Keir Starmer is being urged to more than double Labour’s investment in publicly owned renewable energy to save consumers billions of pounds on their bills, despite the party drastically scaling back its plans last week.
In an intervention after the Labour leader scrapped the party’s £28bn green investment pledge in the most controversial U-turn of his leadership, the Common Wealth thinktank said a step-change in government backing for clean energy generation was still required.
It said plans to retain an initial cash injection in Great British Energy – a state-owned renewable power generation company planned if Labour is elected to power – was an important “down payment”, but should be increased to £30bn over the course of a first term in office.
There have been growing questions over Labour’s target to decarbonise the UK’s electricity system by 2030 after it slashed the funding package behind its green economy plans by half.
As a key group influencing Ed Miliband, the shadow net zero secretary, Common Wealth was the first thinktank to promote a new publicly owned energy generator – providing backing for GB Energy – based on similar European firms such as Sweden’s Vattenfall, Denmark’s Ørsted and Norway’s Equinor.
Miliband is understood to have pushed back against the dilution of Labour’s £28bn investment plan, with speculation – denied by his team – that he could resign over the issue. However, in a sign of unity, he contributed a quote to the press release confirming it would be scaled back.
Labour has said GB Energy would be headquartered in Scotland as a “homegrown, publicly owned champion in clean energy generation” to enable the creation of jobs and manufacturing in Britain’s renewables sector. However, several details remain unclear, including whether it would operate green assets directly or control a portfolio of investments in other companies instead.
Labour said last week that GB Energy would “partner with industry” and “co-invest” in groundbreaking green technologies such as floating offshore wind, hydrogen, carbon capture and storage, and tidal stream energy.
It has also suggested the party would help capital-intensive projects such as the Sizewell C nuclear power plant in Suffolk with “backing and building”.
The government is, however, seeking significantly more investment for the project than Labour currently plans for GB Energy, with ministers looking to raise £20bn from outside investors after removing the Chinese state-owned group CGN in 2022 over security concerns.
In a report setting out the case for a vast expansion of GB Energy in the early years of a Labour government, Common Wealth said state-led investment in clean energy would be substantially cheaper than the private sector equivalent – helping to save households money on their bills.
It said renewable investment financed out of Labour’s initial £8.3bn capitalisation would save between £125m and £208m a year on debt interest costs each year – saving up to £1bn in total compared with private-sector borrowing, which is typically more expensive.
Analysis in the report was based on estimates from the International Energy Association that a 2 percentage point increase in borrowing costs can lead to a 20% increase in a solar or wind project’s “levelised cost of electricity”, a measure of the average cost of each unit of electricity generated over the lifetime of an asset.
Common Wealth said this was a good proxy for the savings between government-backed investment and the private sector, which could be passed on to households in the form of cheaper bills.
Mathew Lawrence, Common Wealth’s director, said: “Keir Starmer’s renewed commitment to GB Energy, Labour’s proposed new public renewables company, is welcome. However, the true test of ambition is in its design and scale.
“An ambitious public renewables company like GB Energy on the scale of leading international equivalents would mean lower energy bills, good jobs in every part of the country, faster decarbonisation and energy independence for the UK - indeed it is the cornerstone of any serious attempt to transition our economy.”
A Labour spokesperson said: “With Labour’s ambitious £8.3bn capitalisation of Great British Energy, we will invest in clean homegrown power that will cut energy bills, create the next generation of jobs in clean industries, and make Britain energy independent.”
