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Why local councils should become energy suppliers

Freeing local authorities to compete in the energy market would reduce prices, attract green industry and create jobs.

A photo illustration of the filament inside a lightbulb on October 17, 2013 in London. Photograph: Getty Images.

Since Ed Milliband unveiled his plan at the Labour Party conference to freeze energy bills until 2017, the price of energy has rarely been out of the news. The problem with the narrow debate around the size of household bills is that it fails to address the issue of diversifying energy generation. The key to lower prices is, ultimately, a more competitive market. Local government has its roots in energy generation – modern Birmingham was built on the revenue from the local gasworks. It’s time we got councils back into the energy game.

The benefits of a new generation of local authority energy provision will not just be felt in terms of greater competition and lower bills. Councils can sell energy to raise money to pay for public services and, if this is positioned smartly, spur green economic development, creating a new generation of good jobs in the sustainability sector. The low carbon economy already accounts for 8% of GDP. With support from councils, it could grow significantly.

Some councils are already using green energy capture to cut their own fuel bills locally. Birmingham, Islington and Woking are all experimenting with energy generation and redistribution. Islington’s Bunhill Energy Centre, for instance, captures wasted heat to provide cheaper energy to estates in the local area – but these initiative tend to be on the periphery of activity. Scaling this up, generating energy on a much larger scale and linking it to local economic growth strategies could completely transform how we control and use energy at a very local level.

Local authorities have a huge role in economic development. If councils were freed up to compete in the energy market on a local basis, to generate and provide energy, this could attract green industry, create jobs and, crucially, underpin communities with green infrastructure. Local authorities are best placed to shape local markets and skills to align to the green energy agenda.

Generating and recycling energy at a local level would also have a huge benefit to local people in a way that the Big Six just can’t achieve. Local authorities would be able to provide cheaper energy directly to their residents, which should take advantage of local resources in the process. Communities would also become much more directly involved in the energy market by working with local authorities through energy co-operatives for instance, to capture and recycle energy to use themselves and sell back to councils for cheaper redistribution locally. Giving this power directly to communities would both incentivise behaviour change locally whilst helping to reduce the cost of living.

Some will question why councils should return to energy. Why not instead partner with energy suppliers and set up joint ventures to distribute cheaper energy? The problem is that attracting this sort of investment is a real challenge. Local authorities have the financial muscle to invest in this sort of infrastructure development that could accelerate projects quickly, whilst linking it to economic growth strategies.

But the real answer to this question lies with community ownership of resources, which would transform how councils and residents interact with the energy market. Given the current direction of energy bills and how powerless people feel to control it, recycling and generating energy using local resources will become more, not less important, in addressing this problem. Behavioural change will only come alongside ownership of these resources and local authorities, as guardians of localities, are ideally placed to lead this.

Laura Wilkes is Head of Policy and Research at the New Local Government Network