Power Struggles - Can the UK's Green Energy Darlings Survive the Shock?

10th November 2025

In the shifting sands of the UK energy market, two of its most celebrated disruptors—Ovo Energy and Octopus Energy are facing existential questions.

Once hailed as the future of clean, customer-centric power, both companies now find themselves grappling with financial fragility, regulatory pressure, and the harsh realities of scaling purpose-driven models in a volatile sector.

Ovo Energy, in particular, has sounded alarm bells. Its latest accounts reveal a "material uncertainty" about its ability to continue as a going concern.

This isn't just accounting jargon—it's a red flag that the company may not survive without significant changes. The root of the problem lies in Ofgem's tightened capital adequacy rules, which require suppliers to hold enough working capital to withstand market shocks.

Ovo has admitted it is not currently compliant, placing it in technical default. While the company insists it is working closely with regulators to deliver a capitalisation plan, the lack of clarity around these measures leaves stakeholders uneasy.

Government support has been a lifeline. In late 2024, Ovo received £18.4 million in state aid to support renewable electricity generation. Though framed as a production subsidy, it underscores the company's reliance on external financial backing to sustain operations and invest in green initiatives. Without continued public support or a major injection of private capital, Ovo's future remains precarious.

Octopus Energy, meanwhile, is navigating its own storm. Like Ovo, it has struggled to meet Ofgem’s new financial standards. But its challenges are compounded by the fallout from its acquisition of Bulb Energy, a deal that transferred 1.5 million customers to Octopus in a government-backed rescue.
That deal is now under legal challenge from rivals like British Gas and E.ON, who argue it was unfair and lacked transparency. The outcome of this judicial review could reshape investor confidence and regulatory norms across the sector.

Adding to the pressure, Octopus has warned of a 20% rise in household energy bills over the next four years—not due to wholesale prices, but escalating government policy costs. This forecast lands at a time when UK households are already squeezed by inflation and stagnant wages, threatening to erode the brand’s reputation for customer-first service.

Both companies are caught in a tension between mission and margin. They’ve built their identities around green energy, innovation, and ethical service. But the maturing market demands financial discipline, regulatory compliance, and resilience—qualities that legacy providers like E.ON and Scottish Power, despite their slower pace of innovation, are better positioned to deliver.

E.ON, for instance, has emerged as a model of stability. Backed by strong financials and regulatory compliance, it offers reliability even if it lacks the agility and customer engagement of its newer rivals. Scottish Power, with its deep roots in rural Scotland, is focused on community support and renewable integration. Yet its service delivery remains uneven, and its financial transparency leaves questions unanswered.

For rural communities in Scotland, the stakes are high. Octopus could be a transformative force if it stabilizes and expands its footprint. E.ON offers dependable service but may not meet the bespoke needs of remote areas. Scottish Power is best aligned with regional priorities but must improve execution to truly deliver on its promise.

The UK’s energy transition is not just about technology or tariffs. It’s about trust, resilience, and the ability to balance purpose with pragmatism. Whether Ovo and Octopus can survive without government funding will depend not just on their financial strategies, but on their capacity to evolve in a market that’s no longer forgiving of idealism without infrastructure.

The rules

Ofgem's capital rules for energy companies, implemented in March 2025, require domestic suppliers to have a Capital Target of £115 of adjusted net assets per dual fuel customer and a Capital Floor of zero. These rules aim to improve financial resilience and protect consumers by ensuring companies have sufficient capital at their own risk. Companies that fail to meet the Capital Floor may face enforcement action, while those that don't meet the Capital Target must agree on a plan to improve their capital position with Ofgem.

Key capital requirements
Capital Target: £115 of adjusted net assets per dual fuel equivalent customer.
Capital Floor: £0. A company cannot have negative adjusted net assets.
Implementation: The rules came into effect on March 31, 2025.

Purpose: To make companies more resilient to market volatility and prevent future supplier failures that can lead to costs for consumers.

What happens if rules are not met?
Failure to meet Capital Floor: Companies may face enforcement action from Ofgem.
Failure to meet Capital Target: Companies must agree on a plan with Ofgem to show how they will increase their capital to the target level.

Additional rules and context
Customer credit balance (CCB) ringfencing: Ofgem has the power to direct companies to ringfence customer credit balances if they are below the capital target or a "cash coverage trigger".

Dividend payments: Ofgem expects companies to prioritize building capital over paying dividends.

It is particularly concerned if a company has negative net assets or its capital position would be below a sufficient level after the distribution.

Holistic approach: Ofgem emphasizes that capital is not the only factor. Other important elements of financial resilience include maintaining sufficient liquidity, good risk management, and strong governance.

Energy Suppliers
As of mid-2025, there are approximately 18 to 23 active domestic energy suppliers and around 72 business energy suppliers in the market in Great Britain.

The exact number can fluctuate due to market dynamics, but the market is heavily dominated by a handful of large companies.

Key market structure points:
Domestic Suppliers: The number of suppliers in the domestic market is around 18-23. The "Big Six" (Octopus Energy, British Gas, E.ON Next, OVO, EDF, and ScottishPower) account for over 90% of the market share.

Business Suppliers: There are many more suppliers for the business market, with around 72 active as of an April 2025 report.

Market Concentration: Following a period where many smaller suppliers went bust, the market has consolidated, leading to the lowest number of energy providers in the UK since 2012.

Octopus Energy
In April 2024, Ofgem reported that Octopus had become the UK's largest electricity supplier by domestic customer numbers, with a 22% share, and that Octopus had a similar share of domestic gas customers, ranking second behind British Gas.[32] By the end of that year, Octopus, having gained almost 1 million new gas and electricity accounts, had become Britain's largest household energy supplier,[33] with 12.9 million domestic customer accounts in 7.3 million households (a 23.7% market share) - overtaking British Gas for the first time since its privatisation.

Octopus Energy acquired a 50% stake in Lintas Green Energy in March 2024.[34] In September 2024, Octopus Energy acquired 100% of solar and battery storage developer Exagen Group. Octopus had already taken a 24% stake in the company in August 2022.[35]