The UK has announced that local governments will be allowed to sell electricity to households for the first time since 1976. In a preview piece for a new book, Stephen Tindale and Prashant Vaze of renewable energy consultant Climate Answers argue, using case studies from Europe and the US, that by localizing energy and energy efficiency policy, the widely-recognized and urgent need to invest in low-carbon energy can be met.
Stephen Tindale, environmentalist
Prashant Vaze, economist
The UK government is committed to giving more power to local government, to reverse a trend of rising centralization.
Local governments often turn down planning applications for wind farms, leading many to fear that this ‘localism’ will slow down the move to clean energy and to controlling climate change. But it need not. There are some examples of progressive energy and climate policies by UK councils, and many more of effective approaches by local and regional government in other European countries.
Planning has been the greatest impediment in the UK to the rapid expansion of renewable energy. In 2007, only 5.5% of Britain’s electricity came from renewables, compared with over 15% of German, 18% of Danish and 10% of US electricity. As the UK has one of the world’s best renewable potentials, this is disappointing.
UK local authorities – although they once played a leading role in energy supply – currently lack a financial incentive to support renewable energy. Local government should therefore be allowed a much larger role, as it had before nationalization, which would make it more favourable towards, for example, wind farms. The evidence suggests that this would be good for consumers, too: about a third of Americans get energy from municipal or cooperative companies, and their average tariff is about 20% lower than those charged by private companies, as often there are no shareholders to whom to pay dividends.
THE POWER TO SELL POWER
In July 2010 the UK’s new energy secretary Chris Huhne, a Liberal Democrat, announced that local government will be allowed to sell renewable electricity to households – for the first time since 1976.
The coalition agreement between the Liberal Democrats and the Conservatives also promises to allow communities that host renewable energy projects to keep the additional business rates they generate from them. Since Margaret Thatcher’s Conservative gov-ernment of the 1980s, the funds raised from business rates have been redirected to central government.
As Huhne noted in his speech outlining his plans, the dynamic Liberal mayor of the city of Birmingham, Joseph Chamberlain, oversaw the development of the city’s gas infrastructure in the 1870s. More recently, a handful of local authorities have supported voluntary actions of residents, by providing advice, grants or loans.
For example, Yorkshire’s Kirklees Council has devised schemes to lend money to residents for domestic renewables, and to provide free home energy audits. About 36,000 lofts have been insulated and 17,000 cavity walls filled. Some 24% of the local population have already benefited from energy efficiency measures.
Braintree Council in Essex has run a project with British Gas since 2004, offering homeowners cavity wall and loft insulation at competitive prices, with Council Tax rebates. This has proved popular – overcoming inertia and the hassle factor of having to clear lofts – and has led to more than 1200 installations so far and high reported rates of customer satisfaction.
But Europe offers many more lessons on what local government can achieve. Huhne is a former member of the European Parliament, as is his party leader – and now deputy prime minister – Nick Clegg, so they are more aware of events elsewhere in Europe than are most British politicians.
For good examples of what local and regional authorities can do on energy efficiency, district heating and renewables, they will be considering the lessons to be learnt from several European councils, including authorities in Berlin, Copenhagen, Rotterdam, Freiburg and Upper Austria.
BERLIN: ENERGY SAVING AND MODERNIZATION
In 1992, the German city of Berlin set up its own energy agency, a partnership between the council, the KfW bank – a publicly owned bank that offers low-interest loans for development and renovation – and energy companies. In 1994, the Berlin Senate passed an energy programme that contained measures ranging from energy saving in housing and public buildings to energy services and solar energy.
The Berlin Energy Agency has financed a modernization programme for old buildings and flats, and also promoted district heating. The largest redevelopment project, in association with the Gesobau letting agency, involved more than 13,000 flats being substantially improved since 2008, at almost no cost to tenants, and connected to a district heating network.
COPENHAGEN: CHP PLANTS AND DISTRICT HEATING
Denmark’s Copenhagen has an extensive district heating network, for which almost all the heat comes from combined heat and power plants.
The development of the district heating network started in the 1920s. Today, heat sources range from community-scale plants such as the 60 MWe Kara waste CHP plant, to large centralized plants like the 840 MWe Avedore, which runs on a mix of fossil fuels and biomass, and provides power for 1.2 million people and heat for 300 000. Heat is transported approximately 30 km to Copenhagen.
