OVO Energy will cease operations later this year, sell its operations and exit the market.
The company said expectations about financial resilience and increased regulatory scrutiny have changed the economics of the sector, “particularly for standalone energy retail companies”.
Fellow domestic energy company E.ON will acquire OVO’s energy retail business, in a transaction that will include OVO’s retail customers and staff. The process is expected to be completed this year, until then the two will continue to operate as separate companies.
OVO’s home services business, which provides boiler maintenance and insurance, has been sold to Hometree, and Kaluza, OVO’s energy management software business, will continue to operate independently.
The two companies did not disclose the purchase price and the acquisition is subject to UK regulatory approval.
E.ON will continue its existing energy intelligence platform licensing agreement with Kaluza for the customers it acquires from OVO, and will evaluate the potential adoption of Kaluza within the wider E.ON Group outside the UK. Within Great Britain E.ON has a licensing agreement with Krakenthe energy management platform that emerged from Octopus Energy (and a competitor of Kaluza).
According to a statement from OVO, being part of a larger energy group will support investments in products and services to help households manage their energy consumption and adopt low-carbon technologies.
The company’s founder, Stephen Fitzpatrick, said he started OVO in 2009 on the premise that “energy should be cheaper, greener, simpler, and it should work for customers.”
“Energy retail is now more regulated, more capital intensive and increasingly dependent on long-term investment and scale. In that context, bringing OVO together with E.ON is the right next step for customers, for colleagues and for the long-term commitment that decarbonisation requires.”
Financial resilience rules push companies out of the market
The British energy regulator Ofgem has introduced certain measures rules for energy suppliers in 2022, after rising gas prices closed 27 suppliers in 2021.
Before the financial resilience requirements came into effect, when an energy company went bankrupt, its customers would be transferred to a new supplier under the Supplier of Last Resort (SoLR) mechanism, but the new supplier would not receive customer credits from the bankrupt supplier.
This meant that the cost of replacing those balances was instead spread across all consumer accounts. Now, energy supplier licensed companies must maintain minimum capital buffers to deal with market shocks such as the 2022 energy crisis, putting their own capital at risk to ensure they are not dependent on their customers’ money to finance their business.
OVO actually put itself on the map as a ‘challenger’ during the energy crisis has acquired SSE’s domestic energy activitiesmaking OVO the second largest domestic energy retailer at the time, behind British Gas.
E.ON’s comments on the acquisition center focus on the need for energy retailers to be able to support consumer flexibility, digitalisation and domestic renewable technologies, as the market is no longer “formed upstream, around large-scale generation”.
E.ON UK CEO Chris Norbury said the principle behind the deal is that “a larger, digitally native E.ON UK accelerates the shift to a customer-driven energy system”, as opposed to “scaling for its own sake”.
Consolidation or competition
CEO of environmental consultancy SaveMoneyCutCarbon, Mark Sait, said the deal is “less about growth and more about the survival economics of UK retail energy.
“The market has become so low-margin, regulated and capital-intensive that scale, technology and balance sheet strength are now essential. Energy retailing is no longer just about billing customers for gas and electricity, it is becoming a platform business built around smart tariffs, EVs, heat pumps, batteries and real-time flexibility,” he added.
However, as Sait noted, “The risk is that consolidation leaves households and businesses with fewer real choices and further weakens confidence in the market.”
In its news report on the takeover, Bloomberg quotes Ofgem figures to say that the takeover will make E.ON the largest domestic energy supplier in Britain, with a 27% market share.
Cornwall Insight’s Domestic Market Share Survey estimates E.ON’s post-acquisition share to be closer to 25%, just behind Octopus, which has a 26% market share and has been the largest. largest UK energy supplier since early 2025. When it took over the title from British Gas, it was the first time the top position had changed since the retail energy market opened to competition in the 1990s.
Cornwall Insight measures market share by the total number of electricity and gas accounts a supplier has for live delivery, meaning dual fuel consumers who receive both gas and electricity are counted as two accounts. Different methodologies take different market share projections into account in this way.
If the takeover is approved, just five companies will control more than 90% of the domestic energy market, and the top three would have almost three-quarters of the total market share, according to Cornwall Insight.
Tom Goswell, head of energy at the consultancy, said: “Higher costs and stricter regulations have naturally favored suppliers with the scale to absorb them, and E.ON’s acquisition of OVO is a logical step in that direction.”
While he conceded that larger suppliers offer greater stability and resilience, as well as opportunities to invest in new technologies, “the conversation for policymakers is that consolidation and competition are not mutually exclusive, as households will need both stability and choice as the market evolves.”
Kraken vs. Kaluza
In one article published on LinkedInAccording to LCP Delta principal analyst Nigel Timperley, vertically integrated energy retailers fall into “distinct strategic layers”. This is contrary to expectations once held for future energy retailers, where the current market means that “the winners may not be the companies that do it all”.
Timperley called the acquisition less of a takeover and more of a “mutilation,” in a LinkedIn article about the news.
He said E.ON is going for retail scale by acquiring OVO’s operations, adding that the “era of the courageous challenger supplier appears to be largely over”, but that innovation has not disappeared but is increasingly concentrated “in software, propositions, data, orchestration and services”.
Furthermore, the purchase means we can see “one of the most valuable comparison exercises in European energy,” Timperley writes: “Kaluza versus Kraken, on a large scale, in a large retail environment.”
