This is an extract from a recent paper “The UK’s Decarbonisation Objectives and the Role of Great British Energy” by The Oxford Institute for Energy Studies.

Introduction

The United Kingdom’s new Labour government came to power after an overwhelming victory (at least in terms of Parliamentary seats won) in the General Election of July 4th . Throughout the campaign, it trod a fine line between promising change and holding out the prospect of stability, after what it saw as the chaos of the latter years of Conservative government. This difficult balancing act will now have to be implemented in a number of policy areas as the new government develops the details of its programmes, and the problems may be particularly acute in relation to energy policy. 

Energy was an important component of the Labour Party’s platform; one of its five key ‘missions’ was to ‘make Britain a clean energy superpower to cut bills, create jobs and deliver security with cheaper, zero carbon electricity by 2030, accelerating to net zero’ and one of its proposed first six steps was to set up Great British Energy (GBE) ‘a publicly-owned clean power company, to cut bills for good and boost energy security’. To achieve its 2030 goal the government promised to ‘work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030.’ The goals are very ambitious and represent a deliberate contrast with the policies of the previous Sunak government, which had deferred the target for the phase-out of fossil fuel vehicles and promised an ‘affordable and pragmatic approach to net zero’ in order to minimise the impact on citizens. 

Yet, although there were wide divergences between the parties in terms of the rhetoric used, there were also question marks over whether the Labour approach would be as ambitious as it looked. The then Shadow Chancellor (now Chancellor) Rachel Reeves had announced to the 2021 Labour Party Conference a Green Plan based on investment of £28 billion each year up to 2030. But this commitment was also deferred before the Election; GBE will have a capitalisation of only £8.3 billion (over the lifetime of the new government) as the need for fiscal stability appears to have been prioritised over the environmental goals. Against this background, this Comment looks at the new approach to energy policy (and in particular the goal of zero carbon electricity by 2030 and the role of GBE). It considers whether the new government has the will, means and resources to deliver its ambitious targets.

Great British Energy

The new government has wasted no time in starting to implement its mission. On 25 July Ed Miliband, the new Secretary of State for Energy Security and Net Zero published a ‘Founding Statement’ for GBE and introduced a Bill to Parliament to bring it into being. The new company is not a traditional energy company – it will not be involved in supplying power to consumers. Its aim is rather to act as a catalyst, working with industry, local authorities, communities and public bodies to ‘speed up the deployment of mature and new technologies, as well as local energy projects, to support the government’s aim of decarbonising our electricity system by 2030’. It will be headquartered in and run from Scotland. It is hoped that it will promote energy independence, create jobs, lower bills and put the UK on the path to becoming a clean energy superpower.

These goals are very wide but, perhaps recognising the resource constraints, the government has provided a clearer focus in a set of five functions for GBE:

• Project Investment and Ownership: The aim is that GBE will be more than simply an investment vehicle; it will also directly invest in and operate clean generation assets, particularly in less developed technologies like floating wind and carbon capture

• Project Development: GBE will partner with other bodies to promote clean energy investment. An agreement has already been announced with the Crown Estate (which manages offshore waters in the UK) to bring forward new offshore wind developments, stimulate new technologies, unlock strategic bottlenecks and lower risks for future investors. 

• Local Power Plan: GBE is to work with local authorities and communities to help develop a more decentralised and resilient energy system with more local generation and ownership. 

• Supply chain: GBE will work to drive investment in clean home grown energy production and supply chains across the UK 

• Great British Nuclear: Great British Nuclear was set up in 2023 to help deliver new nuclear projects. GBE is exploring how best to work with it to deliver the common goals.

Assessment

The government has moved with commendable swiftness to start delivering on its clean energy goal and the plans for GBE seem to have been thought through, with a sensible identification of priority areas. Of course, some will be unhappy with the idea of a public corporation. There are well recognised risks with such a body – it may lack expertise and face insufficient competitive pressures to promote efficiency. However, the government believes that the public should be able to share more directly in the benefits of decarbonisation investments. There is also a case for saying that, in an area dominated by policy decisions, a public corporation is better placed to take policy risk, for instance in supply chain investments. In any event, the issue is academic. The government included GBE in the policy platform which it presented to the UK public and for which it received a clear endorsement. Nonetheless a number of question marks remain over the 2030 goal and how and whether it can be achieved. It may help that the goal has not been clearly defined. Although sometimes the government has talked about clean ‘energy’ by 2030, more often it has referred to clean ‘power’ and it seems that it is referring to a zero carbon electricity system – a more realistic goal than a zero carbon energy system – with the net zero target for energy overall remaining at 2050. 

However, even in relation to electricity, a completely zero carbon system also looks very difficult to achieve. The problem is that, unless there are enormous advances in battery and other technologies, the system is likely to need to call on some fossil resources for back-up supply in times of low wind and solar generation, even with a huge growth in renewable generation. Indeed, the new government appears to recognise the need for some continuing gas fired generation. The Manifesto speaks of maintaining ‘a strategic reserve of gas power stations to guarantee security of supply’. Nuclear may also have a role in the longer run, but in the period up to 2030 we cannot expect major new developments beyond those in the pipeline. Fossil fuel generation fitted with carbon capture may also be an option but again it seems unlikely that much will be available by 2030 – and the cost could be high. In other words the 2030 target might be achievable in principle, provided there is a bit of wiggle room in the precise definition. But is it achievable in practice? There are significant problem areas.

