28 April 2016

A project aiming to put local organisations and communities at the heart of the British energy market has been launched today by former energy and climate change secretary Sir Ed Davey.

The initiative aims to bring together councils, electricity generators, suppliers and a range of other organisations to understand how the energy market could be transitioned away from the existing, centralised model––and towards one driven by people at the local level. This transformation promises to increase innovation, strengthen competition and ultimately to reduce energy costs for households and businesses.

The Local Supply Community (LSC) project is being led by Pixie Energy––a new venture established by industry expert Nigel Cornwall, who will serve as co-chair alongside Davey. Representatives of the Department of Energy and Climate Change and energy regulator Ofgem will be observers on the LSC project’s board.

The past couple of years have seen the establishment of a number of innovative, locally-focused schemes that have sought to drive consumer engagement in the energy market. The city councils of Bristol and Nottingham have both begun operating fully-fledged energy supply businesses; meanwhile, local authorities such as those of Southend and Peterborough have entered into arrangements in which they use their brands to attract customers, who are then serviced by existing suppliers.

The LSC project is aiming to progress this shift towards local energy markets by finding new ways to develop the links between regional electricity generation and supply. It has already examined how local energy tariffs––based on “decentralised” power projects that are not connected to the national grid––could be designed, and their costs compared with the offerings of the national energy firms.

The next phase of the project, which will run through to October, will focus on building the business case for the local energy transition. Through the involvement of councils and energy firms in three regions––Eastern, South Wales, and Yorkshire and North Lincolnshire––it will seek to scope the changes needed to the current arrangements in order to facilitate the creation of local energy markets. It will also evaluate how these changes could be implemented.

With the government’s recent cuts in subsidies for renewable technologies such as wind and solar farms, the initiative is aiming to identify new revenue opportunities for owners of local green energy projects.

Pixie Energy, which is utilising the expertise of consultancy Cornwall Energy as part of its work, believes that the new market model could be available as early as next year.

Nigel Cornwall said: “We want to help deliver a market that works better for small and community organisations and believe that this project will create exciting opportunities.”

Sir Ed Davey, who served as energy and climate change secretary between 2012-15, said: “Both during and since my time in government I have believed strongly in the ability of competitive markets, coupled with local generation and supply, to help the UK to meet its energy and climate objectives better. Perhaps most importantly, action at the local level can give consumers greater control over their energy future and save money on their bills as a consequence.”

Cornwall Energy managing director Jo Butlin said: “We’re very pleased to be supporting a programme of work that seeks to boost competition and innovation in the energy market. As a company, we have over many years built up substantial expertise on the issues affecting local and community energy.”