The Political Physicist

Rhetorically, Labour has fully committed itself to fighting climate change and recognises that public ownership of energy will be vital in doing so. However, as yet they do not have a practical plan for achieving this. As I have explained previously, Labour’s policy proposals on green energy and climate change more generally have been disappointingly vague and limited. Unfortunately, the party has done little better when it comes to more explicitly political questions such as nationalisation. Its proposals will not amount to anything like a restoration of the post-war energy sector: only the grid is to actually be taken out of private ownership, while new local public generators and suppliers will continue to compete in the market against private ones. This fails to tackle the neoliberal electricity market which Margaret Thatcher imposed on this country, greatly limiting the public’s ability to plan and exert democratic control over energy companies. Below I will attempt to outline what a more appropriate ownership structure could be for energy.

The Limits of Localism

Before proposing a new ownership structure for electricity, it is useful to understand how the sector is currently structured. Upon privatisation, it was split into four components: generation, transmission, distribution, and supply. Generation refers to the powerplants which produce electricity and these are owned by a wide range of companies including the Big Six, other energy multinationals, and small businesses. Transmission is owned by National Grid, plc, and consists of the high-voltage wires used to send electricity from powerplants to where it is needed across the country. National Grid also has the responsibility of “system operator”, turning powerplants on and off (via elaborate market mechanisms) to match supply and demand. Distribution is made up of the 14 low-voltage regional grids which carry electricity from the national grid to homes and businesses. A number of companies own these, including some of the Big Six as well as multinational energy corporations. Finally, supply refers to the retailers from whom we actually purchase our energy. They buy electricity from the generators on a wholesale market through a mixture of long-term contracts and spot-trading, attempting to match the demand of their customers. The Big Six are the dominant players in the residential supply market, although a large number of private and a few local authority-owned alternatives have become available in recent years.

I have written previously, about how the nature of the electrical system means that a high degree of centralisation will remain vital in this industry, even if individual power plants become more diffuse with the adoption of renewable sources. I gave numerous detailed arguments for this which there is not sufficient space to repeat here. Suffice is to say there is no avoiding the fact that a national authority will be required to plan load balancing and the correct combination of investments needed to ensure the lights stay on. The only possible alternative would be the electricity market, which for a host of reasons is unacceptable to socialists (and in any case, probably wouldn’t work). Furthermore, the concentration of people in relatively dense urban centres means that there is not sufficient space for energy production to be local to them. Some have suggested that it at least does no harm to allow people to generate some of their own electricity, but even this isn’t entirely true. While households owning, e.g., solar panels would reduce the amount a utility needs to spend producing electricity, the utility still needs to pay to maintain backup capacity to provides households with electricity when the sun isn’t shining. One public utility in Canada claims that the revenue lost from widespread adoption of solar panels would thus be greater than the reductions in costs of operating the electrical system and that this would resulting in higher prices overall. Such a possibility is something we must be aware of when developing energy policy; what makes economic sense at the level of the individual does not necessarily lead to optimal outcomes at the national level.

While it is true that centralised institutions can, at times, be alienating, that doesn’t necessarily mean that decentralised ones will be more resistant to privatisation. On a recent panel discussion hosted by We Own It, Leo Murray (of 10:10) argued that it would be impossible to privatise the solar panels on the roof of your local primary school. Given that schools have been known to sell off their sports grounds (not to mention academisation, which is another form of privatisation despite continued receipt of state funding), I find this unconvincing. Indeed, attempts to privatise the NHS have often involved greater decentralisation and fragmentation of its management, thus breaking it into pieces of a size more digestable for the private sector. This is a common tactic in the process of privatisation, as can currently be seen with the much-vaunted SNCF in France.

With all of that said, energy policy will still necessarily require local involvement. In addition to democracy and public participation being easier at this level, it can help to overcome NIMBYism and to coordinate more locally-based projects such as the upgrading of housing stock. Such arguments make the idea of a local authority-owned grids and energy suppliers attractive. While such suppliers (purchasing from a public monopoly in generation) do allow for the level of planning I have called for, they come with their own issues. First and foremost, the distribution grid is currently organised at the regional scale and it is unclear if it would be practical to break it up into locally-sized units. Secondly, if such suppliers are created with the goal of out-competing the Big Six, then this would represent a threat to (or at least disruption of) the jobs of existing employees.

