Proposal #6: A share in the profits of renewable energy

By Melanie Smallman

This article is an amended version of the one that first appeared here on July 30, 2009.

The one idea that Labour should consider for the new manifesto is, in my view, to ensure that communities are given a stake or dividend in large renewable energy developments.

In July, Ed Miliband and Lord Mandelson launched the Low Carbon Transition Plan. With hugely ambitious plans to generate 40% of our energy needs from renewable sources by 2020. The plan also introduces the idea of a community dividend in renewables, saying that the government will encourage developers of large-scale renewables to share the benefits of those developments. They now need to set this in stone, to ensure that renewable energy developers commit to sharing the benefits of their developments with local communities on a long-term basis.

The precedent for sharing the benefits of our collective energy resources was set a long time ago with North Sea Oil. Wind and wave energy is essentially the same – while the energy companies pay for the equipment, they are essentially harvesting a ‘free’ resource. Why shouldn’t ‘host’ communities be given a stake in these developments and a share in the profits?

As well as helping offset any local loss of amenity, such as views from the installation of a wind farm, sharing the profit of new renewable developments could be crucial in meeting our 40% renewable target by 2020. At the moment, local opposition is the biggest factor holding up the growth of renewables in the UK. Conservative councils in particular are guilty of blocking renewable developments – to such an extent that at the current rate of planning approval, it will take 35 years before we can build enough wind turbines to replace just one coal-fired power station. Would communities hold a different view of living by a wind farm if they were to get lower energy bills as a result?

Owning a stake in local energy generation is also likely to change the relationship between citizens and the energy they use, encouraging less wasteful behaviour – one of the keys to reducing our carbon emissions. At the moment, only 35% of the energy going into power generation ever reaches homes; the rest is wasted as heat during electricity generation and transmission through the National Grid. These in-built inefficiencies mean that regardless of the price of oil or how well insulated homes are, consumers ultimately are forced to pay for more energy than they actually use, as well as produce more carbon than necessary.

In the current energy market, as long as we are prepared to pay to keep our lights on, there’s little pressure on the energy companies to tackle these inefficiencies and invest in a modern system. But just as home owners make decisions about their homes for reasons which aren’t just financial, a community stake could also help change the role and perspective of energy companies – taking their long-term responsibilities for the energy infrastructure, their charging structures and their impact on the environment more seriously.

Finally, for Labour, a community dividend could have broad appeal across the party and be something we could unite behind. As renewable resources are geographically distributed in some of our poorest communities, a community dividend could play a significant role in redistributing wealth and helping tackle fuel poverty further. Handing ownership (of otherwise private utilities) back to citizens also speaks strongly of traditional Labour values while at the same time chiming with the need for modern community empowerment.

Most importantly of all, giving communities a stake in renewable energy generation could have a lasting impact on society and show very clearly how Labour is on your side.

Melanie Smallman is National Co-ordinator of SERA.