Vattenfall will compete aggressively on price as it looks to take large electricity customers away from established business market energy suppliers.
The firm announced plans to enter the UK business to business (B2B) market last month and is now negotiating terms with a number of large industrial and commercial power users, according to James Hunt, who heads up Vattenfall’s UK B2B team.
The company will provide 100% renewable electricity, sourced from its own generation portfolio (which next year will top 1GW in the UK) and the power it buys from other parties.
Customers will be able to manage power purchases via a modified version of the platform Vattenfall established in the Dutch market (the Nuon Handelsplatform). Hunt says it is designed to service customers with “many metering points” and that the degree of flexibility it provides enables customers to fully manage price risk.
While providing real-time flexibility to spread purchasing risk is the initial focus, Hunt says the firm will “in time look at other aspects around flexibility”, potentially across areas including demand-side response and flexible consumption. “But at this stage we are very much focused on delivering a product that deals with the main concerns consumers have regarding price transparency.”
How cost competitive will Vattenfall be?
“Cost is an important factor [for businesses] when choosing their supply. It is not the only reason, but it is a major driver,” says Hunt. “Ultimately, we expect to have to compete with all other competitors directly on price.”
While some new entrants need time to adjust to the peculiarities of the UK power market, Hunt says Vattenfall has significant experience through its generation activities. It has held a supply licence for several years and Hunt thinks its expertise in balancing its portfolios will help minimise excess costs.
“We pride ourselves on being able to forecast both our generation and consumption very well – that is one aspect that Vattenfall puts a lot of time into managing,” he says. “We feel that provides us with an edge in relation to the competition. Clearly, if you put less imbalance into market you will be less exposed [to ever increasing imbalance penalties].”
While directly engaging large I&C firms, Vattenfall is also talking to third party intermediaries (TPIs), which buy power for the bulk of the B2B market. Given transparency is one of the pillars of its product offering, is Hunt concerned by perceived lack of transparency in the TPI market?
“We always expect TPIs to be working on behalf of their clients,” he says.
“We encourage them to be as transparent towards their consumers around the rates that they charge in relation to their activities. That is our expectation. From the TPIs that we have spoken to and dealt with to date, they take a similar view.”
Vattenfall’s B2B supply product is expected to officially launch on 1 October.