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Putting energy into the local economy

Big northern councils like Sheffield could boost their economies and reduce their emissions through local energy production. They need to get behind the Local Electricity Bill, writes Labour Party activist Matt Killeya.

Paces solar array sheffield renewables

Sheffield Renewables community energy solar array at Paces community centre in High Green.

Sheffield Renewables

Ofgem recently confirmed a rise of its energy price cap, with the typical gas and electricity customer likely to see their bill go up by £139 a year.

This will be tough for many to manage, especially after 18 months of financial strain from the Covid-19 crisis. In the towns and cities of Yorkshire alone, hundreds of thousands of people are already nervously eyeing the end of both the furlough scheme and the £20 per week Universal Credit increase.

Ofgem puts the blame on rising global prices of fossil fuels, particularly gas. Their main piece of advice to customers: shop around for the best tariffs and bag some big savings by doing so.

There are currently around 50 energy suppliers in the UK, with ‘the Big Six’ controlling the majority of the market. At the same time, renewable energy currently accounts for around 11% of all UK energy use. That’s not a huge amount of choice within a market dominated by fossil fuels. Wouldn’t it better if we had more choice and specifically, more renewable choice?

Suppose there were 20 times as many choices – not 50 but 1,000 suppliers. Imagine furthermore that most of them are local, community-owned suppliers and almost all supply renewable energy. Let’s say that these community groups are so successful that the top four businesses in this market control only 40% of the market.

What you have just imagined is not hypothetical. In fact, it’s the energy market in Germany today.

This shouldn’t be news to the UK government. Its own report back in 2014 it stated that the community energy sector could deliver more than ten times that of the UK’s current level of community generation today, with the potential to grow substantially further beyond even that.

So why has that not happened? The issue is the market structure itself. Energy is most efficiently used closest to where it is generated. It’s this advantage of local energy generation that the current market rules simply don’t recognise.

Designed in the late 1980s, in the days of privatisation of energy utilities, this structure suits a small number of large providers. The costs to set up a supply company are fixed and estimated at over £1 million by the Institute for Public Policy Research. This has crowded out small companies, stifled innovation and competition and ultimately held back the UK’s community renewable energy generation.

People for Power, which campaigns on the issue, likens the cost to a microbrewery delivering to local pubs and off-licences being told that they have to pay £1 million in road tax for their delivery van. Sheffield’s thriving microbrewery scene would never have happened.

The previous Labour government attempted to address the problem in 2010 by introducing a feed-in tariff to subsidise small-scale renewable energy generation. Less than a year later the new coalition government began drastically scaling back and reducing the tariffs until they were no longer viable. In 2019 the tariff was finally wound up, with no replacement in sight.

Enter a group of cross-party MPs with the Local Electricity Bill. The private members’ bill is currently working its way through parliament and aims to rewrite the market rules. It would establish a “right to local supply”, where Ofgem would be mandated to establish a new market structure that would make the costs of being an energy supplier proportionate to the scale of the business. Small providers would no longer be priced out and, unlike the feed-in tariff, there would be no subsidies. It’s simply a rewriting of the rules.

Support for the bill is growing steadily. 262 MPs have declared their support, including a majority of MPs from Sheffield.

So what should Sheffield City Council do? Well, the first thing they can do is get behind the Local Electricity Bill and declare their support for it. Many local authorities have already done so; 96 local authorities and county councils at the latest count. This would put additional pressure on local MPs yet to declare support. The Council should also work proactively with other authorities who could in turn put pressure on their own MPs. A petition has recently been started which asks them to do exactly that.

Sheffield Council declared a climate emergency back in 2019 and announced its target to reach zero carbon by 2030. It’s hard to see how they will come close without generating more of their own power locally and renewably.

People could form financially-viable community energy groups to put solar panels on the roofs of large buildings such as farm outbuildings, schools or hospitals. New housing developments could incorporate shared energy generation to heat homes and sell the rest on, thus addressing the issues of new build emissions. Even the region’s abandoned coal mines could be repurposed to extract geothermal energy from naturally-heated water and help regenerate mining communities.

The city has seen some small-scale innovation along these lines, with firms like Sheffield Renewables, but after early successes the project had faced headwinds from the end of the feed-in tariff. The market needs to be rebalanced to support them.

As well as cutting emissions, a restructured electricity market would lead to a more diverse and resilient energy system locally. More money spent on energy would circulate locally, creating local jobs and businesses and a stronger local economy. It’s exactly the kind of community wealth building the city should be engaging in.

As this Government’s ‘levelling up’ agenda continues to be frustratingly absent of detail, Northern cities can adopt one of Boris Johnson other’s mantras and start to “take back control” themselves – starting with energy.

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