Western Europe’s medium-sized energy users have not gained as much from competition as major energy users or residential customers. However, companies can make substantial savings if they tender for supply contracts through online brokers. The majority of mid-sized firms will be using online brokers by the end of next year.
Online energy brokerage will generate E390 million annually in western Europe by 2004.
Datamonitor’s new brief, Online Brokers in I&C Energy Supply: Taking competition to the next level, finds that by 2004, online energy brokerages will generate E90 million per annum in the UK alone, and as much as E300 million in the rest of Europe.
The introduction of competition in European energy supply did not benefit small-to-medium-sized business users to the same extent as major energy users and residential customers, largely because the mid-market segment is extremely diverse in consumption levels and load profiles.
Mid-market clients therefore find it hard to compare suppliers’ offers on a like-for-like basis, creating a space in the market for online brokers. Companies such as Utilyx, BuyEnergyOnline and UX Online enable mid-market users to play suppliers against each other to get better prices.
Datamonitor expects the majority of mid-market customers in Europe’s leading liberalised markets such as the UK to sign up with online brokers by the end of next year. As brokers fight for customers, fees are set to fall from the current average of E750 per meter to as low as E15. Even so, the high penetration means that brokerage revenues could reach E90 million a year in the UK alone.
Yet online brokers will not render their conventional counterparts obsolete – the channels are complementary. The online channel is ideal for sourcing cheap energy and for maintaining a record of consumption profiles. Then, traditional brokers can offer tailor-made solutions such as energy management and risk-management services.
Utilyx also offers energy management consultancy, but the online brokers that currently do not offer consultancy would do well to partner with a conventional brokerage – the former providing clean data, the latter helping extract value from it.
Over the next few years, a closer relationship (including co-branding and revenue-sharing) will emerge between online brokers and offline broker-consultancies. They will team up to compete against integrated utilities in providing their clients with ‘total energy solutions’.
Related research: Datamonitor, 2002: Online Brokers in I&C Energy Supply: Taking competition to the next level
You can download a FREE utilities report at www.dmfreereports.com