A Public Monopoly on Power

Given the current fragmentation of the electricity structure, returning it to public ownership can not be simplified to demands such as nationalising the Big Six. Instead we must focus on the individual services and pieces of infrastructure which we wish to see under public control. Thus, the model I propose would see the creation of a nationally owned public utility made out of

• the national transmission grid
• the regional distribution grids
• connections to the other countries
• zero-carbon generators (except those small enough to receive a feed-in tariff)
• energy storage facilities
• the supply divisions of the Big Six

During a transition period, the electricity market would continue to operate as before, despite most of the components being owned by the same parent company. Over this time, the divisions of the national utility would be fully merged and made to operate as a single, vertically-integrated enterprise. Contracts would be negotiated with the remaining fossil fuel power-plants to buy any additional electricity needed to meet demand from them. All new powerplants would be built in the public sector and, as fossil fuels are phased out, the public utility would come to own the vast majority of generating capacity. If desired, it could also make contracts to purchase power from locally-owned generators, although I would generally advise against this as it is likely to increase costs. The national utility would be required to develop plans stretching 20 to 30 years into the future indicating paths it can take to eliminate fossil fuels and regularly report to parliament on its progress. Gas heating will likely need to be phased out (more on this below), so it doesn’t make sense to nationalise the gas infrastructure and instead we could just have the national supplier make use of the private network and producers. There is some risk that the remaining private generators and gas companies would be uncooperative faced with their imminent extinction, failing to invest adequately in maintenance. There is no simple answer to addressing this, but vigilance will be required to ensure this does not happen and, if it is found to be cheaper than bribing the private companies to cooperate, nationalisation should remain on the table.

Of course, none of this provides for any localism, so I propose that each local authority would be charged with creating what I will call a Local Energy Service Company (LESC). The LESCs would have numerous roles and local authorities would be encouraged to experiment. However they would have two core purposes: providing an interface by which local residents could interact with the national utility and implementing energy-related projects which are inherently local in scale.

Linking the National and the Local

In service of the first of these goals, each LESC would be required to establish at least one storefront, preferably on the High Street. These would be similar to the storefronts which used to be operated by the old Area Electricity Boards, where people could pay their bills as well as buy electrical appliances. Both of these would also be possible at the LESC storefront. The exact relationship between the LESC and the national utility could be something like a franchise system. The national utility (or a subsidiary) would provide the stock for the store and set prices, but the LESC would handle the day-to-day management of the premises.

Such public distribution would sell people high efficiency appliances at-cost. Sales could be integrated with government grants for home energy efficiency. Another possibility is leasing appliances, helping avoid the issue of high up-front cost. The national utility could try to build a supply chain of cooperatively-owned manufacturers, thus providing a mechanism for broader economic planning. However, there is an even bigger advantage to this system when it comes to the energy transition. If the electricity grid is to handle large-scale deployment of intermittent renewable energy sources, “smart grid” technology will be necessary to allow demand to adjust to meet supply. In the present system, this is often argued for in terms of consumers becoming savvier, choosing when to use electricity based on market conditions. This becomes particularly true with regards to the “prosumer” model, in which we all become both producers and consumers interacting on the liberalised energy market. In reality, I doubt many would actually find this prospect attractive; what people really want out of their electricity is the ability to use it without having to think too much about it. I suspect most people would rather leave such matters to the national utility which would be responsible for rationally planning the system as a whole.

If the national utility begins to supply people’s electrical appliances (via the LESC stores) then it becomes relatively straightforward to distribute smart appliances which can be controlled by the the grid operator. The best way to achieve this would likely be by leasing the appliances to consumers (also avoiding high up-front costs which might otherwise make them unaffordable). Customers would receive discounts on the lease depending on how aggressive the demand management is (and thus how likely it is to be noticed).

Additionally, the LESC would be tasked with consulting local residents on energy plans. This could involve identifying potential sites for new generators (with the information passed on to the national utility) as well as providing feedback on national proposals. While the goal would always be to bring local communities along with decisions made by the national utility, it remains possible that NIMBYism would result in an insufficient number of locations for new power plants being identified to meet demand. Should such situations arise, it will likely be necessary for the national plan to overrule local preferences. While the Left typically takes the side of local communities against national priorities, it would be naive to ignore the fact that sometimes the national interest must take priority over local objections.