The largest municipal energy company within greater Copenhagen is Copenhagen Energy, originally set up back in 1857. As well as electricity and hot water it supplies town gas for cooking, water and sewerage services. It is replacing coal with wood in two of its CHP plants.
Copenhagen is now experimenting with district cooling in the heart of its central business district. A small district cooling system has been planned, which would connect 16 commercial buildings in the heart of the Old City. The technology is expected to be highly carbon efficient, saving about 80% of the electricity used for air conditioning. It uses a mixture of seawater and heat pump-powered chiller units to produce cooling water.
ROTTERDAM: WORKING WITH THE PRIVATE SECTOR
In 2006, the Dutch city of Rotterdam set up the Rotterdam Climate Initiative, in partnership with the port of Rotterdam and trade associations. It has set a target to reduce Rotterdam’s carbon emissions by 50% by 2025, and to make the city 100% adapted to climate impacts by then. The city works with the Clinton Climate Initiative, and is headed by former Dutch prime minister Ruud Lubbers.
The Rotterdam Climate Initiative works extensively on energy efficiency projects such as retrofitting of existing stock, green roofs, renewables (predominantly biomass and wind energy), district heating and carbon capture and storage (CCS). It argues that Rotterdam should be a hub for CCS, taking CO2 from the Netherlands and Germany to storage in disused oil and gas fields and saline aquifers in the North Sea.
To expand district heating in Rotterdam, which is not currently widespread, the city has set up a heat distribution company in partnership with German utility E.ON. A new operating company will be established in which both the city of Rotterdam and E.ON will participate. The operation of the current heat distribution company will be transferred to this new company, and the operational risks of expansion and management will be borne collectively by the City Council and E.ON.
FREIBURG: THE POTENTIAL OF SMALL-SCALE INITIATIVES
It is not only large cities that can implement progressive climate programmes. Freiburg in Germany, with a population of just over 200 000, is rightly regarded as inspirational.
In 1992, Freiburg’s council required all new buildings to be low energy, and in 1996 it adopted the Climate Protection Concept, to reduce CO2 emissions to 25% below the 1992 level by 2010. Target areas for reductions were energy in private households and businesses, as well as industry and transport. Emissions from waste, farming and forestry were considered too neglible to be included.
The council requires all public buildings to have solar panels. There is also strong encouragement for residents to install photovoltaic (PV) panels. In addition to the national feed-in tariff, the regional power company Badenova, which is jointly owned by several regional municipalities and a natural gas company, offers a subsidy of about €300 ($380) for customers who want to install PV panels. This is financed by customers who choose to pay a 1.5% higher electricity tariff to support PV, biomass and small hydro.
There has been a 10% take-up of this by Badenova’s customers, which has provided subsidies of over €500,000 a year. By 2008, the city’s total PV installations covered over 13,000 m2. Some 35 out of 70 municipal schools have installed PV systems; some also have solar thermal water heating. Freiburg now uses only about half of the energy that other towns of its size do. The town’s emissions from energy fell by 16% between 1992 and 2007. However, most of the emission reductions have been due to a new gas CHP plant, with the heat being used by the chemical industry.
UPPER AUSTRIA: PIONEERING REGIONAL POLICIES
Nor is it only town and city councils that can perform well on energy issues. An instance of pioneering policy comes from Upper Austria, one of Austria’s nine regions, which has 1.4 million inhabitants and is highly industrialized, with significant heavy industry such as steel and machinery.
The regional government established a regional energy agency in 1991, mainly to provide energy advice, and since 1994 it has been actively promoting renewable energy. It has set itself a target to reach 100% renewable heat and electricity by 2030.
Renewables provide over 30% of the primary energy consumption, of which 14% is biomass and 14% hydro, and the share of renewable heating is 45%. Upper Austria now has the Oekoenergie-Cluster (OEC), a network of green energy companies with more than 4500 employees and an annual turnover in excess of €1.5 billion.
More than 40% of municipalities use biomass for heating, with over 35,000 biomass heating installations, operated frequently by farmers’ cooperatives. Some 30,000 heat pumps have been installed for space heating and domestic hot water. The region has also been innovative on financing. In 2002, it set up the Energy Contracting Programme, which offers a subsidy delivered to consumers via an energy services company. The programme covers energy efficiency and renewable heating – providing up to 13.5% of the investment costs for renewable heat, and up to 6% of the total energy investment, up to a maximum of €100 000, which can include energy efficiency.
