Labour promised a state-owned energy company. Can it work? (2024)

LONDON — It has already become a common phrase on the general election campaign trail: Great British Energy.

Labour’s plan for a publicly owned, Scottish-based national energy company is front and center of the party’s offer to voters ahead of the surprise July 4 election. Setting it up is one of leader Keir Starmer’s six “first step” priorities for the new government polls suggest is on the cusp of taking office.

The goal, Starmer said in one early campaign speech, is to harness “the opportunity of clean British power, [make] us energy independent, [remove] Putin’s boot from our throat, and [cut] bills in your home — for good.”

But amid all that ambition, there are plenty of unanswered questions.

While there is enthusiasm from some leading industry figures — GB Energy “could help drive innovation and investment where the private sector can’t on its own,” Octopus Energy’s Greg Jackson told POLITICO — others want much more clarity. “We understand the overall aims of GB Energy,” said Tom Glover, of power company RWE. “But we’re not really clear what its first priorities are and where its focus will be.”

With Labour potentially just five weeks away from government, industry bosses and voters alike want the party to fill in the gaps.

First steps

Conversations with Labour officials, advisers and industry figures familiar with the party’s thinking reveal plans for a two-speed approach for GB Energy.

Its £8.3 billion capitalization will be split into two parts.

An initial £3.3 billion is for the so-called Local Power Plan — essentially, a funding pot that local authorities, metro mayors and community groups can dip into for grants and loans towards small-scale clean energy projects, such as solar panels on council houses, schools or hospitals.

This local cash should be flowing as early as the new year, two people familiar with the party’s plans said.

“You can start dispersing grants and loans to local authorities immediately,” said the first person. “They will be writing to every local authority and every mayor as soon as possible asking: ‘Do you want to invest in clean energy projects?’”

The hope is that, if projects are up and running quickly, the party would soon be able to point to “GB Energy-backed” schemes lowering bills for local communities.

If Labour wants this investment to fall under the GB Energy brand, the company would first need to be incorporated. That is planned through one of Labour's first pieces of legislation, the Energy Independence Bill — although the precise timescale remains unclear. A board and interim boss could feasibly be in place by the fall, the second person said, and could draw on expertise within the existing U.K. Infrastructure Bank.

One key advocate of the project is Scottish Labour leader Anas Sarwar. He told POLITICO he wanted to see GB Energy up and running quickly.

“I don't want to overstep the mark by being the one that writes the first King's Speech,” Sarwar said, of the program of legislation drawn up by the government and read out in parliament by the monarch. “I of course will be feeding into [it] if we have the good fortune of being elected. I'll of course be pushing for GB Energy to be delivered as quickly as possible … and to be honest, I know I'm pushing an open door,” he added.

No nationalization, thank you

Insiders insist that GB Energy will not mean, as Conservative ministers have claimed, Shadow Energy Secretary Ed Miliband “running U.K. energy” from Whitehall. Although Starmer once vowed to support “common ownership” of energy, the plan is not to nationalize the energy sector at large.

Instead, GB Energy will be just one — initially fairly small — player in the market. Starmer and Miliband both say their ultimate ambition is to set up a British equivalent of Denmark’s Ørsted, Sweden’s Vattenfall or France’s EDF — energy companies owned by their respective governments but operating independently in the free, global market.

“Yes the government will own the shares, but the relationship realistically stops there,” said the second person familiar with the party’s plans.

Miliband would be the sponsoring secretary of state — but he wouldn’t be on the board. “Whitehall officials won’t be in the boardroom,” the person insisted.

The company would be headquartered in Scotland. Labour is eyeing Aberdeen, a North Sea port city and hot spot for oil and gas workers, although details remain flimsy.

“I recognize that Aberdeen is an energy hub, both for the U.K. and actually across Europe. It's got a huge potential,” said Anas Sarwar. The party would likely decide the precise location for GB Energy after any general election win, he added.

The long view

The remaining £5 billion of GB Energy funding would become investment capital helping the new company establish itself in the market.

Miliband and his team expect this to be a slower, more gradual process. Ultimately, they hope the firm would be a lead developer on U.K. renewable energy projects and even overseas. But that is a long way off.

“Is [overseas investment] something that can be looked at at some point in the future? I think, absolutely, that's an option,” said Sarwar. “But we have to maximize our energy potential here at home first.”

“It's not just one parliament [term], it’s probably at least two, before you’ve got something of the scale of EDF or Ørsted,” agreed Adam Bell, a former U.K. government energy official now working for the Stonehaven consultancy.

Miliband himself has conceded the company won’t be “Ørsted overnight.”

And success in getting there would depend on the biggest unknown — whether the company’s tentative steps into the market helped it turn a profit after a few years, or fell flat.

“The first five years, GB Energy will likely be taking minority stakes or doing a small amount of joint venture work in onshore wind, solar, and tidal,” said the second person quoted above, predicting a staff of around 50 to 100 people within that first period. “It only has £5 billion. You have to hire and develop expertise.”

Stick a Union Jack on it

So why bother? What can GB Energy achieve that simple government subsidies cannot?

One answer, Labour believes: good branding.

GB Energy — with its appeal to patriotism and building in Britain — does well with voters. “This is an incredibly popular policy,” said the first person quoted above, pointing to a YouGov poll in February suggesting 66 percent support for a national energy company.

A national energy company could also, in theory, return profits to the public purse and benefit British taxpayers — although Labour can give no timeframe for when GB Energy might be expected to start returning net income to the Treasury.

Another potential benefit, cited by fans including Octopus’s Greg Jackson, is for GB Energy to partner with private companies when they invest in new technologies, taking on some of the risk which might stop an independent firm going it alone.

Both people familiar with the party’s plans pointed to tidal stream as one possible area for early investment — this form of renewable electricity is generated by the rise and fall of the sea, a technology unproven at scale, but which some studies suggest could eventually deliver up to 11 percent of British power.

The second person said more established tech such as solar and onshore wind could also partner up with GB Energy, arguing that the state-backed brand would be in a good position to help win over local people skeptical about new projects proposed on their doorsteps.

Lowering your bills (eventually)

Having more renewables in the British energy mix means cheaper bills in the long run, Miliband has argued, as the U.K. weans itself off dependence on gas and vulnerability to the global market which dictate gas prices. (Not to mention the price distortions created by foreign dictators, hence the oft-repeated line about Vladimir Putin’s boots.)

By that measure, GB Energy’s initial success will depend on how many projects are up and running within the first parliamentary term of up to five years — and whether they are contributing to Labour’s wider ambitions of decarbonizing the electricity supply by 2030. Come the next election due by 2029, voters would be expecting to see some reduction in their energy bills — the question for the new government will be, given its scale, how much of an impact is GB Energy is likely to have.

Some in industry are broadly supportive of the plan. But they believe it will fall to other aspects of Labour’s green policy offer to make or break the party's net zero goals and its push to lower household costs.

Nathan Bennett, head of strategic communications at the RenewableUK industry group, pointed to a Labour promise on planning reform and £500 million a year in incentives for clean energy companies to develop local supply chains as other areas worthy of attention. “GB Energy is fine, but it's the rest of the Labour clean power package that's really going to be delivering the jobs and the clean energy,” Bennett said.

Others are even more skeptical of how central the company will be to Labour’s lofty targets.

“Actually, the risk is that we put a lot of time and resources, and particularly the civil service resource, into creating GB Energy — and that it actually distracts from some of the things that we know are the major barriers to 2030,” said another industry figure, granted anonymity to speak candidly.

They added that: “[The clean energy goal of] 2030 does not live or die with your ability to create GB Energy.”