Consumers learned about their power company with the energy crisis. And as prices increased, prices skyrocketed. marketing exchanges in search of best offer. However, once the crisis is over, the changes not only do not stop, but increase: in the first half of this year the historical documentation with almost 4 million of exchanges in the heat of low prices.
This is clear from the latest report on the retail electricity market published by the National Markets and Competition Commission (CNMC), which also reflects the loss of 400,000 customers of the three large electricity companies -Endesa, Iberdrola and Naturgy– in favor of Repsol and independent resellersPleases Octopus Energy or Eni.
In the first quarter of 2024 the number of marketing changes in the electricity sector amounted to 1.95 millionwhich represents an increase of 22.3% compared to the previous quarter and 11% more than the same period last year. That figure already represented a historical documentation of swap compared to previous quarters, which however was pulverized in the second quarter, when the 1.98 million changes (6.5% of consumers).
In total, 3.9 million changes in the first half of the year, a 20% more compared to the same period of the previous two years, marked by a exchange register resulting from the astronomical increase in electricity prices. In these first six months it was precisely the opposite situation that encouraged the movements: the wholesale market averaged 39 euros per megawatt hour (MWh), 55% less than the previous two semesters and 80% less than the first half of 2022, the most expensive in history.
More competition
If the focus is broadened, in the moving year that includes the period between July 2023 and June 2024 Almost one in four consumers has changed electricity company (7 million). This intensity of consumers looking for a new company with which to contract their electricity supply implies that the Spanish market enjoys a good level of competenceAccording to a recent study by PwC consultants. However, the company also adds that “only a long-term perspective can contribute to a better understanding What triggered the change in marketers? and how a competitive market reacts to all this”.
Most of the changes – 78.4% in the first quarter and 80.6% in the second – occurred in free marketthat is, consumers who had a fixed rate They signed the contract with another marketing company. At the end of June it was there 21.8 million users in the free market (71.8% of the total), while in the regulated sector it is barely reached 8.6 million. The latter has historically been the one offering the tariff cheaper because it is linked to the wholesale price, but with the crisis many consumers They terminated these contracts and sought refuge in a fixed rate.
Repsol, leader in recruitment
As for companies, the five large groups (Iberdrola, Endesa, Naturgy, Repsol and TotalEnergies) represent over 90% of the total electricity market (if the free and regulated market is added), but the three main electricity companies (Iberdrola, Endesa and Naturgy) lost around 400,000 customers in the first half of the year, to Repsol (104,000), Total energies (37,000) e small traders (372,000). In this last category it stands out Octopus Energy, the MásMóvil Group and the Eni Group with growth of 107,000, 35,000 and 33,000 customers respectively.
Endesa it is the company that loses the most customers, 229,000 in just one semester, while Iberdrola give up 129,000 users and Naturgy almost 40,000. “We are worried about the loss of consumers,” acknowledged the CEO of Endesa, Jose Bogason the occasion of the presentation of the company results for the third quarter, held at the end of October, a fact linked to the drop in prices on the wholesale market.
No price wars
But at the same time he clarified that this new competition “is not very based discountsbut rather inside aggressive commercial campaigns”, thus excluding the possibility that the sector is heading towards a ferocious phase trade war to see who offers the lowest price, as happened with the telecommunications company and this has taken this industry to an amazing level drop in income.
According to the director, the small businesses they “increased their activity” before drop in wholesale priceswhich allows them to sell electricity based on futures prices and buy it based on the daily market, so that “when there are such low prices (like those of the first half of the year) they are more aggressive than in other periods when prices are higher.”
Meanwhile, the companies oil and gas “They combine offers of electricity and gasoline,” which encourages their hiring. “I don’t know if it’s the right thing to do, but it’s very good for them. They have a strong position in the market,” added Bogas in clear reference to Repsol, which since purchasing Viesgo in 2018 has added 1.9 million electricity customers with this strategy multienergy.
How are traditional energy companies in Spain adapting to the increased competition from newer players in the market?
Interview: The Shifting Landscape of Spain’s Electricity Market
Editor of Time.news: Good morning, and thank you for joining us today. We have with us Dr. Elena García, an expert in energy economics and market dynamics. With the recent shifts in Spain’s electricity market, it’s clear there’s a lot to unpack. Dr. García, could you start by summarizing the impact of the recent energy crisis on consumer behavior?
Dr. Elena García: Good morning! Absolutely. The energy crisis has significantly reshaped consumer awareness and behavior regarding electricity providers. As prices soared, many consumers became more engaged and proactive in searching for the best deals. This shift is evident in the historical documentation where we see nearly 4 million exchanges of electricity providers in just the first half of this year.
Editor: That’s a staggering number! What do you think triggered this mass migration among consumers?
Dr. García: The primary driving force was undoubtedly the sharp increase in electricity prices, which prompted many to reassess their options. When wholesale prices averaged around 39 euros per megawatt-hour, it represented a 55% decline from previous periods, allowing consumers to find better offers. It’s also indicative of a more competitive market environment, with around one in four consumers having changed their electricity provider in the last year.
Editor: Speaking of competition, how are the traditional giants like Endesa, Iberdrola, and Naturgy reacting to this change?
Dr. García: Well, as we can see in the report, these three companies have collectively lost about 400,000 customers in the first half of 2023. They are clearly feeling the heat from newer companies like Repsol and various independent resellers such as Octopus Energy and Eni. Endesa, in particular, has faced the most significant customer loss, which raises concerns about their market strategy moving forward.
Editor: Repsol seems to be capitalizing on this trend. What strategies do you think they are employing to attract these customers?
Dr. García: Repsol has successfully positioned itself as a competitive player by offering attractive rates and innovative customer service. The recent increase in their customer base—gaining over 100,000 new consumers—suggests they are doing something right. Additionally, they provide flexibility and options that resonate well with the current market demand for stability amidst fluctuating prices.
Editor: It’s refreshing to see that consumers are exercising their power. But do you think this trend will continue? What does the long-term outlook look like?
Dr. García: The trend is likely to persist, especially as consumers grow more informed and comfortable switching providers. However, it’s important to maintain a long-term perspective; while the current market is competitive, it’s essential for consumers to be cautious and well-informed. Strategic pricing and loyalty programs will be crucial for the larger companies to regain consumer trust.
Editor: Interesting insights, Dr. García. Before we wrap up, could you share what consumers should keep in mind when switching electricity providers?
Dr. García: Certainly! Consumers should consider the total cost of switching, including any potential fees, the nature of contracts—fixed vs. variable rates—and the overall customer service experience. Additionally, understanding how each provider aligns with their sustainability goals can also be a significant factor. Market dynamics are shifting, and consumers now have the power to shape this market by making informed choices.
Editor: Thank you very much, Dr. García, for your valuable perspectives today on this evolving energy landscape. We appreciate you taking the time to share your expertise!
Dr. García: Thank you for having me! It’s been a pleasure.