Great British Energy, Labour’s proposed publicly owned energy company, scores well with voters, according to the pollsters, and one can understand why. The promise to invest in “cheap, clean, homegrown energy, to cut bills for families and rebuild the strength of British industry” ticks every imaginable box. What’s not to like?
And, since the privatised utilities are never going to win a popularity contest (especially when the boss of British Gas’s owner is being paid £8m), the publicly-owned structure of GB Energy is almost a cherry on top. Other countries have state-owned firms making good profits in the UK energy market. Now the home side will be on the pitch.
Yet Labour would be wise to temper expectations about what GB Energy can achieve, and when. Keir Starmer’s claim this week that the operation will be “taking control of our energy supply to bring down bills” requires several gigawatts-worth of context. Energy is a very large and long-term business and you do not work miracles with £8.3bn, the sum earmarked for GB Energy over the course of the next parliament.
Look at what the existing players will be investing in the same period. National Grid intends to spend £30bn in the UK over the next five years, SSE is on course for £20.5bn in the five years to 2027 and Scottish Power’s plan is £12bn between now and 2028. GB Energy may be able to use debt to leverage its £8.3bn into a bigger sum (it’s not currently clear), but it’s a stretch and a half to say it will have a controlling role in energy supply.
On bills, Labour should equally be careful. As National Grid et al crank up spending, it’s nailed-on that the “network costs” element of our energy bills will increase – that is how energy infrastructure is paid for. Eventually, we trust, there will come a cross-over point when more electricity from wind, solar and nuclear sources reduces costs for consumers, but it probably won’t be reached during the life of the next parliament. In any case, the outcome will be dictated for a while yet by the price of natural gas.
None of which is to suggest that GB Energy is pointless. The part of the mission that deserves a full-throated cheer is the focus on local projects, where £3.3bn of the £8.3bn will be allocated to back small solar and onshore wind projects by lending to local authorities, and so on. That ought to be uncontentious: there are numerous examples, from Germany and Norway, of successful municipal networks and the big players aren’t interested in the fiddly stuff.
Similarly, there’s a fair argument that a state-owned operator can hurry up the development of new technologies, such as floating offshore wind, by reducing the cost of capital in high-risk projects. But, in terms of bills, do not expect quick wins. It took a couple of decades of support from the contracts-for-difference mechanism to take chunks out of the costs of conventional offshore windfarms.
GB Energy, then, on its current iteration, looks a nice-to-have supplement. It should be able to fill gaps in the market and be a co-investor in riskier projects. But £8.3bn – or £1.7bn a year – is not gamechanging money when a single high-voltage subsea and underground cable to bring electricity from Aberdeenshire to North Yorkshire can cost £3.4bn.
If an incoming Labour government achieves its ambitious target of decarbonising the power grid by 2030, it won’t be because GB Energy has ridden to the rescue. Rather, it will be because ministers have succeeded in clearing the planning obstacles that litter the system. That remains the big job.
