The Big Six On The Run
How renewables are disrupting
big energy firms everywhere
The Big Six On The Run 1
‘‘
’’
The biggest story you’ve never been told
‘Europe’s electricity producers face an
existential crisis.’
Headline in The Economist, Oct 20131
1
2
The Economist, ‘How to lose half a trillion dollars’, October 2013, http://www.economist.com/news/briefing/21587782-europes-electricityproviders-face-existential-threat-how-lose-half-trillion-euros
The Big Six On The Run
Contents
Introduction: The biggest story you’ve never been told
4
1. Renewables surge forward
6
2. How renewables disrupt markets
8
3. How big energy firms are getting all shook up
12
Conclusion: The Big Six on the run
18
Recommendations
19
Authors: Guy Shrubsole, Alasdair Cameron
With thanks to: Sophie Neuburg, Anna Watson,
Simon Bullock, Andrew Pendleton, Paul Steedman,
Naomi Luhde-Thompson and Professor Catherine
Mitchell, who all reviewed drafts of this report and
offered comments.
Designed by: Leanor Hanny (layout), Claire
Bracegirdle (graphs).
November 2014
The Big Six On The Run 3
The biggest story you’ve never been told
An energy revolution is underway across the globe,
and the old order is running scared.
Big energy firms, once the greatest beneficiaries
of liberalised electricity markets, are suddenly
seeing their profit margins slump, their very futures
imperilled. The traditional privatised utility model that
has reigned supreme for twenty-five years is being
rapidly undermined. The effects are being felt most
strongly in Germany and the US – but increasingly
Britain’s Big Six energy firms are also under threat.
In short, the Big Six are on the run. What’s causing
them to take fright is the disruptive power of
renewable energy – particularly small-scale
renewables owned by lots of people. The reasons for
this are actually quite simple, but seldom explained.
The first reason is that the Big Six are facing a
growing army of competitors. When the utilities
were first privatised in the 1980s, they portrayed
themselves as the face of a new popular capitalism.
The famous ‘Tell Sid’ adverts of the Thatcher years
caught the mood as thousands of people bought
up shares in the new energy companies. But as
the electricity market developed the number of
shareholders and firms dwindled and ossified into
the small oligopoly of suppliers that exist today.
Dogged by numerous scandals, from doorstop misselling to accusations of price-fixing and competition
inquiries, the Big Six today are hugely unpopular:
purveyors of expensive electricity that’s dirty to boot.
Yet where regulators, governments and legislation
has failed, a new David is rising up to challenge the
big energy firms’ Goliath. Hundreds of thousands
of households, businesses and investors have been
investing in solar and wind power. Large numbers of
non-traditional players have entered the electricity
market and are challenging the dominance of the
conventional utilities. A people’s army has risen up
that’s taking ownership of the energy system. It’s
perhaps unsurprising that renewables should be the
beneficiaries of this: besides being hugely popular
– with large majorities consistently supporting
solar and wind over any other energy technology
– renewable energy is inherently decentralised.
Supplies of coal, oil, gas and uranium can be readily
stored and controlled; but sunlight falls on every
inch of the globe and there are few places where the
wind never blows.
4
In some countries over the past decade, mass
ownership of renewable energy has become
a reality: in Germany, for instance, 50% of all
renewables are owned by households, farmers and
cooperatives. Less than 10% are owned by big
energy firms. The remainder are owned by other
private investors and businesses who have emerged
as challengers to the traditional utilities.
The second reason why renewable energy is
disrupting the big utilities is because it has certain
inbuilt advantages over conventional forms of power
generation. To generate power from the sun and
wind, you need to invest upfront in solar panels and
wind turbines – but once they’re installed, the power
is basically free (or as economists say, ‘near-zero
marginal cost’). That poses a major conundrum for
utilities whose main power generation assets are
fossil fuel power stations with ongoing fuel costs –
and increasingly high fuel costs at that.
It means that anyone selling renewable power into
the grid has a competitive advantage. Since an extra
unit of power output from a solar panel is essentially
free, solar can outcompete coal, oil and gas. In
nations with large amounts of solar, this is starting
to cause wholesale electricity prices to crash, and eat
into company profits. At the same time, distributed
renewable energy systems place fewer demands
on expensive transmission grids, theoretically
allowing them to supply power locally at low cost.
It is a classic instance of what the economist Josef
Schumpeter called ‘creative destruction’, whereby
technological innovation rips up the profits of the
old order.2
Of course, up until recently, renewables have
remained a more expensive alternative because of
the upfront costs of installing these technologies
– requiring public subsidies to get a look-in. But
this brings us to the third reason why traditional
fossil-fuel utilities are under threat. Renewables,
particularly solar but also onshore wind, have
plummeted dramatically in cost over the past decade
and in some parts of the world are now cheaper than
fossil fuels, even without subsidy. In fact, investment
bank UBS predict that solar combined with batteries
and electric vehicles will soon be cheaper than grid
electricity and fuel in key markets like Germany,
2
Josef Schumpeter, Capitalism, Socialism and Democracy, 1942.
The Big Six On The Run
Spain and Italy.3 This is quite apart from the fact that
fossil fuel generators aren’t paying the full costs of
their pollution (or ‘externalities’).
All this has meant that large utilities in Germany,
the US and elsewhere are seeing their market share
reduced, and profits undercut. Many are being
forced to adapt – or else lobby hard against the
oncoming changes. “Utility companies that refuse
to let go of an archaic system are losing investors’
money”, says US energy thinker Amory Lovins.4
“Distributed energy is to utilities as social media is
to newspapers”, argues the CEO of Bloomberg New
Energy Finance, Michael Liebreich.5
In the UK, energy firms appear to be at a crossroads.
With two of the big German utilities, EON and RWE,
also major players in Britain, how is the renewables
revolution that’s sweeping the continent affecting
3
John Vidal, ‘Big power out, solar in: UBS urges investors to join
renewables revolution’, The Guardian, 27th August 2014, http://
www.theguardian.com/environment/2014/aug/27/ubs-investorsrenewables-revolution
4
Amory Lovins, ‘Let’s Celebrate, Not Lament, Renewables’
Disruption of Electric Utilities’, 6th February 2014, http://blog.rmi.
org/blog_2014_02_06_celebrate_renewables_disruption_of_
electric_utilities
5
Michael Liebreich, Bloomberg New Energy Finance conference
April 2014 keynote speech. Viewable online here: http://about.
bnef.com/video/summit-2014-michael-liebreich/ And see @
MLiebreich’s tweet here: https://twitter.com/MLiebreich/
status/457498076828426240
The Big Six On The Run what they lobby for in the UK? Will the Big Six
continue to pressure government behind the
scenes to keep Britain from going the same way as
Germany? And how can the British public reap the
benefits of surging solar, plummeting prices and
mass energy ownership?
