wave, marine, hydro, solar and biomass.
Where does our gas come from?
Most of the gas used by UK homes and businesses is produced in the UK, much of it offshore. According to a 2020 British Gas study:
- 44% of the UK’s gas supply comes from offshore platforms in the North and East Irish Seas
- 47% of our gas is pumped in from Europe through long-distance pipelines
- The rest is imported from all over the world as Liquified Natural Gas (LNG)
- Most of our gas is imported from Norway, the Netherlands and Qatar. A tiny amount comes from the USA and Russia.
- A small but growing proportion of our gas supply, comes from renewable sources like landfill waste, farm waste and even human waste.
What about fracking?
Very little of our gas supply comes from on-shore hydraulic fracturing (fracking). Part of this is because of the environmental implications, but mostly because there simply isn’t that much frackable shale in the United Kingdom. As such, the only shale gas in the UK network is the gas that comes from overseas, most notably from the US.
The History of UK Electricity
The history of UK Electricity generation goes right back to the late 1800s. Below we’ve compiled a timeline that shows you just how much our electrical infrastructure has grown in line with the growing demands of our modern times:
- 1881- The first public electricity generator in Britain was installed in Godalming, Surrey.
- 1900- Several Acts of Parliament are passed granting rights to power companies to supply electricity to authorised undertakings (mostly manufacturing and industry).
- 1926- The Electricity Supply Act introduced in an attempt to affect national coordination of the electricity supply.
- 1935- The National Grid is completed.
- 1960s- The National Grid’s capabilities are improved and transmission voltages almost doubled from 275 kV and then 400 kV. The Central Electricity Generating Board (CEGB) runs this nationalised “Super Grid”.
- 1990- The Nationalised UK energy sector is privatised and sold off to private companies. The energy industry as we know it today is created.
- 2000- Ofgem is introduced as the regulatory body to ensure that UK energy companies act in the best interests of consumers.
The History of UK Gas
Our national gas infrastructure predates even our electricity grid. We’ve compiled this timeline to help readers better understand the history of UK gas:
- 1792- William Murdoch becomes the first person to successfully light an entire house using gas.
- 1805- The UK’s first commercial gas plants are installed.
- 1920- The Gas Regulation Act is established, changing the charging method and establishing a baseline for testing and reporting the quality of gas.
- 1944- In the wake of WW2 much of the UK’s gas infrastructure is devastated. It becomes clear that this private industry needs to be reconstructed.
- 1948- The Gas Act of 1948 is enacted, nationalising the UK gas industry. The Gas Council is established.
- 1960s- Gas starts to be brought in from the North Sea and imported as LNG.
- 1973- The Gas Council is replaced by the British Gas Corporation.
- 1986-1990- British Gas is privatised.
Energy Research & The Future of UK Energy
As the 21st century dawned it became clear that our reliance on finite fossil fuels for energy needed to change. As such, the Climate Change Act of 2008 was put into place. This act was geared towards incentivising energy companies to work with the government to reduce greenhouse gas emissions and increase research into renewable sources of gas and electricity.
The Committee on Climate Change published an interesting retrospective that you can read here. According to government projections, it’s estimated that by 2025 50% of our energy mix will come from renewable sources.
We already know about the role of wind farming, hydroelectricity, solar power and biogas in creating a more carbon-neutral energy sector. These are likely to become the backbone of a more sustainable future, as energy companies are incentivised to channel more of their profits into renewable and carbon-neutral infrastructures.
You can take a look at a report on the future of the energy sector here.
Need a hand choosing a new UK energy supplier? We’re here to help!
As we can see, the UK Energy sector is increasingly fast-moving, forward-thinking and competitive. But in an era where the vast majority of us are still paying too much for our energy, it’s important to remember that you have the luxury of choice.
We can not only help you to find a new energy supplier, we can also manage your move from end-to-end. So you can enjoy hassle-free savings sooner. Want to know more?
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In this digitally interconnected world of modern conveniences, we’re all more dependent on our energy supply than ever. We’ve become so accustomed to having instant access to gas and electricity that we’ve forgotten how many generations before us would marvel at such a prospect. It’s easy to take our energy supply for granted. Only when it doesn’t work do we stop to consider the vast infrastructures that supply our gas and electricity to us, and how these get converted to kWhs on our energy bills.
UK Energy FAQs
How many energy suppliers are there in the UK?At present there are 57 active energy suppliers all over the UK. These include the “Big 6”, smaller energy suppliers and renewable energy suppliers like Bulb, Ecotricity, Green Energy and Good Energy.
How is the UK Energy industry fighting climate change?Climate change is a huge priority for the UK energy industry, which is why Ofgem incentivises energy suppliers to invest their profits into generating energy in ways that result in fewer carbon emissions. The goal is for the entire UK energy sector to be carbon-neutral by 2050.
Who regulates UK energy suppliers?Ofgem is the regulatory body that oversees UK Energy suppliers. It was established in 2000. If you have a complaint about your energy supply, or your energy supplier you are advised to take it to the UK Energy Ombudsman.
I’m not happy with my current energy supplier. When can I switch?Technically you can switch energy suppliers whenever you like! When you switch to a new supplier, they will contact your old supplier and the transition will usually take 17-21 days. However, you may find that switching incurs an early exit fee for each fuel you switch. But if you want to avoid incurring this fee, you don’t necessarily have to wait out your contract. You can switch from 49 days before your contracts’ end without any fees!
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