Lower bills depend on support for new local suppliers
This is according to a new publication by think tank ResPublica, which has revealed that businesses looking to become energy suppliers face major barriers to entry in the UK. Twelve new businesses have entered into the supply market since 2011, taking the total number to 25, but the 'big six' still capture 93.5 per cent of the market share.
ResPublica holds up Germany as a model worth emulating – with 1100 electricity suppliers, it has 44 times the number of suppliers of the UK. The four largest energy businesses hold only 44 per cent of the retail market. Households in Germany can choose from an average of 72 energy suppliers, most of which are established locally.
The ResPublica essay, ‘Creating Local Energy Economies: Lessons from Germany’, which is supported by the Winston Churchill Memorial Trust and Co-operative Energy, argues that Government should do more to enable communities, local authorities and small businesses to enter into the supply market and sell their energy locally. At present, there are no local suppliers in the UK.
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.
ResPublica's head of research, Caroline Julian (pictured), 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."
The ResPublica Essay 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.
Lord Smith, chairman of the Environment Agency, says:
“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.”
