New research: Public energy would pay for itself in 10 years

A report released today reveals that moving to a publicly owned energy system in the UK would pay for itself in 10 years. Savings of £3.2 billion per year would be possible because no shareholder dividends would be paid out and the cost of capital would be lower.

The research challenges a previous assertion by stockbroking firm Jefferies that the cost could be as high as £185 billion. It estimates that the cost of compensating shareholders would cost between £24 billion and £36.6 billion (a final price of £32 billion would take 10 years to pay back).

The report proposes a new model of public ownership based on a combination of national, regional and local public ownership. The proposal is affordable and practical under existing EU law.

The model would encourage renewable energy generation by local authority providers, co-operatives and community groups. There would be a public purchase of some generating capacity, the National Grid and energy distribution. The Big Six energy supply companies who currently have 95% of the supply market would not be bought (as Jefferies assumed). Instead, new local public sector companies would be created who would compete with the Big Six to supply consumers. In Germany such companies have captured up to 50% of the market. 

Professor David Hall, author of the report, said:
"The paper takes a hard look at the costs and benefits of public ownership of the energy sector,  and the practical issues of how to get there - what needs to be bought and what doesn't, how transparent local ownership can work. The benefits are much greater than usually imagined, and the costs are much lower than previously assumed."

Director of We Own It, Cat Hobbs, said:
“This report makes our choice very clear - keep energy profits and control in the hands of shareholders or follow the example of countries like Germany and provide local, public, accountable, cheaper, greener energy. Energy run for people not profit is not only possible, it's a smart investment. The model works for local communities, delivering lower prices and more renewables. Privatised energy has failed - we hope this report kickstarts a debate about creating a better system.”

Steve Battlemuch, director of Robin Hood Energy, Nottingham Council’s new not-for-profit energy provider said: 
"We welcome this report. At the moment, the process for setting up energy companies is long and complex and completely geared towards the private sector. We are the first local authority to launch our own company aimed at bringing cheaper prices to consumers by cutting out the profit motive of the Big Six."

Laura Hill from Switched on London said:
“People are sick and tired of being ripped off by profiteering energy companies. The Big Six have forced up prices, pocketed billions in profit and continue to invest in dirty energy. This report demonstrates this no longer needs to be the case and supports our campaign for a people’s alternative in London. A London public energy company could decrease bills by 25% and invest enough in solar energy to power a fifth of London’s electricity. What’s more, 78% of Londoners want this. We’re calling on the Greater London Authority to set up a democratic, affordable and clean energy company that is controlled by ordinary Londoners, not cash-hungry business executives."

Green MP Caroline Lucas said: 
“This report backs up what the majority of British people already think: a public energy system would be better for everyone. A publicly owned system would benefit from the low cost of borrowing, and – with no shareholders to pay – bills could be kept lower, permanently. The most exciting part of this proposal is the potential for decentralising the energy system and putting power generation into the hands of local communities. The era of privatised and centralised energy must now come to an end and a new transparent, accountable and affordable alternative must emerge.”

Under the new model, after ten years, the ongoing savings from public ownership could be converted into price cuts of 10% or reinvested in renewables. The refinancing of private debt would mean further savings over time of £0.7 billion a year - equivalent to a further price cut for households of £25 a year.

Public ownership of energy is increasingly common around the world. The report points out that 48 million Americans, in over 2000 cities and districts, get their electricity from the public sector, at a price on average 12% lower than the price charged by private energy companies.