Because if David beats Goliath – if the popular army
of small-scale owners of renewables triumph over
the clunking Big Six energy firms – then everything
changes. Households, communities and businesses
get to be producers of energy, not simply consumers.
They’ll no longer be at the mercy of annual pricehikes by a narrow set of suppliers but will get to
benefit from fuel-free power and greater ownership
of the energy system themselves. We’ll see Britain’s
energy supply cleaned up, our emissions from
electricity generation plummet, and the road cleared
for mass roll-out of electric cars and heating.
» Bringing it home:
Farmer Adam Twine and
advisor Liz Rothschild
at Westmill Sustainable
Energy Trust, set to be
one of the biggest solar
cooperatives of its kind in
the world. Friends of the
Earth has been showing
that, far from being too
expensive, a switch to
clean energy and less
waste is good for the
economy and jobs – as
well as the planet.
This is a big, dramatic story that hasn’t yet been
properly told. Indeed, it’s still unfolding. It’s
the energy equivalent of when mobile phones
leapfrogged landlines; when email replaced post;
when canals got lapped by railways. In those
earlier examples of technological transition, the
lumbering incumbents failed to spot the disruptive
power of their smaller, smarter competitors, and got
squashed. This is the story of how the power of the
sun got the Big Six running scared.
5
1. Renewables surge forward
Since the 1970s, environmentalists have promoted
renewables as an alternative, cleaner source of
energy to the traditional dirty forms of coal, oil, gas
and nuclear. At first, renewable energy – whether
from the wind, sun, tides, or waves – appeared
marginal, too unreliable and expensive to ever make
a serious contribution to our energy needs.
The oil crisis of the mid-70s panicked western
governments into researching alternative forms
of energy, but as oil prices slumped again, so did
renewable investment. Then, in the late 1980s,
came climate change. Suddenly there was a new
imperative to quickly phase out fossil fuels and
power up with clean energy. Governments around
the world were generally slow to act; some opted for
nuclear, others to simply switch from coal to gas.
But many nations also chose to invest in renewable
energies, and as research and development
progressed, costs began to fall and deployment
grew. With the warnings of climate scientists
growing louder and more insistent, by the 2000s,
serious programmes of investment into renewables
had begun around the world.
Now, over the past decade, renewables have surged
forward in countries around the globe:
nIn
Germany, the amount of solar power installed
grew from 2 Megawatts (MW) in 1990 to 37
Gigawatts (GW) in 2014 – 37,000 Megawatts.6
6
6
Dr Bruno Burger, ‘Electricity production from solar and wind in
Germany in 2014’, Fraunhofer Institute for Solar Energy Systems
(ISE), 18th August 2014, http://www.ise.fraunhofer.de/en/
downloads-englisch/pdf-files-englisch/data-nivc-/electricityproduction-from-solar-and-wind-in-germany-2014.pdf
That’s equivalent to nearly half of the UK’s entire
power generating capacity7. On one sunny Sunday
in May 2014, Germany’s solar panels and other
renewables provided almost 75% of total national
electricity demand.8
n
China
has currently installed 18GW of solar,
according to the International Energy Agency9. In
May 2014, the Chinese government announced a
new target to reach 70 GW of solar by 2017 – in
other words, committing to install nearly as much
solar power as there is total UK power generating
capacity, in just three years.10
nBy
mid-2013, the US had installed 10GW of
solar,11 and in the first quarter of 2014 installed
a further 1.3GW – a rise of 79% on the same
quarter last year.12 The rapid expansion of onshore
wind has played a role too. In 2014, the cost of
7
At the end of 2013, UK installed generation capacity that could
feed into the grid was around 77GW. See Digest of UK Energy
Statistics, chapter 5 (Electricity), 2014, https://www.gov.uk/
government/uploads/system/uploads/attachment_data/
file/337649/chapter_5.pdf
8
Clean Technica, ‘Germany Reached Nearly 75% Renewable
Power Use on Sunday’, 15th May 2014, http://cleantechnica.
com/2014/05/15/germany-reaches-nearly-75-renewable-poweruse-sunday/
9
IEA, ‘Snapshot of Global PV 1992-2013’, http://www.iea-pvps.
org/fileadmin/dam/public/report/statistics/PVPS_report_-_A_
Snapshot_of_Global_PV_-_1992-2013_-_final_3.pdf
10 Business Green, ‘China aims for 70GW of solar in race to ditch
coal’, 19th May 2014, http://www.businessgreen.com/bg/
news/2345344/china-aims-for-70gw-of-solar-in-race-to-ditch-coal
11 Renewable Energy World, ‘US Joins 10-GW Solar PV Club, Prepares
For Liftoff’, 10th July 2013, http://www.renewableenergyworld.
com/rea/news/article/2013/07/us-joins-10-gw-solar-pv-clubprepares-for-liftoff
12 Bloomberg Businessweek, ‘U.S. Solar Power Rises 79% as
Home Panels Beat Warehouses’, 29th May 2014, http://www.
businessweek.com/news/2014-05-29/u-dot-s-dot-solar-powerrises-79-percent-as-home-panels-beat-warehouses
» Below left: Hong
Kong’s first zero carbon
building, located at
Kowloon Bay.
» Below: Wind Turbines,
Coachella Valley, Palm
Springs, California.
The Big Six On The Run
new wind power fell to 2.5 cents per kWh – the
lowest of any new energy source in the US.13 In
mid-2014 it was announced that the US had
generated 14% of its electricity from renewables,
something the International Energy Agency had
once stated would not happen until 2040.14
nBy
the start of 2014, the UK installed its
500,000th solar panel – up from 200,000 just two
years previously and a huge increase on the tiny
numbers deployed prior to the start of the FeedIn Tariff in 2010.15 The UK has suddenly become
investors’ country of choice for solar – two-thirds
of planned European solar projects for 2014-15
are in the UK.16
Accompanying and driving this surge in solar
installations is the tumbling cost of photovoltaics.
Solar PV has developed in leaps and bounds since
its origins as a space-age technology. As Figure 1
illustrates dramatically, in the 35 years from 1977
to 2012, the cost of solar PV declined by 99%. Some
call this ‘Swanson’s law’ (named after a US solar
advocate) – that for every doubling of solar PV
installations worldwide, there is a 20% drop in costs.
Together, these trends paint a very different picture
to the doom-and-gloom we are used to hearing
about climate change and dirty energy. Decades
of campaigning, policy change and investment
are starting to pay off. We are witnessing a quiet
revolution in the way we obtain our energy, and not
everyone has yet woken up to this fact. Just as canal
engineers were trumped by railway industrialists,
and record companies have fallen prey to online
downloads, so solar and other renewables are
preparing to bury their dirty fossil-fuel competitors.
The next chapter explains how.
