What exactly is GB Energy?

Labour’s policy to create a public energy company features in several of its outline green policies. However, the party has still yet to set out a detailed vision of what GB Energy will be, or what it won’t be. David Blackman gauged the view of experts at Labour’s party conference.

Queuing was de rigeur at this year’s Labour Party conference in Liverpool. The reason for the snaking lines wasn’t old-style socialist shortages but the sheer popularity of the opposition’s annual gathering this year. Many of those queuing in Merseyside were lining up to attend events on energy policy, which has never featured so prominently at a Labour conference before, seasoned attendees at such events attested.

They had plenty to chew over as the opposition set out its plans to remedy another set of queues – those plaguing access to the grid for new projects. Labour made its plan to unblock the sclerotic transmission network one of the centrepieces of the policy platform presented at last week’s conference.

Measures to achieve this include an update to the national policy statements that govern infrastructure projects like transmission lines, and tackling the kind of time-consuming litigation barriers that hold up work on such projects. The party also said it would remedy cable shortages by organising a “super tender” for transmission operators to procure scarce capacity in the supply chain, as detailed in last week’s edition.

Under Labour’s vision this would be co-ordinated by GB Energy (GBE) – its proposed public energy company.

It’s been a year since leader Kier Starmer first proposed GBE, as part of the party’s pledge to turn the UK into a “clean energy superpower”. Last week Labour’s shadow minister for energy security Alan Whitehead told a conference event that the creation of GBE was a “day one” priority for the party, alongside fixing the grid.

But what actually is GBE and will it really speed up the energy transition or does it risk getting in the way?

Not everyone at the conference was a fan of the idea. Professor Martin Freer, director of the Birmingham Energy Institute, speaking at the same gathering as Whitehead, questioned Labour’s proposal that GBE should take public stakes in new low carbon infrastructure.

He said that despite last month’s failure of the most recent Contracts for Difference auction to attract any offshore wind bids, this mechanism for attracting private finance remained viable, pointing to the success of a more generous exercise run earlier this year by the Irish government.

Meanwhile setting up a new company to deliver network infrastructure, for example, could divert scarce skills and supply chain capacity from existing outfits, he said: “You’ve got to probably take it from National Grid and it probably ends up slowing things down.

“Whatever you do, don’t slow stuff down. Reform needs to be decisive but minimal and any new organisations need to be tightly focused to give the greatest chance of success. Don’t do everything and concentrate on the problems that nobody else can resolve so don’t try and compete.”

Areas where GBE could contribute could be where market failures currently exist, such as local energy projects and storage, Freer added.

Adam Berman, deputy director of Energy UK, agreed that GBE’s remit should be tightly focused.

“There are very few discrete problems that GB Energy can solve that are not already being solved or could be solved through regulatory or legislative change.”

He also said that an incoming Labour government would need to decide how any profits made by the company should be used, such as subsiding bills for low-income customers or supporting the UK supply chain.

“You could maybe do a little bit of all of these but you can’t do all of them at scale.

“It (GBE) needs to crowd in investment. If it doesn’t crowd in investment and if it crowds out investment, it will be a counterproductive because about 70% of the capital we need to reach net zero comes from the private sector.

“Whatever Great British Energy does, it needs to be really focused, it could probably do one or two things really well.”

Whitehead revealed that GBE would be a “fairly lean vehicle”.

The new company’s role would be to “crowd in” private investment by offering guarantees that would de risk projects, thus reducing the cost of capital, Whitehead said: “Great British Energy will have a variety of roles, sometimes to effectively be the catalyst for those developments, sometimes to be the part owner of those developments, sometimes to be the lead investor in those developments and bring other people in on the back.”

As an example, this could include giving a “substantial amount” of seed capital to local decarbonised energy projects that suffer from a high risk of failure, he said.

But Berman was doubtful that it will be able to play much of a role in achieving Labour’s goal to decarbonise the power system by 2030.

“Great British Energy is not a mechanism to try and get us to 2030.

“You need to staff up, you need to put in legislation, you need to get the money, you need to get the board: it’s going to take time,” he said, pointing out that it took the recently established UK Infrastructure Bank two years to make its first equity investment.

Pointing out that a general election may not happen until the tail end of next year, meaning legislation to establish GBE could not be passed until the middle of 2025, he said: “You’re really looking very much at the last part of the 2020s to have GBE kicking off in in any kind of tangible way.”

Many in the industry are sceptical that 2030 is even a feasible target. Catherine Raw, managing director of SSE Thermal, pointed out that regulatory structures are currently premised around the government’s less ambitious 2035 target.

However, Jeff Smith, recently appointed shadow minister for consumers and clean power, defended the opposition’s goal.

“It’s a stretch ambition but we think we can do it,” he said.

Pointing to the emergency efforts mounted during the coronavirus pandemic, he said: “We’ve said all along, it’s a very challenging target but if we can make this a national mission on the scale of the vaccine taskforce, we believe it can be done.”

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