On 10 July SERA and the Co-operative Party held a joint event to explore co-operative and community energy. Here Ash McGregor of the Socialist Societies Executive reports on the meeting.
Shadow Secretary of State for Energy and Climate Change, Caroline Flint spoke of the strong analogies between the energy and banking industries, with companies that owed a duty to their customers but who weren’t fulfilling those duties. The Government’s current Energy Bill doesn’t refer to customers and their needs and ministers haven’t provided a clear vision for energy. Labour would need to be a positive influence on the development of the Bill.
Key to change in the energy sector is decentralisation in order to get communities involved and engaged. For example, how do we deal with the issue for planning for wind turbines where communities feel ‘done to’? In her own constituency of Don Valley EON has a community fund, but this is not the same as engagement. In Denmark wind energy generators have to offer 20% stake to local community. In Germany 65% of renewables are owned by individuals or communities whereas it is less than 10% in the UK.
She highlighted Labour’s record in reducing carbon emissions and fuel poverty with schemes such as Warm Front, Decent Homes Standard and Margaret Beckett’s transformation of the UK boiler market.
Chief Executive of Co-operative Energy, Nigel Mason spoke of the rationale for its creation just over a year ago. Energy is a basic household need and with prices rising we need to save energy. Consumers are disengaged, with confusing tariffs, seemingly arbitrary price changes and poor sales practices. 99% of customers are still with Big 6, who own 70% of generating capacity. Energy needs a co-operative solution.
As a new entrant to the market Co-operative Energy a has been able to gain 54,000 customer (1 in 500 households), doubling in size through an auction with the Consumers Association. It has also create 63 jobs in its Warwick call centre.
Key to Co-operative Energy’s offer is the ability to offer consistently competitive prices (not always cheapest but tends to be cheapest on full year average), to keep things simple and provide excellent customer service. It is open, honest and transparent (especially on the relationship between wholesale costs and retail prices), uses sells low carbon energy and share our profits with its members .
It aims to buy energy flexibly throughout the year to try to achieve less than half the national average carbon emissions. In the first year the a mix of 100% renewable (mostly biomass) was achieved.
Co-operative Energy is also starting to buy from co-operative generators and services from service providers, thereby building a co-operative supply chain. It has made 5 year commitments to as yet unlaunched energy schemes, the strength of the Co-operative balance sheet allowing banks to finance these.
Rebecca Willis of Co-operatives UK has been taking the temperature of communities re: energy generation. Last summer (against the backdrop of changes to feed-in tariffs) she visited five co-operatives looking at what they did, how, their achievements and pitfalls.
A vibrant co-operative energy sector has great potential. It is popular with the public and could bring in some of the £billions of investment required over the next decades. Community energy is not just about small-scale schemes – 3.5GW could come from this in the UK if incentives are right.
Currently energy co-operatives are not entering the mainstream. Everything between home generation and the Big 6 is squeezed. Regulatory policy needs to be rethought in order to allow this mid-market to flourish. There is a need for a community tariff to encourage the sector but unfortunately the Government seems to be backing away from this, and there is concern that the Energy Bill will further squeeze the middle.
Government needs to map out a clear community energy pathway – what is required and what you’ll get in return. For example, it is difficult to register with OFGEM regarding feed in, difficult to deal with the Environment Agency regarding hydro and the planning framework is unsupportive. Things need to be simplified and there is a need to co-ordinate, advise and support. It’s hard to get legal, technical and financial advice.
There is a clear challenge in building partnerships between emerging community generators, banks, local authorities and house associations. The sector needs to be more ambitious – most are not thinking about MW generation and may need to partner with large companies in order to do so.
It is clear that Government does have a role in creating a better energy market. For me the key issues that Labour needs to deal with are:
- Transparency throughout the supply chain, whether it‘s trading data, distribution costs, predatory pricing, commissions paid to intermediaries, clarity for customers over best available tariffs and the issue of vertical integration
- The need for government to ensure a level playing field across sizes of organisation re: tariffs, funding , whether large energy or housing association, so we don’t have a squeezed middle in the energy sector
- The need to ensure tapered rather than sudden transitions in regulation and funding
- The potential role of local government and sub-regional bodies in creating local supply chains and local Green jobs and providing leadership in sustainable development
- The need for the planning framework to support and maximise the potential of Co-operative and community energy, e.g reduction of planning costs, making it easier to use agricultural and industrial buildings to contribute to generation
- The need for provision of technical, legal and financial advice and support for energy co-operatives to start up and grow
Ash McGregor is Vice Chair of the Socialist Societies Executive and a Co-operative Party activist