Welcome to the GB Energy Market: A Primer for 2022
Introduction
Welcome to the first post in my new series exploring the Great Britain (GB) utilities and energy market. My aim is to demystify the complex world of energy supply, regulation, and settlement, and to chart the dramatic changes we’re seeing in the sector as we move through 2022 and beyond. Whether you’re an industry professional, a policy enthusiast, or just a curious consumer, I hope you’ll find this series both informative and thought-provoking.
In this opening post, I’ll set the scene: how the GB energy market is structured, who the key players are, and what’s shaping the headlines as we start 2022.
The Structure of the GB Energy Market
The GB energy market is often described as one of the most liberalised and competitive in the world. But what does that actually mean?
Key Players
- Suppliers: Companies like British Gas, EDF, Octopus Energy, and (until recently) Bulb, who buy energy wholesale and sell it to homes and businesses.
- Generators: Firms that produce electricity, from traditional gas and nuclear plants to wind farms and solar parks.
- Transmission and Distribution: National Grid Electricity System Operator (ESO) manages the high-voltage transmission network, while regional Distribution Network Operators (DNOs) handle local delivery.
- Regulators and Market Operators: Ofgem is the regulator, overseeing market rules and consumer protection. Elexon operates the Balancing and Settlement Code (BSC), ensuring the system stays in balance and that market participants are paid correctly.
For a detailed breakdown, see Ofgem’s Guide to the GB Electricity Market.
How Did We Get Here?
The GB market has evolved dramatically over the past 30 years. The 1990s saw the privatisation of the Central Electricity Generating Board and the creation of a competitive market. Since then, the sector has been shaped by waves of policy reform, technological change, and—more recently—ambitious decarbonisation targets.
For a concise history, Elexon’s Market Timeline is a useful resource.
The Price Cap and the 2022 Energy Crisis
As we enter 2022, the market is under unprecedented strain. Wholesale gas prices have soared, leading to the collapse of over 25 suppliers since August 2021 (Ofgem: Supplier of Last Resort process). The government’s energy price cap, designed to protect consumers, has squeezed supplier margins to the point of insolvency for many.
This crisis has exposed the fragility of some business models and raised questions about the future of the retail market. For a real-time view, National Grid ESO’s Winter Outlook Report 2021/22 provides insight into system risks and resilience.
Balancing and Settlement: Keeping the System Running
Behind the scenes, the market relies on a complex system of balancing and settlement. Every half hour, Elexon ensures that the amount of electricity generated matches what’s consumed, and that payments flow correctly between generators, suppliers, and traders. This process is governed by the Balancing and Settlement Code (BSC), which you can explore in detail on Elexon’s BSC page.
Decarbonisation and Net Zero
The UK government has committed to reaching net zero carbon emissions by 2050. This is driving a rapid shift towards renewables, electrification, and new technologies like battery storage and hydrogen. The BEIS Net Zero Strategy sets out the roadmap, but the transition is not without its challenges—especially in a period of high market volatility.
What’s Next?
In the coming weeks, I’ll be diving deeper into each of these topics: the causes and consequences of the current crisis, the mechanics of settlement, the future of gas, and the role of new technologies. I’ll also be sharing case studies from across the industry, and linking to the best public domain resources for those who want to dig deeper.
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