Chart of the week | The end of vertical integration…or not?

Within the last decade the vertically integrated (VI) model, whereby companies own generation and supply businesses, has fallen away.

In 2008 the traditional VI model was at its height – the Big Six owned over two-thirds of the generation fleet, and supplied over 90% of electricity by volume (99% in the domestic market). This approach helped mitigate the risk associated with volatile commodity markets and imbalance prices by routing power to a largely ‘sticky’ customer base within the retail arm. In essence, the customer base provided a stable and long-term offtake route.

Our chart this week shows that although the percentage of generation owned by integrated companies has fallen. Investors in renewables also have a position in the retail market, bucking the trend to restructure and sell generation assets.

Tim Dixon

Tim Dixon

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