Figure 1: The tumbling cost of solar. Source: Bloomberg New Energy Finance, 2012.17
80
1977 price: $76.67/watt
70
60
50
40
30
20
10
0
2013 price $0.74/watt
(forecast)
1977
2013
13 Clean Technica, ‘How Low Can Wind Energy Go? 2.5c per
Kilowatt-Hour Is Just The Beginning’, 23rd August 2014, http://
cleantechnica.com/2014/08/23/cost-of-wind-energy-25-permwh-and-falling/
14 PV Magazine, ‘US electrical generation from renewables hits
14.3%’, 27th August 2014, http://www.pv-magazine.com/news/
details/beitrag/us-electrical-generation-from-renewables-hits143_100016232/#axzz3Bgqvw1KJ
15 DECC, Weekly Solar PV installation data, last updated 2nd April
2014, https://www.gov.uk/government/statistical-data-sets/
weekly-solar-pv-installation-and-capacity-based-on-registrationdate
16 Solar Power Portal, ‘Two-thirds of Europe’s planned PV projects are
in the UK, says IHS’, 28th May 2014, http://www.solarpowerportal.
co.uk/news/two_thirds_of_europes_planned_pv_projects_are_
in_the_uk_says_ihs_3296. See also EUObserv’ER, ‘Photovoltaic
Barometer for the EU’, 2013: http://www.energies-renouvelables.
org/observ-er/stat_baro/observ/baro-jdp11_en.pdf.
The Big Six On The Run 17 Bloomberg New Energy Finance analysis, 2012, graph featured in The Economist, ‘Sunny Uplands’, 21st
November 2012, http://www.economist.com/news/21566414-alternative-energy-will-no-longer-bealternative-sunny-uplands
7
2. How renewables have disrupted markets
Renewables are different from fossil fuels in one
obvious respect – they generate power cleanly,
without emitting carbon dioxide and thereby driving
climate change. But renewables also differ markedly
from fossil fuel in their economics. As a fuel-free
source of power – or rather, a source where the ‘fuel’
is provided for free by the shining sun or blowing
wind – they are very different from fossil fuel and
nuclear power stations, which require coal, oil, gas or
uranium to be dug out of the ground and processed.
This happened most famously in Germany on
June 16th 2013, when high output from solar and
wind power, combined with low demand, caused
wholesale prices to plummet to minus 100 Euros per
megawatt-hour.20 In other words, prices sloughed
off to negative to encourage companies to actively
remove generating power from the grid; the system
couldn’t cope with the sudden rush of renewable
energy.
The way renewables interact with energy markets is,
therefore, different – and disruptive. Here’s why.
Electricity usage isn’t steady, but instead varies over
the course of a day: ramping up as people get up in
the morning and go to work, spiking at tea-time in
the evenings, and reducing as people turn out the
lights and head for bed. In many countries there
may be spikes during hot days as air conditioning
kicks in. Matching demand for electricity with a
constant supply is the challenge that national grids
successfully deal with every day.
a) Plummeting wholesale electricity prices
Renewables generate at near-zero marginal cost.
So in some countries with high levels of renewables,
there have been increasing instances of shortterm surges in renewable generation which have
collapsed the spot price of electricity. In other words,
there has been more electricity generated than
needed for large periods of time. In Germany, for
example, surging quantities of solar and wind have
helped depress the wholesale price of electricity by
over 30% over the last three years – as the graph
below shows.18
18 Bloomberg, ‘German Power Costs Seen Dropping for Fourth Year’,
3rd January 2014, http://www.bloomberg.com/news/2014-01-03/
german-power-costs-seen-dropping-for-fourth-year-energy.html
b) Holding down peak electricity prices
Traditionally, electricity grids have coped with
fluctuating demand by turning on and off various
forms of electricity supply. Relatively inflexible forms
20 See for example the account given by Dr Kathrin Goldammer,
‘Electricity for free? Negative electricity prices and their
consequences’, Institute for Advanced Sustainability Studies (no
date), http://www.iass-potsdam.de/research-clusters/globalcontract-sustainability-gcs/news/electricity-free-negative-electricity
Figure 2: Plummeting wholesale electricity prices in Germany. Source: EnBW 2013 Factbook.19
2015
2014
2013
2012
70
65
€/MWh
60
55
50
45
40
35
2010
2011
2012
2013
19EnBW 2013 Factbook, https://www.enbw.com/media/downloadcenter-konzern/factbook/enbw-factbook-2013.pdf
8
The Big Six On The Run
Surging renewable energy installations have
complicated this picture. Solar, of course, only
operates during the day; but on sunny days it can
deliver huge quantities of power very fast. The same
is broadly true for wind power (though the wind of
course also blows during the night). This will result in
two major changes to how grids manage moments
of peak demand in the UK, as is happening already
in Germany.
Firstly, a lot of solar isn’t fed into the high-voltage
transmission system – it’s installed on the roofs of
buildings and feeds power directly into appliances
and the local networks, and appears as a reduction
in electricity use. So when solar is generating, it can
shave off a chunk of demand for grid electricity.
This may leave a smaller market for operators
of traditional power generating kit to sell their
electricity into. In the UK, there is some evidence
that this effect may already be visible: in the
summer months of 2013, demand ‘dropped’ from
2012 levels by around 5%-6% during sunny days.21
Secondly, solar and wind power that is connected to
the grid will inevitably push down on trading prices
when it is in operation, because it is generating
electricity at near-zero marginal cost. In some
markets, or at certain times of the year, this can
have a particular effect on generation around peak
times. This is particularly the case in places where
demand spikes from air-conditioning frequently
coincide with warm summer days, such as in
California or Southern Europe. Wind too is often well
matched to eat into early evening power demand,
and in the UK is at its strongest in late afternoon
and early evening.22 And as renewables generate at
21 Chris Goodall, ‘Look carefully and you can see solar PV output
denting UK electricity demand’, CarbonCommentary, 7th June
2013, http://www.carboncommentary.com/2013/06/07/lookcarefully-and-you-can-see-solar-pv-output-denting-uk-electricitydemand/
22 Graham Sinden, ‘Characteristics of the UK wind resource: Longterm patterns and relationship to electricity demand’, Energy
Policy, 2006, http://www.eci.ox.ac.uk/publications/downloads/
sinden06-windresource.pdf
The Big Six On The Run near-zero marginal cost, they get taken up by the
grid first before other sources.
In the UK, maximum daily demand usually occurs
during the afternoon and in the early evening. This
means that solar and wind output has the potential
to significantly eat into one of the largest markets
for peaking generation. A study conducted by the
National Grid includes estimates of how 22 GW
of solar power would eat into the summer and
winter peaks of energy electricity demand (see
Figure 3 below).23 This effect can disrupt fossil fuel
operators’ profits, particularly in summer. Evidence
from Germany suggests this has already begun
to happen. In 2008 the average price for peak
electricity was €14 above the baseload price, while
by 2013 it had fallen to just €3.24 Essentially, the
ability to ramp up peak plant has become less
valuable.
