Posted on Nov 11, 2013

Apples. There’s a lot of them about at the moment, but where do you buy yours? Do you buy them from the “Big Five” – Asda, Morrisons, Sainsbury, Tesco and Waitrose? Or do you shop at your small local shop or do you perhaps collect your apples from your neighbour with plenty and make a donation in the “honesty box”? Strangely apples and electricity are not that different. It seems the idea of local produce, local market is catching on at a high level. Greg Barker (Energy Minister) spoke recently on the Government’s drive for Community Energy and seemed warm to the idea of local energy markets. But is Government’s idea of local energy markets what we envisage and would a local market in energy resolve some the current issues related to consumer bills?

Like apples, electricity can be purchased from the “Big Six” – British Gas, E.On, EDF, NPower, Scottish and Southern and Scottish Power, but unlike apples, there are very few other “local” suppliers of electricity and certainly no equivalent to the apple “honesty box” with your neighbour. Currently the Big Six are receiving considerable negative attention for their recent hikes in bills, with concerns about the impact on consumers, particularly those in fuel poverty.

The Big Six would like us to believe that it is the green taxes and line charges (and even the wholesale price of electricity) that push up the price of electricity, but largely the Big Six can repeatedly increase their charges to consumers because there is not true competition in the electricity market – a fact recognised by Ofgem’s ongoing attempts to improve liquidity and transparency in the wholesale electricity market. The Big Six not only supply electricity, they also generate electricity, but often their generation never makes it onto the wholesale market, because they trade internally at prices not known to the wider world.

The Government is seeking to address the problem of rising electricity bills, not by increasing competition, but by reducing the green tax component of electricity bills. The green taxes represent 10% of a typical bill and to remove even some of this support for green energy approaches will impact on the development of a sustainable electricity system and impact adversely on those in fuel poverty, since some of the green taxes, through the ECO program, go to support energy efficiency programs in vulnerable households.

Local energy markets would empower local people not only to generate their own energy, but to sell energy too. When electrons can be made and sold locally in a genuine local energy market, just our apples are now, then we will have created a more efficient and fairer electricity system.