London has become the latest municipal authority to take a position in the energy market through the launch of the “London Power” white-label partnership with Octopus Energy. Our Energy for Londoners Feasibility Study, commissioned by the Greater London Authority (GLA) in 2017, advised on the pros and cons of establishing a fully-licensed or white-label supply entity in the capital.
We concluded that once all risks had been weighed for the particular circumstances in London a white-label approach was favoured. The option for London Power to establish itself as a fully-licensed supplier at some point in future remains, and the experience gained from operating with an energy partner will be invaluable to understand future options to deliver the Mayor’s ambition for London to become a zero-carbon city.
This is one example of the long and well-established pedigree Cornwall Insight has in helping parties of all flavours assess conditions for market entry and understand the complex processes and steps to supply energy to end consumers.
We previously worked with GLA as advisors when it established its ‘licence-lite’ supply entity, which went live in 2018. This approach involves the GLA being a licensed supplier (but not fully licensed, with many industry-focused activities including balancing, settlement and metering dealt with by a senior fully licensed supplier – npower in this case) and procuring local low-carbon power from generators to sell directly to Transport for London. The ambition is that the volume of local generation and local supply could grow, with GLA acting as the non-profit facilitator to sleeve power around London to public sector consumers. Household supply was not considered under this arrangement, given the significant compliance requirements when contracting with domestic consumers.
An example where we worked with a local authority that did become fully-licensed is the work we did for Bristol City Council in 2015, which culminated in the launch of Bristol Energy. In this instance, the decision was taken to become a fully licensed supplier, with all the costs and complexities that entails, with a view for the company to take a long-term view and be a vehicle to not only supply energy locally, but be a key part of the local energy ecosystem – including the potential for it to be a route to market for local generation that was being considered as part of a wider regeneration plans.
We have advised many other local government entities, ranging from borough councils, county councils, combined authorities, to devolved administrations. In each case, although the local conditions differ, the proposition starts from the belief that municipal entities have the potential to reach consumers left behind by the conventional market and that not operating for profit should deliver better outcomes for the locality.
Where we come in is to assess the local market (its size, levels of switching, intelligence on the competitive landscape etc.) and advise on the potential for their plans to be realised. Often there is no special desire to become an energy supplier, but rather a belief that the option could open doors to realise other ambitions – be it to leverage investment in low-carbon generation, underpin energy park developments, or help with the local transition to zero carbon emissions. This has to be considered against the activities and costs that fully-licensed, licence-lite, or white-label approaches incur – the range is startling.
The fact that white-label arrangements are the favoured approach for local government to enter the supply market is of no surprise to us – the constraints of the current licensing regime and market complexity is just too risky for most. Undoubtedly the experience of local authorities who have had their ambitions dampened by present arrangements has added to the calls and growing action to change up the market frameworks and rules to allow for innovative local supply entities to enter the market, provided consumer and market protections can be adequately preserved.
If you wish to learn more about the operation of the GB electricity market, from generation through to end supply we run a course on Understanding the GB Electricity Markets.
For training enquiries please call Emily Matthews on 01603 542115 or email training@cornwall-insight.com
To discuss our project work on market entry, please contact Adam Boorman on 01603 542105 or a.boorman@cornwall-insight.com
