Environment

What is Labour's Great British Energy plan – and will it really bring down bills and ease cost of living?

Great British Energy is Labour's flagship energy policy. Here's how it will work – and what it means for your bills

Keir Starmer addressing a business conference in London, February 2024

Keir Starmer addressing business leaders at the Kia Oval, London, earlier this month. Image: Toby Shepheard/Story Picture Agency/Shutterstock

Great British Energy is live – or at least, its website is.

Labour has long-pledged to establish a publicly owned national energy company if it wins the general election.

The clean energy firm – one of the party’s ‘six first priorities’ for government – would invest public money in renewable projects like wind farms and solar panels.

Today (31 May), Keir Starmer unveiled GBR’s website and logo, reiterating his promise to end the “pain and misery” of the cost of living crisis.

“Our clean power mission with Great British Energy will take back control of our destiny and invest in cheap, clean homegrown energy that we control,” he said.

But the Tories have slated it as “nothing more than a logo”, questioning whether it will really bring down bills. And environmental campaigners have said it doesn’t go far enough.

So how will it work – and what do experts think?

How will Great British Energy work?

For two years, Brits have suffered a series of sharp bill increases.

The price surge – prompted by Russia’s invasion of Ukraine and the subsequent hike in wholesale gas prices – have seen the typical family pay around £1,880 more than if prices had stayed at their previous levels.

In 2022, fossil fuels accounted for 33% of the UK’s electricity generation. But ‘home-grown’ renewables are a less volatile energy source.

The government wants to transition fully to renewables by 2035, while Labour have promised to bring forward this target by five years.

Part of the Labour’s plan is Great British Energy, funded by an £8.3bn windfall tax on the profits of oil and gas companies. The UK already has a windfall tax but Labour would raise it from 75 per cent to 78 per cent.

This aspect has been welcomed by some in the industry: today, Greg Jackson from Octopus said that the UK’s reliance on fossil fuels adds “thousands of pounds to bills”.

“We’re pleased to see that [Labour] plan to fund a clean energy future by taxing the oil and gas giants,” he said.

It’s popular idea with the public, too: A YouGov poll in February suggested that 66% of people support a national energy company, while windfall taxes regularly polls approval ratings above 90%.

It is not a plan to nationalise energy fully. The company will compete with private providers, acting as just one player in the market – like state-owned Ørsted does in Denmark.

Former chief scientific adviser Sir Patrick Vallance endorsed the plan today, calling for grid decarbonisation to proceed with the same urgency that the COVID-19 vaccine rollout did.

“Moving swiftly towards a clean power system is an investment, not just a cost,” he told The Times. “Achieving energy self-sufficiency will protect us from the volatility of the international fossil fuel market.”

“If we choose to go slowly, others will provide the answers, and we will ultimately end up buying the solutions.”

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And the Energy, Climate and Intelligence Unit also welcomed the plan, calling for rapid decarbonisation.

“The UK has spent £100bn on gas during the energy crisis of the last couple of years, placing a burden not only on bill payers but also taxpayers as bills were subsidised. With prices are set to go up again in October, there will be a need to insulate from more gas price volatility,” said ECIU head of parliamentary engagement Alasdair Johnstone

“This means using less gas and more British renewables along with insulating homes so they leak less heat.”

But does it go far enough? And will it actually bring down bills?

However, some have questioned the scale of the plan.

Great British Energy will not generate energy itself. Instead, it will invest public money in projects like offshore wind farms and solar panels.

Last year, the Common Wealth think tank proposed a model where, by contrast, the government owns and operates state-owned generating assets such as wind farms. The “benefits of scale outweigh the caution”, they said

Trade Union Congress conducted analysis last year showing that this would cost between £61bn to £82bn of investment between 2025 and 2035. Labour have committee a little more than £8bn.

Environmental campaigners have also expressed concern with the ambition of the commitment, slating Labour’s decision to water down its £28bn-per-year spending pledge.

Labour’s pledge to develop the UK’s enormous home-grown renewable energy potential is great news that will help to power the transition to a green economy that we so urgently need,” said Friends of the Earth’s head of policy, Mike Childs.

“But the party mustn’t rest on its laurels just because it has one strong green policy. We’re yet to hear how it intends to tackle the enormous carbon pollution created by transport and heating our homes, for example, which can be addressed by rolling out a nationwide programme of insulation, funding the switch to heat pumps, and delivering a true public transport renaissance.”

Will Great British Energy actually lower bills?

It could take a while for bills to fall. Earlier this week, Mark McAllister, the chairman of energy regulator Ofgem, said that the costs of building out the electricity network to support the transition to renewables would offset immediate savings.

“As we build in more and more renewables, we’re also building in the price, amortised over many years, of the networks as well,” he told the FT.

“If we look at the forecasts for wholesale prices and then build on top of that the costs of the network going forward, I think we see something in our view that is relatively flat in the medium term.”

However, the plan will mean a bigger portion of energy is derived from renewables, which will eventually mean cheaper bills, as the UK becomes less vulnerable to the fluctuations of the oil and gas market.

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