Have you heard the one about Jeremy Corbyn’s plans to renationalise the energy system? asks Stephen Hall, research fellow in energy economics and policy at University of Leeds.
In an interview with Greenpeace, the Labour MP and leadership candidate said: “I would personally wish that the Big Six were under public ownership, or public control in some form.”
It would be easy to take this quote out of context, add up the market value of the Big Six and suggest the Corbyn campaign wants to spend £124 billion renationalising the utilities. Yet, in the next breath however Corbyn added: “But I don’t want to take into public ownership every last local facility because it’s just not efficient and it wouldn’t be a very good way of running things.”
So what does the Corbyn camp suggest instead? The only clear evidence is in his Protecting Our Planet manifesto, which sets out ten energy pledges and details some key policies.
It’s no aggressive nationalisation plan. What it is, is a manifesto for a more decentralised and democratically accountable system, inspired more by present-day Germany than 1980s Britain.
So does Corbyn’s energy policy look like a throwback or a revolution? There are four reasons to suspect the latter.
Introducing Genuine Competition
“Competition” in the UK energy market has left consumers bamboozled and overcharged. Our choices are like a shopping mall food court: you can have anything you like, as long as it’s fast food. The energy market is similar, most suppliers are operating the same big utility model with the same options; you can have anything you like, so long as it’s a national tariff from a large private utility.
Corbyn’s manifesto cites Germany, which allows consumers the option to buy energy from municipal utilities or co-operatives. Some new consumer options are being seen in the UK. Smarter ways of buying green energy are appearing, and Nottingham City Council has set up its own energy company with a name that sends a clear message: Robin Hood Energy.
But while it’s easy enough to build a wind turbine these days – or even a whole wind farm – it’s significantly harder for innovative new businesses to actually join the market. Corbyn’s manifesto commitment to growing municipal and co-operative models would mean consumers face more meaningful choices.
Smaller Energy Startups
The manifesto pledges to create a “route-map into tomorrow’s ‘smart energy’ systems” to “use smart technologies to run localised storage, balancing and distribution mechanisms” and allow customers the “right to have first use of the energy they generate themselves”. But why isn’t this happening already?
It’s useful to think of our electricity system as being like a big swimming pool. Everyone’s electricity has to go into this big pool and a vast amount of market regulation is needed to make sure the pool stays “balanced” at the right level, with all the buying and trading and using of power going on underneath the surface. This means small-scale solutions to generating and using power locally are extremely difficult to set up, as they all incur the costs of trading in the big pool. To stretch the metaphor, this means little fish have to swim in a big pond.
Such a setup creates barriers to innovation and is holding back new technologies. There is no technical reason why you shouldn’t be able to choose to buy energy from local sources these days – what stands in the way is the requirement that everyone has to swim in the big pool first. By creating local energy markets, smaller but still viable businesses can flourish.
Cheap Access to Green Investment
The manifesto commits to pursue energy investment through a National Investment Bank. While this model has seen success in Germany, what is less well understood is how important citizen banks have been in deploying this investment.
The UK doesn’t have a citizen banking sector like Germany. This means you can only invest in renewables by either buying shares in a green energy company or investing in a co-operative. However, new models are emerging. Abundance Generation, an online crowdsourcing platform, allows investors to participate in renewable energy schemes for as little as £5, and a German-style local bank is being developed in Hampshire.
While Corbyn’s manifesto sees the benefit of establishing a state investment bank to invest in the energy transition, it will be important to deliver this investment through the right institutions at the right level so citizen investment can complement state finance.
Democratising the Energy Sector
Throughout, the manifesto argues for more citizen influence over the energy system – and not just through supposed consumer “choice”.
It is not only the German system that can be drawn on to change this. Energy decision-making can be brought closer to citizens by, for instance, looking at public value energy governance which draws on Danish and North American examples, direct action to take back ownership of key infrastructure, or reframing energy as a public good.
It is clear from the manifesto that the energy policies of the Corbyn camp are anything but a throwback to monolithic state utilities. There is potential for more competition through more diverse energy business models, a clear willingness to make space for smart energy innovation, a call for different approaches to energy system finance, and a platform for more plural approaches to energy governance.
Whether or not people agree with these proposals, it should be clear that they are not “old solutions to old problems”, but provocative responses to increasingly urgent challenges.
This article has been cross-posted from The Conversation.
Disclosure Statement: Stephen Hall is a Research Fellow in Low Carbon Cities at the University of Leeds, School of Earth and Environment. Stephen is funded by two complementary RCUK grant centres. Firstly the UK Engineering and Physical Sciences Research Council (EPSRC) and Economic and Social Research Council (ESRC) ‘iBUILD: Infrastructure BUsiness models, valuation and innovation for Local Delivery’ project (Ref.: EP/K012398/1). Secondly by the EPSRC ‘Realising Transition Pathways – Whole Systems Analysis for a UK More Electric Low Carbon Energy Future’ project (Ref.: EP/K005316/1). He is a Labour party member.
Photo: Toby Melville / Reuters via The Conversation