UK Energy Market, Essay Example

Introduction

The United Kingdom is dubbed as one of the world’s most important regions that is noted for its development and its continuous adaptation of growth and development as a primary culture of national improvement. Engaging in rather extensively defined expansions of social systems, the UK administration is noted for its capacity to make the best out of what the nation possess as means of their capital source of social and national competence. Energy, being one of the most sought after elements for development, is one of UK’s most distinct resources of advancement.

Being a non-producer of major energy resources that the country uses to empower development and technological advancements, UK’s energy market reserves its right and capacity to establish a workable system that could help in making effective use of the energy resource they get from outside markets. At present, there are three primary elements that govern the UK energy market. These elements directly affect how energy is purchased and distributed for public utilization. The three elements of function include creating electric energy resource through national generation of power, another is the acquiring of energy resources through purchasing such resource from the international market and third is the actual distribution process embraced by the nation in relation to how they make use of the energy that has been purchased and produced accordingly. In the discussion that follows, a distinct indication on how modern systems of energy generation and management shall be given attention to. The distinct insistence on how the nation survives through making good and effective use of the supply available for consumption shall be evaluated herein.

Analysis of the UK Energy Sector

The UK Energy Market

Most electricity markets operating in the UK are privatized. It could be considered that this process of privatization allows companies to be more focused on how energy regulation could be managed for the sake of the people’s general benefits. Depending on the programs that they use to be able to establish proper distribution of energy provision to consumers, the local market could choose from which of these companies they would like to receive energy from. There are currently six primary energy suppliers in the UK. The six companies include the British Gas, EDF Energy, Electricite de France, NPower, E.ON UK, Scottish Power, and SSE. These organizations are noted for buying their energy resources from outside the region. About 30% of what they sell are personally produced in the country, but are of scarce resources hence requiring them to regulate the use and distribution of the said resources.

In relation to this matter, it could be understood that the graph herein shows how market development in the field of energy distribution operations in the UK commercial distinctions make a definite turn on how the established policies are able to turn the situations around, therefore affecting the distribution of energy among public residents in the local population. With R&D support and technological subsidies at the bottom point of market competition, the big six energy providers in the country are able to establish a new sense of market control that affects everything else in the said industry of market distribution.

The Current Status of Competition

Competition among these six energy providers in the country is tough. Making sure that they give what the market demands for is a core source of operating competence for the said operators. The retailing and supply of energy in the country is handled accordingly to make a definite course of distinction on how the path of energy management is handled in the country. While there is the reigning power of the Big Six, there also exits smaller energy distributors in the country. These smaller organizations take a smaller share from the market; however, their impact on the performance and growth of the Big Six may be fully undeniable. It is because of these smaller performers that the rate of market share that the Big Six gets has noticeably dropped down from 99.8% in 2009 to 92.4% in 2014. The supposedly small drop of almost seven percent in market share and sales recognition does imply a greater impact on how the Big Six performs to provide what the market wants and demands for in the current energy system in the country. Among the smaller organizations include Ecotricity, OVO Energy and Good Energy. Operating in local areas and smaller scales of concentration, these organizations often become more effective in determining their path of operation compared to the more complex systems adapted by the larger organizations. This is why it is most likely that a particularly distinct number of consumers develop a change in attitude especially in choosing their energy provider.

OFGEM, or the Office of Gas and Electricity Markets is a support agency that empowers the Gas and Electricity Markets Authority (GEMA) in UK to make sure that distribution of energy is handled accordingly and in a balanced manner especially through making a definite impact on how the management systems among the providers are guided to ensure public benefit from the operation. Among the authoritative powers that OFGEM depends upon are the Gas Act of 1986, the Utilities Act of 2000 and the Competition Act of 1998.

Application of Economic Theory

The Big Six energy providers in UK are among the most sought after organizations in the stock market. Believing that they control the overall status of the country’s energy market, investors jump into the bandwagon on putting their trust into the marketing and operating systems that these companies embrace, thus making them one of the most sought after organizations in UK among stock holders and international investors. The competition between these six operators even makes the system more distinct; nevertheless, the entrance of the smaller organizations with the industry makes such competition rather compelling and challenging as the people have developed a particular inkling to what the new organizations have to offer.

Theories Surrounding the Situation

According to OFGEM’s report, the current status of the UK Energy market directly involves the broadest form of market competition which is noted as the budget competition. True to its sense, UK and its people are noted for their capacity to spend money; nonetheless, the changing tides of time impose on the change in behavior on how the people would want to spend their financial resources on. Giving them many choices on how they are going to handle such courses of development, people have become more concerned on how they are going to spend their money and on whom or which company they are going to spend their money on.

The budget competition then pushes the Big Six energy providers in the country to become more concerned on observing the discretionary income of the public that is dispensable. The willingness of the people to spend shall determine the effectiveness of the management and marketing mix they are using to influence the market accordingly. Marx’ theory of market competition best fits this presentation of possibilities of operation within the UK energy market. The emergence of substitutes in the said industry even makes the competition broader thus expanding the choices of the market accordingly.

This is why, even though energy consumption is understood as an inevitable matter in UK and among its residents, competitors in the industry cannot let their guard down, especially that they become involved in the process of determining the strength of the economy and the market to face definite competition and staggering management challenges in order to get the interest of most consumers in the market.

Benefiting from the UK Energy Market System

The consumers, the central figure standing at the decision point in the energy market in UK, are the ones whose decision and concerns are of high importance to business operators in the said industry. Practical options of growth and development are handled by the energy providers in the UK to make sure that the demands of the market are met. Most often than not, these companies entail to adjust their main systems of operation and programs for energy distribution to be able to fit the consideration over the concerns of the public especially on determining the rate of budget they are willing to spend in gaining the right source of energy service they need to survive everyday concerns. True to its sense, the current status of the energy market in UK demands business operators in the field to find ways to give attention to how the market wants to spend and how they want to spend available budget into the system. Adjustments and massive transformations are then considered by current operators to make sure such demands and expectations are met accordingly.

Conclusion

The overall status of the energy market in UK suggests that competition among industry-players create a distinct line of definition in the manner by which the industry itself performs. OFGEM’s report on the current status of the industry provides a definite picture that suggests how good management of resources through the creation and implication of effective programs help out in determining the real worth of the current industry’s status especially dedicated to serving the needs of the public. This is where the consideration over public concerns comes into play. Given that there are distinct smaller organizations spurring out within the industry, it is assumed that the larger entities would adjust accordingly to protect their market share in the industry.

Works Cited

Baskoy, T. Karl Marx Theory of Market Competition. http://www.yorku.ca/problema/Issues/Problematique0801.pdf. (Retrieved on January 27, 2015).

Allen, SR. (et al). Prospects for and barriers to domestic micro-generation: A United Kingdom perspective. Department of Mechanical Engineering. Science Direct.

OFGEM. (2014). Consultation on a proposal to make a market investigation reference in respect of the supply and acquisition of energy in Great Britain.

Pym, H.(2013).Energy: Is there enough competition in the market? BBC News Online. http://www.bbc.com/news/business-25018828. (Retrieved on January 27, 2015).