UK’s energy market

Order Description

INTO City University

City University International Foundation Programme

(Business & Humanities)

ECONOMICS

September 2014 intake

Economics Coursework Summative Assignment

DATE ASSIGNMENT RELEASED: Week commencing 5th January 2015

ASSIGNMENT DUE IN: BY 3PM Thursday 5th February 2015

• Instructions

The background to the coursework is as follows:

‘The principal objective of the UK’s Office of Gas and Electricity Markets (OFGEM) is to protect the interests of existing and future UK electricity and gas consumers. In a recent report, OFGEM criticised the effectiveness of competition in the UK energy market. The big six UK energy firms- SSE, Scottish Power, Centrica, RWE Npower, E.On and EDF Energy – account for about 95%* of the UK’s energy supply market.
The OFGEM report finds “possible tacit co-ordination” on the size and timing of price rises, but does not accuse the major energy firms of colluding over prices.’

*For more current data see Figure 6 in the ‘Appendix’.

The coursework question is:

Discuss the findings of the OFGEM report with regards to the UK energy market; and discuss if more competition between the big six UK energy firms may benefit UK consumers.

The essay should be 1500 words in length. In writing the essay you should make use of the basic principles of Microeconomics and the relevant theories associated with perfect competition, a monopoly and an oligopoly. You will also need to consider how these theories relate to the case of the big six UK energy companies and the findings of the OFGEM report. [‘Executive Summary’ – Pages 5-7,
‘Chapter 3’ – Pages 15-24 and ‘Chapter 4’ – Pages 26-33].

You will need to use relevant Microeconomic diagrams in order to make your essay analytical.

• Recommended Essay Structure with suggested word count and headings:

Essay Title

Introduction [200 words] [5 marks]

You should discuss the background to the essay, the aims and objectives of the essay and your expected findings. You should also briefly discuss how you will resolve the aims and objectives of your essay.

Analysis: The UK Energy Sector [400 words] [20 marks]

Use the graphs and tables provided in the ‘Appendix’ to analyse the UK energy sector. You do not need to copy graphs/tables from the Appendix.

Application of Economic Theory [700 words] [40 marks]

Answer the following questions in this section:

• Evaluate which type of market structure best describes the UK energy industry;
and discuss why this market structure is the best description of the UK energy
industry.
[Explanation – 21 marks, Diagram – 7 marks]

• Discuss FOUR proposed reforms, identified in the OFGEM report, which can
make the UK energy market more beneficial to UK consumers.
[Explanation – 12 marks]

Conclusion [200 words] [5 marks]

In this section you should summarise the findings of your analysis and then critically discuss the extent to which you either agree or disagree with these findings.

Referencing [10 marks]
2 marks [1 mark for citation, 1 mark for accuracy of in-text referencing] for each source accurately cited in the main body of the essay using HARVARD REFERENCING SYSTEM (2 marks x 5 = 10 marks)

Sources [10 marks]
Bibliography – Minimum of 5 sources
2 marks each for THREE sources used from list provided [6 marks]
2 marks each for TWO sources FROM STUDENTS’ OWN RESEARCH [4 marks]

An additional 10 marks will be awarded for the use of headings (1 mark for each heading up to a maximum of 5 marks) and for the coherency of the essay (5 marks).
You will need to use four of the academic journal/book sources which have been provided. You are free to do additional research and find an additional academic source (journal or book) for you to use as a reference. YOU SHOULD NOT USE WEBSITES, BLOGS, WIKIPEDIA, INVESTOPEDIA OR OTHER NON – ACADEMIC SOURCES.

• Marking Criteria

Your essay will be marked on the basis of the following criteria:

• Structure [20 marks]
Your essay should have a coherent, consistent and logical structure with headings for each section. It should start with an ‘Introduction’ in which you discuss the background to the topic you will be writing about. In the ‘Introduction’ you should also state your aims and objectives and what you expected findings will be. The essay should end with a conclusion in which you state your findings and then discuss whether you think these are correct and if not, why not?
1) Introduction – 5 marks
2) Headings – 5 marks
3) Coherency – 5 marks
4) Conclusion – 5 marks

• Application of economic theory [40 marks]
Your essay should use relevant economic theory which has been taught on the course.

• Analysis [20 marks]
Use the graphs and tables provided in the ‘Appendix’ to analyse the UK energy
sector. You do not need to copy graphs/tables from the Appendix.

• Referencing [10 marks]
Your essay should be well referenced using the Harvard Referencing System.

• Sources [10 marks]
You should use a minimum of THREE sources from the list provided and FIND TWO other sources by yourself.

Suggested readings include the following. But you can also do research to check other sources in the LRC.

General Background Reading:

Allen, S., Hammond, G., and McManus, (2008), ‘Prospects for and barriers to domestic micro-generation: A United Kingdom Perspective,’ Applied Energy, 85, pp. 528-544

Warren, P. (2014), ‘A Review of Demand-Side Management Policy in the UK,’ Renewable and Sustainable Energy Reviews, 29, pp.941 – 951.

Main Readings:

‘Chapter 5: Market Structures’ in Sloman, J., and Garratt, D. (2013), ‘Essentials of Economics,’ 6th edition, Pearson.

