What Labour’s Great British Energy can’t do

For whomever forms the next British government, ensuring an affordable, secure and sustainable supply of energy for all households will be a key priority.

It will be important not just for pursuing net zero ambitions, but also improving households’ wellbeing and the wider economy, with the potential jobs and boost to the economy that the transition to low-carbon energy could bring.

In answer to this, and set out in its manifesto, Labour has promised to “switch on Great British Energy”. This national energy company would be based in Scotland and would partner with industry to invest in clean electricity technologies and develop local energy projects.

But is this the answer? Great British Energy is part of a wider package of measures, the “green prosperity plan”, which Labour says will create jobs, cut energy bills and help the country achieve energy independence.

A nationally owned energy company may be able to deliver against UK goals more effectively through its ability to borrow at lower costs, and access windfall taxes, general taxation or other routes that are not open to private industry.

Detractors, however, are concerned over the impact on economic growth and the new company’s ability to deliver value for money.

Vattenfall (Sweden), Ørsted (Denmark) and EDF Energy (France) are all examples of similar publicly owned companies. And there are also several historical examples in the UK where large strategic challenges in the energy sector were deemed too big for the private market alone (British Petroleum, British Electricity Authority, Central Electricity Generating Board and the National Coal Board).

Who pays?

Labour says the £8.3 billion cost of Great British Energy will be part-funded by closing loopholes on oil and gas windfall taxes.

Its funding and timing will be critical, especially alongside numerous other net zero policy actions. As research by my colleagues and me has continuously underscored, who pays for net zero is a critical factor that leaders must consider. In other words, will it be government, taxpayers or industry who bear the cost burden?

Timing is important too. A lack of consideration and planning around the sequence of net-zero projects could increase competition for workers, alongside rising wage costs and consumer prices.

These factors, left unaddressed or exacerbated by targets being delayed or ditched (which we have seen from both Conservatives and Labour) could unnecessarily inflate the net zero bill.

Scotland and Wales’s attempts to establish national energy companies of their own can also offer lessons. Scotland’s plans were shelved in 2021, with ministers blaming Westminster, the need for energy market reform and the fact that a large part of energy policy is not devolved to the Scottish parliament.

The Welsh government established Ynni Cymru in 2023. However, the scale is quite different to that planned for Great British Energy, with the focus on developing community energy projects over the next three years with £750,000 of funding.

Both cases point to some wider challenges, around effective coordination between national, devolved and local government, which the National Audit Office has highlighted as key to delivering net zero.

Great British Energy would work with local authorities and regions to kickstart projects. Yet it’s not clear how this will be coordinated alongside other efforts and initiatives such as Ynni Cymru, and against a wider backdrop of nations having different approaches to net zero.

Other factors will come into play too. Wider energy market reform is one. This includes: decoupling the price of electricity from gas to reflect cheaper renewable energy in consumer bills; avoiding the uneven and unfair distribution of standing charges; addressing persistent market failures that consumer switching has failed to resolve; and providing protection to the most vulnerable customers.

A new Labour government will also need to examine why so many people have too little income to live comfortably and sustainably in the face of persistently high energy prices.

Jobs and labour markets will also form part of the picture. Labour has said its green prosperity plan, including Great British Energy, will create thousands of skilled jobs. But in a recent televised debate, SNP leader John Swinney said that Labour’s plans could lead to significant job losses in the oil and gas sector.

The key issue here, and that our research has highlighted, is that addressing persistent skills and worker shortages will be vital in delivering on these types of jobs promises as well as the UK’s broader net-zero ambitions. A new government will need to devise strategies to get more people into energy jobs with upskilling and training, and increasing labour market participation.

Ultimately, Great British Energy can only be one part of the solution to the complex and pressing public policy challenge that is net zero.

Answering it will require a whole-government approach, with effective and sustained coordination across national, devolved, regional and local governments, and through effective engagement across private industry and local communities alike.

by : Jamie Speirs, Deputy Director, Centre for Energy Policy, University of Strathclyde

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