Public ownership through community energy
The main objection to bringing the electricity and gas industries back into public ownership is the cost to the taxpayer. A new report challenges that assumption and offers a new model.
The report challenges a previous assertion by stockbroking firm Jefferies that the cost could be as high as £185 billion. It estimates that the cost of compensating shareholders would cost between £24 billion and £36.6 billion and take 10 years to pay back.
The model would encourage renewable energy generation by local authority providers, co-operatives and community groups – proper community ownership, rather than the partial models that dominate in Scotland. There would be a public purchase of some generating capacity, the National Grid and energy distribution.
The big saving from the Jefferies assumption is because the Big Six energy supply companies would not be bought. Instead, new local public sector companies would be created who would compete with the Big Six to supply consumers. In Germany such companies have captured up to 50% of the market.
Professor David Hall, author of the report, said: “The paper takes a hard look at the costs and benefits of public ownership of the energy sector, and the practical issues of how to get there – what needs to be bought and what doesn’t, how transparent local ownership can work. The benefits are much greater than usually imagined, and the costs are much lower than previously assumed.”
Under this model, after ten years, the ongoing savings from public ownership could be converted into price cuts of 10% or reinvested in renewables. The refinancing of private debt would mean further savings over time of £0.7 billion a year – equivalent to a further price cut for households of £25 a year.
Public ownership of energy is increasingly common around the world. The report points out that 48 million Americans, in over 2000 cities and districts, get their electricity from the public sector, at a price on average 12% lower than the price charged by private energy companies.
Closer to home it has been argued that Glasgow is uniquely positioned to take advantage of this type of model. The city could become a power station that no longer relies on the grid, by benefiting from a new wave of urban solar farms and windmills due to the “unusual” amount of vacant land and buildings, many of them already under public ownership, within its boundaries.
Jim Metcalfe, a trustee and director of the UK Energy Saving Trust, said changing the way we produce and use energy was a worldwide challenge – but one that could be met at a local level.
Delivering a talk on the subject at a meeting of the Glasgow Skeptics society this week, he outlined why Scotland’s biggest city could take the lead on energy sustainability. He said, “The city has a high level of energy demand, both from domestic and commercial users. It also has an unusual amount of space with the potential for generation. Its supply potential is very high, and new and improving technology means we can exploit it. What we want to do is match up the generation of energy with using any marginal profits to help the efficiency question.
Glasgow City Council said it was already in the process of setting up an energy services company which will oversee the creation of renewables low carbon projects in the city. It has already carried out mapping of derelict and vacant land across the city to determine which sites would be best suited for use as mini-solar farms – either by the council or for community-owned projects.
Similar to the Hall model, the most radical aspect of his vision is the creation of a locally-owned company which would able to reinvest profits from power generation on improving building insulation and reducing fuel poverty. He said, The proposal is to design either a community-owned company or social enterprise based in the city, which would take on land, often gifted, and then collectively raise finance to build power installation to generate power.”
Our own view is that such a model is workable, but it would need a big input from local authorities to get it started. Council’s, like Glasgow, are interested, but have been slow to get plans off the ground.