A Public Sector Energy Company for Scotland?

In a recent blog for Clean Energy News, Stephen Cirell considers the Scottish Government's Energy Strategy and its proposal to establish a Governmental level Energy Services Company.


 I read with interest Liam Stoker’s piece on the potential for the Scottish Government to create its own ESCO, Scottish government eyes launch of own energy company. This suggestion was raised as part of the recently published Scottish Energy Strategy. As I pointed out in my recent series of blogs for Clean Energy News (reference), this would be a sensible step to take.

It is clear that the developments in Nottingham (with Robin Hood Energy) and Bristol (with Bristol Energy) have reverberated around the country. I expressed the view that whilst every local authority would clearly not go down this route, for reasons of cost, complexity, internal resources or other priorities, it seems clear more will.

Recently I have been working with half a dozen of the 32 Scottish local authorities on energy and renewables issues. Each time, when discussing supply of electricity, we have had a discussion on ESCO’s and looked at whether this would be the right route for that authority. Each time I have reiterated that working jointly with other authorities shares both cost and risk, as well as providing valuable peer support and skills transfer. In other words, it is considerably easier.

It is predictable, therefore, that there will not be hundreds of ESCO’s to match the number of local authorities around the country. Instead, it is likely that regional arrangements will emerge. This might be just half a dozen or so local authority ESCO’s established around the UK (perhaps Scotland, the North, the Midlands, Wales, the South East and the South West) who establish their own businesses but also enter into white label arrangements with many other surrounding authorities to help them make a market intervention. But it could as well be groups of authorities acting together to jointly own those companies.

The two obvious candidates for a joint approach are London and Scotland. Leaving London aside for now, as the newly elected Mayor has already made some strides in this direction, the issue would be how to make arrangements for Scotland.

Scotland has a very good record in relation to renewable energy, particularly wind energy and hydropower, and is now progressing in relation to solar farms as well. It is inevitable that with such high generation, there should be an attempt to ‘close the circle’ and create involvement in combined generation, distribution and supply electricity operations. This is the strategy recommended in the recent APSE Energy report Investing in Electricity: reducing costs and generating income for local authorities.

However, the kite being flown by the Scottish Government is that the ESCO would be its organisation, presumably operated at arm’s length like some of the other similar quasi Governmental organisations North of the Border.

This would be a mistake. Energy is a very local issue and it is essential that the local authorities are fully involved in such a venture. Having worked with half of them, I can say with confidence that they would be enthusiastic about a collaboration with their neighbouring authorities.

This does not mean that Holyrood cannot be at the party too: just that it should partner with the local authorities to create a pan Scotland ESCO, rather than impose something from above.

Such an organisation would offer a huge disruption to the electricity supply industry in Scotland. This can only be a good thing. But a joint company could also provide much more than just electricity supply, such as those areas covered in my last blog ESCO’s: What the Future Holds. This could be advice, to training, to innovation and development. Despite their great pioneering work, this is the sort of kick start that Nottingham and Bristol will struggle to reach on their own.

Fuel poverty is high in Scotland with many families finding difficulty in meeting their energy bills. This is a major factor in prompting local authorities to move into the electricity supply area. The evidence in Nottinghamshire clearly suggests that were a pan Scotland public sector ESCO to emerge, then energy costs would reduce across the board. There can be little better stimulation to create the agreement necessary to bring this excellent idea to reality.

Stephen Cirell is an independent consultant on the green agenda specialising in local government and the public sector. He is author of books on both solar PV and biomass.