Mayor bids to boost market for London’s small energy producers

14 March 2013

In a ground-breaking new move to secure London’s future energy supply and boost investment and growth in London’s low carbon economy, the Mayor Boris Johnson is bidding to enable the capital’s small electricity producers to sell power to the market at a better rate.

The Mayor, who has a target to produce 25 per cent of London’s energy from local sources by 2025, is the first authority in the country to apply to Ofgem for a new type of electricity supply licence. Initially it will allow the Greater London Authority to buy excess electricity produced by London’s boroughs and public bodies before selling it on, at cost price, to other public sector organisations, such as Transport for London, the Met Police and NHS hospitals. If the scheme proves successful the Mayor plans to extend it to include private sector energy producers in London as well.

Increasing revenues for smaller generators will improve the viability of local energy projects in London and spark an investment boom in the capital’s low carbon energy infrastructure. In the short term, it could help bring in more than £300 million worth of investment for 22 heat and power projects already in the pipeline. In the longer term, it could help generate over £8 billion of investment and around 850 jobs a year until 2025.

Efficient delivery of electricity supplies plays a vital part in London’s ability to attract investment from developers and new businesses, and therefore helps generate economic growth. Demand for electricity in the capital is expected to grow by up to four per cent a year over the next decade so investment in London's power infrastructure is crucial to help boost jobs and growth and protect the capital's economy.

Twelve boroughs already have schemes which could benefit. Together they are capable of generating around 76 megawatts of electricity – that’s equivalent to the power used by about 76,000 homes. These types of schemes primarily heat local buildings through the electricity generating process. For example, Islington's Bunhill Heat and Power project uses a gas engine to warm hundreds of homes and local swimming baths. Westminster’s Pimlico District Heating Undertaking heats thousands of homes, commercial premises and three schools through two gas engines.

The Mayor of London, Boris Johnson, said: “We need to do everything we can to develop a more secure, cost-effective and sustainable energy supply for the capital. By pouring more investment into locally sourced energy supplies and reducing carbon emissions we will not only save money for Londoners but drive innovation, jobs and growth in this burgeoning sector.”

The Mayor is also investigating opportunities for using smart technologies to help manage peak demands on London’s power grid and make London’s energy more resilient in the future. Intelligent energy systems can help deliver secure, affordable, low carbon energies and will help meet his target to cut carbon emissions by 60 per cent by 2050.

The Mayor has taken a leading role in taking this new system of licencing forward and has been working with Ofgem and the Department of Energy and Climate Change since 2011 to develop it.

Secretary of State for Energy and Climate Change Edward Davey said: “This is a hugely encouraging development and I welcome the London Mayor’s announcement today and fully support councils such as Haringey with this project. Opening up our energy market to smaller companies is good news for competition and therefore good news for consumers. This is a welcome initiative that will make better use of energy produced locally and help Londoners get the best bang for their buck.”


Notes to editors

The Mayor has made an application to Ofgem for a new type of electricity supply licence, sometimes known as Licence Lite. This will enable the Greater London Authority to sell electricity produced by London boroughs and other public sector owners of systems producing heat and power locally (decentralised energy systems). The licence may be widened in the future to include private sector small energy producers as well.

The Mayor will offer London’s small electricity producers a better rate than they can obtain currently in the market. Better rates for small energy suppliers will stimulate investment and growth, leading to more small energy centres, and help to secure London’s energy future.

The Mayor has taken a leading role in developing this new system of licencing and has been working closely with Ofgem for the last 18 months to make the new licencing regime implementable.

The Mayor is working with Ofgem and the Department of Energy and Climate Change to bring this new route to market by early 2014.

An analysis of emerging smart technology opportunities, ‘Smart City – Intelligent Energy Integration for London’s decentralised energy projects’, which considers how an intelligent energy system might evolve in London in the period up to 2050 is available here

The Mayor’s planning rules are also driving investment in decentralised energy systems. The London Plan supports the development and promotion of decentralised energy and district heating networks as an important part of London’s energy infrastructure and these should be developed as a priority in borough local development frameworks (Policy 5.5 DECENTRALISED ENERGY NETWORKS). It also requires that all development proposals should assess the feasibility for incorporating of Combined Heat and Power systems and communal heating networks (Policy 5.6 DECENTRALISED ENERGY IN DEVELOPMENT PROPOSALS).