23 National Grid solar briefing for DECC, 2012 https://www.gov.
uk/government/uploads/system/uploads/attachment_data/
file/66609/7335-national-grid-solar-pv-briefing-note-for-decc.pdf.
24 Fraunhofer Institute for Solar Energy Systems, ‘Electricity SpotPrices and Production Data in Germany, 2013’, January 2014,
http://www.ise.fraunhofer.de/de/downloads/pdf-files/aktuelles/
boersenstrompreise-und-stromproduktion-2013.pdf
Figure 3: Modelled impact of 22GW of solar on peak electricity demand. Source:
National Grid briefing for DECC.25
60
50
22 GW solar
Residual
Nuclear
40
GW
of electricity generation, like coal and nuclear, have
provided a constant ‘baseload’, whilst spikes in
demand have been accommodated through quickly
turning on flexible ‘peaking plant’, like gas. Electricity
markets pay a premium to operators of flexible fossil
fuel plants to bring forward peaking plant at times
of sudden high demand.
30
20
10
0
6am
12 noon
6pm
25 National Grid solar briefing for DECC, 2012 https://www.gov.uk/government/uploads/system/uploads/
attachment_data/file/66609/7335-national-grid-solar-pv-briefing-note-for-decc.pdf.
9
Of course, flexible supply will still be needed to
cover fluctuations in demand, but the nature of this
market is changing. The times in which peakinggeneration will be required will be less predictable,
and the number of hours it may be needed to
operate for and the amount of capacity regularly
required may reduce.
Furthermore, while it’s clear that a high-renewables
electricity system needs ways to balance variable
supply and demand, there are lots of ways this
can be done besides paying for new fossil fuel
back-up plant. Smart grids utilising demand side
management techniques to better match electricity
supply and demand; electricity storage like batteries,
pump hydro stations, and electric vehicles;26 more
undersea electricity cables to plug into the European
grid – all these alternatives are technically viable,
and many are growing very fast. Like renewables,
they go against the grain of traditional utility
business models. Yet they are already making their
impacts felt. Germany, for example, has recently
installed Europe’s largest battery storage system.27
And current trends suggest that in many countries
– such as Spain, Italy, Australia and Germany – the
combination of solar and home battery storage
systems will be cheaper than electricity bought
from the grid in just a few years, and it some cases
already is.
c) Retail prices remain high
Of course, declining wholesale prices aren’t the
whole picture. There’s a difference between the price
at which electricity is traded wholesale, and the
retail price it ends up being sold at to consumers.
It’s a bit like the difference between the cost of a
barrel of oil, and its price at the petrol pump. Along
the way, wholesale electricity costs are added to:
electricity suppliers price in the costs of transmission
and distribution, marketing, taxes, balancing costs
and, of course, profits.
The economics of renewables energy means that, as
explained previously, there is a relatively high upfront
cost to install renewable technologies, in order to
26 For more on the potential of electric vehicles to act as a giant
battery, see Professor Dame Julia King, ‘Four things about electric
vehicles’, 16th May 2014, http://www.foe.co.uk/blog/four-thingsabout-electric-vehicles
27 Business Green, ‘Germany charges forward with opening of
Europe’s largest grid battery plant’, http://www.businessgreen.
com/bg/news/2370677/germany-charges-forward-with-openingof-europes-largest-grid-battery-plant
10
access fuel-free power later. This cost is rapidly
falling, but in most parts of the world, renewables still
require public subsidies to be brought forward, for
a few more years at least. To fund their installation,
many countries place green levies or taxes on their
utility companies, which ends up being passed onto
the consumer as part of the retail price of electricity.
In the UK, this remains a small fraction of an average
electricity bill – about 11% in 2012.28
Nevertheless, green levies for renewables do
marginally push up retail electricity prices. Bringing
more variable-output renewables (like solar and
wind) onto the grid also slightly increases the costs
of balancing supply and demand. Sometimes, the
role of renewables in driving up retail prices has been
increased by the way governments have shared out
the costs – in Germany for instance, heavy industry
is exempted from paying for renewables, lumping
the cost onto households instead. Around 3/5ths of
the extra cost that renewables adds to German retail
electricity prices is actually due to this exemption for
heavy industry.
Yet rising retail prices also, seemingly paradoxically,
encourages more people to invest directly in
renewables. This is because the higher retail prices
rise, the more it makes sense to invest directly in
some solar panels, lessen your reliance on expensive
grid electricity, and benefit from the attractive
paybacks of selling your power onto the grid. This
circle of higher renewable deployment leading to
still higher renewable deployment can also become
a ‘death spiral’ for traditional utilities – further
lowering wholesale prices and reducing demand
for grid electricity. In the future, as costs continue
to fall and storage becomes more affordable, it will
further increase the incentive for individuals and
communities to generate their own power. The
process will likely accelerate rapidly as domestic
renewable energy sources reach grid parity,
something expected to happen in the UK for solar
PV by 2020.
d) Wider ownership of electricity
generation assets
As more and more people invest in renewables –
from the half-million households going solar in the
28 House of Commons Library Standard Note, Components of an
energy bill, January 2014: http://www.parliament.uk/briefingpapers/SN06751/components-of-an-energy-bill
The Big Six On The Run
UK to the 50% of German renewables owned by
farmers, individuals and cooperatives – the stiffer
the competition for the established big energy firms.
It’s a fascinating and transformative development in
how our economies operate. Once, energy supply was
the jurisdiction of monolithic, nationalised utilities;
then these got broken up and sold off to private
companies; now those companies appear to be being
eaten up as their own energy customers become
energy producers. In the same way that social media
has allowed an explosion of decentralised news
sources, shaking up the old journalistic models, so
the advent of renewable energy is altering the very
foundations of the energy markets.
Of course, this isn’t to say that traditional utilities
aren’t investing in renewables themselves; many
are, and we explore this later. But it’s also harder for
utilities to invest in them than it is for households or
non-energy company investors. Utilities struggle to
invest in small-scale, distributed energy systems like
solar, as it’s harder to aggregate them. Utilities have
also sunk huge chunks of their capital into fossil
fuel or nuclear assets, and have a vested interest in
maintaining the profitability of those assets (many
of which have long lifespans) – so are conflicted in
investing in ‘challenger technologies’ like solar and
wind that directly undercut their existing assets.
full costs of grid balancing and transmission. In the
US, for example, domestic solar producers benefit
from ‘net metering’, which exempts them from
paying for grid charges. But a lot of solar doesn’t
need the entire grid; it’s installed on people’s roofs,
right next to the appliances that use it. As for grid
balancing, the costs that utilities have to pay are
usually not that substantial. Rather, there is a
strong argument that utilities are the ones getting
a free ride, through exemption from the full cost of
the pollution they produce, and through inherited
monopolies. Private energy companies have
benefitted hugely from inheriting grid infrastructures
that required large public investments, and were
often sold off at bargain-basement prices during
privatisation firesales. This begs the question: who
are the real freeloaders here?
