Can Elon Musk’s Tesla Shake Up The U.K. Electricity Market?

(Photo & illustration: Vincent Feuray / Hans Lucas)

Hans Lucas/AFP via Getty Images

Elon Musk’s automotive and engineering firm Tesla (NASDAQ: TSLA) is back in the U.K. electricity market frame, after it applied for a licence to supply power to British consumers.

The application for the licence was filed with the U.K. market regulator Ofgem late last month by Tesla’s European division. It is currently open for public consultation and comments until August 22. Then it may take up to nine months to issue the licence after which things get serious.

The company and Musk’s interest in the British market isn’t new. It started the process at the height of the Covid-19 pandemic in April 2020 by approaching the U.K.’s Gas and Electricity Markets Authority, the board that oversees Ofgem, for permission to generate power.

If granted final approval, both generating and selling electricity in the U.K. is unlikely to be easy. The country is one of the toughest markets to operate in Europe riddled with political demands for price caps and onerous regulations.

It’s dominated by suppliers known as the ‘Big Six’, namely – British Gas (owned by FTSE 100 company Centrica), EDF Energy, E.ON, OVO Energy, Octopus Energy and ScottishPower – controlling much of the market.

In 2019, tough operating conditions saw over a dozen independent U.K. energy suppliers bite the dust.

Is A Shake Up Really Possible?

The Big Six themselves have seen seismic shifts in recent years. SSE, a former member of the dominant group, exited the residential power supply market after selling the business to OVO Energy.

Npower – another dominant residential power brand – was absorbed by E.ON. One of the biggest U.K. independents – First Utility – was acquired and rebranded by oil and gas major Shell as one of its divisions. But unable to make it work in line with a changed post-Covid strategy, Shell subsequently sold it on to Octopus Energy, which itself has become a market force to reckon with.

Alongside acquiring Shell’s U.K. power business, Octopus Energy’s growing business has also seen it acquire Exagen and ENGIE UK’s household supply unit, as well as the customer portfolio of Bulb Energy after the supplier entered administration.

Octopus Energy’s market share was just shy of 24% at the end of last year, making it the largest U.K. household electricity supplier. That too, a mere eight years after it entered the market.

Tesla Has Pedigree

However, the move may be viewed or Musk and Tesla’s ultimate objective, no new U.K. energy independent’s pending entrance has created such a market buzz in the past. And Tesla could crack it, perhaps based on the belief that if Octopus Energy can get the operational balance right, so can it.

Tesla will not be starting from a blank canvas. It already operates a power supply unit in Texas for owners of its EVs to charge their cars and compensates them for feeding the surplus electricity back to the grid.

In 2017, Tesla built one of the world’s largest lithium-ion batteries for the Australian state grid. The move came after South Australia was plagued by blackouts in 2016.

It prompted Musk to step in saying Tesla would get the battery storage systems installed and working within 100 days of the contract being signed or the $50 million renewable energy project would be installed for free.

It was a target Tesla met quite comfortably in the end. However, supplying power to U.K. homes might be a whole new ball game, and anybody’s guess on how it may play out.