Giving the Local its Due

The above dealt with how the LESCs would relate to the national utility. However, there are numerous areas where they could act on their own initiative. Key to these is heating. While electricity tends to get the most attention when discussing energy, in truth it only makes up about 20% of UK energy usage. Gas (used for heat) is about 30% and petrol products (mostly used for transport) make up 50%. The latter will be left to an article in its own right.

Burning gas is a source of CO~2~, meaning we can’t use it indefinitely. Biogas (produced by fermenting food waste) presents a green alternative but it won’t provide enough to replace our current level of gas use. It may, however, be sufficient to power gas stoves and barbecues. Hydrogen is sometimes suggested as a replacement. However, it is often produced by removing carbon from natural gas. That carbon will have to be stored somewhere. In any case, natural gas is a limited resource. Hydrogen can also be produced cleanly from water using only electricity. Unfortunately, this wastes a fair amount of energy and other technologies, such as heat pumps, would use far less electricity to deliver the same amount of heat. These devices are very similar to air conditioners except, rather than moving heat from a relatively cool home to a warmer outdoors they move heat from a cold outdoors into a relatively warm home. Because they make use of existing heat they are far more energy efficient than conventional electric space-heaters, which must produce all of it themselves. As previously mentioned, the LESCs could supply heat pumps through their high-street retailers.

However, the single most cost effective way to reduce emissions from heat is through energy efficiency. The next Labour government should immediately update the building code so that homes are built to the highest standards (i.e., PassiveHaus technology), drastically reducing energy use. It probably won’t be possible to bring most existing housing stock up to this standard, but considerable improvements can be made. This is another area in which LESCs can become involved. They could offer household efficiency assessments and work with local builders and city works departments to perform renovations. LESCs can also partner with existing grassroot initiatives along these lines, such as Carbon Co-op in Manchester, where they are present. The local company should offer to finance these renovations, although that would likely require a partnership with a larger organisation such as the national utility, public banks, or credit unions.

While I have tended to dismiss local ownership of energy systems, there is a notable exception to this: district heating networks. These consist of centralised boilers for entire neighbourhoods (typically municipally or cooperatively owned), with hot water pipes carrying the heat to residents’ homes. Often the heat is provided via “co-generation” (i.e., producing heat and electricity at the same time), although the efficiency of this is disputed. This probably will be less viable in future as gas must be phased out and the supposedly green alternative (biomass) has dubious environmental credentials at best. Waste incineration will be able to contribute, although will not be enough on its own. Some have suggested using small modular nuclear reactors (with the city council in Helsinki actively investigating this at behest of the local Greens, of all people) and this would be acceptable from a climatological perspective, although needless to say that most on the Left would not be comfortable with it.

However, other sources are available to district heating networks. They can make effective use of heat which would otherwise be wasted, such as that from heavy industry, the Underground, data centres, cooling systems, large bodies of water, sewage, and heavy industry. One European study suggested that such heat sources could provide about 20% of the EU’s total heating demand by 2050. London has been developing a “heat map” to identify such sources and other cities should follow suit. Renewable sources such as geothermal energy and solar thermal panels can also be used, with the potential to store heat from the latter in the ground or water-filled tanks during the summer, for extraction come winter. The LESCs would be ideally placed to plan, build, own, and operate these district heating systems where heat sources are available and population density makes them viable. They would be a natural monopoly, allowing progressive tariffs to be set and/or subsidies to be given to low-income users, funded by high-income consumers.

The final big user of energy is the transport sector. This is such a massive topic that it deserves an article of its own but, once again, the goals will be efficiency and electrification. Efficiency will primarily take the form of getting people out of private cars and onto public transit, bikes, or their feet. This will be a massive, multi-decade project involving the redesigning of our cities. Electrification means that the national energy utility will need to project for an increase in demand and plan its generating capacity accordingly. Meanwhile, the LESCs would be well placed to oversee the build-out of charging stations for electric vehicles. This would allow local involvement in deciding where to place them, ensuring they do not become a nuisance. Ideally, all such charging stations would be brought into local or national public ownership and payment integrated with people’s monthly electricity bills.

Conclusion

Like all aspects of climate policy, governance of the energy grid must be able to operate on both the local and national scale. In its haste to reject “top-down” solutions, much of the Left in this country has lost sight of the benefits which come from being able to engage in nation-wide planning of industry. In climate policy, as in all other policy areas, we must be able to distinguish which sectors are well-suited for decentralised local control and which are not.