Written Statement - Response to energy company recommendation

The National Assembly for Wales’ Environment and Sustainability Committee produced a report at the end of the Fourth Assembly on a smart energy future for Wales. It recommended the government set up an umbrella, not-for-profit energy service company for Wales. In my response, I committed to explore the proposal. The report on the exploratory events Welsh Government held is now published and this statement sets out my response to the committee recommendation.

I do not believe a strong case has been made for establishing an umbrella supply company for Wales.

The recommendation was based in the desire to address a lack of choice of energy provider, as well as enabling local -uthorities and other organisations focused on providing local benefit to provide energy at reduced rates. The example of Dŵr Cymru is frequently quoted. In order to replicate this model, a similar body for energy would have needed to be established before the privatisation of the energy industry in the 1970s. However, a large number of energy providers now exist in a highly competitive market, including a number based in Wales and several who deliver on local social objectives.

A closer exploration of existing lower cost offers for those in fuel poverty show links with higher carbon generation. In my opinion, our approach to fuel poverty, which is to improve the energy performance of homes, provides a long-term solution supporting both our fuel poverty and decarbonisation aims.

The Welsh Government events explored the broad proposition of an energy service company, focusing on an energy supply company because of the requirement in the recommendation to be able to offer energy supply locally. For the majority of participants, the risks, challenges and tensions inherent in the government setting up and running a supply company heavily outweighed the potential benefits of doing so. Many felt government had an important trusted neutral voice, which could be lost if participating in the market. Those with experience of the industry felt an energy supply company operating in a commercial market would struggle to be profitable and generate the funds required to support the range of social outcomes identified in the recommendation. Across the 3 events, a clear consensus was reached that it was not the proper business of the Welsh Government to set up an energy supply company.

However, it was clear a supply company may be necessary as part of the delivery solution for a specific purpose. Some local authorities and housing associations are considering the need for a supply company in support of local heat networks, for example, where a competitive market does not exist. I hope the report will be helpful to them and I will ensure the report is brought to the attention of interested communities across Wales to further inform their thinking.

Whilst a supply company is not the solution to many of the challenges we face in energy, there are a number of areas where people clearly expect government to act. It was apparent, at the events, many people were unaware of the range and variety of existing Welsh Government activity. I set out my priorities and the actions I am taking to deliver them in my Oral Statement last December. I have also responded to a number of reports containing recommendations for action on energy, providing more detail on what we are doing across a range of topics to address the challenges people face in supporting delivery of these priorities. I intend to publish a report updating progress at the end of the year.

The clear and consistent direction set out last December, continuing the strategic direction set out in “Energy Wales – A Low Carbon Transition” will be further supported when I establish energy targets in September, following the event we held on 17 July.

We have recently held events involving people who use and deliver our energy support services for communities and the public sector, such as Local Energy and Green Growth Wales, to understand current and future needs. We will consider the implications of this report within the work we are doing on future service delivery.

The approach of involving people through topic specific events has proved popular and I intend to continue this approach to our work on energy, building a community of action in Wales on decarbonising energy and capturing benefits for its people. This will also help to identify and recognise the many areas where others are already active, as whilst it is for Welsh Government to lead, to set the direction and ambition for Wales, it is for all of us to deliver.

This statement is being issued during recess in order to keep members informed. Should members wish me to make a further statement or to answer questions on this when the Assembly returns, I would be happy to do so.