Energy entrepreneurs can plug the gap in our power supplies

If we are serious about meeting climate targets we must open the energy market to support independent project developers
Jo Butlin
guardian.co.uk, Wednesday 11 November 2009 14.23 GMT

On Monday, new nuclear power stations and big energy projects were on everyone's lips. So yesterday's agreement by the European Investment Bank to provide £700m of loans to independent windfarm developers marks a refreshing alternative to Britain's utility-centric energy policy.
Our reliance on a small handful of utilities has failed to meet carbon-cutting targets, a fact backed up by recent reports from Ofgem and the Committee on Climate Change. And there is no evidence to suggest that the same handful of suppliers will do any better in the future.
If we are serious about meeting our energy and climate targets we need to make sure that the market is fully opened up to support the legions of independent project developers, or energy entrepreneurs, who can seize this opportunity and help fill the void.
The main problems with relying only on utilities to build the low-carbon solutions of the future are ones of size, speed, cost and diversity.
In the case of renewable energy such as wind, utility companies are only really interested in investing in or developing projects of a particular size to achieve an economy of scale. These are very slow to get off the ground, take a long time for any decision to be reached within the organisation, and then a long time again to get through planning, order equipment supplies and so on. Large projects also carry a significant financial risk which, especially during a recession, even the most solid of utilities are unwilling to carry.
Without a much higher price placed on carbon emissions or increased renewable subsidies, utilities argue they cannot make the investment necessary to meet renewable targets. We are already seeing large utilities deferring or even cancelling projects for this reason.
By contrast, the independent developers are mostly focused on smaller projects, with lower financial risks, which are quicker to get through planning and buy the necessary equipment for. Each project may be smaller in output, but with a far higher number of potential developers, the aggregate results can plug a vital gap in our energy supplies – and do so far quicker than any company could build a nuclear power station.
This brings us to the final point about the independent sector: diversity. Over the past year alone we have signed Power Purchase Agreements (PPAs) with developers covering wind, anaerobic digestion on agricultural sites, energy from waste, and small hydro, as well as corporate developers building on-site renewables.
Each one of these project developers acts as an entrepreneur or small business outfit, generating not just electricity, but income and jobs too. They are a multiplier in the wider economy, helping to address two of the crises of our current age: recession and climate change.
This decentralised model has the potential to grow exponentially if the UK corporate sector is given the right incentives and motivation to invest in their own generation capacity. While the government talks of providing these incentives, in reality policy and approach is still focused on the large utilities and centralised solutions, as the current push for nuclear shows.
Larger utilities have dictated and monopolised the debate over energy policy for too long. No single company, developer or sector can tackle this energy gap alone. It will take a variety of solutions, including nuclear, from a variety of outlets.
But to accelerate the decentralisation and decarbonisation of our energy supply, we will have to accelerate the decentralisation of ownership and generation first.
• Jo Butlin is vice president of SmartestEnergy, a purchaser and supplier of electricity generated from renewable sources