Together, these factors amount to a series of severe
disruptions to the way traditional electricity markets
operate and the way big utilities do their business.
The next question is, how are they coping?
» In Holland: Ice
skating on a lake with
wind turbines in the
background.
e) Accessing and managing the
electricity grid
A number of other factors put small-scale renewable
generators at an advantage compared to large
energy firms.
In some countries, renewables are given legal right
of first access to the grid, before other forms of
electricity generation. This disadvantages fossil
electricity. But it’s worth noting that the inherent
economics of renewable electricity – being nearzero marginal cost – means that even in countries
without this legal right, renewables are likely to
come onstream first before the grid starts buying
electricity with a fuel cost.29
Secondly, critics have argued that small-scale
renewable generators often don’t have to pay the
29 It’s worth noting that decentralised renewables are also being held
back by grid connection in countries like the UK. For example, the
District Network Operators who manage local electricity grids are
becoming increasingly reluctant to connect new wind turbines and
solar farms.
The Big Six On The Run 11
3. H ow big energy firms are getting
all shook up
Plummeting worldwide costs for renewables are
causing a surge in the deployment of solar and wind,
and this is exacerbating the inherently disruptive
effects that renewables have on electricity markets. In
turn, the currently-dominant players in these electricity
markets, the large privatised and state-run utility firms,
are having their business models shaken up. Some
utilities are being forced to adapt; others are putting
up a fight and lobbying hard against renewables.
This chapter looks at how big energy firms have
been reacting in Germany, the US, and lastly, the UK.
Germany
Germany’s biggest energy firms have been hit hard by
the country’s Energiewende, or ‘energy transition’, that
has been taking shape over the last twenty years.
The Energiewende has been characterised by: a
long-term suspicion of nuclear, culminating in Angela
Merkel’s commitment to phase out nuclear entirely
in 2011 following the Fukushima disaster; a price on
carbon, though not yet to the extent that Germany
has squeezed out all its coal and lignite; strong
support for renewables through Feed-In Tariffs; and
a tradition of federal government, cooperatives and
a strong SME sector that have all contributed to the
promotion of distributed energy ownership.
Critics have claimed the Energiewende has led to
grid instability and increased use of brown coal
(lignite). Yet current evidence does not support this.
After an initial increase in coal use, predicated by
low carbon prices and a slump in coal prices, use
of lignite and hard coal in Germany dropped by
16% in the first seven months of 2014 against the
same time period a year earlier.31 Meanwhile, grid
reliability and growth in renewable energy seem to
go hand-in-hand: the amount of time lost to power
outages appears to affect countries with high levels
of renewables, like Germany and Denmark, far less
than nations with lower levels, like the UK and US.32
Germany has three main energy utilities, RWE, EOn
and EnBW, all of which have been seriously affected by
the Energiewende. In 2013, the three firms announced
capacity cuts amounting to 15GW of old fossil fuel
31 Dr Bruno Burger, ‘Electricity production from solar and wind in
Germany in 2014’, Fraunhofer Institute for Solar Energy Systems
(ISE), 18th August 2014, http://www.ise.fraunhofer.de/en/
downloads-englisch/pdf-files-englisch/data-nivc-/electricityproduction-from-solar-and-wind-in-germany-2014.pdf
32
Craig Morris, ‘German grid more stable in 2013’, Energy Transition
website, 25th August 2014, http://energytransition.de/2014/08/
german-grid-more-stable-in-2013/
Figure 4: German renewable energy ownership.30
The Big Four energy suppliers
6.5%
Other
1.5%
Other energy suppliers
7%
Industry
9%
Private individuals
51%
Investment funds
11%
Project firms
14%
Farmers
11%
30 Craig Morris, ‘Citizens own half of German renewable energy’, Energy Transition website, 29th October 2013, http://energytransition.
de/2013/10/citizens-own-half-of-german-renewables/
12
The Big Six On The Run
plant.33 There has been a huge mothballing of gas
plant no longer considered profitable as solar and
wind have eaten into peaking demand and forced
down wholesale prices.34 There has been a startling
decline in wholesale electricity prices in Germany in
recent years, intimately connected to the development
of renewables (see Figure 2, earlier in this report).
The three main utilities have responded quite
differently, however.
RWE’s share price had already been declining
continuously since 2008. But the true scale of its
financial woes became publicly apparent in October
2013, when the Energy Post journal obtained an
internal RWE strategy document that stated: “The
massive erosion of wholesale prices caused by the
growth of German photovoltaics constitutes a
serious problem for RWE which may even threaten
the company’s survival.”35
In an earlier presentation from May 2013, RWE
states that “Generation earnings are coming under
severe pressure”, that there is a “deteriorating
[situation for] conventional power generation”, and
that earnings from conventional power generation
in 2013 were “significantly below last year’s level.”
The report warns that “old gas fired power plants are
under most pressure but even some new state of the
art gas plants are cash flow negative”.36
RWE’s chief executive, Peter Terium, has lamented
that his company had been slow to embrace change.
“We were late entering into the renewables market
– possibly too late,” Terium told reporters at RWE’s
2013 annual press conference.37
33 The Economist, ‘How to lose half a trillion dollars’, October 2013,
http://www.economist.com/news/briefing/21587782-europeselectricity-providers-face-existential-threat-how-lose-halftrillion-euros
34 Mothballing of plant: See Bloomberg, ‘German Utilities Hammered
in Market Favouring Renewables’, 12th August 2013, http://www.
