UK energy market competitiveness
Herfindahl-Hirschman Index
Regulators use the HHI Index using the 50 largest companies in a particular industry to determine if that industry should be considered competitive or as close to being a monopoly.
A market with an HHI of less than 1,500 is considered to be a competitive marketplace, an HHI of 1,500 to 2,500 to be a moderately concentrated marketplace, and an HHI of 2,500 or greater to be a highly concentrated marketplace.
\[HHI = 10,000 [s^2_1+s^2_2+s^2_3+...+s^2_n]\]
library(tidyverse)data <- readxl::read_excel(file.path("energymarket.xlsx")) %>%
filter(!is.na(share)) %>%
mutate(no_customers = as.numeric(no_customers))
data_HHI <- data %>%
mutate(prop = (no_customers / sum(no_customers)) ^ 2) %>%
mutate(HHI = 10000 * sum(prop))
HHI <- mean(data_HHI$HHI)The UK energy market has a HHI of 1182.8 showing a relatively competitive marketplace.
UK energy market biggest suppliers
data %>%
mutate(name = fct_reorder(name, no_customers),
row = row_number()) %>%
arrange(desc(no_customers)) %>%
ggplot(aes(name, no_customers))+
geom_segment(aes(xend = name, yend = 0), size = 1.5) +
geom_point(shape = 21, colour = "black", aes(fill = "blue"), size = 12) +
geom_text(size = 3, aes(label = paste(round(no_customers / 1000000, 1), "m", sep = "")))+
scale_color_manual(values = c("orange","dodgerblue"), aesthetics = c("fill"))+
scale_color_manual(values = c("orange","black"), aesthetics = c("colour"))+
scale_y_continuous(labels = scales::comma_format())+
labs(title = "No. Customers of UK Energy Suppliers",
x = "",
y = "No. Customers")+
theme_void()+
theme(legend.position = "none",axis.text.y = element_text(hjust = 0.95))+
coord_flip()