How electricity can help councils to pay the bills

A new report highlights how local authorities can use electricity to generate income and deliver social value. Jamie Hailstone talks to author Stephen Cirell to find out more

If you work in local government, then the chances are income generation is one of the subjects at the very top of your agenda.

With the end of the revenue support grant and the full devolution of business rates from 2020 onwards, many local authorities are looking to generate additional revenue – not just from their own services but also from new ventures including property and commercial events.

And as councils prepare to become financially independent, a small but growing number of local authorities are also looking at how energy can help plug the financial gaps.

A new report by APSE Energy, Investing in electricity: reducing costs and increasing income for local authorities, also encourages local authority leaders to consider energy as another means of balancing the books, as well as creating additional social value at the same time.

‘The opportunities to make money off the green agenda are in a different league, compared to local authority charging and trading,’ says report author and renewable energy consultant, Stephen Cirell.

‘Cornwall Council’s first solar farm made a net profit in excess of £20m and more than £20m will be made by Wrexham Council in relation to its project to put 5MW on council house roofs.’

He adds: ‘Less people have been aware of the energy market, and it is seen at times as specialised and having high risk. But if you’re looking for something that ticks all the boxes, this is it. You will make money yourself; you can also have an intervention in the local market, so people will pay less for their electricity and you can have a social gain by addressing fuel poverty.’

While some local authorities have launched their own energy company, like Nottingham City Council’s Robin Hood Energy, the report highlights the different ways in which local authorities can make money from the power they use.

At a basic level, Mr Cirell says councils can look at how much electricity they use, the tariffs they currently are on and become a more ‘savvy organisation’ when it comes to electricity bills.

‘You could have a council that’s paying 10p or 11p per kilowatt hour, it could just go out to procurement and get a cheaper tariff. But then you could go further and put solar panels or a biomass boiler in a leisure centre or council building and save even more.’

‘Once you start going up through the levels of sophistication, the gains become magnified,’ adds Mr Cirell.

‘Most local authorities have half-hourly metering. That means in the winter, between 5pm and 7pm you are paying a much higher price for your power. If you have a leisure centre that’s open 18 hours a day, seven days a week and all the lights are on, you might be paying up to 28-30p a unit in the winter.

‘Three times a year, there are also real peaks on the National Grid, called the Triad payments. One of things we are looking at now is if you put 50 KW of solar PV onto that leisure centre roof and add some storage batteries, we can ensure you do not pull on the grid during that Triad periods. Your electricity costs could come down substantially, because you are avoiding the peak times.’

There’s no reason why a group of local authorities could not bid on the capacity market and make a much higher return on the electricity they have generated.

Mr Cirell says the new generation of energy batteries are a real ‘game changer’ for the energy market, because they enable businesses and homes to store up energy, which can be used instead of paying higher prices.

The report also highlights the growing capacity market, which allows energy producers to sell electricity to the National Grid at higher prices during peak times.

‘The government can’t possibly have enough power to meet all the peaks, because that would be a waste,’ explains Mr Cirell. ‘So what the government does is buy in power at peak time and it pays a lot for more it. But in order to do this, you need to be organised. You have to bid against the private sector.

‘There’s no reason why a group of local authorities could not bid on the capacity market and make a much higher return on the electricity they have generated.

‘Capacity market bidding is complicated and it may well be it would cost you £50,000,’ he adds. ‘But if it’s being split between a load of authorities, the costs are manageable. I think we will see more collaboration between authorities as a result of this in the energy market.’

The energy market is ‘quite complicated’, says Mr Cirell. ‘You have to understand what you are doing. That’s why we encourage people to join APSE Energy. It’s a non-profit organisation and it’s here to help you. The other thing we are trying to do through APSE Energy is peer support, so we can put you in touch with other local authorities who have done this, and you can go and see their facilities.

‘It is not the case you can’t build a solar farm if you are a small local authority. South Gloucestershire Council has built two solar farms [one of which is pictured above]. They have done this because they have assets and they wanted to enhance them.

‘There’s a whole world out there and the private sector are doing this all the time now. Local authorities should be too, because if they’re not then they are missing a trick.’

• The report is available free to APSE Energy members. For more information go to http://www.apse.org.uk/apse/index.cfm/local-authority-energy-collaboration/investing-in-electricity/