Germany has also been creative on financing. KfW has offered low-interest loans for refurbishment since 1990, and from 2001 loans have been available specifically for energy efficiency improvements. In 2006, the KfW programme on energy efficiency was almost tripled, to around €1 billion per annum for the next four years (and subsequently increased to €1.5 billion). There have been specific KfW loans and grants for non-profit organizations, local authorities and associations of local authorities since January 2007.
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UNITED STATES: LOCAL AUTHORITIES TAKE THE LEAD
There are also lessons to learn from the role of local government in the US. Indeed, power generation by municipal governments in California, is thriving, despite the efforts of private companies to kill it off. In a June referendum voters rejected a private utility-sponsored campaign to stop local government choosing where they source their power.
The private utilities have good cause to be fearful of municipal competitors. Take Sacramento’s municipal utility SMUD (Sacramento Municipal Utility District): without shareholders and corporate salaries, and with cheap capital because of its good credit rating, its tariffs are well below those of neighbouring private utilities.
SMUD consistently provides the best customer service and is among the most reliable power suppliers in California. It also lends customers money to install energy efficiency measures, and accredits reliable local installers.
Similarly, the state government of Vermont – dissatisfied with the traditional utilities – handed over energy efficiency responsibility across the whole state to a local not-for-profit in 2000. This has mobilized near universal participation in localized energy efficiency projects. In a single year, 2006, Energy Vermont managed to increase the energy efficiency of the homes of more than 10% of Vermont’s residents.
So, those concerned about climate change and fuel poverty need not be concerned about a commitment to localism. Local government could and should play a much greater role. But not everything should be left to local authorities. Massive offshore wind farms are needed, but for obvious reasons will not be constructed by councils. Large CCS plants are also needed, as a low-carbon bridge technology until we can be 100% reliant on renewables. These will be too expensive for local councils to build. It is not, therefore, a choice between municipal energy companies and large utilities. Both are needed.
THE UK: VAST ROOM FOR IMPROVEMENT
Nevertheless, much more emphasis should be put on municipal energy activities. UK councils are held back by three factors: lack of money, lack of ways to co-ordinate with neighbouring authorities, and lack of national leadership. The city of Birmingham has ambitious plans to improve the energy efficiency of its social housing stock – the largest in Europe – but the price tag runs into tens of millions of euros.
Councillors in Greater Manchester recognize that renovating buildings would deliver jobs, economic activity and energy efficiency. But how will the 10 local authorities come together to deliver the changes? Sheffield cannot expand its district heating network because it cannot guarantee that homes will connect to the network if it is built.
On finance, local authorities should be encouraged to borrow, as they can get low-interest loans – for example from the European Investment Bank – and have secure assets. They should also be encouraged to introduce green taxes such as road pricing. And in the UK they could be eligible for loans from the coalition government’s much vaunted Green Investment Bank. On co-ordination, the coalition government appears to disfavour the regional tier of government: it has abolished regional development agencies and the government offices for the regions – although London’s Regional Develop-ment Agency survives.
Cynics say that this is because London has a Conservative mayor. A more charitable explanation is that the national government accepts that there is no single correct approach to co-ordination between local councils and national government. After all, some parts of the UK still have county councils and district councils, and some have unitary authorities. A similar, non-doctrinaire approach to regional co-ordination should be adopted.
LOCALISM ALSO NEEDS THE STATE
The essential ingredient to local success in energy is strong national leadership – not yet more platitudes on the importance of climate change but delivery, though public money and, where necessary, national regulations.
Copenhagen has achieved a great deal through its district heating system, but this required the Danish Heat Supply Act, which obliges homeowners to connect to local district heating networks. So some specific regulatory leadership is needed from national government.
This will also need to include some control of what local councils do. Giving a much greater role to local government is both democratically desirable and potentially very effective. But that cannot simply mean leaving them to do whatever they wish. The need to control climate change is too important and too urgent for that.
Stephen Tindale is an associate fellow at the Centre for European Reform. Prashant Vaze is the author of ‘The Economical Environmentalist: My Attempt to Live a Low Carbon Life. ‘They are writing ‘Repowering Communities: Local Solutions to Global Problems’