Smart Local Energy Systems: A blueprint for the UK's energy future

David Aird, Net Zero & Energy Solutions Director
20 March 2025
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The drive to achieve Net Zero by 2050 is prompting a shift in the UK’s energy landscape, moving away from fossil fuels towards decarbonised energy generation, widespread electrification and energy efficiency.

Smart Local Energy Systems (SLES) are emerging as a pioneering approach to address the UK’s energy challenge, designed to attract large scale private sector investment to deliver vital social, economic and environmental benefits. Unlike traditional centralised energy systems, these networks leverage local renewable energy sources, storage and digital technologies to optimise decarbonised energy use and place local community needs at the centre of investment decisions.

The synergistic objectives of clean energy growth and local devolution are at the heart of the government’s Great British Energy and Local Power Plan strategies. When combined with the private sector’s expertise, innovative approaches and available financial resources, this clean energy ambition can become a reality.

As the cost of renewable energy and storage continue to fall, SLES increasingly offer a viable route towards lower domestic energy bills, enhanced resilience and support for the UK’s Net Zero ambitions – provided policy, regulatory, and community engagement hurdles can be overcome.

Energy solutions that deliver targeted economic and environmental benefits

Embracing a systems approach

At their core, SLES embody a "place-based" Whole System strategy, integrating renewable energy generation, smart grids, and advanced storage technologies tailored to local demand - an approach supported by the UK Government's Local Power Plan, which aims to support community-led and locally-owned renewable energy projects.

This bottom-up approach contrasts with traditional energy models that rely on large-scale, centralised fossil fuel generation and distribution systems.

The prize for implementing SLES is significant: reduced energy costs, increased social equity, and community resilience. Utilising real-time data enables accurate demand prediction, avoiding overproduction or shortfalls of supply. A study by the University of Leeds and PwC highlights that place-specific investments in energy systems could generate social benefits of £825bn through local job creation for example, significantly outstripping the returns from the existing centralised strategies.

Smaller-scale "campus SLES" initiatives also demonstrate the adaptability of this approach. By involving public and private stakeholders - such as universities, hospitals, and local businesses - these systems can drive urban-scale energy solutions that deliver targeted economic and environmental benefits.

Recent policy shifts are starting to signal a turning point.

Policy barriers to overcome

Despite the promise of SLES, existing government policies and regulations often lag behind technological and societal innovations. Historically, UK policies have favoured centralised energy models, leading to today’s systemic inefficiencies including decade long timescales for grid connections and out of control system balancing costs (£2.8bn in 2023).

However, recent policy shifts are starting to signal a turning point. The desire for action to tackle climate change has seen policy being reframed to demonstrate that emissions reduction can also deliver lower energy costs and greater energy security from international wholesale markets.

As such, the private sector now stands ready to help cut through some of the complexity to fund, coordinate and deliver SLES solutions and bring communities the long awaited and much demanded lower cost more reliable sourced of low carbon power.

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The private sector now stands ready to help cut through some of the complexity to fund, coordinate and deliver SLES solutions and bring communities the long awaited and much demanded lower cost more reliable sourced of low carbon power.

The UK Government’s Local Power Plan intends to put local authorities and communities at the heart of restructuring our energy economy. This plan commits £1bn annually to support community-led renewable energy projects including £600 million for local authorities and £400 million for community energy organisations. Other key initiatives include:

  • Lifting the onshore wind ban through planning policy reforms.
  • Establishing a publicly-owned energy company, Great British Energy, to drive renewable developments.
  • A National Wealth Fund Task Force with initial £7.3bn funding.
  • Addressing grid interconnection issues by prioritising local demand and reducing strain on national transmission systems.

These measures, coupled with a focus on decentralised energy generation, lay the foundation for the rapid scaling of SLES. However, the sector still requires continued regulatory reforms to unlock their full potential.

Local authorities are pivotal to the success of SLES

Local authority challenges

Local authorities are pivotal to the success of SLES, acting as facilitators and coordinators of place-specific energy transitions. Early adopters such as Bristol and Coventry have showcased the potential of city-scale SLES, but these projects faced significant hurdles, including funding constraints. Meanwhile in Oxford, Project LEO (Local Energy Oxfordshire) has established a strong evidence base for SLES to support the transition to a clean, secure and affordable energy system with a key focus on community engagement, participation and inclusion.

The recent shift in government strategy has revitalised local authority engagement. With the Local Power Plan providing dedicated funding streams and a clearer policy framework, councils are better positioned to pursue ambitious local energy projects.

One of the key goals for this strategy is to decentralise energy production, allowing local communities to generate, own, and benefit from their own energy sources and contribute to the UK's Net Zero transition. By streamlining planning processes and addressing critical barriers to local energy projects, such as long wait times for grid connections, SLES offer an accelerated route to achieving this ambition.

It is clear that for SLES to thrive, local authorities must foster partnerships with private sector investors, align with national energy strategies, and actively engage their communities to ensure equitable outcomes.

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One of the key goals for this strategy is to decentralise energy production, allowing local communities to generate, own, and benefit from their own energy sources and contribute to the UK's net-zero transition.

Community engagement

The government’s Local Power Plan is intended to democratise energy production and ensure the transition to renewable energy benefits all regions and communities across the UK. The success of SLES hinges on public trust and participation to support and invest in local clean economic growth. 

Without active community involvement, even the most well-designed systems risk resistance or underutilisation. Effective engagement can build this trust by highlighting the benefits of SLES:

  1. Access to affordable energy for low-income communities: Demonstrating how localised energy systems can lower household energy bills.
  2. Energy democracy: Empowering communities to take control of their energy resources fosters a sense of ownership and accountability.
  3. Energy independence: Local energy generation reduces reliance on international wholesale energy markets insulating communities from geopolitical risks and price shocks.

Governments and local authorities must prioritise transparency, provide accessible opportunities for involvement and learning and engage stakeholders in decision-making. Initiatives like energy cooperatives and community renewables projects can offer low-income households a stake in energy and economic benefits, addressing energy poverty and fostering inclusivity.

The UK can lead the way in sustainable energy innovation.

The way forward

To realise the full potential of SLES, the UK must adopt a systems led, coordinated, multi-stakeholder approach which puts the private sector at the heart of change. Key steps include:

  1. Accelerating regulatory reforms: Further removing barriers to decentralised energy systems, such as outdated grid access rules and planning restrictions.
  2. Scaling investments: Expanding financial support for local authorities and community organisations to kickstart SLES projects.
  3. Promoting innovation: Encouraging the development of advanced digital technologies that optimise energy generation, storage and demand management.
  4. Building capacity: Supporting local authorities and communities with the skills, knowledge and practical engagement and participation approaches needed to implement and manage SLES.
  5. Enhancing collaboration: Strengthening partnerships between public, private, and community stakeholders to drive integrated energy solutions.

The UK's journey towards a clean, decarbonised, resilient energy future is at a crucial stage. SLES represent a transformative opportunity to decentralise energy generation, reduce emissions, and deliver socio-economic benefits.

By embracing this systems approach, engaging a highly motivated private sector and addressing the barriers ahead, the UK can lead the way in sustainable energy innovation.

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