Acquisitions and mergers have been the biggest form of energy supplier growth

What is SoLR?

Before the failure of Tonik Energy, Scottish Power’s share of the UK energy supply market was 8.7%, since being handed the 130,000 Tonik customers by Ofgem this market share has now climbed to 9.3%.

Other energy suppliers have seen their customer bases grow as a result of the SoLR process. For example, British Gas acquired 18,000 new customers after Ofgem revoked Breeze Energy’s licence and attained a further 112,000 customers following the collapse of Robin Hood Energy.

The SoLR process was first introduced back in 2003 to ensure that in the case of a supplier failing, affected customers are guaranteed continuity of supply.

One side effect of it is that energy suppliers chosen to be a SoLR see a boost to their number of customers. This increase may be short-lived, however, as many customers often jump ship and switch to a supplier of their choice at the earliest opportunity.

When it comes to choosing a SoLR the authority assesses which bidding licensee can support the influx of new customers without jeopardising the supply to its current customers. It must also be able to fulfil its other supplier obligations. If no suitable supplier wants to be a SoLR, Ofgem can use its powers to appoint a supplier without its consent.

Also read: What is a Supplier of Last Resort

Mergers and acquisitions

The biggest shifts in market share have come through the various mergers and acquisitions that have occurred in recent years.

The largest such acquisition was made in January this year when Ovo Energy’s purchase of SSE that saw Ovo’s market share climb to 14.5% and made it the second-largest energy supplier in the country.

Challenger suppliers have also got in on the action with Octopus Energy growing its market share to 5.7% after it acquired Co-op Energy in August last year and ENGIE in January of this year.

The moves have resulted in Octopus becoming one of the largest of the medium-sized challenger suppliers.

The rate at which it is acquiring new customers is also likely to result in it breaking into the ‘Big Six’ in the near future.

Other challenger suppliers have taken advantage of mergers and acquisitions. Both Bulb and Npower have grown their market shares by buying up competitors.

Bulb hasn’t hidden the fact that it has grand aims of increasing its market share and spreading its reach overseas. Both it and Octopus recently launched endeavours in the US markets and the CEOs of both companies have stated they want to have 100 million customers globally by the end of the decade.

Perhaps the biggest shift in customer share to occur will be from Npower’s merger with Eon. Eon purchased Npower’s German proprietor Innogy in September final 12 months after Npower lost 708,000 customers in 2019. Such a merger between the two would take their combined market share up to 16.6%.

With the market is currently it looks like it could be a battle between Octopus and Bulb over which breaks into the Big Six first.

Also read: Bulb aiming for 100m customers & Octopus acquires 70k customers

The changing Big Six

With the various SoLRs, mergers and acquisitions the face of the Big Six has altered over the last five years.

In 2015 the Big Six was: 1. British Gas 2. Eon 3. EDF 4. Npower 5. Scottish Power 6. SSE

In 2020 the Big Six is: 1. British Gas 2. Ovo 3. EDF Energy 4. Eon 5. Npower 6. Scottish Power

“Acquisitions and mergers have been the biggest form of supplier growth, with 10 instances of trade sale events in the domestic supply market since January 2019. Alongside this was also 10 exits through the supplier of last resort process. 'Of the gaining suppliers, the greatest level of activity was seen across the medium supplier group, consolidating their position among the largest 17 suppliers by customer number. Despite market share growth for some suppliers this quarter, it is currently a challenging environment for suppliers due to Covid-19, and some impacts have still yet to be seen,” said an analyst from Cornwall Insight. 

Further Reading

World Energy Outlook 2020: The Key points for Energy Suppliers

Ofgem to increase monitoring of Renewable Energy Guarantees of Origin' (Rego) certificates following Times Investigation

As Winter approaches three million households are in Energy Bill debt to Energy Suppliers

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