“The more [retailers] we come across, the more problems we see”

Thirty-one retailers have gone bust since the start of 2021 in the UK. At least one of those entities has a subsidiary in the Australian market (having yet to acquire any customers, according to the most recent AER and ESC data). In this Chart of the week, we take a look at the growth of the retail market in Australia and whether there has been any meaningful change in market share from new retailers over the past decade.

For this analysis, we have considered new retailers to be those that have entered the market after 2012. The total number of new retail licences granted by the AER since 2013 (incl.) is 69, which is more than a doubling of the roughly 40 licences that had been granted as of the end of 2012; in 2019 and 2020 alone the AER approved 25 new licences (14 and 11 respectively). Over the last 9 years, this represents 12.2% compound annual growth in the retail sector. However, of those 69 who have received retail licences, only 40 of them have acquired a customer (based on the AER and ESC data). To give context for the UK, 13 additional retailers were entering the market in 2016, 18 in 2017, 4 in 2018, 8 in 2019, 2 in 2020, and 2 in 2021 (as at Q3).

Below is a graph of the current number of customers that each of the new entrant retailers services, broken out by the year their retail licence was approved. Interestingly, a significant number of these new entrant retailers have failed to acquire a significant number of the customers, with only 5-6 of them having acquired more than ~40,000+ customers. Meaning that less than 10% of these new retailers have had any real impact on the market. As a total share of the entire retail market (by customer), they have only acquired 5.9% of customers, mostly in the residential space. The latest retail report from the AER states that the Tier 1 retailers (or the primary regional retailer) account for more than 80% of the residential market. This remains relatively unchanged even though we have switching rates across the NEM ranging from 3.5% in SA to 6% in VIC (when adjusted for AGL’s acquisition of Amaysim Energy in late 2021), meaning that much of the switching that is occurring is between the bigger retailers.

Sources: AER and Victoria Essential Services Commission

Ovo Energy (which, after having acquired one of the largest retail books in the UK, became the second biggest retail supplier with over 5million customers in 2020) but prior to this grew over a decade to have ~1.5million customers. For context, the UK has around 28 million customers, meaning they acquired ~5.3% of the market. Ovo has a retail licence in Australia and launched in 2019, but has only managed to acquire ~7,500 customers, roughly ~0.1% of the Australian market in 3 years. Bulb in the UK was founded in 2013 and grew to 1.7 million by the end of 2021 (before going bust in part to rising gas prices and insufficient hedging strategies), but during that period, it was able to acquire a significant portion of the market within a relatively short period of 8 years. This ability to capture market share appears to be a significant barrier in the Australian retail market. Even the largest new entrant retailer GloBird Energy has only acquired ~62,000 customers, which is only ~1% of the market.

It appears that we have a significant problem in the Australian retail market that even with a significant number of new entrants that have extremely promising business models that deliver value to customers, they have as yet not managed to convert those into customers switching from the large retailers. Additionally, the current ISP has more than 30GW of controllable DER/Storage to be leveraged from customers being a part of the wholesale market by 2050, but at this rate, it does not appear that we have sufficiently innovative tools or sufficient customers aligning with new retail models to be able to capture and realise that DER based future.

To keep reading, please log in to your account or sign up for free

Alternatively, please sign up to receive free market insight online and direct to your inbox

Related thinking

Commercial and market outlook

Winter is coming: MT PASA scheduled coal outages for winter?

The number of thermal generator problems continues to grow, and so does peak time volatility in the two northern states. On top of the closure of Unit 3 at Liddell occurring on 1 April and Unit 4 at Callide C still out without a public resolution, outages and problems have...

Energy storage and flexibility

Hydrogen hype: How cheap the hydrogen from electrolysis can be?

Hydrogen is considered a potential replacement for fossil fuels for energy generation, transport etc. Currently, 96% of hydrogen production originates from fossil fuels through steam reforming and coal gasifications. Only a small fraction (~4%) is produced via electrolysis. The high Capex of the electrolyser is usually referred to as the...

Home supply and services

Switching duck: electricity switches to remain subdued in the near future

In November 2021, switching levels plummeted in response to rising tariff prices and a lack of market choice. By January 2022, domestic switching reached its lowest level on record, falling 80% on January 2021. This 'Chart of the week' checks in with the options, if any, available to households wanting...

Commercial and market outlook

Nobody said it was easy, but it’s time for us to part: VIC’s climate targets & coal

In 2017, the Victorian Government legislated a state target of net-zero greenhouse gas emissions by 2050. Since then, short-term targets have been set in five-year increments, with the 2030 target being to cut emissions by 45-50% below 2005 levels. The Government is currently consulting on the 2035 target, which must...

Commercial and market outlook

BSUoS charges: volatility, deferral and reform

Over the last few years Balancing Services Use of System (BSUoS) charges have experienced significant volatility, with costs reaching record high levels which have added to the rise in consumer electricity bills and ultimately resulted in intervention in order to cap BSUoS rates. In this Chart of the week', we...

E-mobility and low carbon

I can see clearly now: ZEV mandate to provide path to 2030 new ICE vehicle phase-out

The last few weeks have seen several policy documents and consultation responses from the government published in the electric vehicle (EV) world, against the back-drop of record-breaking EV sales. In this 'Chart of the week', we explore the latest consultation conclusion from the Department for Transport (DfT), outlining proposals on...

Energy storage and flexibility

Price spikes in Queensland: Is solar revenue affected?

In the last few months, we have seen a substantial number of high price intervals in Queensland. Increased Market Demand on 9 March and the simultaneous trip of Gladstone units 3 and 4 on 31 March spiked energy prices to $8,800/MWh and $15,100/MWh levels, respectively. These price spikes occurred between...

Business supply and services

A GoO-ey end? Green power import certificates poised for removal

On 29 March, BEIS published a consultation seeking views on the removal of Feed in Tariff (FIT) and Contracts for Difference (CfD) scheme cost exemptions for green imported electricity and the recognition of EU Guarantees of Origin (GoOs) in GB altogether. Our 'Chart of the week' shows historic GoO imports...