To fix our broken energy market, we need Help to Supply

The government should do more to help communities, local authorities and businesses not only produce but supply their own power.

The Help to Buy scheme has so far attracted 6,000 applicants in just two months, and has already enabled nearly 750 people to climb onto the property ladder: another step towards encouraging a "property-owning democracy" and securing assets for individuals and families. Great. But there is a much more radical shift waiting to happen in the energy retail market, and a far greater opportunity to facilitate widespread ownership, not only among individuals, but communities and businesses too. We have heard so much about the need to encourage diversity and competition beyond the "big six", yet seen little by way of policies to put this into action.

In fact, we’ve seen the reverse taking place. The reduction in the Energy Company Obligation (ECO) levy will aid to bring down costs, but only for the larger energy companies, giving them an even greater advantage in winning over customers. And according to a recent report, the 20 month price freeze advocated by Ed Miliband will see smaller utilities lose out. We desperately need policies that will not seek to disadvantage start-ups and smaller players within this sector. The party manifestos - if they are serious about tackling high energy bills – must include measures that encourage innovation, competition and widespread ownership, not stifle it.

Markets overseas show that an entirely different picture can be painted. Germany has 1,100 electricity suppliers, and the average household has a choice of around 72 of these. The four major energy companies operating in Germany (E.ON, RWE, EnBW and Vattenfall) take up 43.8 per cent of the retail market. Most other suppliers are owned by the municipality or the community, and the rate of "bottom-up" ownership of such services and assets is growing. At the end of 2012, 190 communities had been successful in bidding to run – yes, own and run – their local distribution grid (at least nine of these are co-operatives) and 70 municipal utilities had been founded.

This is not renationalisation or even remunicipalisation, but a move toward a much more constructive, locally-governed infrastructure in which communities ensure transparency, efficiency and good competition. Many of these emerging community-owned suppliers, such as Feldheim Energie and EWS Schönau, are not only offering cheaper tariffs than their competitors, but are seeking and fuelling the prosperity of their locality. In contrast, the UK has 30 licensed suppliers and the largest six take up 98 per cent of this market. No community has yet set themselves up as a competitor.

True, we cannot lift the infamous successes of Germany’s market and immediately apply them to the UK, and neither for this reason can we directly duplicate policies from overseas. But what we can do is not do nothing: we need a strong policy infrastructure, backed by government, that will catalyse new start-ups and new competition.

The Community Energy Strategy, published today, recognises that many of the UK’s communities, local authorities and businesses have an ambition to not only produce, but supply their own power. Ofgem’s "Licence Lite", which was introduced five years ago to make this possible, has so far seen only one application progress. The GLA, the largest governing authority in the UK, has the facility, scope and financial backing to take advantage of this scheme, but many institutions and civic groups don’t. The London Authority’s application is still pending final approval, so we are unsure as to whether even this will be successful.

What we need is a "Help to Supply" scheme. Government, working with the Department for Energy and Climate Change and Ofgem, should set up a series of pilots to work with a range of partners – communities, generators, local authorities, supermarkets, business hubs, Local Enterprise Partnerships – to help them establish a licensed supply company. Along the way, risks, costs and barriers should be noted and policies – perhaps even an alternative to Licence Lite – should be implemented as a result of this learning. This way, we may move from the paltry 30 suppliers we currently have to doubling or trebling this number in the next couple of years, and perhaps even more as the momentum builds.

Our ambitions are right, but our policies are wrong. If we are to take rising bills, competition and transparency seriously, we simply cannot let this opportunity pass us by.

Caroline Julian (@carolinejulian) is Head of Research at ResPublica and undertook a Winston Churchill Memorial Trust travel fellowship to Germany last year to explore the ownership structures of local distribution grids and utilities. The report based on this trip will be published through ResPublica this year.

Lightbulbs on display in an electrical retailer in Soho in London. Photograph: Getty Images.

Caroline Julian is Deputy Director, Head of Policy and Strategy at the thinktank ResPublica.

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Calum Kerr on Governing the Digital Economy

With the publication of the UK Digital Strategy we’ve seen another instalment in the UK Government’s ongoing effort to emphasise its digital credentials.

As the SNP’s Digital Spokesperson, there are moves here that are clearly welcome, especially in the area of skills and a recognition of the need for large scale investment in fibre infrastructure.

But for a government that wants Britain to become the “leading country for people to use digital” it should be doing far more to lead on the field that underpins so much of a prosperous digital economy: personal data.

If you want a picture of how government should not approach personal data, just look at the Concentrix scandal.

Last year my constituency office, like countless others across the country, was inundated by cases from distressed Tax Credit claimants, who found their payments had been stopped for spurious reasons.

This scandal had its roots in the UK’s current patchwork approach to personal data. As a private contractor, Concentrix had bought data on a commercial basis and then used it to try and find undeclared partners living with claimants.

In one particularly absurd case, a woman who lived in housing provided by the Joseph Rowntree Foundation had to resort to using a foodbank during the appeals process in order to prove that she did not live with Joseph Rowntree: the Quaker philanthropist who died in 1925.

In total some 45,000 claimants were affected and 86 per cent of the resulting appeals saw the initial decision overturned.

This shows just how badly things can go wrong if the right regulatory regimes are not in place.

In part this problem is a structural one. Just as the corporate world has elevated IT to board level and is beginning to re-configure the interface between digital skills and the wider workforce, government needs to emulate practices that put technology and innovation right at the heart of the operation.

To fully leverage the benefits of tech in government and to get a world-class data regime in place, we need to establish a set of foundational values about data rights and citizenship.

Sitting on the committee of the Digital Economy Bill, I couldn’t help but notice how the elements relating to data sharing, including with private companies, were rushed through.

The lack of informed consent within the Bill will almost certainly have to be looked at again as the Government moves towards implementing the EU’s General Data Protection Regulation.

This is an example of why we need democratic oversight and an open conversation, starting from first principles, about how a citizen’s data can be accessed.

Personally, I’d like Scotland and the UK to follow the example of the Republic of Estonia, by placing transparency and the rights of the citizen at the heart of the matter, so that anyone can access the data the government holds on them with ease.

This contrasts with the mentality exposed by the Concentrix scandal: all too often people who come into contact with the state are treated as service users or customers, rather than as citizens.

This paternalistic approach needs to change.  As we begin to move towards the transformative implementation of the internet of things and 5G, trust will be paramount.

Once we have that foundation, we can start to grapple with some of the most pressing and fascinating questions that the information age presents.

We’ll need that trust if we want smart cities that make urban living sustainable using big data, if the potential of AI is to be truly tapped into and if the benefits of digital healthcare are really going to be maximised.

Clearly getting accepted ethical codes of practice in place is of immense significance, but there’s a whole lot more that government could be doing to be proactive in this space.

Last month Denmark appointed the world’s first Digital Ambassador and I think there is a compelling case for an independent Department of Technology working across all government departments.

This kind of levelling-up really needs to be seen as a necessity, because one thing that we can all agree on is that that we’ve only just scratched the surface when it comes to developing the link between government and the data driven digital economy. 

In January, Hewlett Packard Enterprise and the New Statesman convened a discussion on this topic with parliamentarians from each of the three main political parties and other experts.  This article is one of a series from three of the MPs who took part, with an  introduction from James Johns of HPE, Labour MP, Angela Eagle’s view and Conservative MP, Matt Warman’s view

Calum Kerr is SNP Westminster Spokesperson for Digital