ESCOs: Why a local authority is the ideal organisation to create one

In the second of his series of blogs for Clean Energy News, Stephen Cirell considers why local authorities are the ideal organisation to establish local authority Energy Services Companies (ESCO's).

Local authorities are the democratically elected bodies to provide governance at local level. Their role is to enhance their areas, provide key public services and oversee the health and wellbeing of their inhabitants.

However, local authorities also have many buildings and considerable land holdings. These assets are necessary to provide the public services. But such assets are expensive to run and energy costs are high. The typical local authority estate usually includes town or civic halls, drop in centres, schools, social housing, depots and other buildings.

For this reason, local authorities all over the country have been looking at electricity generation through renewable energy schemes. In particular solar PV has transformed the views of many Councils on what renewables can deliver.

This has led to closer consideration of how energy can be reduced and attempts to put self supply in place.

But local authorities are also under legal duties to promote economic development within their areas. They have a keen interest in the health of the local economy, particularly levels of growth and employment, as these reflect directly on the services they provide.

So energy costs outside of the local authority have also been under consideration. Sometimes a private wire arrangement from a local authority asset will supply a nearby company but there is little else the Council can do on the energy front to help its struggling economy.

In order to be competitive, companies need to control their costs. And energy is key cost in that equation. So the energy costs of local businesses are very much the concern of the local Council.

It is the same for inhabitants of the area. More money spent on energy bills means less money to spend in the local economy. Everyone is familiar with the downward spirals seen most often in times of recession.

So local authorities are very much on the ‘front line’ of the consequences of the failure of the electricity supply market. It is for this reason that they want to do something about it.

But this is, in fact, a double edged sword. The Council has a very strong covenant at local level – it is generally trusted by the population (despite what is written in the red top popular press) – and therefore can lead others toward change. It can demonstrate that there are better ways to do this and to seek to persuade others to follow suit. Robin Hood Energy has attracted 50,000 new customers in only a year of operation. So the message that the civic ESCO is different must be getting through.

In the next piece I will consider what the specific benefits of establishing an ESCO might be to a local authority.

Stephen Cirell is an independent consultant on the green agenda specialising in local government and the public sector. He is author of A Guide to Solar PV Projects for Local Government and the Public Sector, the second edition of which was published in 2015.