bloomberg.com/news/2013-08-11/german-utilities-hammered-inmarket-favoring-renewables.html
35 Energy Post, ‘Exclusive: RWE sheds old business model, embraces
transition’, 21st October 2013 http://www.energypost.eu/exclusiverwe-sheds-old-business-model-embraces-energy-transition/
36 RWE presentation, ‘Steps to long-term value’, May 2013,
http://www.rwe.com/web/cms/mediablob/en/1947722/
data/2300728/3/rwe/investor-relations/events/roadshows/2013/
RWE-company-presentation-3-Steps-to-long-term-value-FixedIncome-2013-05-06.pdf
37 Renewable Energy World, ‘CEO of German Utility RWE Says
It Should Have Invested in Renewable Energy Sooner’, 15th
April 2014, http://www.renewableenergyworld.com/rea/news/
article/2014/04/ceo-of-german-utility-rwe-says-it-should-haveinvested-in-renewable-energy-sooner
The Big Six On The Run The company has come to the conclusions that
in order to profit in future, it should undertake
“seasonal and permanent mothballing” of its
fossil fuel portfolio; concentrate on “asset-light
projects”; and focus on “value enhancing growth
over volume expansion, especially in renewables”.38
Yet it also warns that “Our cost of capital will not
be competitive against funding from private and
institutional equity investors” who have got involved
in financing renewable energy.39
RWE’s largest competitor in Germany, EON, “has fared
somewhat better”, in the eyes of some – partly because
its portfolio of assets is spread over a wider range of
international markets. Holdings in Turkey and Brazil
have “provided some protection from the German
power market”.40 Even so, the FT reported that EON
ditched its profit target for 2013 after warning that its
gas-fired power plants had become “‘barely profitable
to operate’ because of weak economic conditions
and a surge in renewable energy in Europe.”41
The third and smallest of the German energy
utilities, EnBW, has perhaps been most forthright
in its apparent embrace of the Energiewende. The
firm has been forced to close ‘uneconomical’ coal
plants,42 and suffered a 15% drop in profits in the first
quarter of 2014, “weighed down by a mild winter,
lower wholesale power prices and a rise in renewable
capacity that has hit its thermal power plants.”43
But it appears to understand these trends are
not merely surface-level, stating in its company
factbook in September 2013: “Traditional business
38 RWE presentation, ‘Steps to long-term value’, May 2013,
http://www.rwe.com/web/cms/mediablob/en/1947722/
data/2300728/3/rwe/investor-relations/events/roadshows/2013/
RWE-company-presentation-3-Steps-to-long-term-value-FixedIncome-2013-05-06.pdf
39 Energy Post, ‘Exclusive: RWE sheds old business model, embraces
transition’, 21st October 2013 http://www.energypost.eu/exclusiverwe-sheds-old-business-model-embraces-energy-transition/
40 Renewable Energy World, ‘CEO of German Utility RWE Says
It Should Have Invested in Renewable Energy Sooner’, 15th
April 2014, http://www.renewableenergyworld.com/rea/news/
article/2014/04/ceo-of-german-utility-rwe-says-it-should-haveinvested-in-renewable-energy-sooner
41 FT, ‘Eon warns on conventional power’, 13th November 2012,
http://www.ft.com/cms/s/0/47fe92d6-2d71-11e2-998800144feabdc0.html#ixzz31mW4U87b
42 Power Engineering International, ‘EnBW looks to close
uneconomical coal-fired power plants’, 3rd March 2014, http://
www.powerengineeringint.com/articles/2014/03/enbw-looks-toclose-uneconomical-coal-fired-power-plants.html
43 Reuters, ‘German utility EnBW first-quarter profit falls 15pct’, 9th
May 2014, http://in.reuters.com/article/2014/05/09/enbw-energieresults-idINL6N0NV1N820140509
13
models of large utilities [are] no longer an option.”44
EnBW forecasts that its earnings from generating
electricity will fall by an extraordinary 80% between
2012 and 2020, and that to make up for this loss,
it must concentrate on obtaining “higher earnings
from energy services and renewables.”45
at how solar is performing in some states – and not
even just in the sunniest ones. Recently, a Judge in
Minnesota ruled in an enquiry that solar was now
the cheapest form of electricity in the state – the
first time solar had officially out-competed natural
gas in the US without incentives.50
Its corporate reports now read – at least on the surface
– like cheerleading for the Energiewende. EnBW’s 2013
financial report, for example, states: “We will safeguard
our role as one of Germany’s largest supply companies
while actively promoting the Energiewende… We are
in the process of redesigning our energy fleet and grids
to become the ‘engine room of the Energiewende’”.46
Though the US has far fewer nationwide regulations
for combating climate change than European
countries, it’s still developed support mechanisms
for renewables at state level – such as state targets
for solar, tax breaks for renewable companies, and
‘net metering’, the practice of allowing customers to
sell excess renewable energy generated back to the
utility (though usually only for market rates).
Part of this has been due to the leadership of
EnBW’s new CEO, Frank Mastiaux, who envangelises:
“The Energiewende is irreversible. There is no time to
lose… The Energiewende is causing the value chain
to shift, away from large conventional power plants
towards local power generation and a smart world
at home”.47 Elsewhere, Mastiaux has stated: “We
have to rethink what is our role, and our place in the
energy sector.”48 Whether this becomes more than
mere words, only time will tell.
The US
US utilities have not yet had to cope with the same
level of market penetration from renewables as
their German counterparts. Even so, in May 2014,
Barclays Bank dramatically downgraded the credit
ratings of the entire US utility sector, asserting: “We
believe that a confluence of declining cost trends in
distributed solar photovoltaic power generation and
residential-scale power storage is likely to disrupt the
status quo.”49 That’s less surprising when you look
44 EnBW factbook 2013, https://www.enbw.com/media/
downloadcenter-konzern/factbook/enbw-factbook-2013.pdf
45 The Economist, ‘How to lose half a trillion dollars’, October 2013,
http://www.economist.com/news/briefing/21587782-europeselectricity-providers-face-existential-threat-how-lose-half-trillioneuros
46 EnBW, Report 2013, http://report2013.enbw.com/fileadmin/
ONGB13/Downloadcenter/EN/EnBW-Report-2013-Complete.pdf
47 EnBW, ‘Turning Point’ magazine, 2013, http://report2013.enbw.
com/fileadmin/ONGB13/Downloadcenter/EN/EnBW-Report-2013Magazine-TurningPoint.pdf
48 The Economist, ‘How to lose half a trillion dollars’, October 2013,
http://www.economist.com/news/briefing/21587782-europeselectricity-providers-face-existential-threat-how-lose-half-trillioneuros
49 Elias Hinckley, ‘Barclays Just Threw Gasoline on the Fire that
is the Battle Between Utilities and the Solar Industry’, Energy
Trends Insider, 28th May 2014, http://www.energytrendsinsider.
com/2014/05/28/barclays-just-threw-gasoline-on-the-fire-that-isthe-battle-between-utilities-and-the-solar-industry/
14
In response, many of the older energy firms have
lashed out, funding lobbying groups to oppose
legal supports for solar, and making common cause
with names that will ring bells for anyone familiar
with American climate sceptic organisations. The
notorious Koch Brothers, low-tax campaigner Grover
Norquist, and a variety of large utilities have all
recently begun campaigning against state targets
for solar and net metering.51 The Energy & Policy
Institute has documented in detail this onslaught,
revealing how fossil fuel interests are attacking
the development of disruptive renewables through
numerous front groups.52
The Edison Electric Institute (EEI), the trade
association of electric utilities, released a report
in January 2013, Disruptive Challenges, which
warned its clients: “Today, a variety of disruptive
technologies are emerging that may compete with
utility-provided services. Such technologies include
solar photovoltaics (PV), battery storage, fuel cells,
geothermal energy systems, wind, micro turbines,
and electric vehicle (EV) enhanced storage. As
the cost curve for these technologies improves,
they could directly threaten the centralized utility
model… a scenario where efficient energy storage
combined with distributed generation could create
50 Zachary Shahan, ‘Judge Rules Solar Power A Better Deal For
Minnesota Than Natural Gas’, Clean Technica, 2nd January 2014,
http://cleantechnica.com/2014/01/02/judge-rules-solar-powerbetter-deal-minnesota-natural-gas/
51 Evan Halper, ‘Koch brothers, big utilities attack solar, green
energy policies’, LA Times, 19th April 2014, http://touch.latimes.
com/#section/-1/article/p2p-79962747/
52 Gabe Elsner, ‘Attacks on Renewable Energy Policy by Fossil Fuel
Interests 2013-2014’, http://www.energyandpolicy.org/renewableenergy-state-policy-attacks-report
The Big Six On The Run
the ultimate risk to grid viability.”53 The report
even draws comparisons between the plight of the
electric utilities, and the decline of past corporate
behemoths like Kodak, AT&T and the US Postal
Service.
