Labour Party Leader Sir Keir Starmer has announced his plans for Great British Energy, a state-owned clean power company aimed at reducing bills, creating jobs, and increasing energy security. This announcement comes after the idea was first introduced in October 2022.
In a press release, Labour stated that Great British Energy will provide a permanent solution to the threat of £900 annual energy price spikes under the current Conservative government. This claim is based on analysis of fluctuations in the energy price cap set by Ofgem and the potential for further price increases due to global events, such as the recent Russian invasion of Ukraine.
According to Labour’s analysis, since April 2022, consumers have paid around £1,880 more on their energy bills compared to pre-war levels. The government has also spent £94 billion on the energy price guarantee, capping bills at £2,500 per household. While the £900 figure is accurate and energy bills remain significantly above the long-term average, the likelihood of future price spikes depends on one’s interpretation of world events.
Both Labour and the Conservatives agree that accelerating the transition to renewable and low carbon sources of power is the key to increasing energy security and reducing bills. However, they differ on the pace at which this should happen. Labour accuses the Conservatives of hindering the growth of clean, homegrown power, as evidenced by the slowing of new renewable capacity in recent years.
Currently, the UK has approximately 15GW of installed solar, onshore and offshore wind capacity, enough to provide over 40% of the country’s electricity last year. However, onshore wind has stagnated in England due to planning restrictions, while offshore wind, previously a success story, experienced setbacks when a government auction failed last year. The government has targets to increase renewable capacity, but only in solar (up to 70GW) and offshore wind (50GW by 2030). There is no target for onshore wind.
Labour’s proposal is to build 35GW of onshore wind, 55GW of offshore wind, and 50GW of solar capacity, with a goal of decarbonizing the grid entirely by 2030, five years earlier than the Conservative plan. However, this target is deemed extremely challenging by industry experts and even some within the Labour Party, given recent supply chain and inflationary pressures that have caused delays in UK projects.
Sir Keir Starmer has stated that the implementation of Great British Energy will result in a £300 decrease in energy bills. However, this figure is subject to debate and is a complex calculation. While renewable energy is cheaper than fossil-fuel alternatives, the initial infrastructure requires subsidy, and the cost of the electricity transition alone is estimated to exceed £100 million.
The majority of the funding for Great British Energy will come from the private sector, as the state-owned entity will aim to compete in the market. Modeled after the French national provider EDF and Sweden’s Vattenfall, both of which have a significant presence in the UK, Labour envisions the entity as owning and operating major renewable generation assets in the future, but not acting as a retailer.
However, initial plans for Great British Energy have been scaled back at the request of Shadow Chancellor Rachel Reeves. The new proposal involves an investment of £8.3 billion over a five-year term, a significant amount for a state start-up but relatively small in the energy sector. Labour acknowledges that it will take time for the entity to grow, but believes that with access to capital on preferential terms and possibly more flexibility for risk-taking compared to other industry players, the British state can also profit from the energy sector, similar to France and Sweden.
