The liberalization of energy markets, ie their opening to competition, has been widely commented on in terms of short-term results. Has competition favored lower prices for consumers?
But liberalization has been much less often seen from the point of view of actors’ game and dynamics of national ecosystems, ie from the perspective of what could be long-term effects.
In countries where the historical supply market is concentrated on a dominant player, such as Belgium (Electrabel), Ireland (ESB), Portugal (EDP) or France (EDF, Engie former GDF) ), the watchword is, from the opening of the market, “Come on !, all against the historic leader”.
The approach of the new suppliers is, at first, to identify the weaknesses of the leader and to attack these weaknesses: among these weaknesses, we often find the price level or responsiveness, two frequent consequences of a situation of sustainable monopoly. The opening of this type of market creates, during the first years, little diversity; the situation evolves when some challengers reach a size allowing them to invest in a more elaborate positioning.
Two cases arise, depending on the success of the defensive strategy inevitably followed by the incumbent operator and according to its awareness and image:
- Either the churn rate of its customers is important (it is almost always the case of large accounts, sometimes the case of private customers) and the historic leader has no choice but to reinvent himself in pain and, in the best case, it takes him at least five years to stop reverse the trend.
- Either the churn rate is low and legitimizes its defensive strategy and, in this case, nothing significant happens on the market as long as the situation persists.
In countries where the historical supply market is fragmented, with regional or even very local historical actors, such as Austria, Germany, Switzerland and to a lesser extent Great Britain, the word Order is “Let’s make the difference! “.
Each supplier becomes a potential new supplier in the neighboring territories of its historical perimeter. It is therefore possibly attacked from all sides but cannot be satisfied with a single target.
This market configuration gives more diversity because it is necessary to differentiate in the middle of several different approaches. Utilities are therefore forced to gradually define their value proposition, their specificity and be more inventive.
On the other hand, there are more difficulties for some suppliers, forced to partner or even be bought by competitors, or to cease their supplier activity to focus on activities remaining in the regulated domain.
Significant differences in dynamics are emerging between utilities from neighboring countries but with market structures that are more or less supportive of change: pay attention to ensuring that markets that still seem protected today do not become priority targets in the future.
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