Industry reacts to Labour’s renationalisation plans

Industry voices have reacted to the news that Britain’s energy networks could be nationalised under a Labour government, following publication of the party’s plans.

Under the plans the transmission and distribution systems could be broken down into “multiple” structures.

The plans were put forward in a document entitled Bringing Energy Home.

Labour leader Jeremy Corbyn and Rebecca Long-Bailey, the shadow business and energy secretary, are due to give an official speech today (16 May).

Announcing the plan on Twitter, Long-Bailey said: “Private energy networks have ripped off customers and failed to invest enough to tackle climate change.

“We’ll need publicly owned networks to bring vast amounts of renewable energy online and to make energy affordable for households.”

But the Energy Networks Association warned the move could prove costly. The organisation’s chief executive David Smith said: “These proposals will not only fail to deliver Labour’s objectives but they will also be extremely costly to the British public.

“The companies responsible for grids are already delivering huge levels of investment that have led to record levels of clean energy, lower costs and fewer power cuts than ever before.

“Over the last six years network companies have invested over 2 per cent of annual UK investment.

“At a time when there are constraints on public spending we need to ask where the money would come from to pay for and provide future investment in these vital assets.

“Under state ownership the energy networks were more expensive and less reliable. Since privatisation in 1990 network costs to the bill-payer have fallen by 17 per cent.

“At the same time that costs have fallen, reliability has improved: the public have experienced 60 per cent fewer power cuts while their length has been reduced by 84 per cent.

“Over £100 billion of investment has been delivered by network companies since privatisation.

“In the last six years alone, they have invested over £22 billion in their gas and electricity grids across the country and provide jobs for 36,000 people, while the UK is now ranked globally seventh by the World Bank for ease of getting electricity.

“This vital investment could all be jeopardised with these plans.”

Energy UK’s chief executive Lawrence Slade said: “Private investment in energy – which is £12.6 billion each year and 10 per cent of total UK investment, has revolutionised the energy industry.

“It has created a power sector that has been world-leading in decarbonisation while creating green jobs, boosting economic growth and delivering increased choice and better service for customers.

“Since privatisation in the early 1990s, the sector has already invested over £170 billion to radically transform itself and over the next decade billions more investment is needed if we are to continue to upgrade our energy infrastructure to deliver benefits for customers and keep us on the path to a net zero economy.

“Any unnecessary, complex restructure or move to state ownership would jeopardise this investment at a critical time for the UK’s energy transition.”

Patrick Erwin, Northern Powergrid’s policy and markets director, said: “Labour’s renationalisation debate is seeking to solve an issue in electricity distribution network companies which does not exist.

“Robust regulation, combined with our reinvestment of some 95 per cent of our profits, after tax, since 2004 means that we are delivering more for customers and able to fund our current £3 billion, eight-year investment programme.

“We’ve already delivered double-digit percentage reductions in network-related costs, increased reliability and are creating a smarter, low-carbon network that all customers can benefit from. We must remain focused on this.

“A costly renationalisation will only result in taxpayers money being unnecessarily diverted from key areas like the NHS, police, education and social care.

“It will also distract us from our work to create future energy systems that meet customers’ needs, including the most vulnerable in society, and enable more smarter, low-carbon technologies.”

An SSE spokesperson said: “Aside from extensive disruption, paying for state ownership and control of energy networks would require full compensation for owners at great expense to taxpayers, or risk destabilising UK listed utilities, which most pensions are invested in. Neither are in the public interest.

“Electricity networks are 17 per cent cheaper than before privatisation and more reliable thanks to £100 billion of investment by private companies like SSE – all funded by private capital investment and not a penny in public debt at the expense of the NHS or schools.

“These plans jeopardise the reliable, low cost, quality service customers expect and the billions in vital investment needed to continue the UK’s progress in tackling climate change.”

A spokesperson for Scottish Power said: “Scottish Power is one of Scotland’s biggest companies supporting thousands of jobs.

“We have consistently invested and spent more in Scotland and the UK than we have made in profit or paid in dividend.

