Are firms confident of keeping the lights on in 2020?

2019 was a tough year for the UK energy market. 

A total of nine companies went out of business to date with 19 short circuiting the year before. 

The supply of money and customers is being squeezed so the lights are going off at some of the smaller energy providers in the market. 

These companies aren’t just selling electricity to households and businesses but are also part of the distribution supply chain including literal power brokers and agents that arrange the sale of electricity via power distribution systems and operators of electricity and transmission capacity exchanges for electric power. 

Energy companies going out of business spreads trouble further down the supply chain. 

If an energy business goes bust then they’ll most likely owe money to other suppliers which means that a single insolvency could push multiple wholesalers into financial difficulty or worse. As a result, the remaining businesses could raise their prices to mitigate these negative effects which then puts further strain onto energy retailers. 

It becomes a negative feedback loop. 

The renewable power market is another example. If a supplier collapses their unmet supply obligations have to be distributed across the rest of the existing market. 

Energy expert Paul Pittman said: “Smaller energy companies are squeezed from both sides by existing larger competitors and the demands of the sector and its regulators.

“Ofgem set an energy price cap for instance which is particularly challenging for smaller suppliers who struggle to benefit from the economies of scale the big six established energy companies enjoy. 

“Ultimately it’s not in the interests of consumers if choice is restricted through providers leaving the market.”

Hopefully 2020 is a lot brighter for them – and everyone!

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