Energy and Corbynomics
Catherine Mitchell, IGov Team, 4th September 2015
Many column inches have been used up discussing what Jeremy Corbyn stands for, and whether he would be a disaster for the Labour Party. With respect to energy, what seems to have caught the headlines is his potential for ‘renationalising’ the Big 6. It turns out however, on reading Corbyn’s environmental manifesto, Protecting Our Planet, and his 10 energy pledges given below, that the words ‘renationalise’ or ‘renationalisation’ are not used.
The nearest phrases are:
- Our campaign will prioritise our planet and stand for ‘Britain providing international leadership on climate change and the socialisation of our energy supply leading an end to the era of fossil fuels (page 3);
- Britain needs an energy policy for the Big 60 million not the Big 6 (page 6);
- We must socialise our energy supply and move toward breaking-up the failing energy cartel (page 7 and number 9 of the 10 pledges).
One way to describe the energy systems is to divide it between producers / generators, distributors, transmission and suppliers. So what do these words and phrases mean for those segments of the GB energy system?
A half page (page 7) in the manifesto is about ‘socialisation’. This is essentially about decentralising the energy system so that more new entrants generate and supply energy; more households become prosumers; and more local authorities and so on become involved. All of which is good news for innovation within the energy system, new entrants and so on. Thus, ‘socialisation’ as the manifesto talks about is not ‘renationalisation’ as I would understand it.
Listening to Jeremy Corbyn on an 8 minute Energy Desk video – he does talk about bringing energy generation back under social control – but not supply. When pressed, he talked in generalities and seemed fairly open to discussion about the best ways forward but he is clear that his basic principles and goals are: that we look after our planet, we make energy affordable and we don’t allow companies to ‘rip off’ consumers.
As we know, in countries with large % penetration of renewable electricity, fossil fuels get displaced and peak prices come down – thereby reducing profits, and share prices of the fossil fuel generators. To the degree that there is vertical integration, this will also affect the parent energy companies as well.
At the same time, in countries where governance supports renewable energy and energy efficiency policies all sorts of social innovation occurs. This gradually transfers ownership of generation from the conventional utilities to local authorities, individuals and communities – as well as reducing the proportion of the market supplied by the large companies – again reducing their profits.
Whilst the manifesto does not use the word, there is no need for Corbyn to ‘renationalise’ or ‘take back into public hands’ the Big 6 generators or suppliers. I take this to mean buying back a majority of shares, which would cost lots of money.
The preferred alternative is to restructure the energy industry so that it is not de facto set up to maintain the interests of the Big 6 and so that it is open to social innovation; then spend the money otherwise spent on buying back the Big 6 shares to support renewable energy and energy efficiency measures, and the Big 6 generators and suppliers will wither as they are in Germany. Provided the RE and EE measures are open to anyone –like a classic German FIT – far cheaper than our analogous policy in GB so far – combined with a decent green investment bank (one of Corbyn’s major policies) then energy innovation will occur, thereby benefiting the 60 million – something I would not feel confident about if the Big 6 were owned by the State.
‘Renationalising’ or taking back into public ownership distribution and transmission networks is a bit more complex.
Pledge 9 of the 10 says: ‘we must socialise our energy supply and move toward breaking-up the failing energy cartel. Instead, I want to look at the role of the state as guarantor of last resort; with more direct responsibility for the nation’s back-up generation, high voltage grid and interconnectors; directly ensuring that Britain’s ‘lights never go out’.
I support taking the system operator arm of National Grid into public ownership. It is a private monopoly which already has conflicts of interest and these can only increase as European Directives – which encourage integration of European energy systems – become enforced. A state-owned system operator – like Energinet in Denmark and multiple other places – which has responsibility for transformation and security is the most appropriate model going forward.