But EEI has not been content simply to chart the
challenges it sees facing the utilities; it has also
filed comments with the Arizona state docket
arguing, amongst other things, that “DG [Distributed
Generation] systems should not be compensated
directly for reducing market prices”, but instead
should be charged for grid services.54 It’s all a far
cry, sadly, from the words of Thomas Edison, who
once mused: “I’d put my money on the sun and solar
energy. What a source of power! I hope we don’t
have to wait until oil and coal run out before we
tackle that.”55
installed56 – the old utility Pacific Gas & Electric
(PG&E) have taken the issue of net metering to
the agency that sets the state’s power prices, the
California Public Utilities Commission. PG&E wants
solar producers to get smaller payments or to be
charged a monthly fee as payment for grid services
– despite the fact that having rooftop solar installed
means that households don’t need the grid all the
time. Edward Fenster, co-founder of San Francisco
solar company Sunrun, comments that “the utility
anxiety is palpable”, since “PG&E has never had
to compete in 140 years”.57 As of March 2014,
Californian legislators have extended net metering
for existing solar producers, but prospective solar
installers will have to get cracking before 2017 if
they are to take similar advantage of net metering.58
The UK
In California, one of the sunniest states of all –
and by far and away the one with the most solar
Like in Germany and the US, the UK’s electricity
markets and major players are being disrupted by
the transition to low-carbon energy. But so far, the
picture here is more nuanced. The UK’s Big Six are
53 Edison Electric Institute, ‘Disruptive Challenges: Financial
Implications and Strategic Responses to a Changing Retial Electric
Business’, January 2013, http://www.eei.org/ourissues/finance/
Documents/disruptivechallenges.pdf
56 Solar Energy Industries Association, ‘2013 Top 10 Solar States’,
http://www.seia.org/research-resources/2013-top-10-solar-states
54 Adam Browning, ‘Edison Electric Institute Really Does Not
Want You To Go Solar’, GreenTechSolar, Feb 2014, http://www.
greentechmedia.com/articles/read/In-Rare-Public-Filing-EdisonInstitute-Downplays-Value-of-Solar-For-Arizon
55 Thomas Edison, 1931, as quoted in Uncommon Friends : Life with
Thomas Edison, Henry Ford, Harvey Firestone, Alexis Carrel &
Charles Lindbergh (1987) by James Newton, p. 31.
The Big Six On The Run » Houses with solar
panels in a village
in Germany.
57 Lauren Sommer, ‘Could Rooftop Solar Kill Utilities? California
Grapples with Solar’s Success’, KQED Science, 17th May 2013,
http://blogs.kqed.org/science/audio/could-rooftop-solar-killutilities-california-grapples-with-solars-success-2/
58 David R. Baker, ‘Solar “net metering” extended by California
regulators’, SFGate, 27th March 2014, http://blog.sfgate.com/
energy/2014/03/27/california-regulators-to-extend-solar-netmetering/
15
not being uniformly affected by the renewables
revolution – partly because of forward-pricing
agreements, partly because most of them are large
multinationals with their asset portfolios spread
across different countries. As the Economist has
noted (Oct 2013): “Utilities are not powerless in the
face of these problems, and they are not all affected
equally. The big six British utilities, for example, have
been sheltered by their long-term electricity-price
agreement with the regulator, though their profit
margins remain thin.”
Even so, renewables are beginning to disrupt the
UK electricity market. As EnergyUK, Britain’s trade
lobbyists for energy utilities, outline in a Nov 2013
briefing,59 payments for renewables (the Renewables
Obligation, Contracts for Difference and Feed-In
Tariffs) are expected to bring down wholesale prices,
whilst raising retail prices. Meanwhile, emissions
controls and carbon taxes placed on fossil fuel plant
(such as the Industrial Emissions Directive, Emissions
Performance Standard, and Carbon Floor Price) will
push wholesale prices up. EnergyUK conclude that
the most significant recent development in the UK
energy market is that “Intermittent generation will
impact the profitability of conventional generation”.
Indeed, it appears that some of the Big Six are
having to rethink their business models. In May
2014, Centrica issued a profit warning for the year
ahead and announced that it would sell off “three
power plants at Langage, Killingholme and Humber,
worth around £500 million… and accounting for the
majority of the utility’s conventional generation
capacity at 2.7 gigawatts.” Instead, “The company
plans to focus on small-scale gas plants that can
operate more flexibly to respond to sudden changes
in supply and demand caused by renewable energy
generation.”60
NPower’s External Affairs Director Guy Johnson
stated: “The reality is that there are some power
stations, for example in Germany, that are being
mothballed. That has not yet happened in the UK,
at least as far as our portfolio is concerned, but
the fact remains that with Pembroke [gas power
station]... we have concerns about its profitability
into 2014.”61 Pembroke CCGT was only completed in
2012, at a cost of £800 million. Some Big Six CEOs
have seen the writing on the wall: on August 2014,
Volker Beckers, former RWE Npower chief executive,
gave a revealing interview in which he declared that
“the centralised, fossil fuel system will soon reach
its end”.62
RWE Npower, whose parent company in Germany
has been so challenged by the growth of solar, has
started to voice concerns about its British assets
too. In an oral evidence session before the Energy
and Climate Change Committee in October 2013,
In response to such challenges to their assets and
profit margins, the Big Six have begun to warn of
the dire consequences if Britain attempts its own
Energiewende. “Other European markets such as
Germany have provided examples of the unintended
consequences policies can have on overall market
operation when they are not carefully designed
with a system view”, argue EnergyUK, in a none-toosubtle dig at Germany’s massive expansion of solar
and wind. Instead, the utilities have lobbied hard for
the recent Energy Act to create a ‘capacity market’,
59 Energy UK, ‘Policy interactions in the UK electricity market: A guide
to the impacts of policies’, November 2013, p.28, http://www.
energy-uk.org.uk/publication.html?task=file.download&id=3258
61 Guy Johnson, RWE NPower, oral evidence to the Energy and
Climate Change Select Committee inquiry into energy prices,
October 2013, http://data.parliament.uk/writtenevidence/
WrittenEvidence.svc/EvidencePdf/3242
60 Karolin Schaps, ‘Centrica warns on 2014 earnings, puts
UK gas plants up for sale’, Reuters, 8th May 2014, http://
uk.reuters.com/article/2014/05/08/uk-centrica-outlookidUKKBN0DO0E320140508
62 Hugh Bowring, ‘Fossil fuel energy system “has reached its natural
end”, says ex-npower boss’, Forum for the Future blog, 29th August
2014, http://www.forumforthefuture.org/blog/fossil-fuel-energysystem-has-reached-its-natural-end-says-ex-npower-boss
16
» Industrial scale
photovoltaic solar field
installation, Rosamond,
Kern County, California.
