Can we drive down energy prices without it costing the earth?

John Ruddy argues that while tackling fuel poverty amid rising energy costs is hugely complex, there is a way government could help to deliver cheaper, greener electricity to millions of homes.

As energy prices rocket, fuelling a cost of living crisis, some on the left have focused debate on state-owned energy generation, either via nationalisation or through setting up a new public energy supplier. In Scotland, despite the creation of a new publicly-owned energy company being included in the Scottish Green manifesto and the idea having been backed at SNP conference, the coalition government at Holyrood has rejected this plan; but only after the previous SNP administration had spent £500,000 of public money on consultants to help deliver it.

So why is it so difficult? Simply put, the complexity of modern energy markets means any public sector interventions would be prohibitively expensive. The web of different organisations and companies involved in the generation, supply, distribution and metering of our energy networks, while all making their costs very transparent, do not lend themselves to simple interventions by the state, or other community or co-operative players. Other high-profile attempts to do so have also failed.

Short of a massive reorganisation of the energy market, which would in itself be costly and take several years to implement, what can we do now that would deliver cheap, green energy to people, especially those who need it most who are already in fuel poverty? I have long argued for a solution that, while perhaps not perfect, would be relatively quick and easy to implement, would deliver cheap, green electricity to large number of properties, and at the same time could create thousands of jobs. Its something I think we as Scottish Labour should argue for, as it will appeal to voters and, if delivered, could be portrayed as a win for state intervention.

The Government (either in Scotland or at a UK level) should set up a company (with all the relevant powers) to deliver a large scale installation programme of solar PV panels on the roofs of domestic buildings. Householders would purchase the electricity at a fixed price, effectively paying back the cost of installation. This bypasses all the issues around distribution costs and creates thousands of jobs in the installation industry – and even potentially in manufacturing the panels if they could be sourced locally.

The state can afford to take the long-term view when it comes to payback. The lifespan of PV panels is typically 25 years, and government is currently able to borrow money over such periods at historically low interest rates. A large-scale programme could be expected to drive down the cost of installation as economies of scale kick in, and even at current costs it has the potential to be cost-neutral.

Such a scheme could sell electricity to householders at say 10p/kWh – that’s less than half the current cost – and tick a lot of boxes in helping to meet our green targets and reduce fuel poverty. Even if such a set-up did not provide all the electricity the householder required it could still make a big impact on overall fuel bills. It could even be possible to make the finances work at prices as low as 6p/kWh – less than a third of current prices. And those prices would be fixed for 25 years, not increasing at the mercy of the markets and global supply.

There are roughly 1.5 million suitable houses in Scotland. If we aim to fit solar panels to a third of them over the next 10 years, that could be achieved at an initial cost of £500million – and even that would be paid back over the 25 year lifespan of the panels. This is the sort of national energy company we could start straight away. So lets do it!

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