2017: What a year

A year comes and goes in the blink of an eye, or so it seems. 2017 was a real stand-out year for the utilities industry, for several reasons. So, what were the key moments of 2017, from our perspective?  

 

Water

With the biggest change this year coming from the water industry, it seems fitting we start with that. The year kicked off with a lot of apprehension and doubt surrounding the opening of the market to retail competition, and MOSL were appointed the market operator in early March. This meant much movement from water retailers and wholesalers alike and has led to 61,311 non-domestic water customers switching supplier (as at 1st October 2017). This is apparently a higher number of switches for so early on in the market opening, when compared to the same time period in the opening of the Scottish water market in 2008. And this figure should be taken with a pinch of salt as it includes both water supply points and sewerage supply points, and with most properties having both, it is likely to be around 30,000 switches. It's difficult to say how many customers actually switches as the figure is not published.

Whatever the figure actually is, Wheatley believe more could be done to really highlight the benefits of switching supplier, or at least more could be done to encourage businesses to speak to their current supplier. Our own research, conducted in April 2017, showed that just over half of SMEs were aware of the market opening up and that they were entitled to switch water supplier.

Many in the industry believed the opening of the retail market to competition would pave the way for the domestic market to quickly follow suit. However, it has all since gone very quiet on this front, and we are left unsure if it is still on the government’s agenda.

A year of activity in the water market concluded in December with Ofwat releasing their final guidance for PR19. The main themes that came from this were resilience, affordable bills, customer service and innovation. The aim of PR19 is to encourage, incentivise and enable water companies to achieve the four themes, so that customers will get more of what really matters to them. It was also announced in December that WACC (weighted average cost of capital) will hit a record low for a regulated utility, going down to 2.4% - Ofwat estimates this reduction in the cost of capital should  result in an average saving of £15-25 per customer, per year from 2020 onwards.

2017 was a year of flushable focus, with the Marine Conservations Society’s campaign to get the word “flushable” removed from packaging – in an effort to improve our coastlines, and sewers. The Marine Conservation Society even revealed that 83% of the public would like to see the word “flushable” removed from all packaging, if wet wipes do not meet the standard of what can be safely flushed down the loo – and with 93% of the material causing sewer blockages being wet wipes, it seems they certainly do not meet the standard!  And I cannot leave the water section without mentioning one story that hit headlines around the world – the giant 130 tonne, 250-metre long fatberg found underneath Whitechapel Road in London. YUK!

 

Energy Switching

On a more positive note, Energy UK announced that more than 5,000,000 customers switched electricity supplier in 2017, topping last year’s figure! And, what’s more, is that with over 55 suppliers to choose from now, nearly a quarter of the switches were made in favour of small or mid-tier providers .


Smart Meters

SMETS1 meters have been rolled out by many energy providers over the last year, according to BEIS more than 8,600,000 were operating across Britain as of November 2017. These generation one meters and are due to stop being rolled out in July 2018, to be replaced by SMETS2 meters. However, this is yet to be confirmed and there are still many market challenges……


Utility Week revealed that a piece of research they conducted in 2017 indicated more than 50% of their respondents may choose not to install a smart meter, with a quarter saying they were not interested in one, 24% saying they would need to find out more before making the decision on installing one and 5% indicating they are worried about the decision to get one.  When you consider the amount of money and time being put into rolling out smart meters, that is a large chunk of the market who may be turned off already.


Still, the program is well underway and 2018 will be the year more installations take place – something that the Data Communications Company (DCC) will welcome with open arms after admitting only 250 second generation smart meters had been installed as of November 2017, a figure that had been branded as ‘shocking’ by the Labour party. Will the decisions needed to turn this around mean that 2018 is the year that the smart meter roll out really takes off?  

 

Renewables

One of the biggest good news stories from 2017 comes from WWF, and was confirmed by National Grid. WWF announced at the very end of the year that 2017 has been the greenest year ever for electricity production! And, what’s more, Britain has broken 13 different renewable energy records in 2017 – with 2018 looking to be even greener.


Some of these records include:

  • The first 24-hour period without coal generation happened on the 21st April, the first time this has happened since the Industrial Revolution, happened on 21st April
  • The longest period ever without coal generation on 28th and 29th October
  • The greenest summer ever with 52% of electricity generation coming from low carbon sources (between 21st June to 22nd September)
  • 1st time ever that wind, nuclear and solar were generating more than both gas and coal combined.

We’ve also seen one of the big six suppliers, Eon, launch a new tariff in 2017 – one which uses only 100% renewable electricity and green gas. Apparently, it is the cheapest renewable tariff offered by any major supplier and was launched after Eon discovered almost 40% of its customers would be interested in a renewables-only tariff.


Universities are also playing a noticeable roll in the renewable world, and the University of Sheffield released a free forecasting tool for network operators, generators and traders which aims to give them greater visibility over the impact of solar on the power grid. Ultimately, the tool should improve the efficiency of the power system and bring down balancing costs by reducing the need for standby generation. To see the tool for yourself, you can go to: https://www.solar.sheffield.ac.uk/ .


Overall, 2017 was a year of utility focus, despite everything else going on in the world. Headlines were made, records were broken and energy bills went up, again. Will 2018 be the year of SMETS2 meters, of the dominance of green energy, or perhaps the year when blockchains transform the utilities world?

 

If you have a view on what you think 2018 has in store, we’d love to hear it!

 

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