Public electricity suppliers, a new tool for energy change
Faced with the current situation of soaring energy prices, cooperative and public electricity suppliers can contribute enormously to the energy transition to bring about a sustainable, transparent and just model. Non-profit, they encourage tools to consume less and better, through energy sovereignty, public and citizen energy production, democratisation of access and management as a public service. They do not aim to make an economic profit, but to serve a social and community purpose.
Europe has been experiencing an unprecedented energy crisis since last May. The price of hydrocarbons, especially natural gas, has risen exponentially. Given that the electricity pricing system on the continent is marginalist – i.e. the last technology that meets demand is the one that sets the price for all electricity producers –, the price in the wholesale electricity market has climbed to fifteen times the price in 2020.
This has resulted in an electricity bill for families and companies that is twice the amount of last year, despite tax reductions and the regulated tariff set by the state government. The rise is a result of the evolution in gas prices, especially since the conflict between Russia and Ukraine broke out last February: gas flows from Russia to Europe have been cut from 40% to 10%, and it shouldn’t be ruled out that it could fall to nothing. But other factors that have led to the current perfect storm in the energy markets should also be taken into account.
A perfect storm with many underlying factors
Firstly, the energy price situation dates back a long way, to the rising inflation of international commodity prices. The health crisis triggered by the Covid-19 pandemic led to a global halt in the production and extraction of raw materials – such as gas and oil – and a scaling back of investment in the extraction of these materials due to the sudden drop in prices in 2020, during the lockdown. This was exacerbated by a faster emergence from the pandemic than initially expected, and an economy over-stimulated by low interest rates and huge injections of money from central banks around the world.
Secondly, 2022 has been a year marked by severe drought, with hydro production well below the average of the last ten years and wind generation lower than normal. If, on top of this, we add a nuclear flu in France with more than 30% of production shut down due to corrosion problems in the cooling systems at 32 plants, we are up against a major production crisis.
Although prices slackened in September and October this year, it should be borne in mind that this is a temporary phenomenon. Temperatures, which are much higher than normal for this time of year, have led to lower gas consumption than usual, together with storage above 90%, as European governments have done their homework. However, if we have a cold winter, as is to be expected, prices are likely to rise again.
Barcelona City Council in the energy crisis situation
The escalation in prices has resulted in a rise of more than 50% in Barcelona City Council’s energy bill. However, this increase has been well below the general trend, thanks to the energy efficiency and rational consumption policies applied over the last few years.
To be specific, in Barcelona City Council’s own supply, from July 2018 up to now, the supply points managed have increased by 33%, from 3,803 to 5,040, mainly due to the increase in photovoltaic self-consumption installations, electric vehicle charging points and Bicing stations. However, total consumption has remained at around 165 GWh/year – equivalent to the consumption of some 65,000 families – which translates into a major reduction in consumption per supply point: efficient and rational management.
Public and cooperative electricity suppliers prioritise good service and guaranteeing the lowest possible price for a basic utility such as electricity.
The impact of public and cooperative electricity companies
Cooperative and public electricity suppliers are working in three distinct areas to speed up the energy transition towards a sustainable and fairer model. The first is energy efficiency and rational energy consumption: we have provided our users with tools to consume less and better. Examples of this are the quarterly energy efficiency reports and all the work carried out in the field of education and communication. In contrast to other schemes, the cooperative and public electricity suppliers are not for profit and are therefore in a position to work unrestrictedly to reduce consumption.
In other words, this kind of supplier’s goal is not to yield a profit, but to serve a social and community purpose. For this reason, offering a good service and guaranteeing the lowest possible price for a basic utility such as electricity takes precedence over the company’s economic profits.
The second area involves the promotion of local renewable energy generation, providing the service of installing photovoltaic panels (turnkey, in the case of Barcelona Energia (BE)), and providing advice to all citizens and companies. These two measures bear a significant impact, as they reduce the demand for energy and increase the supply of renewables, which leads to a reduction in energy prices.
