GB energy suppliers were required to take “all reasonable steps” (ARS) to install smart meters for their residential and small business customers before the end of December 2021.
UK Government has confirmed there will be a new obligation on all suppliers to continue installing smart meters for the period January 2022 to December 2025. The UK Government has consulted on the annual minimum installation targets all suppliers will have to meet for the first two years: 2022 and 2023. The targets will not be covered by ARS. These targets are challenging and there are real risks that suppliers will fail to achieve them, given that smart meters remain optional for customers. EDF and other suppliers are working with UK Government to develop future targets which strike the balance of completing smart meter roll out in a way that maintains pace, the correct technical standards and a positive customer experience.
EDF Energy remains committed to delivering smart meters to all residential and small business customers who want to benefit from this new technology. In 2021, EDF Energy has installed a further 452k smart meters and at the end of 2021, 43% of EDF Energy customers in scope for the rollout have smart meters. This meant that EDF Energy has installed a total of 2.4 million smart meters to date. This continued progress is despite several serious challenges, including a Covid-19 related pause of all smart meter installation activity to ensure the safety of its customers and operatives and a nationwide fuel shortage.
In 2021, the non-residential segment supplied a total of 30.83TWh of electricity, of which 1.94TWh was supplied to 221k small business customers (“SME”) and 28.89TWh to 9.2k medium and 5k large business customers (“I&C”). The business customer electricity market in the UK is c.164.1TWh in total, making EDF Energy the second largest supplier to business customers by volume.
The industry has recovered from the Covid-19 demand reduction seen in 2020. Whilst UK non-residential electricity segment has seen an increase of 0.3TWh in the 6 months from 30 April 2021, a volume increase of 1.3TWh YoY was seen for EDF Energy non-residential electricity segment in 2021.
In SME, managing the risks which have arisen from the pandemic has been the primary focus for much of 2020 and 2021. Steps were taken to price-in additional risk, increase credit restrictions and limit winning higher risk sectors in order to protect EDF’s position. Despite this, SME has developed its channels as customer numbers grew 10% in electricity and 31% in gas this year.
EDF’s Medium Business segment have continued its focus on the number of meters, which has increased by 42% since the start of the year.
In the Large Business segment, the continuation of a targeted new-business approach has led to the successful acquisitions of 12 new customers in 2021 (double previous years). Additionally, 21 Large Business contracts have been renewed.
In the electricity purchase market, EDF has grown its Power Purchase Agreement business and has become the largest renewable power offtaker (based on owned and 3rd party capacity) according to the latest industry market report. EDF has also successfully bid to become the offtaker of the Sofia Wind Farm, 6.5TWh of annual volume expected to become fully operational in 2026.
The policies surrounding EDF Energy’s energy purchasing and risk management activities are carried out in accordance with EDF group’s policies and ensure that EDF Energy’s activities are optimised and its services delivered at a competitive price while limiting its gross margin volatility.
The Wholesale Markets Optimisation (WMO) Division’s purpose is to manage the wholesale market risk of EDF Energy in one place within pre-defined risk limits and control framework. It provides an interface with the wholesale markets, via EDF Trading. WMO also provides modelling services to the whole of EDF Energy, as well as negotiating and managing asset backed commercial structures with third parties including providing route to market agreements for producers.
Since April 2010, 20% of the output from nuclear generation is separately sold to Centrica, the minority shareholder of the current nuclear fleet, under the agreements entered into with Centrica. The remaining 80% is sold internally under the same transfer price as used for the transaction with Centrica, based on published market prices, smoothed over forward electricity prices where liquidity allows.
Over and above its own generation, EDF Energy also sources electricity through export power supplied from power purchase agreements which are mainly with renewable and CHP producers. In 2021, EDF Energy acquired approximately 6.7TWh through this channel.
EDF’s innovative Powershift platform gained its first customers in 2019. It offers customers flexibility and forecasting services for storage and small-scale generation to earn revenues from reducing or shifting energy demand.
For delivery in 2021, EDF Energy’s net position on the wholesale market was a purchase of approximately 1.1TWh (including structured trades). In 2021, EDF Energy sold approximately 31.0TWh and bought 32.1TWh.
Coal and gas contracts (physical and financial) and CO2 emissions rights are entered into by EDF Energy to hedge the fuel requirements of its power plants, gas storage and gas consumers. Purchases are based on generation forecasts and target fuels stock levels. In 2021, EDF Energy’s coal deliveries totalled 45kt, all of which were from international sources.
The Pod Point acquisition has strengthened and created significant value for EDF Energy in the UK. In 2021, EDF Energy sold 8,565 electric vehicles (EV) related products.
EDF Energy accelerated the promotion of EV solutions for its existing customer base, capturing a significant share of customers churning when buying an EV.
This acquisition brings together the first mover advantage of Pod Point, who is already well adapted in the growing EV market, and EDF Energy’s strong industrial expertise on operations and logistics with smart metering experience allowing EDF to be the leader in this market demanding high quality service.
Pod Point was successfully floated on the London Stock Exchange on 4 November 2021 raising £105 million of third party financing to fund future growth in the UK electric vehicle market. The IPO valued Pod Point at £352 million, a significant uplift on the valuation at the time of EDF’s initial investment in February 2020 (EDF stake: 77.7%). EDF has retained a 54.05% stake in Pod Point following the IPO.
