energy politics

How local councils are changing the energy market

Britain began privatizing its energy markets in 1989 under Margaret Thatcher. Competition was slowly phased in, and from the consumer perspective there has been a choice of energy suppliers since 1999. There’s a growing number to choose from, but the ‘big six’ still dominate the energy landscape, controlling over 90% of the market between them.

It is widely recognized that power is too concentrated and the market doesn’t function as well as it should, but little agreement on how to reform it. Labour have called for price freezes and some argue that the whole system should be re-nationalized. Others focus on trying to streamline the market, making it easier for people to change supplier and lowering the barriers to entry.

While this debate is going on, a new class of hybrid energy supplier is emerging that may make the whole nationalization vs privatization argument obsolete. Councils are setting up their own companies, offering a better rate to local people than the big six can deliver, and demonstrating Donnie MacLurcan’s argument that traditional businesses. Here are some of them:

The first to this particular party were Nottingham council with their not-for-profit . The service is aimed at tackling fuel poverty in the city. Generation from the council’s incinerator and solar installations is included, but most of the energy is bought in. As the priority is to keep costs down, the is still pretty heavy on fossil fuels, but they’ve blazed a trail for others to follow and are proving useful at sharing what they’ve learned.

Named after Angel, a part of North London that I used to call home, is a partnership between Nottingham and Islington councils. They’re providing cheaper energy for London residents on a not for profit basis.  – or Liverpool Energy Community Company, to give it its full name, is another Robin Hood partnership. Set up by the Mayor of Liverpool, it will aim to make a difference to the one in seven households in the city that live in fuel poverty.

What Robin Hood are doing in these partnerships is providing ‘white label’ services – acting as the supplier and allowing other councils to operate the brand. Ovo Energy also supply white label power, and some councils have partnered with them to create cheaper energy retailers for their local citizens. is one, and is another. These council projects deliver cheaper energy by cutting out the retail mark-up, and since Ovo is two thirds renewable, it’s lower carbon than the industry standard as well.

Woking council is another pioneer, working with a very different model. It set up its first energy services company in 2000 to provide heat and power to the town centre and its own buildings. was a unique and visionary project that was years ahead of its time, and it’s often used as a case study. The council installed its own private grid to provide district heating and electricity from its gas CHP plant. At one point Woking had 10% of the country’s solar panels too. Since it uses a private network, Thameswey only supplies buildings with a direct connection. Among its customers are the WWF’s Living Planet Centre that I wrote about here.

Gateshead council is attempting something similar to Woking with its . At the heart of its scheme is the Gateshead Energy Centre, a highly efficient gas-powered heat and power plant (below). It delivers electricity and heat through its own network of pipes and cables under the city centre, providing for the council’s buildings, nearby colleges and homes, with plenty of capacity for commercial contracts too.

I expect it’s only a matter of time before we see a project that brings these approaches together, with a council generating its own power and handling the retail side of things too. I expect to see council not for profits with elements of community energy ownership in the mix, with regional as well as municipal companies. There are plans afoot in London at an unprecedented scale (though ). The Scottish government plan to create their own supplier too, operating at a national level. We’re at the beginning of this change in the market, and there’s more I could mention, such as or in Leeds. As I wrote a few years ago, there used to be 600 energy companies in Britain. After nationalization there was one, then six. We’re now on our way back to 600.

4 comments

  1. I know that there are moves to try to create something similar in Manchester. But it would be good if some of these town based firms tried for 100% renewable electricity and at least offset the carbon from gas. The ideal would be some sort of marriage between a community / local authority owned retailer and a 100% renewables supplier like Good Energy or Ecotricity.

    1. Yes, I’d like to see more of a commitment to renewable energy in these council schemes. There’s plenty of potential for community energy hybrids where council tenants have a share in the company, for example. I think we will see those sorts of things – we’re at the beginning of what I expect to be a fairly broad diversification of the energy market.

  2. It a good that more competition and new models are entering the energy market.

    That said there is an issue of who bears the risk. Profits are not guaranteed. Energy companies can lose lots of money. Council tax payers and the users of essential local services are on the hook if these go wrong.

    One of the many problems with Donnie MacLurcan’s ideas (still waiting for the book Donnie) is that making profits is easy. It isn’t and risk, and who bears it, is vital but missing from his ideas.

    1. January 2018 for the book, apparently. I’ve been waiting for it for a while too.

      Yes, risk is the flipside of private investment – or it should be. Without the ability to venture big things, NFPs usually have to grow very slowly or stick to local markets. Most of these council examples are local, and low risk – small number of employees, energy services contracted in, and relatively easy to fold up again if it doesn’t work out. Once you start building your own plant, that’s where the bigger capital comes in and it will be interesting to see how many councils take that on.

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