A new state-owned energy company could help boost the economy and alleviate fuel poverty, new analysis shows.
A report drawn up by consultants EY for the Scottish Government sets out the options for a publicly-owned energy company.
First Minister Nicola Sturgeon has said the government intends to set up such an energy company by the end of this parliament in 2021 with the aim of providing competitively priced energy and cutting fuel poverty.
The report by EY notes a “significant driver” of high energy prices and fuel poverty is a lack of customer engagement, with low rates of customers choosing to switch suppliers.
A new energy company would be well positioned to attract customers if it could provide competitive pricing, the report notes.
If successfully implemented it could also help to encourage greater energy efficiency and support sustainable economic growth, analysts conclude.
However it warns the financial landscape could present “significant challenges” to setting up a new energy company “in a highly complex and competitive market”.
The report notes that of the 42 domestic energy suppliers offering services in Scotland, around half recorded losses in their most recent financial statements, including two of the so-called ‘Big 6’ companies.
EY has drawn up up a shortlist of possible options for the new company, including one option that would see local councils involved in the delivery of energy.
Depending on the option chosen, the set up costs could be in the range of £500,000 to £3.5 million with an annual operating cost of between £2.8 and £9 million.
The report concludes: “It is possible to establish an energy co. to achieve the stated objective of delivering competitively priced energy to help alleviate fuel poverty in Scotland.
“We also, however, recognise the challenges of doing this in a highly innovative, competitive and evolving energy retail market.
“State aid restrictions prevent the energy co. from operating on a subsidised basis, therefore a commercial model is required for this to be successful.
“As a result, the over-riding strategic question for SG is how to make the energy co. cost competitive, in a low margin market.”