The government’s highly anticipated industrial strategy was published earlier this week. The prime minister launched the strategy at a regional Cabinet meeting in the North. Entitled ‘Building Our Industrial Strategy’, it’s a green paper with the intention of pointing the way on policy and canvassing views and opinions to help forge the path forwards.
Normally green papers are followed by further consultation before the government announces its favoured path, which then moves into formal policy. But this paper has a ‘post Brexit’ feel to it, with the prime minister in her foreword indicating that it is time to start thinking about the future for the UK once it has left the EU and the single market behind.
There are ten ‘pillars’ identified in the summary to drive forwards the industrial strategy across the entire economy. It is a relief that ‘effective energy’ forms one of that group, alongside skills, growth and infrastructure. In this way, energy formally sits alongside other key areas for the UK and its significance is surely cemented securely into this line of policy.
So one section of the strategy covers energy and discusses two areas of energy policy that require a higher level of priority. These are the affordability of energy for households and businesses and securing opportunities from innovation.
At last affordability is officially highlighted as a concern. Of course it is widely known that both families and businesses have been deeply worried about spiralling energy costs for some time. On the commercial side, this is particularly so for high energy users, a group which includes local authorities, whereas on the domestic level those having difficulty paying energy bills are the particular area of concern.
One area receiving no emphasis is how local authorities can alleviate the costs of energy to both these groups.
Some time is spent on the costs of energy to businesses. It is said that the government will set out a long term roadmap early in 2017 to minimise costs of energy to businesses. There is a specific reason for this: “Places with … more affordable energy … grow faster and have higher levels of productivity,” the document claims. Productivity is highlighted as a separate area of concern.
Local authorities across the country are working on renewable energy strategies that involve new sources of generation. Solar PV is the dominant technology, but wind energy, AD and hydropower also feature. One of the ways in which large scale projects, such as solar farms, can be made to deliver good financial returns, whilst the general PPA rate is low, is by sale of power directly to commercial users via private wire schemes.
This can offer a ‘win win’ situation: the local authority needs a higher rate than the 5p/kWh commonly on offer under PPAs; and the users need to break the link between what they pay and the energy price inflation and network charges. To date the focus on this has been largely on the benefits to the local authority (ie being able to develop the schemes now rather than waiting for the economics to improve); but it goes without saying that such a deal makes local commerce and industry more competitive (by reducing its costs). This, in turn, generates growth and creates or protects jobs in the local economy. In difficult financial times, the value of this cannot be over emphasised.
On the domestic front, local authorities have particular concern over fuel poverty. This is a growing band of people who are struggling to pay their energy bill. The social consequences of this, in terms of health and wellbeing, often fall back on local government.
But by going down the ESCO route this can be confronted head on. Tariff rates and types of meter (pre pay or credit) are key to this and both these areas can be improved by ESCO involvement. More authorities are now intent on this path.
So the government’s aims are already being addressed by local authorities and if public policy can be harnessed to encourage more authorities to do so, the benefits will be achieved all the sooner. Sadly, this point seems to have been missed by the authors of the green paper. Whilst local authorities will not be dissuaded by this, as their actions are motivated by real and tangible benefits to their own communities, rather than what the government wants to see happen, it does mean that unless public policy into the future is changed, it is unlikely that any financial or other government help to local authorities for addressing this key part of the industrial strategy will be provided.