10 Medium-Sized Energy Suppliers Hold a Quarter of the Market

Mid-sized energy suppliers gained more than half a million accounts in the second quarter of this year, consolidating their hold on a large swatch of the market despite depressed switching figures.

Just 10 medium-sized suppliers now hold nearly a quarter (23%) of the domestic supply market, according to a new analysis from Cornwall Insights.

Mid-sized energy suppliers are a relatively new breed in the UK supply market, which for years was dominated by the Big Six, suppliers with several million household accounts, and a handful of small challengers. 

A few of those small competitors broke away from the pack early last decade, winning hundreds of thousands of accounts with green energy tariffs, discount prices, digital solutions and mergers and acquisitions.

First Utility and Utility Warehouse became the first challenger brands to crest 250,000 accounts in 2014, earning Cornwall Insight’s designation as medium-sized suppliers. Since then a further 17 suppliers have crossed that threshold, most recently Tonik Energy. 

These mid-tier suppliers have attained this growth by both attracting new customers and gobbling up competitors, including failed energy suppliers, Katie Hickford, Analyst at Cornwall Insight, said.

“Over the last six years, the suppliers in this group have taken different strategies to grow, using both organic growth and customer acquisition strategies. Some suppliers have used supplier exits as an opportunity to grow, changing the face of the retail landscape in the process.”

Today the middle of the market is dominated by Octopus Energy, which posted the highest growth for medium-sized suppliers last quarter, with both strong organic growth and the addition of small supplier Engie’s 70,000 domestic customers. Octopus now serves more than 1.5 million customers.

The green energy supplier also became a unicorn—a startup valued at over £1 billion—in May, as Australian energy company Origin acquired a 20% stake for £300 million. 

Shell Energy—the former First Utility—had the second-highest growth between April and June, acquiring Green Star Energy and reaching a 3% share of the market. Shell is making a play for more environmentally-conscious customers--and trying to shake off its association with its oil and gas parent--with its new seasonal solar-battery tariff. The tariff will allow households with solar panels to reap energy discounts even in the depths of winter.

Meanwhile, Bulb, with 1.6 million accounts, gained GnERGY’s 9,000 customers through the supplier of last resort mechanism.

But while they readily gain customers, medium-sized suppliers frequently lose them—to other challengers. The churn rate for small and mid-sized suppliers is 32%, compared to 18% for large suppliers, Cornwall Insights said.

“The challenge for these suppliers now is to retain the customers they have gained,” Hickford said.

Mid-sized energy suppliers posted strong gains last quarter despite stagnation in the energy market during the coronavirus lockdown. Electricity switching slumped to a three-year low in May, before rebounding in June.