Utility Week

8 | 30TH AUGUST - 5TH SEPTEMBER 2019 | UTILITY WEEK Interview "It's fine as long as they remain middle class trinkets, but if the poor get to benefit, it's game over." By contrast, when on a recent trip to Germany looking at community energy schemes, he recalls householders in the town of Feldheim telling members of Labour's shadow cabinet how they paid half as much per kilowatt-hour for their electricity as their fellow citizens in Berlin. "Whole communities saw the shi to renewables as a way of saving money," he says. And there was a better option for controlling the costs of the scheme than the cash-limited budgets introduced by Osborne when he became chancellor in 2010. The unabashed le winger, who still writes for the ex-Communist Morning Star newspaper, points to the system dreamt up by middle of the road Germany for reg- ulating the delivery of small-scale renewable subsidies. The Germans got university academics to monitor their version of the system so that the levels of support for installations could be adjusted in line with improve- ments in energy efficiency. Decentralised energy The widespread adoption of small-scale renewables has also eased pressure on the German grid, he says. "In terms of physics, the electrons go to the nearest point of use so it makes sense. It allows electricity to come in at much lower levels, so you are not over-taxing either the distribution or transmission networks," he says. This is where Simpson's thinking on the decentrali- sation of energy ties most directly into Labour's broader enthusiasm for restoring public ownership over the util- ity sector. Policymakers should learn lessons from how the Vic- torian municipalities, which developed the first wave of gas and electricity companies in the 19th century, did it. "The profits earned from power effectively paid for much of the social infrastructure, like libraries and swimming pools, that was built up during that era," he says. But to achieve this kind of shi will mean breaking the hold the big energy companies have on government policy, Simpson believes. "We need to replicate [the Victorian system] in the age of clean energy, and to do that you have to some- how break the grip of the energy cartel in the UK that has completely dominated UK energy thinking," he says. And he points to Denmark as a model of a well-run energy system in common ownership. The Scandinavian country rethought its energy policy a er it was "pretty much pole-axed" by the oil crisis of the early 1970s, Simpson says. "The decision on a cross- party basis was to treat energy as a service, not as a mar- ket, so it is illegal to provide energy for profit." The state owns the grid, and the three biggest cities run their own municipal energy companies with the rest of the country covered by local energy co-ops involving different combinations of communities, businesses and local authorities. These companies can cover their maintenance and investment costs and supply is delivered on an inte- grated heat and power basis that is "much more cohesive and joined up" than the UK's, he argues. By contrast, UK policy is "driven by short-term poli- tics", Simpson says: "The whole of the energy sector has scared politicians, whose long-term vision is the next election, into thinking they are not going to get re-elected if there are blackouts in their constituencies." This lack of long-term thinking is reflected in the government's willingness to carry forward past over-performance on cutting emissions to help meet its future carbon budgets. Observing that one of the reasons for this better-than-anticipated performance was the recession of the late noughties, he says: "The emis- sions surpluses only exists because of the crash, so it's quite perverse to claim it as part of a success and carry it forward." This criticism of a lack of long-term thinking extends to the energy regulator. "Ofgem has been one of the mechanisms delivering and maintaining this insecurity because its remit has been focused on short-term price competitiveness. "They simply don't get it, or else they are prey to a notion of short-term market competitiveness that is bere of a long-term vision." Simpson is one of those tasked by McDonnell with getting the Treasury, which has traditionally been focused on economic growth at the expense of all other considerations, to address sustainability. He has his work cut out, judging by the rearguard action mounted during recent weeks by Whitehall's most powerful department to the idea of adopting a net zero emissions target by 2050. "There's no doubt there are good minds inside the Treasury who understand that climate change is coming over the hill at a rate that we are singularly ill-prepared to deal with," he says, arguing that the Treasury's entire process for appraising investment will have to change in order to address the issues. As a model of the kind of policy changes required, Simpson once again points to Germany, where the Bun- destag is currently legislating on climate action. "This puts their financial minister at the centre of a process that both sets national annual carbon budgets and cuts the carbon cake by sectors," he says. Applying this approach to the UK would see the Treas- ury setting central targets and using national infrastruc- ture investment to help localities deliver their allocated carbon budgets. Simpson also counters arguments about the cost of action to tackle climate change by pointing out that the cost of not dealing with the problem will be even greater. He says: "As [ex-US president Franklyn D] Roosevelt and the Labour 1945 government demonstrated, the next generation can live with debts; death tends to be more final. "The question is what debt is for. Investment and borrowing is not now about propping up banks but propping up an economic system that will provide the generations that follow with something to work with. This is why Hammond's response as chancellor shows that he didn't get the scale of the crisis we face." He sees signs of hope, however, in the pressure that politicians are now under from outside groups such as Extinction Rebellion. "They are forcing politicians to recognise that this is something hitting the fan now. Political extinction is what they are scared about and they have every right to be." He concludes: "There is going to have to be the sea change in thinking. Whichever political party you are in, the game is up." "In the UK we seem to be caught up in knee-jerk solutions that try to throw more lifelines to yesterday's energy sector than tomorrow's."

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