In this latest market assessment report, Key Note examine the UK utilities market, covering electricity, gas and water services (water supply and sewerage). It provides data on industry turnover and household consumption for each of the three services, it also examines industry structure. In financial terms, the electricity sector has the largest turnover of the three types of service — much of this being due to the cost of converting primary fuels (principally coal and gas) into electrical power. The next largest sector is gas, major markets being direct use and also as a fuel for power generation.
The UK energy market (electricity and gas) is dominated by a small number of large companies, most of which were power companies but have now expanded to supply gas. Energy can also be obtained through marketing companies with no physical involvement in the production or distribution of electricity or gas. Some of the large energy companies operating in the UK are subsidiaries of major European energy companies.
Important issues have to be addressed by the UK energy industry, a major topic being climate change and the need for a reduction in the use of fossil fuel to cut carbon emissions. Developments here include a greater use of renewable energy and a new programme to build nuclear power stations to replace existing power stations. Gas will still be an important fuel for the UK and, as the UK’s own gas production decreases, new sources of imported gas will have to be arranged. Some of this future gas supply will be from politically unstable regions of the world.
The current economic situation is affecting the utility sector: difficulties in the financial sector have restricted borrowing, and some customers have reduced their requirement for energy or water due to poor market conditions for their business. However, even though energy demand in the next few years is expected to show little or no growth, energy prices are expected to rise to fund the large investment needed to develop a secure energy supply with reduced carbon emissions.
This report is available to current London Business School staff, students and faculty from Key Note Online which can be found on the A-z list of library databases via Portal.
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