Great British Energy – will it deliver for consumers?

A flagship policy of the Labour government’s energy and industrial strategy is the establishment of a publicly owned organisation – Great British Energy (GBE) – that will own, manage and operate clean power projects, supplementing those wholly in the private sector.  The stated intention is to deliver clean, home-produced energy that will enhance UK energy security, build supply chains and create jobs. 

In many ways this sounds laudable – what’s not to like?  A more difficult question to answer, though, is how successful GBE is likely to be in delivering these objectives, and at what cost to consumers.

Energy Secretary Ed Miliband, No.10, and the Treasury are clearly eager to get GBE up and running.  It had been agreed before the election that GBE would have a budget of £8.3bn over the course of the current parliament (supposedly funded through windfall tax on UK oil and gas producers) and that the organisation would be headquartered in Scotland.  The government also recently appointed Juergen Maier (a well-known industrialist and former CEO of Siemens UK) as its Chair. 

Initially its focus will be on renewables – principally wind and solar, probably also some tidal and community schemes – but in due course other technologies, including carbon capture, may be included.  Eventually, it is expected that the already existing Great British Nuclear will be merged into GBE so that investments in all low-carbon technologies and their supply chains are within its remit.

So far, so good.  But it’s still far from clear when GBE will be in a position to start making clean energy investments and/or significantly influencing the creation of new UK-based supply chains.  Given the lead times involved for major energy projects, factory startups, etc., it seems unlikely that GBE will have a major role in delivering a clean electricity system by 2030 (a stated goal of the Labour government), although by the early 2030s the impact of its actions could be much more significant.

Questions remain, too, about the size of the budget.  £8.3bn is certainly a lot of money but, to put it in context, that’s around a tenth of the expenditure required just to meet the government’s goal of tripling offshore wind capacity by 2030, let alone the additional expenditure needed on solar, onshore wind, tidal, community energy schemes, carbon capture and storage, etc. 

The key question, therefore, is how successful GBE will prove to be in leveraging its limited budget in order to magnify shifts in private sector investment that could have a truly transformative effect.  Optimists will likely focus on the opportunity for GBE to make targeted investments in specific areas where the market is currently unable or unwilling to deliver, and where the potential value from government-led intervention is theoretically greatest.  Pessimists, on the other hand, may recall attempts by previous governments to ‘pick winners,’ which proved less than commercially astute, cost consumers and taxpayers large amounts of money, and failed to establish economically sustainable supply chains.

It’s impossible to know for sure how well GBE will deliver, but there are a number of things than might tip the balance in its favour.  Strong backing from across the whole of government, and especially from the Treasury, certainly helps – as does a recognition that other aspects of regulation (e.g., the planning system) need to be reformed as a matter of urgency if the government’s green growth objectives are to be realised.  Ensuring access to expert engineering advice - both internally within GBE and externally from industry organisations and other parts of government - will doubtless help too.

Consumers tend to be agnostic on the issue of public v. private ownership - provided their supplies remain secure and affordable (or internationally competitive, in the case of industrial users).  So, the acid test for GBE is whether it can help ensure that this remains the case during the transition towards 100% clean energy.

Want to get in touch with Jeremy? Please reach out to jeremy.nicholson@trioadvisory.com.