Vattenfall buys into UK's consumer energy retail market

Swedish utility is latest European power company to enter the UK’s deregulated consumer energy market.
Published: Fri 23 Jun 2017

Swedish state power company Vattenfall has bought British home energy supplier iSupplyEnergy. The independent energy supplier currently serves around 120,000 customers. The company will continue to function as a wholly owned subsidiary of Vattenfall.

The power company sees the UK market as a useful testbed for services enabled by digital technology.

Vattenfall Chief Executive Magnus Hall said in a statement that the acquisition reflected the strategic importance with which the firm views the UK.

“We are in Britain to grow,” he said, “and our acquisition of iSupplyEnergy strengthens our energy business in northern Europe.”

Vattenfall plans to compete in the solar PV and battery storage market as well as business to business energy retail in Northern Europe.

Vattenfall’s Senior Vice President for Customers and Solutions, Martijn Hagens, said: “We have a strong and growing customer focused company with more than eight million power, gas and heat customers in northern Europe.

“We are convinced our acquisition of iSupplyEnergy will be good for our new customers, as we will combine our experience and increasingly smart and fossil-fuel free energy solutions with iSupply Energy’s strong, nimble, digitalised and transparent customer service.”

Rob Gildert, Chief Executive of iSupply Energy, said the firm was “delighted” to come under the wing of the giant energy supplier.

This is the second European company in weeks to seek opportunities in the UK’s highly competitive home energy market. France’s Engie launched a UK home energy business last month.

Engie wants to save customers money

Energie is the biggest supplier to enter the UK domestic market in the last 15 years but Wilfrid Petrie, Head of Engie’s UK business, said it does not want to become as large as the 'big six' suppliers.

Engie wants to differentiate itself by promising to move customers on to its cheapest available tariff when their fixed price deal comes to an end – rather than onto a “standard variable tariff”.

Engie estimates that UK customers could save £3bn by switching from expensive standard rates to cheaper deals on the market. This equates to a saving of about £175 per customer. Engie wants to offer a variety of fixed deals as well as a tracker product that moves in line with wholesale energy prices. All electricity provided through each deal will be 100% renewable.

UK’s home energy market attracts interest

The move by companies like Vattenfall and Engie could be viewed as adding pressure on the 'Big Six' UK suppliers which are trying to fend off dozens of small competitors.

The UK’s large incumbent energy companies are facing growing discontent over rising bills and the threat of state intervention in the market. While Prime Minister Theresa May's government looks to have shelved the idea of capping energy prices, it is still looking at ways to protect energy customers facing the poorest value tariffs, according to plans which were revealed in the recent Queen's Speech.

PWC estimates the UK connected home market could be worth around £3bn up to 2020, while British Gas owner Centrica has said that revenue from its connected home unit could reach £1bn by 2022.

Vattenfall said it made the decision two years ago to expand internationally, and that it was not concerned by the proposed price cap since iSupplyEnergy has well below the market average number of customers on more expensive standard tariffs.

To entice customers, Engie is offering a rollover promise, which commits it to switch households to the cheapest tariff available once fixed-term contracts run out.

Forward-thinking utilities buying into connected home market

Vattenfall already offers connected home products such as remote heating devices in its Nordic markets. The utility aims to introduce similar energy saving products to the UK market.

Many utilities hope these innovations, once established in the home, will help them build a stronger customer loyalty.

According to Steve Jennings, who leads consultancy PwC's Power and Utilities Sector Practice in the UK, some energy companies want to move away from selling energy, purely as a commodity because it presents “race to the bottom in terms of price."

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