“This year Scottish Power is investing a record £7 million every working day, building more windfarms and upgrading the electricity grid.

“Our energy networks business runs a 99.9 per cent reliable network that costs bill payers 35p per day.

“It is driving forward Scotland and the UK’s ambitions for a decarbonised future by connecting windfarms and delivering smart grids that will help us switch to electric vehicles.

“It is at the heart of plans of making Scotland a carbon net zero country by 2045.”

A spokesperson for National Grid said the proposals for the state-ownership of the networks would only serve to delay the “huge amount of progress and investment” that is making the UK a “leader” in the move to green energy.

They said: “National Grid is one of the most reliable networks in the world, we are also at the heart of the decarbonisation agenda.

“Only a few days ago we broke the record for the longest period of time the country has gone without coal generation.

“We deliver reliability, investment and innovation for just 3 per cent of the average energy bill.

“These proposals for state-ownership of the energy networks would only serve to delay the huge amount of progress and investment that is already helping to make this country a leader in the move to green energy.

“At a time when there is increased urgency to meet the challenges of climate change the last thing that is needed is the enormous distraction, cost and complexity contained in these plans.”

Rik Smith, energy expert at Uswitch.com, said:“Expanding green electricity generation and measures to reduce energy bills – in particular for those in fuel poverty – will always be welcome, but the detail of how this is funded and exactly how consumers will benefit will be closely scrutinised.

“The current government has proposed to increase VAT on solar panels to 20 per cent this winter, while previous schemes to expand the take-up of renewables and other energy efficiency measures have not always been successful – or cheap. Likewise, the expansion of domestic solar will have a bigger impact on emissions and electricity demand if those homes are also able to install battery storage at the same time.

“Cleaner power helped contribute to a third of the UK emissions reduction in 2017. But there is a long way to go and considerably more investment will be required to meet the country’s electricity needs in the future, especially with the predicted increase in the number of electric vehicles on our roads.

“In recent years Ofgem has significantly reduced what the energy network operators are able to charge – so whether it’s in public or private hands, further changes to how the network is funded need to be carefully thought through if the UK is going to spearhead the green revolution and keep costs affordable.”

Isaac Occhipinti, head of external affairs, the Energy and Utilities Alliance, said: “The ‘Bringing Energy Home’ report acknowledges that the ’energy networks are infrastructure of national strategic importance’ and in addition ‘the UK’s gas networks will undergo significant changes as part of the decarbonisation process’.

“For example, significant investment will be required for the storage and transport of hydrogen and other low carbon gases.

“Given the size of the challenge that lays ahead, the focus must solely be on how we deliver a decarbonised gas network; utilising the extensive and world-leading knowledge and expertise within the industry. There are already mechanisms in place for improving the network and its delivery, through RIIO and Ofgem.

“Adding additional burden to the network such as a transfer of ownership and governance is a distraction that jeopardises decarbonisation and the UK’s ability to deliver on its carbon targets.”

Meanwhile Emma Bridge, chief executive of Community Energy England, the membership body representing more than 200 local community energy generation schemes and support projects, struck a more positive note.

She said: “Community Energy England is pleased that Labour notes the value of community energy in its energy strategy and that it pledges to support communities to take an active role in the supply, distribution and generation of energy.

“Communities have long been striving to ensure that local people receive additional social and environmental benefits from energy as well as lower bills.

“There are excellent examples from around the UK that can be used as a foundation.

“However, community energy can play a much greater role than just at a micro-level and we ask Labour to increase their ambition to enable community-led energy at all scales and for public sector-led energy to be opened up to part-community ownership.

“Whilst this strategy is being discussed today, hundreds of community energy groups across the country are already generating clean, green energy, sharing their knowledge and passion for a low carbon future and putting money back into community projects – many focused on energy efficiency.

“The current government can do more to support this, including the reinstatement of social investment tax relief for community energy investors.

“Business can play its role too, offering a route to market and fair rates for energy generated by community schemes.”