Buying and selling power locally = a better energy system. Here's why.

In May 2015, we launched a petition to let community energy groups buy and sell their power locally. Normally we're more into doing stuff than asking for stuff, but this one's different. Winning a 'right to supply' for local energy groups would really boost clean energy and give more people a chance to benefit from it.

But what's the 'right to supply' all about, and why is it such a potential game-changer? We collared community energy champ Alan Simpson to explain.

What's the big deal about local energy?

In some countries, communities already have the right of 'first use' of energy they produce locally ... and at reduced prices. In the UK we don't.

Why not?

Two reasons. UK electricity market rules specify that (unless you have a private wiring system) you have to supply into a national market. To do so, you also have to obtain a 'supply license'. This can cost around £1m.

That's a lot of loose change. Why the big numbers?

Well, it's a good way of making sure that only the big guys get to play in the energy game.

Has it always been like this?

Nope. Until 1947, most local authorities owned their local energy companies (and got 50% of their income from the supply of local gas, water and electricity). For electricity at least, nationalisation created a single national market (with a series of regional supply boards).

I guess you can't turn the clock back, though?

Well, other countries don't have a problem separating the need for a national (high voltage) grid that runs alongside a series of more localised distribution networks. The UK distribution grids also (mainly) work as one-way routes (from the power station to the plug).

But new technologies are turning grids upside down; allowing people to become energy producers, not just consumers

But new technologies are turning grids upside down; allowing people to become energy producers, not just consumers; and making it possible to create new energy markets that work on needing less energy rather than more. This is turning the clock forwards, not back.

Sounds like a game-changer. Why aren't we in it?

It would bust the current UK energy cartel wide open. Big energy relies on a captive market, selling more consumption and setting prices that can't really be undercut.

But wasn't privatisation supposed to bring competition into the energy market?

Even 'Sid' knew that was a load of old turnips. Privatisation was about shareholders not consumers. Within days most of the shares belonged to big investors who expected a steady supply of big dividends. An open, competitive market would kill off their milk-cow. That's why you can't get in.

So what needs to happen?

We need to put a rocket up all the political parties until one of them promises to bring in 'a right of local supply'. This would mean that local areas could have first-use of the (clean) energy they generate themselves. As it stands, those who generate clean electricity feed any surplus into the grid, at prices much lower than when you buy it back. In Germany, communities can buy this electricity directly, at prices that can be 30% (or more) below retail electricity prices.

Whoa, where did the Germans get into this?

Actually, the Germans (and the Danes and lots of others) have been in this game for over 20 years. At the moment over 190 German towns and cities are taking their local grids back into social ownership. Germany's KfW bank even loans communities the money to do so.

Over 190 German towns and cities are taking their local grids back into social ownership.

Today, Germany's 'pioneers' are beginning to turn their towns, cities, villages and regions into the virtual power stations of the future. These will be tomorrow's  'smart cities'.

But I thought Britain was a global leader?

Britain is great at leading from the back, and in subsidising the past. From nuclear to fracking to oil and gas tax allowances,  the UK throws shed-loads of public money into the wrong stuff. Energy market traders love us - referring to Britain as 'Treasure Island'; the best place in Europe to walk off with so much, in exchange for so little.

Aren't the rest of us too small to do anything about this?

Absolutely not. All round the country, communities and localities are driving all the brightest ideas about tomorrow's energy systems.  Last year the UK produced 20% of its electricity from renewable sources. In Scotland it was 50%! Much of this goes into the grid; for which households can get paid as little as 3.4p/kWh. This is a big difference from 15p/kWh it costs to buy it back. Local supply rights aim to split the difference by sharing, storing, saving and supplying within their local (low voltage) grid, and taking pressure off the high voltage grid at the same time.

Are you sure this isn't just a pipe dream?

In other parts of Europe and the USA it is already happening. Loads of UK towns and cities are already pushing for the same sort of energy independence. Last year, there were 15,000 'pilot' energy storage schemes in Germany alone. At the end of April, Elon Musk is promising to unveil his own breakthrough in electricity storage in the USA. All the rumours are that this will be focussed on storage at a household level. Britain isn't a leader in energy transformation thinking, but it would be really good if we were in the game.

Wouldn't it be difficult to do?

Well, remember that we have been here before. In the last industrial revolution, mining communities got free supplies of the coal they mined. It was their 'free' share of what underpinned the nation's wealth and security. Today, you wouldn't even have to have coal lorries delivering the fuel. We all have wiring systems already equipped to deliver electricity straight from the turbine to the table lamp, from the solar roof to the sound system. All we lack, today, is this right to local supply.

Doesn't this have big implications for Britain's energy sector?

You bet. Within a decade, many of today's power stations will be lucky to turn up in car boot sales, and energy companies know it. You only have to look at their balance sheets, their share values, and their demands for new public subsidies, to see that the game is up.

But won't the lights go out if energy companies crash?

That's the 'bogey man' line run out in the press every time Big Energy wants to raise prices or demand more subsidies. Local supply gives communities other choices about delivering future energy security, energy saving and lower prices. It also puts 'us' - the public - in the driving seat of such change.

Sounds great, but isn't this just unaffordable at the moment?