The role of the distribution network operators – whether gas or electricity – have always had the possibility to be at the centre of a ‘new’ dynamic, decentralised energy system. New York State is currently thinking about adding in a whole new value proposition for decentralised energy resources on both the supply and demand side with the distribution network operator as the market facilitator, which becomes the heart of the new energy system. This, in principle, is a fabulous new role for GB distribution network operators. Whether they can do this best as an incentivised private companies or as a state owned company – maybe linked to the SO – needs serious discussion.
In general, I prefer the idea of spending money on incentives which may encourage new entrants or increasing energy efficiency rather than buying back shares of companies – which should (in principle) be able to be regulated for a low % rate of return – not of course that we have so far managed that in practice. What is interesting in NY State, is that there is an attempt to give the DNOs a new source revenue which fits with ‘new’ energy – definitely a ‘carrot’ approach. GB needs a thorough review of the roles of the various stakeholders in the GB energy system.
Jeremy Corbyn has also talked about coal. To the extent, GB uses coal – I also would prefer to use British coal but we have to end our coal use if we are serious about climate change. Again, I wonder if the best use of money is reopening the coal mines or whether it is investing in those coal communities to develop skills with sustainable energy.
Overall, his energy pledges are ‘open’. Contentious words are not used. Given the concerns discussed above, the energy pledges make sense.
New technologies, including ICT, and changing social preferences have finally come to energy – enabled to a greater or lesser degree in different countries via governance. Energy is decentralising not just in energy supply but also in management of the system and new relationships between people, community and local energy. Fossil fuels and economies of scale went together. If we want to get away from fossil fuels we need to have a new scale to our energy lives.
Like many people, I am trying to work out how ‘modern’ Jeremy Corbyn is, and what this means for energy. Various commentators have argued that he may be the way to bring a new politics forward, that he is somehow voicing the concerns of a younger generation which feel that they have not been listened to, that he wants to open up decision-making so that new ways of doing things are let in. It seems to me that the way he moves on energy policy and climate change will reflect whether he is this ‘modern’ person or whether he is essentially about ‘old’ energy – just in a different form from that going on at the moment with the new Conservative Government.
Jeremy Corbyn ENERGY PLEDGES (page 7)
1) My over-arching commitment will be for Britain to take the lead in developing the clean Energy Economy of the future.
2) As leader I would establish an Energy Commission to draft a fundamental shift in UK energy thinking.
3) The Commission will be tasked to produce a route-map into tomorrow’s ‘smart energy’ systems that will:
- Deliver more, but consume less
- Use clean energy before dirty
- Put energy saving before more consumption
- Use smart technologies to run localised storage, balancing and distribution mechanisms,
- Shift the costs of grid access and grid balancing from clean energy across to dirty
- Be open, democratic, sustainable and accountable (in ways that today’s market is not).
4) The Commission will be charged with bringing new partners into energy policy making. These will include local authorities, communities, energy co-operatives, and ‘smart’ technology companies that are already working on tomorrow’s ‘virtual’ power systems and new energy thinking.
5) As leader I will conduct a root and branch review of energy market subsidies; moving away from the notion of everlasting hand-outs; instead, using public support as ‘transition funding’ that transforms Britain’s energy infrastructure.
6) I will expect the energy industry, not the public, to meet the costs of their own clean-up.
7) I will look to re-define of the roles of Ofgem, National Grid and the Competition and Markets Authority, to promote a more genuinely open, competitive and sustainable energy market; one in which there are more players and more clean energy choices than we have today.
8) I will examine ways to allow communities to be owners of local energy systems, with the right (as in other parts of Europe) to have first use of the energy they generate themselves.
9) We must socialise our energy supply and move toward breaking-up the failing energy cartel. Instead, I want to look at the role of the state as guarantor of last resort; with more direct responsibility for the nation’s back-up generation, high voltage grid and interconnectors; directly ensuring that Britain’s ‘lights never go out’.
10) I would commit Britain to binding international climate change commitments; making national targets, local ones too, and devolving both the necessary powers and duties to meet these obligations.