Why we need public ownership of energy
The Big Six energy companies supply 95% of all UK households with electricity and gas – yet they answer to their shareholders, not to us. Privatisation makes energy more expensive because profits are paid out and the cost of borrowing is higher than it would be in the public sector. Public ownership would save money that could be used to cut prices or invest in renewables. Examples from around the world - the US, Germany, Denmark, Spain, and some here in the UK - show energy can be run for people not profit. Local public providers, co-operatives and community groups can all get involved.
British Gas was floated on the stock market in 1986, accompanied by the famous ‘Tell Sid’ advertising campaign. In 1990, the UK’s regional electricity boards were privatised. The Big Six supply companies (British Gas, E.ON, EDF Energy, nPower, Scottish Energy and SSE) are involved in energy generation and have an effective monopoly over supply to customers. Transmission and distribution are also private, including National Grid.
- The real prices of gas and electricity have increased by 13% and 67% respectively since the year 2000.
- Corporate Watch research suggests each UK household could save £158 a year if energy was publicly owned.
- Studies examining the UK energy market have concluded that electricity prices are 10-20% higher than they would have been without privatisation.
- Over 10% of English households live in fuel poverty.
- Customer satisfaction with the Big Six companies is low, and only 32% of the public trust the energy industry.
- 68% of the public believe the energy companies should be run in the public sector, according to YouGov.
- The UK is lagging behind on investment in renewables with only 5.1% of our energy coming from renewable sources.
Privatisation is failing, but a new report proposes a practical, affordable model for public ownership that would pay for itself in 10 years.
Public ownership around the world
There are a number of inspiring examples of how people across Europe and the US are rejecting privatisation and taking control of their energy supply, in the form of co-operatives, municipal energy companies, and community energy projects. As well as putting their customers first, not their shareholders, publicly owned energy companies are creating alternatives for a greener future, with less reliance on fossil fuels.
In the UK, Nottingham City Council has created a new not for profit energy provider, Robin Hood Energy. Bristol City Council has set up a municipal energy services company to generate renewable electricity from solar installations, which will be owned by the people of Bristol. London also has plans to supply 25% of the city’s energy demands from local sources by 2025 through a small municipal energy supplier. A recent Institute for Public Policy report has demonstrated how more cities across the UK could enter the energy market, delivering lower bills and greener energy. The Local Authority Energy Collaboration is bringing together a number of local authorities to advance the municipalisation of energy services, with the aim of addressing fuel poverty and achieving decarbonisation goals.
Our Power is a new non-profit energy supply company, the first of its kind in the UK, which aims to be selling electricity and heat to 200,000 people across Scotland by 2020. Over the next five years, this ground-breaking project could make up to £11 million of savings for some of Scotland's most disadvantaged communities, tackling fuel poverty and inequality by taking on the Big Six. In the future, Our Power hopes to develop renewable energy projects as part of its business for the benefit of local communities.
The residents of Gigha, a small island off the West coast of Scotland, set up Scotland’s first community wind farm in 2004. The profits are used to pay for building refurbishment on the island, and to repay a loan the islanders took out to purchase the island from its former private landlords. Community Energy Scotland, a charity that provides practical help for communities on green energy development, have helped set up over 1400 community energy projects since 2004, from solar and wind to micro-generation for social housing.
In Germany there is an increasing trend towards bringing energy distribution networks into public ownership through ‘Stadtwerke’ - municipal energy companies owned by the local, regional or city authority. Over 44 municipal companies have been set up, and over 100 energy concessions brought back into public ownership since 2007. These municipal, publicly owned energy companies are also taking the lead in implementing the transition to renewables, a move that the big four energy firms that in Germany are only making reluctantly. This trend has meant that 47% of Germany’s energy capacity is owned by citizens, either fully owned, part investment, or individuals. There are 888 grid operators in Germany, many of them locally owned.
A series of referenda and citizens’ initiatives to bring energy supply and generation networks into public ownership have also been launched in major German cities, including Berlin and Hamburg. The people of Hamburg successfully voted to buy back the city’s grid in September 2009, to better facilitate the city’s transition to green forms of energy. In Berlin, the transformative vision of the Energietisch campaign sought to put Berliners at the heart of their energy supply, with a democratically elected board comprised of local politicians, workers and consumers, and a strong focus on renewables and social goals. Although 83% of those that voted opted for a publicly owned energy system, the referendum narrowly missed the quorum of 25% of the electorate.
A number of German cities, including Frankfurt and Munich, decided not to privatise their electricity networks in the 1990s. These cities now have ambitious targets for renewables, with Munich aiming to satisfy the energy demands of the city’s 1 million people with green energy by 2025, a goal local councillor Dieter Reicher says can only be ‘successful if the long-term goal is sustainable economic success rather than short-term profit maximisation.’
There is also a thriving co-operative movement in Germany, with nearly 900 energy co-operatives established by the end of 2013. A newly founded co-operative, Bürger Energie Berlin, is in the process of trying to take over the city’s energy grid.
For further information on Germany’s community energy sector, see Caroline Julian’s thorough essay for Respublica.
Denmark’s electricity distribution grids are predominantly owned by local co-operatives and mutual organisations, the boards of which are democratically elected by members. Community and public ownership of energy also drove the country’s major shift towards wind power in the 1990s, with ownership of wind turbines dominated by local collaboration between neighbours, and co-operatives.
Around 25% of all electricity sold in the US is generated by co-operatives or public power utilities. Co-operatives alone have over 42 million members, and work on a non-profit basis to deliver low prices to members. Co-operative power companies have a long history in the US, especially in rural areas, and are typically rated higher than private energy companies for customer satisfaction.
The Republican state of Nebraska is the only state in the US in which every single resident and business receives its electricity from a public or community-owned institution rather than a for-profit company. Electricity is provided by over 100 municipally owned utilities, cooperatives and public power districts, and Nebraskans pay one of the lowest rates for power in the US. There are no shareholders or profits, and revenues are invested into infrastructure, various state social programs and the development of renewables. A defining feature of Nebraska's publicly owned electricity system is the opportunity for members of the public to become actively involved in the decision-making process of their local electricity provider. This unique system shows how publicly owned utilities can work on a large scale without sacrificing service quality, efficiency or the principle of local accountability.
The people of Boulder, Colorado have recently voted in a referendum to set up a local, publicly owned municipal energy company to replace the private firm Xcel, which had a monopoly over the city’s energy supply.
The Hungarian government has imposed a 20% cut in electricity bills, and aims to bring the nation’s energy sector into public ownership, to operate on a non-profit basis.
Som Energia is an energy co-operative set up in 2011 by students and staff at Girona University in Catalonia to provide renewable energy, and to challenge the oligopoly of Spain’s two main energy companies, Endesa and Iberdrola, which owns Scottish Power. The co-operative has 14,000 members, has financed five solar parks, and is currently building a biogas plant. All members can participate in its General Assembly, which takes place online.
What you can do
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Photo used under Creative Commons licensing, thanks to Kim Hansen https://www.flickr.com/photos/slaunger/
Yes! I want public services for people not profit.
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