The Big Six On The Run
which pays suppliers to bring forward mothballed
or new thermal plant – mostly gas power stations.
The ‘expert group’ that drew up the designs for the
capacity market comprised mostly members of
the Big Six – representatives from Centrica, SSE,
Scottish Power, RWE, plus Drax, who between them
own 17GW of gas plant. The group contained just
one representative from a firm focused on ways of
balancing variable supply and demand that doesn’t
involve back-up fossil fuel power stations.
Decentralised renewables are not yet so wellestablished in the UK as in Germany; Britain has
just reached around 5GW of solar PV, compared
to 35GW in Germany. Less than 1% of Britain’s
renewables are owned by households and
communities, against 50% in Germany. Yet the UK
has seen massive growth in solar in recent years,
going from a base of essentially zero domestic
solar installations in 2010 to half a million by the
start of 2014. That growth has been driven by the
plummeting cost of solar PV and the introduction of
the UK’s first Feed-In Tariff in 2010.
When discussions about introducing a British FIT
began, the Big Six opposed it. Centrica, for example,
stated during a Parliamentary inquiry in 2008:
“The lack of [renewables] development in the UK
is often compared to a high take-up in Germany
where a system of feed in tariffs is seen to have
been effective in bringing on significant renewable
investment against a failing RO in the UK… We do
not believe that a feed in tariff would have been
The Big Six On The Run any more effective than the RO in bringing forward
renewable capacity in the UK.”63 If nothing else,
such statements confirm the short-sightedness of
the big energy firms, stuck in their old financing and
development models.
Similar concerns are now being raised as the focus
turns from domestic renewables to community-scale
energy projects. In their response to a consultation
on the government’s Community Energy Strategy,
Energy UK accepted that “community energy
projects are well placed to bring real benefits to
individuals and communities”, but warned that
“The Government should not look to differentiate
between community and commercial projects.
Both provide significant social benefit”. They raised
concerns about increasing the scale of the FIT to
10MW to allow larger-scale community projects,
arguing: “We believe that larger projects are better
placed to be delivered by companies that have the
expertise, financial backing and ability to hedge
risk”.64 In other words, leave the big, important stuff
to the Big Six. It’s an attitude that may soon come
back to bite them.
» Above left: Wind
turbines, Yorkshire, UK.
» Above: A typical
secondary school fitted
with a good-sized solar
PV system could save up
to £8,000 a year.
63 Memorandum by Centrica to the Economic Affairs Committee
inquiry into The Economics of Renewable Energy, 2008: http://
www.publications.parliament.uk/pa/ld200708/ldselect/
ldeconaf/195/8061703.htm
64 Energy UK, ‘Energy UK response to DECC’s Community Energy
Call for Evidence’, 8th August 2013, http://www.energy-uk.org.uk/
publication.html?task=file.download&id=2790
17
Conclusion: The Big Six on the Run
The Big Six – and large energy firms worldwide –
can see which way the wind is blowing. They have
two choices – try to accommodate the renewable
revolution, or fight to maintain their existing profits
and business model. Some utilities, such as the
German energy giants, have had their profits so
badly affected that they now have little choice but
to adapt. Others, such as some of the US utilities –
who perhaps are more accustomed to lobbying to
get their way by any means – have taken to fighting
change, allying themselves with climate sceptics and
an array of think tanks and front groups.
But any politicians or companies that backed such
moves would be putting themselves on the wrong
side of history. Moreover, they would be setting
themselves against the interests of the British public
– by denying more people a share in ownership of
the energy system and rejecting the benefits of a
fuel-free, carbon-free energy source.
It’s up to us – all of us – to stop them. The rise and
rise of solar energy has got the Big Six on the run.
Let’s give them a run for their money.
In the UK, the Big Six are already seeing their profits
hit by Britain’s gradual embrace of renewables, but
have fought back to safeguard some of their existing
assets through the creation of a capacity market.
Yet the capacity market alone cannot prevent the
rise and rise of solar and wind, as prices continue
to fall. A further slashing of Feed-In Tariff rates for
solar, or an end to all onshore wind subsidies (as
the Conservative Party has suggested), may yet
cause the renewables revolution to stutter in the UK.
18
The Big Six On The Run
Recommendations
It’s inevitable that renewables will get cheaper, their
deployment more widespread, and their ownership
more diverse. Central and local government needs
to grease the wheels of this transition, rather than
throw obstacles in the way. To speed the renewables
revolution, here are some recommendations:
nStop creating uncertainty for the burgeoning clean
For central government:
nBring
nDitch
the Big Six for the Big Sixty Million. Chart a
course for Britain’s transition to mass ownership of
renewable energy, a clean energy system in which
everyone has a stake.
nStop
sheltering the old incumbents. Open up
the electricity market by creating a scaled-up
10MW Feed-In Tariff for small and medium-scale
installations.
nUnlock
barriers so that Britain installs its solar
potential: at least 20 GW of solar by 2020, rising
to around 60 GW by 2030.
energy economy with constant reviews of the FeedIn Tariff. Prices are coming down fast, but cutting
support levels even faster is a false economy.
Investing properly in innovative technology is the
best way to bring down costs later.
in ‘green’ ISAs that enable everyday savers
to become active investors in, and financial
beneficiaries of, tomorrow’s clean infrastructure –
including community renewables.
nDon’t
let the grid operators get in the way.
Guarantee grid connection for renewables, so that
new solar and wind can be quickly ‘wired up’.
nChampion
the right of communities to generate
and supply their own clean electricity.
nAllow
public bodies like schools the chance to
borrow to cover the upfront costs of installing
solar power.
For local authorities:
nUsher
in a new age of municipal energy, with
councils becoming serious investors in renewable
energy and suppliers of clean electricity to residents.
nEnsure
all public buildings – from schools to
council offices – install solar power or other
renewable energy technologies.
For everyone, right now:
nHelp
crowdfund solar on schools by donating
to Friends of the Earth’s Run on Sun schools
competition: www.foe.co.uk/page/run-on-sundonate
nInvest
some savings in a community renewables
project.
nDemand
the government make mass ownership
of renewables the norm – help us campaign for
the changes recommended above.
For the Big Six:
nEvolve
The Big Six On The Run or die!
19
Information about Friends of the Earth’s
Run on Sun campaign can be found at
www.foe.co.uk/runonsun
run on
sun
Friends of the Earth Limited © Friends of the Earth, November 2014
20
The Big Six On The Run