The Nuclear Paradox

Why now?

There is already a potential to create a new Direct-Energie every year”

2. Financial incentives for smaller players facilitate emergence of new offers

  • Bad-payers” costs — These costs are now partially supported by both energy retailers and distributors (vs. historically 100% supported by retailers)
  • Access to ARENH energy — Any retailer can have access to EDF nuclear energy at a fixed price of €42/MWh. This allows small retailers to hedge against market Spot price increase, which can show strong volatility (related to operating status of EDF nuclear plants or winter temperatures for instance). Used cleverly, the ARENH scheme provides a real security of supply for small retailers until they reach a critical size of approx. 50k meters. At that point, retailers are managing a large enough quantity of energy to efficiently forecast demand and plan purchasing strategy accordingly. ARENH access is limited to 100 TWh in cumulated volume. This is sizeable (20% of France total yearly consumption) and has historically always been undersubscribed by electricity retailers, even in periods when market prices were often above ARENH price.

Used cleverly, the ARENH scheme provides a real security of supply for small retailers, until they reach a critical size of ~50k meters”

A new competitive landscape — who will survive?

  • Development additional services should be a cultural mandate for all new entrants. These can include insurance products, boiler installation / maintenance, trusted intermediary (market place) for household energy efficiency investments (insulation, solar, smart thermostats, etc.) and other premium services. In addition to improving customer stickiness and generating actionable customer date for retailers (e.g., smart home devices), they should become a strong margin contributors and change electricity retailers “traditional” P&L.

Quickly reaching a critical size and effectively selling additional high-margin services are two “must-have accomplishments” for new entrants”

Within a 5 to 10-year period, successful new players will all be cheaper than Regulated Tariffs, and will differentiate from one another with alternative energy supply offers and/or innovative additional services.

Today’s competitive landscape and variety of offers show that the market has already reached an inflexion point that will ultimately lead to a more open and more diverse market offering where players will be constantly fighting for new customer acquisition through promotions and innovation. Incumbents will definitely have a role to play along the way by fostering (and sometimes even leading) innovation and leveraging their huge customer base.