Sir Keir Starmer’s announcement earlier this month that he will be shrinking his green prosperity plan was disappointing. Last year was the hottest on record and, most likely, in the past 100,000 years. If there were ever a moment to go big on the climate, it is now. However, even in its diminished state, Labour’s plan represents progress compared with the government’s. That is the message contained in a report by the Common Wealth thinktank, which takes heart from Labour’s proposal for a publicly owned company, Great British Energy.
Common Wealth says this could be the vehicle to deliver Labour’s 2030 clean power goal. It warns that the UK is not on course to deliver on its green generation target through its current approach to decarbonising the power system. The problem is that the status quo relies on private profits and fragmented markets. But the thinktank argues that this is “slower, more expensive, less secure and more carbon intensive” than a transition based on state coordination. Renewable investment financed out of Labour’s £8.3bn capitalisation of GB Energy saves up to £208m a year on debt interest payments alone compared with corporate borrowing.
Private provision does have its advantages, but these don’t figure much in energy. Markets are supposed to be good at discovering what goods and services ought to be provided. But ministers were forced in 2022 to nationalise a key part of the electricity grid to help meet climate goals. Competition should keep prices low by encouraging efficiency. Yet electricity prices alone directly contributed between 3.5 and 5.5 percentage points to inflation between March 2021 and May 2023.
GB Energy could provide for a faster, fairer and far cheaper green transition. This ought to be music to the ears of Sir Keir and Rishi Sunak, both of whom flaunt hair-shirt philosophies that artificially constrain fiscal policy. Mr Sunak’s U-turn last year over net zero targets politicised the climate crisis but left intact the government’s overall strategy, which sees £280bn-£400bn of public and private investment in new generating capacity needed by 2037 to decarbonise the power sector. This represents £21bn-£30bn in spending a year, or 50% to 100% more than the current rate of public and private investment in low-carbon energy sectors.
Central to Common Wealth’s argument is that the present system, which relies on a liberalised wholesale electricity market, makes it “difficult, if not impossible” to rapidly roll out capital investment. The irony is that public ownership already plays a critical role in clean energy generation in Britain – only, at the moment, it is foreign governments that are innovating, scaling up and commercialising new technologies.
Labour’s “clean energy superpower” mission should be achieved with a national champion akin to France’s EDF. About 40% of offshore wind generation is held by foreign state-owned firms. Sir Keir wants to quadruple the power from sea-based windfarms by 2030. This would be better achieved by GB Energy, where income could be reinvested to accelerate the shift toward energy independence, not distributed to foreign states or private investors. The UK has the potential to become the Saudi Arabia of wind. The choice facing a Labour government is whether to sit back and watch the privatisation of our largest clean energy resource, or secure its gains in a more socially just manner. This ought to be an easy choice for Sir Keir.