The third area is the democratisation of energy through the promotion of the sector and the participation of citizens and organisations through assemblies or the Barcelona Energy Council, a body for user participation.
Social management models have proven to be success stories that have been consolidated over the years. Cooperatives are now among the top ten suppliers in terms of market share in Spain, and Barcelona Energia has positioned itself as the eighth largest supplier in terms of market share in the city of Barcelona in just three years. Indeed, Barcelona Energia’s growth has been exponential and unprecedented. Since its inception, the metropolitan operator, which serves the 36 municipalities in the Barcelona area, has doubled its portfolio of private users year after year, and now supplies more private than public user points, despite the size of Barcelona City Council. Commitment to the public supplier is particularly important at a time of heightened instability and escalating market prices, as demonstrated by the notable increase in the number of information requests. Its proposal to absorb most of the increase in energy costs with its margin in order to minimise the impact on the final electricity bill is one of the most widely appreciated aspects.
It is worth noting that, since the public electricity supplier started supplying green energy to Barcelona City Council’s public buildings on 1 July 2018, the Council has saved more than €1.3 million compared to the supply offered by the major electricity companies to city councils in just three and a half years. And not only has it made financial savings, but it has also prevented the emission of 120,000 tonnes of CO2, thanks to the fact that it only sells 100% renewable energy.
As a result of Barcelona’s experience, a total of sixteen town councils in the metropolitan area have begun the process of signing up: Castellbisbal, L’Hospitalet de Llobregat, Santa Coloma de Gramenet, El Prat de Llobregat, Sant Boi de Llobregat, Sant Feliu de Llobregat, Sant Just Desvern, Sant Vicenç dels Horts, Torrelles de Llobregat, Viladecans, Gavà, Esplugues de Llobregat, Pallejà, Sant Cugat del Vallès, El Papiol and Barberà del Vallès. The estimated consumption of these councils is approximately 137 GWh, equivalent to the consumption of almost 50,000 families, and savings of more than 2% of their electricity bill are estimated. It should also be noted that, thanks to this growth, more households and companies will be able to be served, since, according to current regulations, private demand in the public energy sector cannot exceed 20% of turnover. The higher the demand from the public sector, the more private users they can have.
As a result of its commitment to public service, Barcelona Energia has a satisfaction index of 9.25 out of 10 among private users, in a sector in which most companies fail, and has a loyalty rate of 91%. In this case, the importance of receiving a basic service that has the guarantees of public management is appreciated. This support also extends to the business world through the self-employed and SMEs, which since June 2020 can contract Barcelona Energia and benefit from the agreements it has with many associations and business hubs, such as the Federació de Mercats Municipals de Barcelona [Barcelona Municipal Markets Federation] (FEMM) and the Eix Comercial del Raval [Raval Business Hub], among others.
All of Barcelona Energia’s surplus is used to improve the service for the public, responding to projects proposed by users through their assemblies.
This has allowed the public company to have enviable profit and loss accounts at a time like today, which is very critical for independent electricity suppliers. Thus, it had accumulated profits of 800,000 euros at the end of 2021, as can be seen in the information published on the website’s transparency portal. All of the surplus is used to improve the service to the public, responding to the projects proposed by users through their assembly.
This experience has spurred similar initiatives in cities such as Palma and Reus, which have already begun the process of creating their own municipal public electricity companies with the help and advice of the operational team in the Catalan capital’s electricity company. Also noteworthy is the recent creation of a public electricity company promoted by the Generalitat Government of Catalonia.
Initiatives like this help to recover energy sovereignty by fostering public and citizen energy production, the democratisation of access and management as a public service. They thus contribute to accelerating the energy transition towards a 100% renewable, sustainable and more transparent system. The fact that the Generalitat Government of Catalonia is proposing a model such as that established by Barcelona Energia attests to the success of this service and the essential social role played by the public supplier. Barcelona Energia has been a pioneer and is becoming a benchmark model to be followed.
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