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Power to the People

Between the end of WWII and the 1980s, the UK’s energy ran through a nationalised infrastructure, sharing a state-owned commonality with the majority of other British services and utilities.

29th November 2013    |     Peter Rolton: Chairman, Rolton Group

Within a decade of coming to power in 1979, however, Margaret Thatcher and her Conservative government brought about a paradigm shift that opened the market up to privately owned business, completely changing the landscape of the nation’s many industries.

In 1986 came the privatisation of the gas industry as shares of the British Gas Corporation were floated on the London stock market, and four years later electricity began to follow suit; over the course of the 1990s the Central Electricity Generating Board was split into the privately-owned National Grid Company, Powergen and National Power with the aim of encouraging a more competitive, free-market economy whilst putting spending money back in the Government’s pocket.

Well, we’re now several decades beyond this reformulation and unfortunately the hopeful vision of consumer-driven firms vying for the attention of their paying customers has transformed into a picture altogether less promising. Ambitions of a thriving industry have been severely disappointed, with only six players left in the energy provider game; these few corporations account for over 90 per cent of UK energy supply, placing nothing short of a stranglehold on the competitive space. Consumers have little if any control over their energy fortunes, and have found themselves stuck with no choice but to hop between providers that offer almost identical tariffs.

So where do we go from here? Neither of the options explored so far has offered an enduring solution that works for the consumer first and the corporation second, so perhaps it’s time to look elsewhere. Perhaps it’s time for a shift in perspective.

There has been an undercurrent rippling away in the energy sector for some time now, one that moves away from either total state control or total business control and instead flows back towards the consumer. Greg Barker MP has spoken of the need to diversify our sources of energy, stating that ‘the Big Six need to become the Big 60,000’ if we are to have a world-class industry that responds effectively to the needs of its users. This refocusing with the consumer at centre stage is the central tenet to a decentralised energy infrastructure, and could provide the answer that the industry so desperately needs.

The notion of self-sufficiency often summons apparitions of Tom and Barbara toiling away in ‘The Good Life’, trying to get by living off home-grown vegetables and a goat, but this image needs a considerable reboot: on-site generation is a game changer, on both domestic and industrial scales.

Some of the world’s leading business sectors are starting to acknowledge and indeed harness the huge potential of creating their own localised supply of power, taking themselves off the grid and ending their reliance upon an increasingly volatile global market. Far from a millstone around their necks, measures such as these achieve financial parity with traditional methods at the very least, if not producing large profits through the selling of surplus power on to other users or back to the National Grid. No longer are those who take hold of this opportunity confined solely to purchasing their power, but instead can make their own; suddenly, the debate surrounding the ever-climbing cost of utility bills is silenced, nullified.

With a view to exploring the commercial opportunities presented by decentralisation, major property developers are now beginning to consider generating power to sell to their tenants, creating an attractive proposition for the end users who will benefit from stable prices whilst providing developers with a steady stream of income. Also waking up to the possibilities are the nation’s biggest energy users, who currently stand on the front line to be switched off should spare capacity get squeezed past its limit; interruptible contracts mean their power can be rerouted to other, more immediately urgent users when supplies are scarce, which doesn’t make a compelling business case.

By developing on-site measures, these intensive users can continue to operate at full throttle without the threat of shut-down, becoming their own secure supply. Extending this further, it isn’t a far stretch to imagine that in the coming years we will see supermarkets directly selling ‘bundles’ of energy in the same way as, for example, phone contracts. It all hinges on the same idea of decentralisation, creating tailored offerings instead of chunky, one-size-fits-all tariffs; smart meters are already making consumers more aware of their own patterns of energy use, and this awareness could soon tally up with bespoke contracts that make more intelligent use of power.

The energy revolution doesn’t stop there, either; local authorities, supported by recently announced governmental funding, are getting wise to the commercial opportunities that surround them. Towns create waste, that’s a given. What if this waste could go somewhere besides landfill? What if it could be seen as low hanging fruit rather than a nuisance? Those questions are now being answered; waste could have a second life as energy pumped through a district heating network that operates on a local tariff, and this sounds rather appealing to the many councils that struggle year on year to meet their waste reduction quotas.

The other critical point to make here is that the very nature of introducing so many new entrants to an arena ensures the maintenance of a properly functioning competitive market, with power placed firmly back into the hands of the end-users as they regain the ability to choose an offering that suits their needs. Of course, the Government has an important role to play in this; a decentralised energy industry can only thrive if it is free from restrictive bureaucracy and the vested interests of powerful corporations with deep pockets. Equally, the planning process has to be construction friendly in order to create a vibrant and successful market. With these caveats in place, however, there is a very persuasive argument in favour of substantial investment in this sector.

Decentralising the nation’s energy should be seriously considered as one way through which the UK can start to lessen its dependence on the Big Six, instead rising up to become the ‘Big 60,000’. The many various opportunities for businesses, county councils and even individual households to become their own suppliers make it difficult to justify why the UK would remain in its current position, pinned in place by a handful of corporations whose interests lie with shareholders rather than customers. There is a real chance here for the UK to become its own energy boss, and I propose we take it. In the infamous words of Citizen Smith: Power to the people!

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