Resources: Reference was made above to the contrast between the original commitment to £28 billion per annum of government spending and GBE’s capitalisation of £8 billion. One of GBE’s specific aims is to catalyse investment from private and other sources – the Department of Energy Security and Net Zero estimates, for instance, that the partnership with the Crown Estate could help leverage up to £30 to £60 billion of private investment. Indeed, most investment in green technology is made by private industry rather than directly by the government, for instance through the Contracts for Difference for renewable generation. But that does not mean that such investment is problem-free for a government committed to fiscal stability. It still has to balance environmental goals against its fiscal goals. In general, it is not at present clear that sufficient resources are likely to be directed to this area if the goal is to meet the 2030 target. The original £28 billion per year commitment was regarded by many analysts as about the right order of magnitude (the Climate Change Committee, for instance, has estimated that about 1-2% of GDP needs to be devoted to clean energy investment each year – say £25-50 billion) and, even with the extra private sector investment which the Department of Energy Security and Net Zero hopes to generate, GBE is unlikely to be able to mobilise anything like this level of resources.

Planning and Networks: One of the key barriers to the faster development of low carbon energy in the UK has been the difficulty of gaining planning approval (at least for onshore projects; the simpler planning processes are one of the factors which have boosted offshore wind). Under the previous government, for instance, onshore wind was subject to such a restrictive regime that it was in practice almost impossible to develop an onshore wind facility. The Labour government has made it clear that it will prioritise growth over ‘Nimbyism’ (opposition to new development at local level) and make planning approvals easier to obtain, for nationally significant developments in particular (including larger renewables projects). It has already removed the effective ban on onshore wind and Ed Miliband has approved a number of solar farm projects, including one in Cambridgeshire which went against the recommendation of the government’s planning inspectorate. So the will appears to be there but it is unclear how sustainable it will prove to be – governments often find it easier to take difficult decisions early in their term of office. There are larger projects in the pipeline, including the Cottam Solar project, which have attracted considerable opposition. Campaigners argue that it will destroy prime agricultural land and wildlife and diversity. The decision on this project, due soon, will provide a further indication of the government’s determination.

(Over) Coordination: GBE is not the only new body set up to help promote decarbonisation. The UK is currently in the process of establishing a National Energy System Operator. This body, which was formerly part of the National Grid, responsible for operating the electricity system, is soon to become an independent public corporation responsible for planning Britain’s electricity and gas networks as well as continuing to operate the electricity system. It will be tasked with ‘ensuring that Britain’s energy system is secure and affordable as well as forging the path to a sustainable future for everyone’. Meanwhile, the government has set up a new body called ‘Mission Control’, headed by Chris Stark, the former Chief Executive of the UK Climate Change Committee. Its role is to ‘turbocharge the government’s mission to provide Britain with cheaper and clean power by 2030’ . What that means in practice is unclear, though it seems that its role will focus on troubleshooting. The aim is that ‘it will work with key energy companies and organisations including the regulator Ofgem, the National Grid and the Electricity System Operator to remove obstacles and identify and resolve issues as they arise. This will speed up the connection of new power infrastructure to the grid, and cleaner, cheaper power to people’s homes and businesses.’

(Lack of) Systems thinking: It may not seem the most immediate issue at first sight, but the biggest problem with the new government’s approach may well be the lack of systems thinking. It is ironic that, despite the plethora of bodies discussed above, there is apparently none concerned with the architecture of the low carbon energy system as a whole (as opposed to the inputs needed for such a system or pathways towards it). This represents a continuation of the policy approaches to decarbonisation over many decades, based on bottom-up, ‘technology push’ measures. The thinking seems to be that all that is needed to decarbonise the energy system is to substitute zero carbon sources for fossil fuels. But this ignores the fact that the energy system is just that – a system. Any change in one component changes the operation of the whole system and, as the changes accumulate, necessitates a fundamentally new approach.

Conclusion 

The new Labour government has come to power with an ambitious set of energy goals. It has hit the ground running – removing the ban on offshore wind, approving some controversial solar projects, increasing the budget for AR6 and moving quickly to set up GBE, the centrepiece of its Manifesto commitments on energy. But in some ways the ambition is less than it appears, reflecting the government’s commitment to fiscal stability. The resources devoted to decarbonisation are much less, at least so far, than promised earlier. The commitment to decarbonisation of energy by 2030 is in practice rather narrower than some of the rhetoric might imply. 

But it is still an ambitious target and will face a number of key challenges – in particular, whether the government can mobilise the higher level of resource needed; whether it can overcome planning delays; whether networks can accommodate new low carbon projects in a timely manner; whether the new institutional structure will create clarity or simply confuse the situation for all concerned, including the private sector actors who are expected to deliver most of the investment needed; and whether a real attempt will be made to optimise the system as a whole, rather than simply concentrating on technology inputs. However, the situation is developing rapidly; there will be some important decisions in coming months which will throw further light on the government’s priorities. It should soon become clear how far the government is going to prioritise change over continuity and fiscal stability in its energy policy.

Access the complete paper here