Local energy production offers some real opportunities for local authorities to raise much needed finance, to improve the lives of citizens through lower energy costs and to meet climate change targets. Lots of municipal authorities round the world are moving back into energy supply. The IPPR’s new report City Energy lays out recommendations to encourage and support UK authorities down this road. The report focuses on engaging in the energy supply market and raising finance for investment in low carbon infrastructure particular for generation.
Britain’s energy crisis
• Low income consumers are being overcharged
• Crisis of trust in energy companies
• Green finance gap
• UK economy is not benefiting from low-carbon subsidies
• Local energy generation is being held back
Cities account for two thirds of the world’s energy consumption and 70% of global CO2 emissions. Local authorities are well placed to make a substantial impact on the above challenges through producing and selling electricity to their citizens. Munich has a target to supply the whole municipality of one million people with renewable electricity by 2025 and have invested €900m in renewable projects. Energy production offers a much needed source of finance for local authorities in the long term.
Some of Britain’s cities are already have an innovative role in our energy market and local authority pension funds are investing in low carbon projects: Lancashire’s County Pension Fund has committed £200m to low carbon projects. Aberdeen is planning to use hydrogen as a vehicle fuel source which is produced by excess power from offshore wind farms. Bristol has a city solar project where local communities groups can invest in solar installations on council premises.
Business model options for cities
Fully licensed supplier: city authority sets up and delivers electricity Nottingham is pursuing this option
Joint venture: city authority works with third parties to set up and run an independent supplier
Licence lite: city authority becomes junior supplier taking responsibility for some aspects of supply and licensing while senior supplier deals with the rest GLA going down this road
Partnership: city authority works with existing supplier
White label: city authority licences use of its brand to existing suppler who markets to customers in that area.
Done properly local authorities could keep its and citizen’s energy bills low, reduce carbon emissions and ensure energy security. Beyond that there is huge potential for creating and maintaining highly skilled jobs with the many benefits they bring to local economies.
Engaging in the energy supply and targeting low income households with improved tariffs local authorities could make a huge leap in reducing fuel poverty. The report offers three ways that local authorities could invest in carbon reduction: municipal bonds, pension funds and the Green Investment Bank
• Cities should consider engaging in the energy supply market where this promotes local generation and tackling energy affordability
• Cities should explore opportunities for investing in low carbon energy developments through municipal bonds, local authority pension funds and the Green Investment Bank
The report also calls for central government to
• Set up a local authority energy unit
• Encourage all pension funds to adopt the Principles for Responsible Investment
• Design fiscal rules to ensure capital debt from local authority bonds or green municipal bonds do not count against targets for cutting debt
• Give immediate borrowing powers to Green Investment Bank
The report also givens and up to date overview of what local authorities current role and the plans they are developing. Local energy production via city authorities has a substantial potential to improve lives and reduce carbon production. Hopefully we can see a rapid expansion of projects soon.