‘Why there is a place for co-ops in the UK energy system’

Opinion piece from Alex Bird as debate continues over the future of the country’s energy supply

Sadly, I wasn’t able to get to Co-operative Ways Forward, but I was impressed by the report of Chris Saltmarsh (co-founder of Labour for a Green New Deal) telling everyone that co-ops have no place in the production of electricity, which must be nationalised.

As an ex-power station manager from when electricity was nationalised, I have to say his views on nationalisation are based on an inaccurate preconception. While most of the nationalised industries, such as the National Coal Board, British Steel, British Gas, and British Leyland were very centralised and top-down, the nationalised electricity industry was anything but, and its structure could easily be amended to incorporate co-operatives.

Before WWII, electricity was partly in private hands, but much was also in local authority ownership, and so most power stations were small and local. Nationalisation in 1946/47 brought them all together, and enabled the construction of the National Grid, a network of very high voltage lines which could transmit power around the country. This enabled economies of scale and improved security of supply, which was always paramount, and the system was designed to be able to withstand acts of god, terrorism, and war.

The business model was designed by Lord Walter Citrine who had started out as an electrician, rose through the union movement to be general secretary of the TUC from 1926 to 1946, and became the first chair of the Central Electricity Board (CEB) in 1947. He is better known for his guide to chairing meetings, but the business model for electricity was really his finest work. There were different models in Scotland and Northern Ireland, but across England and Wales he went for a multi-level structure. Sales to the public were through seven area boards, who bought electricity from the CEB to sell on to the public, operated the distribution system, and ran a network of shops selling appliances, giving advice, and providing a house wiring service.

All the power stations and the National Grid were owned and developed centrally, but each power station was locally managed and operated as a cost centre within the main accounts. They had no base income and were only paid for the electricity they generated. Each had an efficiency department to minimise operating costs, but also had to calculate the cost of generation, updated each week, which determined where they would sit in the running order. The Grid Control Centre aimed to operate at the lowest possible cost while maintaining security of supply, calling on the cheapest generators at the top of the running order first. This acted as an internal market and determined how much electricity each generator would be asked to provide. 

Everyone knew if they didn’t operate efficiently, they would fall down the list, and less generation would lead to more wasted energy and a bigger burden of overhead costs. It was a slope that could only lead to eventual closure and redundancy if costs were allowed to rise, and the result was that every power station developed a powerful sense of identity and team spirit.

A recreation of this structure, with co-ops running the power stations, and the National Grid in state ownership, would give the central direction and long-term strategy we so desperately need alongside worker ownership. Additionally, the area boards, which had a monopoly of supply, could be recreated as multi-stakeholder or consumer co-ops on the US model. Together, this would give all the advantages of state ownership without the crippling cost to the state of purchasing all the assets, and the co-ops could raise the necessary funds through the sale of bonds and/or shares to the public and the money markets.

This approach worked well for the non-profit mutual that owns Welsh Water which, like the electricity industry, has a valuable asset base, on the back of which it was able to raise £1.9bn in bonds in 2001. Electricity co-ops should be able to raise large amounts with relative ease, particularly if the issue was co-ordinated and supported by government.

With thanks to thenews.coop

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