The UK’s six biggest energy providers must focus on making smart services and local renewables mainstream if they are to continue to thrive in the future, a group of ex-industry leaders has warned.
In a report released yesterday, former energy ministers and utility company CEOs argue that the old-world business model of large power stations is being undermined by a decentralised, people-led approach.
They explain that the speed of the transformation has taken the industry off guard, arguing that incumbents must shift their focus from centralised fossil fuel generation in order to adapt.
Will Dawson, associate director for energy and climate at the Forum for the Future, which produced the report, said these companies should “accept and embrace the revolution”.
He added: “It’s important that the large energy companies that have dominated for so long are playing their part to the full so we don’t lose the expertise and valuable assets they have built up.”
“That means rapidly making decentralised, community and smart energy systems their core business, not innovation trials on the side.”
The report highlights how the market share of British Gas, EDF, npower, EON, Scottish Power, and SSE has fallen from 99% in 2013 to 85% in 2016, since the introduction of privatisation and competition in the 1990s.
At the same time, the number of British homes, communities and businesses generating their own renewable power has risen by over 12,000% since 2010 to 900,000.
Former chief executive at SSE, Ian Marchant, calls this ‘prosumer revolution’ a “double whammy for the incumbents”, who after an overall fall in demand for power, find themselves in a shrinking pond with fast-growing minnows.
However, despite the rapid transformation of the energy sector, the report highlights major challenges that still need to be overcome, such as decarbonising urban heating and electrifying transportation.
“The energy transition is by no means complete, and new technologies and business models are emerging all the time,” it states. “It is not enough for governments and regulators to passively wait and see what happens.
“Policy, and indeed the broader regulatory environment and governance structures that oversee the energy sector, must not only keep pace with the transition, but also encourage further innovation.”
