Peter McGirr wanted to modernize the British consumer energy market when he founded Green three years ago, building a customer base of more than 250,000 households. Now, with the sector in meltdown, he says it is “incredibly unlikely” the Newcastle-based supplier will survive until Christmas without government intervention.
Five smaller suppliers have collapsed in the past six weeks, with four or five more expected to join them in the next 10 days as the industry is battered by unprecedented surges in wholesale electricity and gas prices.
Observers are predicting as few as 10 suppliers will make it through the winter, implying 40 could go bust. Some executives have privately suggested the sector could go back to a big four, five or six companies.
There are nearly 50 energy suppliers in Britain
The natural gas market has been hit by a perfect storm. A prolonged winter left European stocks depleted; lower supplies from Russia and strong demand for liquefied natural gas from Asia hampered summer stockpiling; and UK North Sea production has plunged as companies perform pandemic-delayed maintenance.
Soaring gas prices have hit power prices, with Britain particularly reliant on fuel for electricity generation and home heating. And gas-fired stations have had to do even more heavy lifting because of some of the lowest wind speeds since the 1960s, as well as nuclear outages. wholesale prices lurched even higher last week after a fire at Britain’s main subsea electricity cable with France.
But despite the confluence of issues, industry insiders and observers say the crisis has highlighted deeper structural problems both in the sector and with UK policy that have led to fears of a diminishment in energy security that could have consequences far beyond the failure of small companies.
I’Vhen it came to supplier failures, “the fox was already in the hen house”, said Martin Young, an analyst at Investec.
A decade ago, the supply of electricity and gas in Britain was dominated by a “big six” of British Gas, EDF Energy, Eon UK, Npower, ScottishPower and SSE, whose profit margins and bonuses for executives were often the subject of intense political scrutiny.
A series of regulatory reforms that made it easier to enter the industry led to the number of household suppliers surging from just 12 in 2010 to more than 70 in 2018, making it one of the most liberalized markets in the world.