The Rise of the Big 60,000
When debating issues surrounding the Big Six, it’s almost impossible not to refer to competition and the damaging absence of it within the UK energy sector.
31st October 2013 | Peter Rolton: Chairman, Rolton Group
Indeed, what has been cultivated in its place could almost be described as a system of reverse-competition; a small number of companies monopolising over 90% of the market, overcutting one another rather than undercutting and increasing their prices in tandem to the dismay of the end-user. With the government struggling to combat the problem, the current situation would suggest that the country is somewhat stuck between a rock and a hard place when it comes to energy.
Ed Davey announced today that he intends to up the competitive ante by enabling consumers to switch energy suppliers within a 24 hour timeframe, thus increasing market activity and forcing better value. The problem here is that swapping one major provider for another is unlikely to bring about any real change as their offerings and prices all operate within the same, limited sphere. No, regulating these few companies is never going to create the tidal wave of changes necessary to really improve the sector. The only thing that will do this is seating more players at the table.
In September, Greg Barker spoke of the central issue in achieving the necessary influx: barriers to entry. As he rightly asked, what company would be comfortable joining a sector that is regulated up to its neck, dominated by huge corporations, and faces a very uncertain future? Not many. So the key is to flip the emphasis away from expanding to a Big Seven or Eight, the impact of which would be arguably negligible anyway, and towards what Barker refers to as the ‘Big 60,000’. Decentralising supply to this extent would not only pull the carpet out from under the main providers’ feet, but also offers a very persuasive commercial opportunity to businesses and individuals alike.
Starting with the largest energy users, if businesses fully embraced the idea of becoming their own generators the consequences could be monumental. They could remove themselves from the uncertainty that will always cling to the global market of fossil fuels, whilst saving money and potentially even making profit from excess fuel sold back to the Grid. An on-site energy supply represents a compelling chance to unlock reliable and sustainable heat for industrial scale users, who are currently at the greatest risk of shut-down should spare capacity lose its fight against demand. They rely on swathes of energy to stay in production, and the UK relies on this production to strengthen the economy.
Make no mistake; this is the way ahead for British business. It’s time that the nation’s largest energy users took back the reins and created their own defences against the rising cost of fuel, leading the way for end users everywhere. With only six energy companies providing for almost all of the UK’s requirements, the dynamic market that we so desperately need stands no chance of getting off the ground until that happens.