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Power To The People - The New Local Electricity Bill

December 22, 2020 1:03 PM
By Councillor Dave Busby

9dqz (Photo by Rohan Makhecha on Unsplash)Introduction

Could we finally be seeing cheaper electricity, generated and supplied by local councils? Could we be taking a big step towards zero carbon emissions? The New Local Electricity bill has the chance to deliver this but it has been tried before and failed.

The current system

Anyone (a local company or household) that generates renewable energy power can only sell excess power back to the national grid. Specifically, it cannot supply and sell that power to a consumer. So, we have a situation where residents are selling their surplus energy to one of the large utility suppliers for 5 pence per kWh whilst their neighbours are having to pay the same supplier 14 pence per kWh.

The conditions of the licences of the utility provider obligates the supplier to add to the cost of generated electricity a number of levies (to finance various governmental policies). Suppliers also add the cost of transporting electricity over the grid, the cost of managing the power system and their profit margin and as a consequence, local residents pay more for their electricity.

Under the current legal and regulatory regime, it is incredibly difficult to acquire the licence that companies need to sell electricity directly to consumers. Companies must have a supply licence and comply with a number of industry codes and regulatory obligations to ensure that the system is safe and customers avoid blackouts. As a consequence, the current system imposes a high barrier to entry for new entities to become suppliers of electricity and hence favours existing suppliers.

Existing community initiatives

Communities, in the form of Co-operatives and Community Benefit Groups, have already started to create enterprises that enable the supply of clean energy to the local community. There are examples of successful ventures in Bath & North East Somerset and in Plymouth where they have generated enough renewable power to supply 4,000 and 1,500 homes respectively. In Bath this includes solar p.v. on the roofs of eleven schools and four community buildings, five ground mounted solar arrays and a modern water wheel.

Here in Babergh and Mid Suffolk the council has installed solar panels on the roofs of its council houses which gives the occupiers cheaper electricity. But none of these enterprises are suppliers of electricity in the form of a utility provider. The electricity is bought by a Utility which in turn supplies it to end-consumers, locally or not.

History

Local MP, Peter Aldous, has been building support since he kicked off the process back in June. Over the last year, the Power for the People campaign has accumulated cross-party support from over 200 MPs and 50 national organisations, raising hopes for the successful progress of the new 2020 Bill. The growing support for the Bill is founded on a collective recognition that more needs to be done to meet the UK government's zero emissions targets.

The Paris Agreement in December 2015 pressured nations to undertake measures needed to combat climate change. Its principal aim is to keep the global rise in temperature well below 2 degrees Celsius above pre-industrial levels. The UK ratified the Treaty the following year and then passed legislation in June 2019 requiring the government to reduce the UK's net emissions of greenhouse gases by 100% relative to 1990 levels, and to do this by 2050. Previously the ambition had been to reach 80% emissions reduction, and currently the UK isn't even on track to meet this previous target, let alone the new one. The Climate Change Committee has stated that the new target of 100% is "technically feasible but highly challenging", which is why local initiatives to create clean renewable energy, will assist with these targets and is the driver behind the Local Electricity Bill.

The proposed legislation

The 2020 Local Electricity Bill is due to have its second reading on the 5 February 2021 and is particularly important to local authorities as it would enable them to become a local supplier of electricity themselves. Whilst the conditions of the licences are still unknown, it would make sense that locally generated electricity, supplied to local consumers, should not carry the cost of the national grid. The expectation is that the overall cost per kWh would be significantly lower than that currently charged by the large utility providers and as a consequence the market will become more competitive.

Sourcing electricity from local generators (e.g. roof-top solar, community plant, small-scale renewables, solar farms and wind turbines) businesses and councils would provide electricity directly to local customers. This would enable the councils to create a local clean energy infrastructure that should also create jobs, services and facilities, as well as help to reduce local greenhouse gas emissions supporting the UK in meeting its climate change targets.

The Local Electricity Bill will reform the current regime, by granting Ofgem, already the body responsible for issuing licences, with powers to issue licences to smaller providers of electricity with appropriate conditions.

Summary

The benefits of the new Bill are enticing:

At this stage, however, the conditions of the licences are still unknown and there are still some uncertainties and unknowns, but on balance, the benefits of the Bill could be substantial.