In five years, 2019–2024, just 20 UK energy companies made £420bn in profits, equivalent to over £6,000 per person. These profits are being taken out of disadvantaged communities and concentrated in the hands of a few wealthy people, often overseas. If this wealth was invested in community ownership of energy systems, it would empower development of vibrant communities through cooperation.
The energy divide
Most people live in houses connected to the electricity grid and buy energy from energy supply companies. If someone has around £10,000 to spare, owns their home, and it has a suitable roof, then they can install solar panels to generate their own electricity. When they use their own solar electricity, it is free apart from the initial investment.
However, solar panels produce electricity during the day, and far more in summer, while most electricity demand is in the evenings and in winter. Unused solar electricity can be exported to the electricity grid, for which households earn a small export tariff. These same households will buy back electricity from the energy suppliers in the evenings at a much higher cost. The large difference between export and import tariffs has driven the popularity of systems with batteries that store daytime solar electricity for use in the evenings.
Solar systems often make good financial sense, and reduce carbon emissions. But they are not available to the many people who rent, don’t have the money or a suitable roof, or maybe don’t stay in one place long enough. The wealthy gain from cheaper energy, while the disadvantaged have little choice but to pay what the utilities demand. Deprived neighbourhoods effectively pay an energy tax, similar in size to a second council tax, that locks communities in a cycle of poor health and heat-or-eat choices.
Energy clubs – a better system
Wouldn’t it be better if communities owned and controlled their own energy systems? What if households with solar panels could sell their excess solar electricity to their neighbours, rather than export it to the energy supply company for a pittance? Community buildings such as community halls, sports clubs, churches or nearby industrial buildings could be covered in solar panels and the renewable electricity shared in the neighbourhood.
Everybody would benefit from lower electricity bills while the building owners would get an income. The country would benefit from a more robust, decentralised electricity grid, and lower carbon emissions. We might not need new nuclear power stations or new lines of pylons stretching across rural areas. Homeowners would get higher prices for the electricity they export and cheaper solar systems because there would be less need to invest in batteries.
Best of all, communities would need to develop their own democratic structures to manage their generating infrastructure and policies for distribution of the electricity.
How would energy clubs work?
A group of people form what’s called an Energy Local Club. They all need to be supplied by the same electricity substation, have smart meters, and be signed up with one of a small number of energy suppliers, such as 100Green. Some members will generate electricity, typically from solar panels, and will intermittently export electricity to the grid. Most will import electricity.
The electricity supply company will match the export of locally generated electricity to members’ electricity use and this will be treated as a sale of electricity between club members. The club will determine a price for this local energy that is between the low export tariff and the high price the utility charges for the energy it supplies. The club determines this price and it may change with time of day or could vary between members. There are currently 37 clubs in England and Wales.
Members are connected to the grid and the energy supplier still has a statutory responsibility for continuity of supply. When the club is generating less electricity than it is using, members will buy electricity from the energy supplier as normal. Running an Energy Local Club is largely a bookkeeping exercise performed by the energy supplier. Clubs are also a powerful tool for keeping wealth in the community and developing mutual benefit cooperation within neighbourhoods.
The Energy Local Club, legally a co-op, can develop its own democratic structure and policies. The local energy price is set by the club and can be used to drive energy use to times when the local generators are exporting. Wealthier members could pay a higher tariff to help the less well-off members. Clubs set their rules for joining or leaving and can own their own generating infrastructure.
The club could raise funds to put solar panels on community buildings or on secure land. This could be club money, loans, or there are increasingly grant funders who specialise in churches, village halls and other community buildings. Membership of an Energy Local Club makes grant funding easier to get as there is more demonstrable benefit and the pay-back time for the system is shorter due to the higher export tariff.
What are the barriers to forming clubs?
The barriers are largely bureaucratic. Very few energy supply companies support clubs, as they end up selling less electricity to these customers. The companies that do support clubs charge several thousand pounds to set one up and may have higher tariffs for the electricity they supply.
These are obstructions that need to be addressed by central government through amendments to the statutory responsibilities of the energy suppliers. The government is currently considering P411 Modification to the Balancing and Settlement Code, which includes the requirement that energy suppliers support local energy clubs. People are encouraged to write to their MP asking them to vote for P411.
Other barriers are social. Our society values independence, where individuals have high paying jobs and can afford to buy the things they need. Participation in mutual benefit cooperatives is seen as a poor investment of time, compared to being seen at the office, and may carry a stigma as an activity for the retired or unemployed. This has led to wealthy, dormitory neighbourhoods where people have little interaction with their neighbours. The stigma is also present in deprived areas, but lack of resources and stability are greater barriers.
A cooperative future
Our current centralised energy systems act as a leech constantly sucking wealth out of our communities. They profit from the time-poor and fractured nature of our neighbourhoods. But, if the start-up barriers are removed, then there is strong mutual benefit for neighbours to set-up their own energy market through a local energy club.
What’s more, the establishment of the democratic structures to manage this market comes with many potential co-benefits. As communities assert their independence and recognise the benefits that come from dialogue and cooperation, local energy clubs can be a gateway to other cooperative ventures.
Local savings clubs can provide loans for small businesses, to grow community services while keeping wealth local. Food buying cooperatives and community cafes can give people access to better food at lower cost. Childcare cooperatives can make it economic for parents to have paid work. Car clubs can give everyone access to a modern EV-car when they need one, without the expense of owning one. Joint ownership of the many items we use infrequently, through Libraries of Stuff, reduces waste, declutters our homes and saves us money.
Community cooperation can reduce carbon emissions and make everyone better off. Now is the time, when trust in national politicians is justifiably at an all-time low, for communities to seize control of their own economies and build a brighter cooperative future.
