Select Committee on Business and Enterprise Written Evidence


Memorandum submitted by Roger Brocklehurst

1.  EXECUTIVE SUMMARY

  My recommendation is for the setting up of a new "not-for-profit" national energy Distribution company, which would act as a consolidator for locally-based Combined Heat and Power (CHP) and renewable energy schemes operated by the public sector, local authorities, registered social landlords (RSLs) and social enterprises.

2.  MY BACKGROUND

  For more than 10 years I have been involved at Board level with social housing and am currently an independent Board member of Downland Housing Association and of BHT, two RSLs within the Affinity Sutton Group (52,000 residents).

  Prior to that, I had run an England-wide charity for seven years following on from 30 years in banking and corporate finance.

  The views expressed in this paper are essentially personal and should not be taken as representing those of any organisation, with which I am, or have been, connected.

3.  FACTUAL INFORMATION

    (a)  The current debate on climate change is leading to the promotion of CHP where there is an economic demand at local level for heat and power, in order to save energy and reduce CO2 emissions. (CHP also reduces the "transmission" loss-of-energy effect from which electricity supplied via the National Grid suffers).

    (b)  The Government with EU encouragement has put in place a number of measures to support and encourage the development of CHP.

    (c)  There are already 1500 CHP Units in the UK and it is estimated that by 2010 over 10% of total electricity will come from CHP schemes. (I have not been able to ascertain the breakdown by sector of ownership of CHP plants currently in operation).

    (d)  Local authorities are becoming increasingly involved in the promotion of CHP both as operators for their own needs and through planning conditions attached new housing, industrial estates etc. Notable examples of local authority involvement here include London and Aberdeen.

    (e)  Housing Associations, ie RSLs, are becoming involved as planning consents for the development of larger estates of affordable or mixed tenure homes will often include the provision of CHP.

    (f)  Currently a major barrier to the installation of CHP units is the gap between the "export" price obtainable for generating surpluses that are sold on to the Grid and the "import" price paid for supplies bought in via the Grid.

    (g)  CHP operators individually are essentially small players in terms of potential supply of surplus energy to the Grid: a more collective approach would strengthen their ability to negotiate on price.

    (h)  In an era of escalating energy prices, RSLs are only too well aware of the problems of fuel poverty facing many of their tenants. Recent estimates indicate that fuel poverty (ie households where over 10% of income goes to meet energy costs) affects 3.5M homes in the UK, and every 1% increase in domestic fuel prices forces another 40,000 households into fuel poverty. RSLs therefore already have a very real interest in better energy conservation in the design and refurbishment of their housing stock, but also now in the direct supply of energy to those tenants where CHP units are being installed.

4.  RECOMMENDATION

  My recommendation is for the creation of a new not-for-profit energy distribution company operating across the UK, whose role would be to:

    1.  act as an aggregator/consolidator for all locally-based CHP schemes and/or renewable energy projects operated by its members from amongst:

    (a)  the public sector;

    (b)  local authorities;

    (c)  RSLs; and

    (d)  Social enterprises.

    2.  establish a Distribution Network organisation, so that it can sell back to those members temporarily "in deficit" the surplus energy produced by other members.

    3.  explore the possibility of block energy agreements to supply RSL tenants on better terms than currently available to them as retail consumers. (Many tenants are stuck on pre-payment meter tariffs).

  The company would be set up as a "social" business with the intention that surpluses would be returned to members or reflected in lower "import" and/or higher "export" prices than would be obtainable by operator members going to the market on an individual basis.

  This recommendation has been put to Ofgem as a submission under their recent review ("Review of the regulatory regime for energy markets: Distributed Energy Ref:295/07—March 2008), as changes will be needed to reduce/remove the barriers to the creation of a new mechanism along the lines suggested above.

  The purpose in establishing such an organisation is as follows:

    —  to increase significantly the rate of investment in CHP and renewable energy schemes;

    —  to encourage such schemes to invest in surplus capacity, and in higher efficiency units, reducing reliance on the national grid and the demand for new power station capacity;

    —  to achieve a better balance between the export and import prices currently obtainable by CHP operators;

    —  to create a new credible force within the current marketplace, that is dominated by six major privately-owned utility companies;

    —  to ensure that any profits are returned to members or reflected in lower import prices, for the benefit of RSL tenants/residents;

    —  to secure economies of scale and other efficiencies across the CHP sector; and

    —  to reduce fuel poverty amongst social housing residents.

  If the Government is serious in its commitment to a competitive energy market, to the provision of a secure and environmentally-sustainable supply, and to its drive to tackle fuel poverty, then it should give the proposal outlined above its full consideration.

March 2008





 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2008
Prepared 28 July 2008