UK can learn lessons on local energy suppliers (as well as football) from Germany

Germany and penalty shoot outsGermany has 44 times the number of energy suppliers of the UK – and the Government must do more to support new entrants into the supply market, according to a new report by the influential Res Publica think-tank.

The study reveals that businesses looking to become energy suppliers face major barriers to entry in the UK:  while 12 new businesses have entered the supply market since 2011 – taking the total number to 25 – the ‘big six’ still capture 93.5% of the market share.

In stark contrast, Germany is home to 1100 electricity suppliers, and the four largest energy businesses hold only 44% of the retail market. Households in Germany can choose from an average of 72 energy suppliers, most of which are established locally.

 At present, there are no local suppliers in the UK.

 The Res Publica essay, ‘Creating Local Energy Economies: Lessons from Germany’, which is supported by the Winston Churchill Memorial Trust and Co-operative Energy, argues that the UK can deliver on greater transparency, lower household bills and genuine competition if communities, local authorities and small businesses could enter into the supply market and sell their energy locally.

The Greater London Authority is the only body to formally progress an application to become a local licensed supplier. But over 15 months have passed since the London mayor, Boris Johnson, announced the application, and a decision as to whether the GLA can go ahead has not yet been made. This is despite the introduction of simpler and more accessible routes to market by the regulator in 2009.

In Germany, the story is different. From 2010 to 2012, 90 communities and municipalities had entered into the supply market and 190 communities had bid to run their local electricity distribution network. A growing number of local groups are appealing to private energy companies to put their local utility back into public hands.

 Caroline Julian, Res Publica’s Head of Research, said: “Germany’s energy markets and corresponding infrastructure are so different that it’s tempting to think that we can’t possibly learn from their success.

“To the contrary, there are ways in which we can begin to encourage new businesses into our energy markets and facilitate the local trade and supply of our energy.

 “Communities, local authorities, small businesses and housing associations have the ambition; and recent surveys show that there is demand for local power. Government simply needs to cut the red tape and implement a far more ambitious vision of Britain’s future energy market.”

Res Publica calls on Government to set up a ‘Help to Supply’ scheme, which would open the floodgates to a spectrum of new suppliers. The scheme would encourage existing energy retailers and big businesses to partner up with a community, small business or local authority to help them get off the ground and into the market.

It also calls on Government to radically simplify the requirements needed to set up as a new energy supplier, and recommends that local supply licences should be made possible. At present, it is only possible to register at the national level.

Res Publica, an independent non-partisan think tank, has drawn support from across the heavyweight political spectrum for this plan:

 Lord Smith, Chairman of the (English) Environment Agency, said:

This essay shows very clearly how Germany has succeeded – where we have so far failed – in creating a bottom-up revolution in energy supply and distribution. Property-level renewable installation, community energy companies, small-scale local schemes: these have been the way forward for German electricity production, and it’s been a big success. We could learn some serious lessons here.”

 

Greg Barker MP, former Minister for Energy and Climate Change, said:

“To achieve the competitive, liquid and innovative energy market we need in the UK, it is crucial that we support new entrants, promote decentralised ways of working and harness community-based initiatives.

“This essay rightly affirms that we need to be more ambitious in considering what energy markets in the UK could look like. I believe that we need to deliver power to the people and facilitate the ‘big 60,000: the recommendations from this ResPublica essay deserve serious consideration.”

 

Tom Greatrex MP, Labour’s Shadow Energy Minister, said:

“The obligation to decarbonise is also an opportunity to change how we generate and consume our power. We can put individuals and communities at the centre of that process, empowering them to deliver cleaner, greener energy. This paper is a welcome contribution to that discussion.”

 

Ramsay Dunning, General Manager, Co-operative Energy, said:

 “The amazing progress of citizen-owned energy in Germany shows what is possible when an enabling policy environment is provided by a supportive Government over a number of years. Here in the UK, new entrants such as Co-operative Energy are emerging, but we and others could do so much more if a stable policy framework was in place and Government spoke with one supportive voice.”

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