Quite the opposite. German citizens are currently putting €30bn a year into their own renewable energy schemes. In the UK, community energy co-ops have successfully raised millions of pounds in share offers, to people happy to put their savings into such schemes. This is exactly how Britain's local energy companies were set up almost 200 years ago. We just need to do it again now; but delivering clean energy rather than dirty.

But what if I don't like some of the clean technologies on offer?

The good news is that there is no 'silver bullet' technology that will deliver energy security in the future. All the most exciting areas now draw on a mixture of technologies ... and on what works best for them. The big step change is to recognise that climate change won't offer any of us 'free rides' into the future. Every area will have to work out how to deliver its share of the answers. What seems to make a difference is not the technology, but who owns it. Wind turbines are often quoted as controversial examples, but the ones in Denmark and Germany that are community-owned (and supplying cut-price electricity) have been much less contentious.

Isn't the government already committed to such 'community ownership'?

In theory, yes. The Coalition Agreement actually said:

“We will encourage community-owned renewable energy schemes, where local people benefit from the power produced".

However, Big Energy (and the Treasury) have been doing their best to scupper this, largely because it threatens the 'everlasting subsidies' that Britain's non-renewable energy sector has become completely dependant upon.

And are we just talking about electricity here?

Maybe to begin with, because this is where the most anti-competitive market rules apply. But elsewhere there are examples of localities delivering local (renewable) gas supplies and renewable heat networks. These have different technical issues to address but lots of towns, cities and regions are already piloting schemes that deliver local heat or local gas as well as local electricity. The possibilities are awesome. But everything begins from communities having a right of local supply. In terms of shaping Britain's energy future, it is the difference between being a player or being a passenger.

I'm not sure I want a bunch of amateurs handling my energy bills - what if they get it wrong?

There's nothing amateur about this. Local energy systems are becoming smarter than anything we have now.

Local energy systems will do to Big Energy what the mobile phone has done to the phone box.

They work out how to save energy, when to store it, when it's cheapest and how to pay you for what you generate. Smart technology is already driving this change. Local energy systems will do to Big Energy what the mobile phone has done to the phone box.

Are you saying we can go off-grid with local supply from community energy co-ops?  What happens when it isn't sunny or windy?

This isn't just about co-ops; nor about wind, sun, hydro or geothermal. It is a complete rethink of what grids are about. Some cities are already turning themselves into virtual power stations - linking anything from 50-500 different local power sources into one integrated system. 'Storage' will be one of the key breakthrough areas, but virtual systems will link with other neighbouring ones so we can 'pool' both supply and security. Many will feed more into the National Grid than they take from it. Co-ops will be a part of this, but so will industry, commerce, the NHS, the council and a multitude of households. That's what makes it so exciting.

But if we still need Big Energy and all their gas-plants and pylons and cables to keep our lights on, then how are we going to pay for all that stuff?

'Keeping the lights on' is a phrase used by energy companies when they want to put your bills up. We paid for the grid a long time ago (out of public taxation). Local energy systems will use today's distribution grid more efficiently. Even back-up generation will become integrated into more localised systems. Neither Germany nor some of the U.S. states are racing into this because they've got more money than sense. They are doing it because the future of energy is in systems that use less... and which cost less.

Isn't there something called Licence Lite that is supposed to make local supply work already?

Licence Lite was introduced in April 2009 primarily to help decentralised energy generators get a better price for their power. But six years later it is still not actually in use anywhere - suggesting it probably isn’t the solution to the local supply problem that the renewables sector is waiting for. One obvious design flaw is that it relies on big utilities to parent the ‘junior’ suppliers, without providing any real incentives for them to do so.  Licence Lite has got tied up in so many knots that it may just about be able to supply energy to one giant customer - the London Underground. The proof will be in the pudding here, as it remains to be seen whether even the Greater London Assembly and TfL can make Licence Lite work to realise any significant financial benefits for either small generators or TfL.

What about the 'nice' energy companies?

It's important to note that there are some smaller players in the domestic supply market that are on the same side as us. But they're limited in what they can do to help under current rules. Of today's big energy companies, half will go bankrupt within a decade. Those that survive will have changed into energy services companies. They will also have gone into partnership with local areas, local communities and telecoms companies, to deliver 'smart' energy systems. Along the way, they will have learned that shared ownership (rather than near monopolies) is the only viable market model. 

Isn't calling for cheaper power a bad idea for a climate change campaign?

The experience, so far, in Germany says 'no'. Given the power to to do so, local communities have become the driving force behind Germany's 'clean energy' revolution. The country now has over 2 million 'clean energy' suppliers; and these communities are the ones who put 'using less energy' before 'producing more'. Their starting point is in making homes, schools and offices more energy efficient. In doing so the country has cut its greenhouse gas emissions by 24% over the last decade while growing their GDP by 27%.

What actually happens to the electricity generated locally then?

Well, it doesn't go out clubbing or looking for a holiday break in Ibiza. Electricity always goes to the nearest point of use. There's nothing political or sociological about this. It's just how electricity works. By circulating it within the local (low voltage) network you can make more efficient use of the network, take pressure off the high voltage grid, reduce the costs of transmission, and (if we crack the 'storage' question) actually make the grid more stable. Tomorrow's 'smart grids' are the key to lower energy costs.