Global best practice
This strategy has been developed over more than two years and informed by support from global consultancieslxxxvii and individuals from companies with global perspective and presence, as well as organisations like BEIS, which has a national view; Climate KIC, with a European view; and the universities across the region, with global views. Energy Capital commissioned a short piece of work by Sustainability West Midlands to understand what other LEPs nationally were doing on energy. This has enabled a good sense of best practice nationally and internationally to be compiled.
Much of this work has already been collated and written up for the region as part of the King Commission Reportlxxxviii which provides an excellent overview and commentary. The following is a summary only. As mentioned in Section 5, the intention is to keep a strong sense of global perspective in everything we do in the region, and continuously to adapt and refine the strategy as we progress through delivery and take on board new ideas and experiences from elsewhere.
At the same time, we and constantly aspire to do better than our competitor economies worldwide and are comfortable providing leadership where we have distinctive contributions to make. So, we will seek to develop global best practice and positions of leadership ourselves.
UK examples
Cities which have made significant progress on energy include Bristol, Nottingham, Glasgow and London.
Bristol and Nottingham have set up retail energy companies. Bristol’s now has over 100,000 customers and Nottingham’s 50,000. Nottingham has recently expanded its offer to Leeds under a white label scheme20. Both have invested in energy project teams (numbering in 10s of staff) and have a reasonable pipeline of projects supported by funding from the EU and UK Research and Innovation (formerly Innovate UK).
Neither have yet managed to achieve the theoretical ideal of linking substantive funding streams from a successful retail energy company into local energy infrastructure investment. This has limited the scale of their achievements to modest savings on customer bills (of the order of 10%, or £130- £190 per household) and modest capital investment projects, of the order of £1-£10M21.
Such achievements are substantial in the context of austerity and the wider challenges facing the public sector, but nevertheless fall significantly short both of what Bristol and Nottingham themselves set as targets (Bristol estimates £1 billion of investment is needed in its energy system to meet its 2050 targets) and what the West Midlands is seeking to achieve through its local industrial strategy.
Nottingham is hosting an early UK pilot of the Energiespronglxxxix approach to large-scale housing retrofit, which is of interest to the West Midlands because of its significant fuel poverty challenges and interest in off-site manufacturing (modern methods of construction). Energiesprong was introduced to the UK through the West Midlands’ Sustainable Housing Action Partnership and has been strongly supported from the West Midlands. The Energiesprong board is chaired by Accord Housing from West Bromwich and off-site manufacturing carried out in Walsall. This is already a good example of best practice travelling from the Netherlands to the UK via the West Midlands, as well as ongoing knowledge sharing.
Glasgow has made similar progress to Bristol and Nottingham with a retail energy companyxc, led by the social housing sector (which is helpful in providing access to a semi-captive customer base, thus reducing risk) while London has made useful progress in constructively challenging OFGEM around regulations which inhibit local authorities supporting infrastructure investment ahead of demandxci.
International examples
International examples of progress and innovation in regional energy systems were recently comprehensively reviewed by the West Midlands Regional Energy Policy Commissionxcii. Copenhagen, Munich, New York and South Australia are mentioned as regions which have benefitted substantially from locally-controlled energy investment, but the point is made that in all these cases the municipalities have far greater statutory powers and responsibilities than their UK counterparts.
Copenhagen has a history of local investment in integrated energy infrastructure suited to its needs going back for at least a century. A city region with a population of just under 2 million, its local authority recently issued a bond of EUR500M solely to finance regional energy projects.
Munich is comparable to the West Midlands in terms of population with an urban core home to 1.5 million people and a wider regional population of 2.65 million people. Interestingly, Munich operates its transport and energy systems through a single integrated municipal utility, Stadtwerke München, running a liberalised local energy (and transport) system and market on an entirely commercial basis and securing revenues of EUR6.5 billion in 2016xciii. Munich has already secured and invested over EUR3 billion on its local energy system and plans to raise a further EUR3-4 billion shortly.
As the Regional Energy Policy Commission report notes, what all these examples show is the power of local action to accelerate clean energy deployment and innovation, and to outstrip national targets. Munich is a good example (with its similar industrial heritage to the West Midlands) and is currently one of the fastest growing city regions in Germany.