10 October 2017

Green technology will transform us all into energy capitalists


Recent research by the Legatum Institute and Populus – featured on the CapX podcast this week – recently showed large public support for Jeremy Corbyn’s nationalisation agenda. Second on the list of things people were keen to see brought under state control was electricity at 77 per cent.

The best way to prevent any future Government from centralising energy provision would be to disperse it, empowering the individual to take back control. Encouraging people to generate their own electricity, trade it between each other and manage their energy use through smart technology would incentivise beneficial behaviour and educate a new generation about the benefits of market economics.

At a Policy Exchange fringe event at the Conservative Party conference last week, James Heappey MP predicted that electric vehicles will be the social catalyst for this energy market revolution. Brits are very savvy when it comes to cars. The same person that will stick with an uncompetitive energy tariff for years will happily shop around for the best petrol prices, often going out of their way to fill up at a petrol station they know will be a penny cheaper. If only such consumers were so astute when it came to gas and electricity.

Once these same motorists start topping up their electric cars at home, which may well have a smart meter telling them the cheapest time to tap into the grid, cost savvy drivers will get a crash course in the basics of supply and demand. The benefits of filling up at times of low demand or high supply, when energy is cheaper, such as sunny days or when the UK’s offshore wind farms are whirring, will both reduce bills and put less strain on the grid. Like Adam Smith’s invisible hand, the self-interest of energy consumers will benefit everyone by helping to smooth out the nation’s power supply.

The market incentives that will up-end the politics of motoring and energy are already appearing. From next year, Nissan and challenger energy company Ovo will pilot a scheme for owners of the Sunderland-made Nissan Leaf to be paid in return for using the car’s battery as energy storage. The vehicle-to-grid system would cover the annual £350-400 cost of charging the Leaf.

Smart technology is increasingly being included in household appliances as standard. Dishwashers with “dynamic demand” functions allowing them to come on overnight when demand is low and fridges that can temporarily reduce their energy intensity when the grid is busy, are increasingly common. Without many of us realising an environment of smart devices will be built around us in the coming years.

But what will turn a nation of energy consumers into one of energy traders, is the possibility of decentralised solar power. Rooftop solar panels offer a tantalising prospect of people generating their own energy supply with which they can then do as they please. In Brooklyn, New York, networks of community-linked rooftop solar panels have allowed people to trade energy with each other, selling their excess back to the grid or to their neighbours. Entrepreneurs in the developing world are also seizing the business opportunities of small scale and community solar.

In the future, a renewable-powered decentralised energy grid would provide individual households with a source of their own capital, an electric vehicle battery to store it in and a marketplace to sell to. What better way to demonstrate the genius of the market than with this energy revolution?

To help bring this future to reality the Government should do three things.  The first, as James Heappey outlined in Manchester, is to change planning laws to ensure that new homes are built with the capacity for electric car charging. He said his mailbag is full of letters from constituents angry that their homes are unable to receive fibre-optic high speed broadband, because of a lack of foresight in planning laws years ago. Heappy says if the Government wants to avoid angry constituents in the coming years, they need to ensure homes being built now can accommodate electric vehicles.

The second thing would be to incentivise more people to generate their own electricity. Solar farms are now being opened in the UK without subsidy, but, following the cut in the feed in tariff for rooftop solar last year, installations are now at a six-year low. This is music to the ears of the big six energy firms who fear insurgent technologies like solar might disrupt their cosy hold over the market.

Finally the Government should bring forward the date to phase out the sale of new petrol and diesel cars from 2040. Car manufacturers are already moving quickly on this, introducing their own scrappage schemes. India has set a target of 2030, Norway will make the shift in 2025 and China will soon announce its own date, likely to be an aggressive one as it will go a long way to tackling the country’s toxic air pollution problems. If the UK wants to capture market share in electric vehicles, it needs to put its pedal to the metal now, not attempt zero to 60 in 33 years.  New research by Green Alliance claims that a stronger target for electric vehicles could reduce UK foreign oil imports by more than 50 per cent in 2035.

The call coming out of Conservative Party conference was the need for forward-looking, radical policies that would seize the initiative, appeal to new voters and stem the momentum revealed in the Legatum research. Capping energy prices is merely fiddling around the edges when a more democratic, digitised and decentralised energy market is within reach.

Joe Ware is a journalist and writer at Christian Aid