(Bloomberg) -- Keir Starmer’s promise to create jobs and grow the UK economy hinges in part on the government’s new GB Energy company, which it is pitching as a “national champion” to own, manage and operate clean power projects and generate profits for the benefit of taxpayers and bill payers.
In the election campaign, Labour said little about how GB Energy would work beyond presenting it as a panacea for high energy bills and over-reliance on imported fossil fuels. But now the government is fleshing out details, and triggering questions about whether GB Energy should be viewed by the industry as a market-maker for renewable energy — or as a competitor.
Why is GB Energy such a priority for Labour?
Great British Energy is central to Starmer’s promise to deliver the highest economic growth among Group of Seven nations. Across the economy, the prime minister, Energy Secretary Ed Miliband and Chancellor of the Exchequer Rachel Reeves want to use public money to attract private investment — a solution for the twin problem of dire public finances and ailing infrastructure. They have said by reforming planning regulations and co-investing in clean energy projects via GB Energy, they will overhaul the nation’s energy infrastructure, create 650,000 jobs and help Labour meet its pledge to achieve clean power by 2030.
How will GB Energy work?
Established in Parliament legislation, GB Energy will receive £8.3 billion ($10.7 billion) of public money — funded by extending the windfall tax on oil and gas companies — to own and operate assets in collaboration with the private sector. The government envisages that sum will become the catalyst for much bigger investment. Ministers expect a deal between GB Energy and the Crown Estate of King Charles III, which owns the UK’s seabed, to accelerate the building of offshore wind farms and pull in as much as £60 billion of private money.
Who is running GB Energy?
The government tapped Juergen Maier, ex-UK head at Siemens Energy, to run the company. He is an engineer, industry veteran and well known in government circles having led the Digital Catapult initiative aiming to bring industry leaders, researchers and startups together. But while GB Energy will be operationally independent, it is owned by the UK government and funded by the taxpayer, and its strategic priorities will be set by Miliband. The government can give directions to the firm if it presents these to Parliament first.
What can GB Energy achieve?
The government sees GB Energy as a major lever to achieve its climate goals, including a carbon-free grid powered by a huge expansion of solar and wind farms. The partnership with the Crown Estate, for example, could secure 20-30 gigawatts of new offshore wind seabed leases by 2030. Labour’s goal is 55 gigawatts of offshore capacity. But GB Energy is one piece of the puzzle. Starmer has also promised to overhaul planning rules holding back projects.
How long before GB Energy can make a difference?
Maier will need to appoint a team and the legislation needs to get through Parliament. The bigger issue is that without major planning changes, much of the UK’s project pipeline is already locked in up to 2030. That leaves the company, for now at least, preparing primarily for projects that will come online after that. That presents a political risk for Starmer, who is likely to face a general election in 2029 and will want to show progress on his flagship policy.
Why is GB Energy already proving controversial?
People in the energy industry assumed the company would be used to foster nascent technology like carbon capture and hydrogen needed to decarbonize the most emissions-intensive parts of the economy. That may happen, but the early plans triggered industry alarm bells. The Crown Estate deal shows GB Energy stepping in at the first stages of offshore wind development — a role firms like Orsted AS, RWE AG and SSE Plc typically play. Lobby group EnergyUK said the government should avoid duplicating what’s already happening successfully.
Will GB Energy have a political impact?
The politics of GB Energy are not only about showing progress by the time of the 2029 general election. Starmer and Reeves took flak from the left of the Labour Party when they dramatically scaled down the planned investment in GB Energy to stave off Conservative attacks over tax and spending plans. In essence, the government’s plans for an energy overhaul hinges on imposing a very different way of planning and approving infrastructure projects. The central government will have more control, and communities may be angry. NIMBYs are a powerful force in British politics, especially in local elections.
Will GB Energy lower UK bills?
Whether GB Energy proves a success will depend on how many projects come online that would otherwise not have. But cost is also a major factor. The logic is that wind, solar and other more nascent technologies will displace fossil fuels — often the subject of geopolitical shocks — and bring down wholesale prices that feed into domestic bills. Labour has reiterated that local communities who accept energy projects should get a benefit via lower bills. Yet Starmer also said he stands by Labour’s manifesto commitment to reduce bills by up to £300 across the board. Putting a number on it raises the stakes.
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