Date of release: Thursday, April 14, 2016

Public energy would pay for itself in ten years: New reportMoving to a publicly owned energy system in the UK would pay for itself in ten years, according to a report published today (Thursday 14 April) by a University of Greenwich academic.

Professor David Hall, of the Public Services International Research Unit (PSIRU), part of the university's Business School, claims that savings of £3.2 billion per year would be possible because of the lower cost of borrowing in the public sector, and an end to extraction of dividends by shareholders.

He says: "The paper takes a hard look at the costs and benefits of public ownership of the energy sector, and the practical issues of how to get there – what needs to be bought and what doesn't, and how transparent local ownership can work. The benefits are much greater than usually imagined, and the costs are much lower than previously assumed."

The research challenges a previous assertion by stockbroking firm Jefferies that the cost could be as high as £185 billion. It estimates that the cost of compensating shareholders would cost between £24 billion and £36.6 billion.

The report proposes a new model of public ownership based on a combination of national, regional and local public ownership. The model would encourage renewable energy generation by local authority providers, co-operatives and community groups. There would be a public purchase of some generating capacity, the National Grid and energy distribution.

The Big Six energy supply companies, who currently have 95 per cent of the supply market, would not be bought (as Jefferies assumed). Instead, new local public sector companies would be created to compete with the Big Six and supply consumers. In Germany, such companies have captured up to 50 per cent of the market.

All the proposals are designed to be practical under existing EU law.

Green MP Caroline Lucas supports the research, saying: "This report backs up what the majority of British people already think: a public energy system would be better for everyone. A publicly owned system would benefit from the low cost of borrowing, and – with no shareholders to pay – bills could be kept lower, permanently.

"The most exciting part of this proposal is the potential for decentralising the energy system and putting power generation into the hands of local communities. The era of privatised and centralised energy must now come to an end and a new transparent, accountable and affordable alternative must emerge."

Cat Hobbs, Director of We Own It, the organisation which launched the report, adds: "This report makes our choice very clear – keep energy profits and control in the hands of shareholders or follow the example of countries like Germany and provide local, public, accountable, cheaper, greener energy. Energy run for people not profit is not only possible, it's a smart investment. The model works for local communities, delivering lower prices and more renewables. Privatised energy has failed - we hope this report kickstarts a debate about creating a better system."

Under the new model, after ten years, the ongoing savings from public ownership could be converted into price cuts of 10 per cent, or reinvested in renewables. The refinancing of private debt would mean further savings over time of £0.7 billion a year – equivalent to a further price cut for households of £25 a year.

The report, Public ownership of the UK energy system - benefits, costs and processes, is published on the PSIRU website at http://www.psiru.org/

Story by Public Relations