Mayor to become London’s smallest electricity supplier

25 April 2014

The Mayor, Boris Johnson, has taken the next step to becoming London’s smallest electricity supplier, allowing him to buy power from small generators at a better rate and sell it on to other public bodies, boosting the low carbon economy, and helping to secure London’s future energy supply.

London will be the first public authority in the country to receive a brand new type of ‘junior’ electricity licence, and the Mayor expects to be buying and selling power by early 2015. The ground-breaking move will permit him to offer the capital’s small electricity producers up to 30 per cent more for their excess energy than existing suppliers do, which he will then sell on to TfL, the Met and others at cost price.

The Mayor has now invited the electricity market to come forward with proposals to provide the additional services he needs to begin supply to as a ‘junior’ licensee. This includes the management and maintenance of the large scale systems involved in supplying electricity in London, and follows the Mayor’s initial application for the new licence in March 2013.

Improving the viability of local energy projects is expected to help unlock more than £300 million worth of investment for 22 new 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. The Mayor will initially buy from generators owned by London’s boroughs and public bodies. He will sell it on, at cost price, to other public sector organisations, such as Transport for London and the Met Police and if the scheme proves successful, plans to extend it to include private sector energy producers in London as well.

Twelve boroughs and waste authorities 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 as well as heat from the tube 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: “Nurturing a new crop of small, low carbon energy producers across the capital is the key to a more secure, cost-effective and sustainable energy supply for us all. Investing in locally sourced power will help keep Londoners’ fuel bills down and drive innovation, jobs and growth in this city’s burgeoning low carbon sector.”

The Mayor, who has a target to produce 25 per cent of London’s energy from local sources by 2025, has taken a leading role in taking this new system of licensing 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 Ed Davey said; “This is a significant development and I welcome that London will be the first public authority in the country to become a small electricity supplier. Opening up our energy market to smaller companies is good news for competition and therefore good news for consumers. This is part of my vision to help to meet the UK’s energy and climate change challenges, supporting a sustainable and secure energy system; reducing UK greenhouse gas emissions; and lowering consumer bills.”

The response of the larger, full licensees, to the current tendering process will be an indication of how willing they are to support new entrants and the creation of a wider, more diverse electricity market. 

Notes to editors

In March 2013, the Mayor 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. 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.

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