What will Great British Energy do?

When Sir Keir Starmer proposed a state-owned company called Great British Energy in September 2022, he was aping the man dragged out of 10 Downing St two months earlier. Sir Keir had studied Boris Johnson’s bracing pledge to “take back control” in the 2016 Brexit referendum. Adapting this mantra, the then opposition leader griped that the only governments with a stake in Britain’s energy system were foreign ones, from Sweden, France and China. GB Energy would secure “British power for British people”. It would also allow him to ditch a more radical plan for wholesale renationalisation.

Now that Labour is in government, the question is whether good politics can become good policy. Sir Keir has long been breezy about what exactly a new “national champion” for energy would do. In a speech on July 25th at a wind-turbine factory in Widnes, he gave more clues. The plan still comes wrapped in misty-eyed patriotism; some of it raises eyebrows. But at its core is a sensible urge to use the power of the state to speed private development.

Energy is central to Labour’s plan for government. Of its five organising missions, the most developed is to have a clean power system by 2030, five years earlier than the previous government’s target. Sir Keir and his eager energy secretary, Ed Miliband, have swiftly announced a series of green projects, including wind turbines, solar farms and electricity pylons. This, they argue, is the only way to reduce bills, emissions and the country’s exposure to oil and gas imports. Ministers see cutting the cost of electricity as vital to growth.

As elsewhere, Labour’s approach combines deregulation with enthusiasm for an active state. Within days of taking office, Mr Miliband lifted a de facto ban on onshore wind in England and approved three solar farms that had been gummed up in the planning system. He has promised to remove local vetoes on green infrastructure; on July 30th he announced a big increase in the budget for the next renewable-energy auction. Yet these measures alone, says Mr Miliband, won’t be enough for the pace and scale of change that is needed. That is where GB Energy comes in.

Take offshore wind. Labour wants to almost quadruple capacity in six years, from around 15 gigawatts (GW) today to 55GW by 2030. The current development process is painfully slow. Ground conditions are mapped, seabird flocks assessed, communities consulted, grid connections secured: add that up and there is typically a decade between getting a seabed lease and breaking ground, says Alistair McGirr of SSE, a renewables firm. Things have got slower the more congested the seabed has become; a neighbouring project can easily mess with your study of a kittiwake colony.

Tackling this speed problem will be GB Energy’s first big job. Although planning reforms will help a bit, ministers worry that projects may still get gummed up in legal challenges. Instead, they see a new role for the state in carrying out area-wide environmental assessments and facilitating compensation measures for local communities. In the case of offshore wind GB Energy will partner with the Crown Estate, a public body, to take on this early development work; sites that have been made ready will then be sold on to private firms. The Netherlands uses a similar model; private developers think emulating it is sensible.

What else might GB Energy do? So far it is not entirely clear. The government will establish it as a state-owned company based in Scotland. Its board—which will be chaired by Jürgen Maier, a former boss of Siemens UK, a manufacturing business—will be independent, meaning that Mr Miliband will not be able to interfere with investment decisions. He will set the company’s budget and objectives, however. Over the current five-year parliament it will get £8.3bn ($10.7bn, or 0.3% of GDP), although Labour has not said how this will be allocated. Its mission is set to include not only getting turbines built faster but creating jobs, earning money for taxpayers and lowering energy bills.

Three risks stand out. The first is that GB Energy focuses on the wrong aims. Unblocking private development is where GB Energy can add most value, says Sam Alvis, an energy wonk who worked on the body’s design; if it succeeds, bills should fall over time as more renewables come onto the grid. But lowering bills doesn’t make much sense as a near-term goal, given they will be driven more by oil and gas prices. And asking it to make money for the Treasury could be self-defeating. If Labour wants to speed up development the bigger challenge is to make projects more financially attractive to private firms, says Brett Christophers of Uppsala University.

A second related risk is whether GB Energy ends up crowding out investment rather than crowding it in. Some suspect it might hold onto stakes in offshore wind farms that it has taken through the early stages of development, when these could easily attract private money. “The question is ‘why should the state want to buy a wind farm?’” says Huub Den Rooijen, formerly of the Crown Estate. A better use of a relatively modest budget would be to de-risk areas that the private sector is less willing to invest in, says Josh Buckland of Flint Global, a consultancy. That might involve looking at the barriers to less mature technologies—constructing the right infrastructure at ports to support floating offshore wind platforms, for example.

The third risk is that GB Energy gets too ambitious. Mr Miliband, who has long cast a jealous eye over other state-backed energy firms like Denmark’s Orsted and Sweden’s Vattenfall, hopes that GB Energy will eventually become a fully fledged generator, building and running its own projects. Yet those other companies took years to build up their expertise and they did so in a nascent market. It is probably “ten years too late” to start competing with them, reckons Mr Den Rooijen. What might be more realistic is building up deep expertise as an equity partner.

Flanked by factory workers in Widnes, Sir Keir framed his fledgling creation as a decisive break in British energy policy: “It is time for the British people to own things and make things again.” That language suggests something more radical than the likely reality. Labour still plans to achieve the energy transition through the market. The test of GB Energy’s success will be how much it hastens that process, not whether it creates an alternative one. ■

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