What does 2020 hold for the UK Energy Market?

The energy market explained

Supplying energy to UK households involves 3 main elements: generating electricity, transporting gas and electricity and selling energy to consumers. The UK electricity and gas market are private, meaning that it's private energy suppliers who ensure domestic customers benefit from energy consumption.


Once the electricity is generated, it goes through the transmission and distribution networks which are run by the National Grid. Suppliers then buy energy in the wholesale market and sell it to consumers.

Renewable energy and climate change were also a major factor to the fortunes of the sector with the UK government declaring a climate emergency in the summer and Ofgem tightened the rules needed for new entrants into the market.

With several big energy suppliers going into liquidation in 2019, it has proven to be a tough year in the energy marketplace. There’s a few key events and issues in store for the energy marketplace in 2020 which could affect energy supply businesses. We have listed the top priority issues and key events which should be noted by any energy supplier in 2020, these include:

In March Ofgem’s controversial energy price cap is due for revision in April 2020 and many experts are forecasting that it will be increased.

If this is the case, suppliers are likely to raise their prices affecting millions of customers.

However, there is an opportunity for challenger brands to snap up customers if they can keep their price offerings lower and in turn offer greater savings for consumers.

Data released at the start of the year showed that 11 million customers on default tariffs protected by the energy price cap made savings of between £75 to £100 on their dual fuel bills.

Read more: Consumer Confidence in energy price cap remains low says report

When the price cap was first introduced in 2019 many had forecast that switching would be curbed, the opposite happened with a total of 6.4 million households switched suppliers in 2019.

Typical households potentially saving an average of around £290 if they moved to one of the cheapest deals on the market.

With 2019 being a record-breaking year for switching supplier we could see an ever-greater number of switches in 2020.

After years of uncertainty and political infighting Brexit is happening on January 31st. The landslide general election victory for Boris Johnson gave a clear indication from UK voters that they wanted it to be done and dusted.

However, despite promises from the government that a new trade deal will be achieved by the end of the year, it’s also unlikely to be achieved in such a small-time frame. Negotiations are unlikely to start until March.

According to Ofgem, it did not identify any licence provision that would become inoperable as a result of the UK leaving the EU.

However, if no deal can be achieved in the deadline set out by the government it states that 200 changes are likely to be made to licences in order to reflect any necessary legislative changes that will be required.

As far as possible, the effect of the changes is likely to retain the existing obligations and duties on licensees.

Read more: The Impact of Brexit on the energy sector

With the initial deadline for energy suppliers to put a smart meter into every household being missed, the target was pushed back to 2024.

The controversial rollout has been beset with problems but it’s likely that 2020 will see an increased push to improve the number of smart meters in use.

Further pressure will also be put onto energy suppliers to adopt measures to connect and communicate with the Data Communications Company (DCC).

All energy suppliers were required to become DCC users from November 2017 for the rollout of the first generation of smart meters (SMETS1) and support the installation of second-generation meters (SMETS2), several suppliers were not with nine companies getting into hot water for failing to meet the obligation.

Read more: Nine Energy Suppliers could be issued with Final Orders over DCC requirements by Ofgem

From trade wars, rising tensions in the Middle East between Iran and the United States to the ongoing Coronavirus sweeping through China energy prices and the wider global economy could be at risk.

The impact of the Coronavirus has yet to be discovered but signs are not looking too promising. The biggest factor that will impact energy prices, however, is the situation in the Middle East.

2019 saw wind power break new records in the UK and the emphasis on clean energy is only set to increase.

Savvy energy suppliers can take advantage of this drive for clean energy by offering green tariffs to their customers and demonstrating that they take environmental concerns seriously.

Known as Ofgem’s next round of price control measures RIIO-2 went through several rounds of consultation in 2019 and the process is set to continue throughout 2020. RIIO-2 will be the next price controls for the network companies running the gas and electricity transmission and distribution networks.

By the end of 2020, Ofgem will publish its final view on the price control allowances.

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