A new ResPublica publication, launched today, reveals that businesses looking to become energy suppliers face major barriers to entry in the UK. 12 new businesses have entered into the domestic supply market since 2011, taking the total number to 25, but the six largest energy companies still capture 93.5% of the market share.

In stark contrast, Germany is home to 1100 electricity suppliers, and the four largest energy businesses hold only 44% of the retail market. Households in Germany can choose from an average of 72 energy suppliers, most of which are established locally.

The ResPublica Essay, ‘Creating Local Energy Economies: Lessons from Germany’, which is supported by the Winston Churchill Memorial Trust and Co-operative Energy, argues that the UK can deliver on greater transparency, lower household bills and genuine competition if communities, local authorities, housing associations and small businesses could enter into the supply market and sell their energy locally. At present, there are no local suppliers in the UK.

In Germany, the story is different. From 2010 to 2012, 90 communities and municipalities had entered into the supply market and 190 communities had bid to run their local electricity distribution network. A growing number of local groups are appealing to private energy companies to put their local utility back into public hands.

There is an evident movement in Germany, not toward re-nationalisation or even re-municipalisation, but toward a much more constructive, locally-governed infrastructure, which can enable community participation and ensure transparency, efficiency and the betterment of their neighbourhoods. This is a movement that reaches far beyond the community ownership of generation and municipal governance of public services toward a much more holistic and embedded approach to the very composition of the energy market.

The ResPublica Essay calls on Government to set up a ‘Help to Supply’ scheme, which would open the floodgates to a spectrum of new suppliers. It also urges Government to radically simplify the requirements needed to set up as a new energy supplier, and recommends that local supply licences should be made possible. The publication also sets out opportunities to trade power locally and to facilitate the local governance of energy.

Lord Smith, Chairman of the Environment Agency, says:

This essay shows very clearly how Germany has succeeded – where we have so far failed – in creating a bottom-up revolution in energy supply and distribution. Property-level renewable installation, community energy companies, small-scale local schemes: these have been the way forward for German electricity production, and it’s been a big success. We could learn some serious lessons here.

Rt Hon Greg Barker MP, former Minister for Energy and Climate Change, says:

To achieve the competitive, liquid and innovative energy market we need in the UK, it is crucial that we support new entrants, promote decentralised ways of working and harness community-based initiatives.

This essay rightly affirms that we need to be more ambitious in considering what energy markets in the UK could look like. I believe that we need to deliver power to the people and facilitate the ‘big 60,000: the recommendations from this ResPublica essay deserve serious consideration.

Tom Greatrex MP, Labour’s Shadow Energy Minister, says:

The obligation to decarbonise is also an opportunity to change how we generate and consume our power. We can put individuals and communities at the centre of that process, empowering them to deliver cleaner, greener energy. This paper is a welcome contribution to that discussion.

Ramsay Dunning, General Manager at Co-operative Energy, says:

The amazing progress of citizen-owned energy in Germany shows what is possible when an enabling policy environment is provided by a supportive Government over a number of years. Here in the UK, new entrants such as Co-operative Energy are emerging, but we and others could do so much more if a stable policy framework was in place and Government spoke with one supportive voice.

For more information on this project, and ResPublica’s wider policy work, please contact Head of Research, Caroline Julian, at caroline.julian@respublica.org.uk.