Keir Starmer is promising to turn from slogans to solutions, so here’s a request: can we have a few concrete details on how Great British Energy, a flagship Labour proposal to create “a publicly owned national champion in clean energy”, would operate?
The most basic unanswered question is how much capital the new company would be given on day one. Until we’re told, it’s impossible to tell if GBE would merely reassemble the old small-scale Green Investment Bank, which was launched by George Osborne for the coalition government in 2012 and sold in 2017, or pursue far more ambitious goals, which tends to be Labour’s claim.
Starmer committed to create GBE at party conference last September and repeated the pledge in a speech on Thursday. The idea is to nationalise precisely nothing, note. Nor would the new entity be involved in the retail supply end of the energy market or transmission. It would stick to creating new clean generating capacity, often “in collaboration with the private sector”.
The idea seems to flow from several reasonable observations. First, many European countries have publicly owned energy generators: Sweden has Vattenfall and the Danish state owns half of Ørsted, which operates 30% of the offshore windfarms in UK waters.
Second, the lack of UK ownership of UK generating assets is embarrassing. The Perth-based FTSE 100 firm SSE, which itself wants to be the “UK’s clean energy champion”, is in third place in the generation league table. The biggest player is EDF – owned by the French state – thanks to its nuclear interests. A lot of dividend payments flow abroad, in other words – Starmer last year spoke about the billpayers of Swansea paying for schools and hospitals in Stockholm thanks to Swedish ownership of a local onshore windfarm.
Third, for all the progress in deploying offshore wind at scale, the UK hasn’t grabbed the supply chain opportunities. No great UK manufacturer of wind turbines has emerged over the past 20 years, despite the billions added to our bills in green levies. So, yes, one can imagine how a state-backed player could agitate usefully to shift the industrial profile a little.
But then one comes to hard questions of priorities, tradeoffs and returns on investment – stuff that matters on the ground. Since the world is awash with capital willing to finance onshore and conventional offshore windfarms in the UK, Labour understandably imagines GBE investing in earlier-stage technologies such as floating offshore wind, hydrogen, tidal power and small nuclear reactors.
Fine: one can see how reliable state-backed funding could encourage private sector players to push marginal projects over the line, just as the old Green Investment Bank did. But that is more akin to a financing mechanism. Would GBE be a “company” only in the sense that it would own its portfolio of minority stakes for ever? If so, it would be more like a national infrastructure fund rather than an operator like Orsted. No shame in that, but the financial mandate shouldn’t be blurry. If a tidal scheme, say, proves economically unviable, would GBE be encouraged to back it anyway in the interests of energy security?
The interaction with current funding schemes – for the Rolls-Royce-led small reactor programme and so on – also matters. Would those funding pots be wrapped into GBE or be administered separately? If GBE adds to the overall setup, it could be helpful, argues the independent energy analyst Peter Atherton; but, if it requires years of reorganisation of current schemes, then it could cause delays. It’s a fair point. Again, the design of the model is crucial.
The funding, to repeat, is the biggest question. Initial capitalisation “will depend on the investment decisions GBE decides to make based upon commercial negotiation”, we’re told, a formulation that could mean almost anything. As one senior business figure puts it unkindly, Labour’s ambitions for the new company “depend on whether one is talking to [the shadow chancellor] Rachel Reeves or [the shadow climate change secretary] Ed Miliband”.
The idea of forming a publicly owned generation company isn’t remotely radical in itself. The state is already knee-deep in the market via contracts-for-difference and other incentive schemes. Owning a few projects – or stakes in projects – just takes the process a step or two further. But it is reasonable to expect the initial scale of the venture to be settled at an early stage. Are we talking billions or tens of billions? The era of detailed policies approaches. Starmer needs to clarify.
