Market Competitive Intensity (MCI): United Kingdom

Datamonitor's Market Competitive Intensity Index (MCI) is a robust framework for measuring and benchmarking the development of competitiveness and market conditions in a range of gas and electricty markets. The MCI assessment draws on nine underlying metrics grouped into three broad clusters: Market framework; Supplier Push and Customer Pull.

Report Highlights
Datamonitor's MCI Index offers a robust framework for measuring the development of utility Market Competitive Intensity.

MCI scores are calculated using two different methods. The first, the simple weighted average (additive) measure shows overall competitive intensity. The second, the multipliative method, is more complex. It prevents markets with an overly wide spread of underlying raw scores from exerting undue influence over, or skewing, the final result.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Introduction: Datamonitor's MCI Index offers a robust framework for measuring the development of energy Market Competitive Intensity 2
The MCI Index shows how attractive a particular market is to new entrants in terms of the competitive environment 2
The MCI assessment draws on nine underlying metrics grouped into three broad clusters: Market framework; Supplier Push; Customer Pull. 3
The MCI Index measures competitive intensity in the EU 27 and 6 related markets 4
The MCI Index assesses markets as they stood in early 2008 and forecasts conditions likely to be prevailing three years after full market opening 4
The MCI Index offers an assessment of competitive intensity in January 2008 and a forecast for July 2010 - three years after full market opening took place in the EU states. 4
Each of the nine pillars has an assessment scale to allow for the comparison of diverse markets (see appendix for more details) 5
Two differing overall MCI scores are calculated to ensure full clarity of results 5
A simple weighted average (additive) measure shows overall competitive intensity 5
A weighted multiple (multiplicative) measure shows overall competitive intensity 5
The MCI framework has a number of applications for your organization 6
Context: As Europe's most competitive gas and power market, the UK is ranked at the top of the scale in both gas and power 7
The UK's power score is considerably ahead of the second and third placed markets 7
In common with the power market, the UK is considerably ahead of all the other gas markets surveyed 7
Power MCI: All of the UK's power scores are at the upper end of the scale 9
The UK's Market Framework metrics all achieve scores at the top end of the scale 9
Effectiveness of Regulator [2008: 7/10 2010: 8/10] 9
Ease of Third Party Access [2008: 9/10 2010: 9.5/10] 10
Effectiveness of Balancing and Data Transfer [2008: 9/10 2010: 9.5/10] 10
Supplier Push metrics are driven by the existence of a fragmented wholesale market and the well developed traded market 10
Wholesale Market Fragmentation [2008: 8/10 2010: 9/10] 10
Retail Market Fragmentation [2008: 5.5/10 2010: 7.5/10] 10
Traded Market Maturity [2008: 7/10 2010: 8.5/10] 10
All of the UK's Customer Pull metrics score at, or close to, the top end of the scale 10
Access to Market Information and Assistance [2008: 9.5/10 2010: 10/10] 10
Consumer Representation [2008: 7.5/10 2010: 8/10] 11
Propensity to Switch [2008: 6/10 2010: 7.5/10] 11
Gas MCI: The UK achieves high gas scores throughout the nine pillars 12
The developed and fully deregulated nature of the UK market allows it to achieve the highest market framework score in this study 12
Effectiveness of Regulator [2008: 7.5/10 2010: 7.5/10] 12
Ease of Third Party Access [2008: 10/10 2010: 10/10] 13
Effectiveness of Balancing and Data Transfer [2008: 10/10 2010: 10/10] 13
The only Supplier Push factor not to score highly in the UK is Retail Market Fragmentation 13
Wholesale Market Fragmentation [2008: 9/10 2010: 10/10] 13
Retail Market Fragmentation [2008: 6.5/10 2010: 7.5/10] 13
Traded Market Maturity [2008: 10/10 2010: 10/10] 13
High levels of switching, and facilities to assist this switching, result in high Customer Pull scores 14
Access to Market Information and Assistance [2008: 10/10 2010: 10/10] 14
Consumer Representation [2008: 8.5/10 2010: 9/10] 14
Propensity to Switch [2008: 9/10 2010: 10/10] 14
Outlook: The developed nature of the UK market means that commercial opportunities tend to lie outside of the retail part of the value chain 15
The UK unsurprisingly achieves the highest competitive intensity scores in both the gas and power markets 15
Power scores 15
Gas scores 15
Commercial opportunities do exist in the UK power market, though the high level of competitive intensity means that they are more difficult to capitalise on than in other less advanced markets 16
New Market Entrant Opportunities, Power 16
New Market Entrant Threats, Power 16
The strong level of competitive intensity in the UK means that the market place is in many ways crowded 16
New Market Entrant Opportunities, Gas 16
New Market Entrant Threats, Gas 17
MCI Scores 18
APPENDIX 21
Definitions 21
Ask the analyst 26
LIST OF TABLES
Table 1: Market Competitive Intensity, UK 2008-10 18
Table 2: MCI Additive, Europe 2008-2010 19
Table 3: MCI Multiplicative, Europe 2008-2010 20
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Table 1: Market Competitive Intensity, UK 2008-10 18
Table 2: MCI Additive, Europe 2008-2010 19
Table 3: MCI Multiplicative, Europe 2008-2010 20
Figure 1: MCI Assessment Scale 2
Figure 2: MCI Assessment Framework 3
Figure 3: MCI Market Coverage 4
Figure 4: MCI Scales 5
Figure 5: MCI Applications 6
Figure 6: European Power Market Competitive Intensity, 2008-10 7
Figure 7: European Gas Market Competitive Intensity, 2008-10 8
Figure 8: Power Market Competitive Intensity, UK 9
Figure 9: Gas Market Competitive Intensity, UK 12
Figure 10: Market Competitive Intensity, UK 15
Figure 11: Scale for MCI Assessment, Effectiveness of Regulator 21
Figure 12: Scale for MCI Assessment, Ease of Third Party Access 22
Figure 13: Scale for MCI Assessment, Effectiveness of Balancing and Data Transfer 22
Figure 14: Scale for MCI Assessment, Wholesale Market Fragmentation 23
Figure 15: Scale for MCI Assessment, Retail Market Fragmentation 23
Figure 16: Scale for MCI Assessment, Traded Market Maturity 24
Figure 17: Scale for MCI Assessment, Access to Market Information and Assistance 24
Figure 18: Scale for MCI Assessment, Consumer Representation 25
Figure 19: Scale for MCI Assessment, Propensity to Switch 25
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