That’s the latest news from the London mayor’s office.
What may sound like a wacky scheme from a wacko politician actually has some grounding in reality however.
The intention is part of an initiative to increase London’s energy independence with the aim of producing 25% of the capital’s electricity from local sources by 2025.
Whilst that may sound like a new north south divide in prospect it isn’t anything so dramatic.
In effect, across any large city in the UK there will be significant amounts of embedded generation, or small-scale generators. It is these energy sources that the Mayor’s office intends to purchase and sell on to their own departments such as Tfl and the Met.
Boris said:
“Nurturing a new crop of small, low carbon energy producers across the capital is the key to a more secure, cost-effective and sustainable energy supply for us all. Investing in locally sourced power will help keep Londoners’ fuel bills down and drive innovation, jobs and growth in this city’s burgeoning low carbon sector”.
It is claimed that the Mayoral energy company, provisionally entitled Energy for London would pay a 30% premium to small-scale power generators compared to the current market.
Quite how or why that would be or need to be the case is unclear.
It has been suggested that this is because of the smaller quantities of power involved in transactions, however the logic here feels somewhat skewed. Larger volumes, traded in traditional shapes in a more liquid market will often be cheaper than unorthodox, low traded product however setting out to pay more regardless isn’t a shining example of commercial astuteness.
Whether this is part of a ‘stimulation’ package to encourage investment in small scale generation in the London area remains to be seen, as does the source of the inevitable subsidy required to pay these intentionally inflated costs.
Ultimately embedded generation already exists in significant quantities and a market readily trades this energy to spill it onto the grid. This is done so at a commercial price point, whilst it is true that some smaller generators lose out on gaining a comparative price for their energy generated, the intention to pay a premium for pre-existing generation, already traded in the market is questionable.
In the rush for hyperbole, Ed Davey, Secretary of State for Energy and Climate Change claimed it could help break the “stranglehold” of the Big 6 electricity suppliers.
Again quite how that would work given the focus is seemingly on premium priced energy traded and supplied in an internal market to mayoral departments remains to be seen.
Davey said:
“Opening up our energy market to smaller companies is good news for competition and therefore good news for consumers. This is part of my vision to help to meet the UK’s energy and climate change challenges, supporting a sustainable and secure energy system, reducing UK greenhouse gas emissions, and lowering consumer bills”.
Not wishing to disparage attempts to revitalise, refresh and refocus the energy market but though the goal is admirable, the commercial logic and the commercial reality of the exercise needs significantly more diligent consideration before this becomes a model to inspire others and deliver on its promises. Until that happens we’ll park this one as another Boris moment.