A Guide to Labour's GB Energy

The results of the 2024 General Election have signalled a huge potential change in the direction of government energy policy. The new Labour government was criticised for watering down some of its environmental pledges in the run-up to the election, but one central plank of these commitments does remain: the promise to create Great British Energy, a state-owned energy company to invest in renewables based in Scotland. 

This action is critical in the current energy landscape. The UK has a legally binding goal of net zero carbon emissions by 2050 and interim targets to decarbonise the electricity system. Recognising the importance of this, the previous government had brought forward the date for compliance to 2035. The new government intends to bring this forward by a further five years to 2030.  

What is GB Energy?

Details on the specifics of GB Energy have been somewhat thin on the ground so far, but some broad information is available on how this new organisation will operate. It will be a government-owned vehicle investing in the ownership, management, and operation of clean power projects. 

Essentially, GB Energy is intended to revolutionise the way electricity is generated in this country. The intention is to scale up renewable use, with an estimated saving of £93bn on energy bills by 2030. All this will be achieved while hitting that newly-stretched zero carbon emissions target and, according to the new government, creating thousands of jobs. 

Labour's Energy Policy Overview

The establishment of Great British Energy (GBE) is among the last remnants of the 'green prosperity plan' originally devised and championed by Ed Miliband, now the secretary of state for energy security and net zero. 

His intention was to spend £28bn per year in the first five years of a new Labour government on decarbonising the UK economy, but his plans did not survive contact with the Treasury. Then-shadow chancellor Rachel Reeves watered down the original investment from £28bn to £23.7bn. But GBE, a publicly owned energy company, did survive this scaling down.

The Labour Party’s plan for GBE, according to their own publicity, lists the following benefits: 

• Save £93 billion for UK households.

• Deliver one hundred percent clean power by 2030.

• Cut energy bills for good.

• Create thousands of good local jobs.

• Deliver energy security.

• Make the UK energy independent.

• Labour will build an energy system for the future, run for the British people.

The Great British Energy Plan

Early GBE investments will include wind and solar projects across the UK and plans to make Scotland a world leader in new technologies such as floating offshore wind, carbon capture and storage, and hydrogen. The company will be headquartered in Scotland and paid for by a windfall tax on big oil and gas firms, with initial funding of £8.3bn over a parliament. 

The formation of this business is anticipated to be a win-win-win situation, creating jobs and hitting targets while reducing energy bills for consumers and modernising our energy infrastructure to be world-leading. The government regards stretching reaching their net zero targets as a signal of intent, with the creation of this new company as potentially transformational for the UK energy market. 

How Will GB Energy Be Implemented?

The new government is racing to implement GB Energy. Their predecessors were critical of the plans during the general election hustings and will seize on any slip-ups. The government will obviously be looking to get it all set up and running smoothly by the next general election so that it can demonstrate its success. 

The previous government issued a Strategy and policy statement for energy policy in Great Britain at the start of May, but the election fundamentally altered Britain’s energy policy, with it now expected that greater and more urgent action will be taken to fight the climate emergency. A selection process for the headquarters is already underway, with it widely expected that Aberdeen - traditionally the home of the UK’s gas and electricity supplies - will be chosen. 

The establishment of GB Energy will follow a dual-track approach, dividing its £8.3bn capitalisation into two parts, funded by changes to oil and gas windfall taxes. The aim is to encourage ‘local power generation’, reducing the strain on the grid and ensuring local people benefit directly from the energy their area produces. 

The Local Power Plan will see GB Energy partner with local communities to develop renewable energy projects with a target capacity of up to 8GW. Funding of £3.3bn is planned over the course of the next parliament to achieve this, and this is expected to start by early 2025, following the establishment of GB Energy and the appointment of its board and interim Chief Executive after passing the Energy Independence Act.

The remaining £5 billion of GB Energy’s funding will become investment capital, helping the new company establish itself in the market. This will be a slower, more gradual process with the goal of GB Energy becoming a lead developer on UK energy projects. However, success in getting there will depend on whether the company’s first steps into the market see it turn a profit after a few years or if it falls flat. Success will also be measured by whether its projects contribute to Labour’s broader ambition of full decarbonisation by 2030.

Benefits of Labour's GB Energy Policy

The environmental benefits of successfully implementing this policy would be huge. Eliminating our dependency on fossil fuels isn’t an option; it’s necessary if we’re to come anywhere near nullifying the potentially catastrophic effects of climate change. 

But the potential for economic advantages is also evident. The government claims that it can reduce electricity bills by £300 a year on average. This transformation is also expected to lead to thousands of new jobs, which is critical if the transition away from fossil fuels is to come with minimal costs to ordinary people. 

These benefits don’t end here, either. Russia’s invasion of Ukraine in 2022 demonstrated the extent to which our dependency on the resources of others can leave us hostages to circumstances completely beyond our control. GB Energy, it is hoped, can increase the UK’s energy self-sufficiency. These initiatives also double up as critical infrastructural upgrades, which would have been necessary. As things stand, the biggest single risk to our energy supply is the strain on the national grid. 

How Will Labour's Energy Policy Affect the UK Economy?

The government claims that it can reduce electricity bills by £300 a year on average. This transformation is also expected to lead to thousands of new jobs, which is critical if the transition away from fossil fuels is to come with minimal costs to ordinary people. 

Challenges and Criticisms

Of course, such bold plans were always likely to be criticised. Labour’s claim that its plan would cut energy bills by £300 has already been scrutinised. Ofgem, the energy regulator, has already said that energy bills are not expected to fall substantially over the decade, partly because of the costs of expanding the electricity network to support more renewable sources.

The fossil fuel business has also been critical of the plans. Offshore Energies UK, a trade body representing oil and gas firms, has claimed up to 42,000 jobs and £26bn of economic value would be lost under Labour’s windfall tax plans.

None of this is to say that there aren’t genuine potential obstacles ahead. It is always possible that costs could increase beyond what has been planned, which would likely eat into any proposed savings to be passed onto consumers.

Public support will be important. Media reporting may well partly shape the perception of GB Energy, and there is plenty of reason to believe that much of it will be hostile. This policy affects others as well. Planning laws, for example, may have to be substantially redrawn if the amount of work required to get to net zero in just six years is to be achieved. 

Of course, some say the government hasn’t gone far enough, while others say they’ve already gone too far. But the overwhelming scientific evidence remains that climate change is real. If anything, recent indications suggest that it is accelerating more quickly than previous estimates had envisaged. 

But as an arm of the fightback against it, it may be considered a strong start, and certainly stronger than the Labour Party’s main opponents to form the government were offering. And your business may be able to get involved. Here at Switchpal, we can help you sort through the morass of available information on business energy. We aim to get you a better deal and ease that transition towards a renewable, greener future.