Football isn't the only thing we can learn from Germany
Germany has 44 times the number of energy suppliers than the UK – Government must do more to support new entrants into the supply market, think tank argues. Lower bills depend on support for new local suppliers.
A new publication by the influential think tank ResPublica reveals that businesses looking to become energy suppliers face major barriers to entry in the UK. 12 new businesses have entered into the supply market since 2011, taking the total number to 25, but 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.
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 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. 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, 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.”
Rt Hon Greg Barker MP, former Minister for Energy and Climate Change, says:
“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, says:
“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 at Co-operative Energy, says:
“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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Note to editors
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ResPublica was recently short-listed for the energy and environment award at the Prospect Think Tank Awards 2014.
The ResPublica Trust (ResPublica) is an independent non-partisan think tank. Through our research, policy innovation and programmes, we seek to establish a new economic, social and cultural settlement. In order to heal the long-term rifts in our country, we aim to combat the concentration of wealth and power by distributing ownership and agency to all, and by re-instilling culture and virtue across our economy and society.
We believe that such a settlement can be achieved through the restoration of civic institutions, inter-personal relationships and ethos-led principles, and by fostering an asset-based, competitive and mutual approach to economy and business. To argue this is to say that morality and markets are not opposed: each requires the other to foster prosperity.
Our ideas are founded on principles which move beyond the political dichotomies of left and right, by addressing the future and recognising the reality and complexity of the problems that already confront us. We argue that the solutions we need must prioritise the importance of shared prosperity, a flourishing society and a renewed culture of virtue.
About Co-operative Energy
Co-operative Energy is a new energy provider supplying gas and electricity to customers across England, Scotland and Wales. The business is committed to fair pricing, lower carbon energy and is the only energy supplier wholly owned by its customers, who are rewarded twice a year with a share of profits. Co-operative Energy is committed to providing energy with an easy to understand tariff and a commitment to fair practice. The business is also helping to tackle climate change by supporting renewable energy and has pledged that the carbon content of its electricity will remain less than half the national average. Co-operative Energy is part of The Midcounties Co-operative, one of the largest independent co-operatives in the UK, owned by over 400,000 members.
In addition to general support for renewable energy, Co-operative Energy actively seeks to source power from community generation initiatives. By offering long-term power purchase agreements, a secure market for community energy is provided and a project’s viability is significantly enhanced. Supply is now contracted from six such projects, with supported enterprises ranging from co-operatives to crowd-sourced joint-ventures. Going forward, Co-operative Energy is looking to develop an increasing number of long-term power purchase agreements with community groups and independent energy generators, with a view to directly supporting 160MW by end 2016.
Elliott is responsible for Events and Communications at ResPublica. He graduated from the University of Southampton with a BSc in Politics and International Relations, having won the Peter G Richards...