UK cities could provide energy competition with their own green energy

Competition could be improved in the energy market if cities invested in their own green energy, a new report says.

There has been plenty of talk in recent months about competition in the UK energy market – or the alleged lack of it. The ‘Big Six’ energy companies account for the vast majority of the nation’s customers and with prices continually rising, an official investigation by the Competition and Markets Authority is currently under way.

But a new report from the think-tank the Institute for Public Policy Research (IPPR) argues that there is another way to increase competition – by encouraging cities and local authorities to invest in producing green energy themselves.

Given the way that the energy system is changing, the report says that Europe’s major utility companies are coming under pressure. In the UK, questions are being raised about how the nation will be able to deliver its energy investment plan.

But cities and local authorities are in a position to invest in local green energy generation on a smaller scale, says IPPR. Not only would that make a major difference to jobs and growth at the community level, but it would also mean that councils could benefit from green energy subsidies.

Nick Pearce, director of IPPR, says that cities are already effecting change elsewhere in the world. Munich has pumped €900 million (£712 million) into renewable energy projects and plans to invest a total of €9 billion, which will ensure the entire municipality is supplied with green energy by 2025.

“Local generation technologies like solar and medium-scale wind are radically transforming how energy systems operate, bringing to an end the dominance of centralised generation and distribution,” he adds. “This will create a system which is much more diverse and competitive.”

The report recommends that cities set up collective agencies that issue local authority bonds including green municipal bonds to encourage local investment in renewable energy.

In addition, they will need to work with the government’s Green Investment Bank to put together low-carbon infrastructure projects with strong rates of return.

What’s more, cities can even apply the same principles to other investments. For example, pension funds need to consider environmental and corporate social responsibility issues and look for low-carbon investments.

“Cities should grasp the opportunity this presents to support local job creation and growth and enhance the resilience of local electricity supply. This will ensure that more low carbon subsidies directly benefit British communities,” says Mr Pearce.