We need energy entrepreneurs to fill the power void

The approval of new nuclear sites is good news for Britain's energy supply, says Jo Butlin, but the Government should do more to harness the power of smaller, independent projects.

Published: 8:14AM GMT 12 Nov 2009

This week’s announcement to approve ten sites for nuclear power stations is a welcome long-term measure for our energy supply. However, we should not rely on this alone to meet our long-term low-carbon targets. For that we will need true diversity and decentralisation of supply and ownership.
The recent reports from Ofgem and the Committee on Climate Change provided stark evidence that our reliance on a small handful of utilities has failed to meet our current low-carbon targets. 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 related to size, speed, cost and diversity.
In the case of renewables, 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, and ordering the necessary equipment, etc. Large projects also carry a significant financial risk which, especially during a recession, even the most solid of utilities tend to be 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 contracts linking power purchasers with developers covering wind, anaerobic digestion on agricultural sites, energy from waste, and small hydro, as well as corporate developers building on-site renewable generation.
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 also 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 are still focused on the large utilities and centralised solutions, as the nuclear announcement shows. Many UK companies want to invest in their own generation assets, but it has to make economic sense.
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, delivered simultaneously.
However, 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 for Retail, SmartestEnergy Ltd