Energy Economics & the Leaky Bucket Syndrome
My latest blog is about the economics of our centralised energy system, and how it is quite simply a monetary "leaky bucket" for our country, regions, towns and communities.
The "leaky bucket" syndrome is a concept designed by the New Economics Foundation (NEF) to describe the way that in many economies money leaves without ever coming back as we spend it with organisations that then distribute the money to other economic centres i.e. other cities, regions or countries.
When we start to look at the "energy economy" we start to realise that it is one of the leakiest buckets around. However, the renewable energy revolution can help us to plug the holes if we are smart about how it is done.
Let's take an example. Where I live, in the south west of the UK, it is estimated that the annual spend on energy is £4 billion. Now most of that energy spend is spent with companies whose head offices are either based outside of Devon, in the UK or with parent companies that are based in other countries. Examples are EDF (French owned) & EON / RWE (German owned).
This significant money flow out of a region that is highly sensitive to economic fluctuations is interesting to use as an example. If we could retain even 10% of that money spend within the region the economic benefits could be large when taken with local multiplier effects - a multiplier of 3 would create £1.2 billion of additional value in the region.
The point is that we have an amazing opportunity to deliver energy security and greater economic benefits by delivering de-centralised renewable energy solutions. Local authorities and government need to understand that the economics of renewable energy are not just about the project IRR and carbon savings, but the little discussed reduction in economic outflows - plugging the leaks and ensuring more money can flow again locally.
To do this we need to ensure the widest ownership possible for renewable energy projects. Financial returns in the hands of the few will do something yet will not have as a large an effect as when distributed amongst the wider community. Hence, referencing some of my recent blogs we need to get LAs and communities working together and understanding this economic benefit that the Feed-in-Tariff has made more attractive.
Renewable and low carbon energy development will be a lot easier to sell to the wider community if we can understand and communicate this simple fact more effectively.
Happy to discuss more.
Fraser Durham
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