OFGEM (2014), ‘Consultation on a proposal to make a market investigation reference in respect of the supply and acquisition of energy in Britain,’
[‘Executive Summary’ – Pages 5-7, ‘Chapter 3’ – Pages 15-24 and ‘Chapter 4’ – Pages 26-33].

https://www.ofgem.gov.uk/ofgem-publications/86807/consultationpublish.pdf

Plagiarism Reference:

‘Cite them right online’ – http://www.citethemrightonline.com

• Coursework Submission:

• The assignment should contain a maximum of 1,500 words.
• The Assignment must be typed in Arial, font size 12 with double line spacing. Please leave one free line between each paragraph. The pages should be stapled together (top left corner) and page numbered (bottom right corner).
• The assignment will contribute 20% towards your final grade for this module. PLEASE NOTE:- THERE IS NO PRESENTATION OF THIS ASSIGNMENT
• The final version of the essay must be stamped, signed and dropped in the coursework submission box next to the first floor Welcome Desk by 15.00 hours (3 pm), Thursday 5th February 2015. A Turnitin Similarity Report must also be submitted (Please refer to Turnitin instructions in point 4). Students need to keep the yellow copy of the coursework submission form as proof of submission.
• Failure to submit either a hardcopy or submission through Turnitin will result in penalties being applied, as per the Student Handbook (see point 3).

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• What to include

• A cover page with (1) your family name and first name; (2) student ID; (3) your Foundation group; (4) the essay title and 5) the submission date.
• Any sources should be referenced according to Harvard referencing conventions (Please consult Cite Them Right).
• Students should bear in mind that instances of plagiarism (copying material from any text without giving the reference) and collusion (copying work written by another person or including in your assignment any work that is not your own) are taken very seriously. Please refer to the student handbook for details of penalties.

• Details for late submission of assignment:

Work submitted
Mark Deducted
On The Due Date After 1500 Hours But Before 1700 Hours
5%
On The Day Following The Due Date Up To 1700 Hours
10%
On Either The 2nd Or 3rd Day After The Due Date Up To 1700 Hours
20%
On The 4th Day After The Due Date Or Later
All marks deducted

• Turnitin instructions/plagiarism:

Coursework is to be uploaded to the Turnitin Assignment through your class Moodle page, in order to maintain academic integrity and high standards of coursework.  You will need to be logged in as yourself, and to upload your work to your specific course. It is very important not to upload to another course.  The Turnitin Assignment will be open two weeks before the essay deadline for editing and proofreading.  When starting your assignment, please refer to the Plagiarism Moodle page, where you should watch the videos and do the activities. You can, and should, edit your essay as many times as you like before the deadline.  Before your Similarity Report is ready, you will see the word ‘pending’: submissions take up to 24 hours, whereas resubmissions will always take 24 hours. When you have uploaded your final draft, which is suggested no later than 24 hours before the deadline, wait for the Similarity Report. Print out your Similarity Report, staple it to another clean copy of your final draft, and submit both, with a completed cover sheet, to the Drop Box at the Welcome Desk. The stamp on the cover sheet is considered the time of submission – not the time on the Turnitin Assignment.

For more information about plagiarism and Turnitin, you should explore the Plagiarism Moodle Page, and read your Handbook. For technical problems with log-ins contact the IT helpdesk. For technical problems with Turnitin/Moodle, contact

% Change in Prices
% Change in Prices

Figure 1: Domestic Energy Prices 2011-2013
Source: Office for National Statistics
Index Value
Index Value

Year
Year

Figure 2: UK Energy Firm Market Concentration 2011 – 2013
Source: Office for National Statistics

The Herfindahl-Hirschman Index is a measure of the market concentration of an industry in terms of the number of firms in the industry. The higher the value of the index then the fewer the firms in the industry. You do not need to know anything more than this regarding the Herfindahl-Hirschman Index.

Figure 3: % Household Disposable Income spent on Energy: 2002 – 2012
Source: Office for National Statistics

The poorest fifth of households spent 11% of their income on household energy in 2012, up from 8% in 2002. The richest fifth spent just 3% in 2012 up from 2% in 2002.

Figure 4: Profits of the large energy companies split by generation and supply
Source: OFGEM

Figure 5: % Increase in the Average UK Household Spending on Energy (2002-
2012)
Data Source: Office for National Statistics

Centrica
Centrica
Figure 6: % Market Share by UK Energy Firm – December 2014 – Current Data
Source: http://www.cornwallenergy.com/cms/data/files/Downloads/Cornwall-Energy-data-market- breakdown-public-141212.pdf

£ per month

Year
Electricity
Gas
Other fuels

2002
35
37
68

2003
35
37
65

2004
36
38
78

2005
38
41
91

2006
43
47
104

2007
47
50
101

2008
48
51
140

2009
54
60
107

2010
50
58
126

2011
50
55
139

2012
51
57
131

Table 1: Average Monthly Expenditure on Electricity, Gas and other household
fuels, UK (2002 – 2012)
Other fuels include coal, oil for central heating, paraffin and wood.
Source: Office for National Statistics