UK Labour wants to make Britain ‘a clean energy superpower’. Setting up GB Energy is a crucial part of this strategy. Sir Keir Starmer is hoping to win Scottish votes by basing GB Energy somewhere in Scotland. He says that it will reduce energy bills by £300 per household and create thousands of jobs.
According to the Labour Party manifesto:
“Great British Energy will partner with industry and trade unions to deliver clean power by co-investing in leading technologies; will help support capital-intensive projects; and will deploy local energy production to benefit communities across the country.”
“Labour will save families hundreds of pounds, slash fuel poverty, and get Britain back on track to meet our climate targets.”
A pensioner, Gary is featured in a video in the online manifesto, on the GB Energy page. Gary is in fuel poverty – he says he can only afford to heat one room and is looking forward to paying less for his energy because Labour will look after the vulnerable, the elderly and disabled people.
Will GB Energy sell low-cost power by renationalising our energy sector?
Although GB Energy will be publicly owned, it would stop well short of any form of renationalisation. GB Energy would be an investment vehicle and company working alongside and often in partnership with the existing private sector suppliers. It won’t be offering electricity directly to consumers but financing and helping to build low-carbon infrastructure, from wind farms to – potentially – nuclear reactors.
The company would have access to £8.3bn over the course of the next parliament, which would be partly funded by increased taxes on North Sea oil and gas companies.
How soon can we expect to save £300 on our energy bills?
According to the Labour-sponsored think-tank, Ember, the promised modest savings of £300 from our energy bills can only be made once 98% of our electricity comes from renewable sources. Currently, less than 50% of our electricity is renewable. Given the slow progress in decarbonisation over the last few years, doubling the amount of renewable electricity to reach net zero, will require a significant step up in delivery. This includes reducing delays in onshore wind permitting, increasing solar grid connections and providing adequate support for offshore wind expansion.
Until this happens, the cost of electricity will continue to be determined by the cost of the imported gas that powers the generators. This is because the price of electricity is set by the cost of producing the last unit of electricity needed to meet demand. This is nearly always a gas power plant with high marginal costs.
It should be noted that the Tories ensured that no new onshore wind farms have been built in England since 2015, even though construction costs are lower for offshore wind farms.
Will energy costs and fuel poverty continue to rise?
The Energy Price Cap is due to rise by 12% from 1 October 2024 to £1,762 a year for a typical household, while standing charges for gas and electricity costs as much as £346 per year for some Scottish households. Labour says it will work with the regulator to reduce standing charges, but says nothing about specific measures to reduce fuel poverty.
It is estimated 31% of all Scottish households were already in fuel poverty (around 791,000 households) by 2022. Each of these households required an average of £1,240 to pay their way out of fuel poverty. In Shetland, the heart of both the fossil fuel and the renewable energy industries, 96% of residents were expected to be in fuel poverty. This is because of poorly insulated housing and a lack of mains gas.
The Scottish government does not have the powers to end fuel poverty
Energy policy and pricing is reserved to the Westminster government, so the Scottish government is only able to mitigate the impacts of unfair pricing policies or persuade Westminster MPs to implement changes that would address fuel poverty.
Measures to address fuel poverty in the current SNP manifesto, include the following:
- Press for a significant cut in standing charges for all and removal of standing charges for anyone with a prepayment meter.
- Call for a single, flexible fuel poverty scheme in Scotland.
- Introduce a fair energy pricing and rebate scheme for Highland and Islands residents, offering financial relief and offsetting the higher per-unit costs of electricity those residents currently face.
How could UK Labour slash fuel poverty?
A policy that could make a real difference in reducing fuel poverty UK-wide, has recently been put forward by the New Economics Foundation. They suggest scrapping the existing price cap system altogether and replacing it with a new system of ‘free basic energy’ or a National Energy Guarantee.
Under this system every household in the UK would be entitled to a free amount of energy consumption. This would cover adequate heating, lighting, cooking, hot water, refrigeration, charging phone and digital connectivity, and where needed, hearing aids, medical equipment, stairlifts, and wheelchairs. A higher charge would be made for energy use above this free amount. The universal nature of the National Energy Guarantee avoids the need for means testing and thus avoids missing out some vulnerable families. NEF is confident that this policy would deliver more support at a lower cost to government, thanks to the additional charges on wealthier high-usage consumers.
This radical policy builds on the demands of the ‘Energy For All’ campaign coordinated by Fuel Poverty Action who gathered a petition of 651,193 signatures in 2022.
What will the impacts of GB Energy be on Scotland?
A new report by Investment bank Stifel estimates the introduction of a higher windfall tax on oil and gas firms, proposed by Labour, could lead to the loss of 100k jobs in the North Sea. The Scottish National Party are worried this may interfere with their plans for a just transition. There are also concerns that taxes on Scotland’s energy sector could be used to meet the spiralling cost of Hinkley Point C which is expected to be as much as £46bn. While accelerating new, privatised grid connections and interconnectors will ensure that electricity generated in Scotland is transmitted directly to England, with the surplus sold to other European countries, without any benefits being returned to Scotland.
Will GB Energy help pensioners like Gary?
Unfortunately, Gary will have to wait many years until the UK’s electricity is 98% renewable before he can get his £300 discount. He must also hope that the next Westminster government adopts a radical policy, such as the National Energy Guarantee, so he will be able to afford to heat his whole house.
