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Hitting the ground running: The first 100 days
Hitting the ground running: The first 100 days

Posts Tagged ‘Green energy mission’

GB Energy – Powering the future

Unpacking what GB Energy means for industry and consumers

As the dust settles on the Government’s Great British Energy (GBE) announcement last week, industry and consumers alike are left wondering what the new entity really means for them. While Government is clear it wants to make a fast start on delivering its clean energy mission, clarity on how this will be fulfilled remains unclear.

1. Complementing, not duplicating, the private sector’s role

Offshore wind continues to be a focus of the government’s communications around GBE, especially following the news of the Crown Estate partnership. This has created concern that GBE might result in the displacement of private capital already poised for investment in mature technologies like offshore wind, vital to the Government’s 2030 clean power target.

The announcement also touched on less mature technologies like carbon capture and storage (CCS), hydrogen, wave, and tidal energy. With a limited budget of £8.3 billion over the Parliament, there is broad consensus from industry that GBE could play a more effective role in de-risking investments in these emerging technologies, rather than competing with private investors. By acting as a state-backed co-investor, GBE could provide the necessary reassurance to unlock private sector funding for these “riskier” ventures.

Even for mature technologies, existing mechanisms like the Contracts for Difference (CfD) scheme have faced challenges. Despite the last Government’s ambition to reach 50 GW of offshore wind capacity by 2030, the 2023 auction failed to secure any offshore wind projects due to misalignment between bid prices and actual project costs. While underfunded auctions are designed to maintain competitive tension among developers, relying solely on CfDs might limit the potential scale of investment that is possible. GBE could play a valuable complementary role here

2. Cutting consumer bills

It was striking, albeit not surprising, the extent to which the questions Keir Stamer faced after his speech in Runcorn on Thursday, and that Ed Miliband faced during media rounds that morning, were focused on the impact of GBE on consumer bills. The pair faced scrutiny as to whether they could ‘guarantee’ a £300 reduction in bills and quite how quickly this would be felt. This follows a trend throughout the election campaign, where there was clear confusion from members of the public about just exactly what GBE would be – with many people expecting the new entity to be a retail energy supplier they could switch to and immediately start saving money. Polling by Common Wealth found that 53% of Labour voters expect energy bills to fall during this Parliament as a reuslt of GBE.

Despite recommitting to this figure again and again, there remain questions over how this will be delivered. Moving to a renewables dominated grid will in theory enable lower prices, but wider market reform will be necessary to deliver this – for instance decoupling electricity from gas prices and rebalancing ‘green’ consumer levies between electricity and gas bills.

Fundamentally, the prevailing view from industry is that the creation of GBE alone won’t deliver the level of savings that consumers want to see, and wider reform is needed to bring down energy bills and meet this ambition. But whilst the REMA process remains ongoing, the industry has been clear that revolutionary market change will be challenging at a time where there is significant pressure to reach ambitious power decarbonisation targets.

3. Skills and supply chain vital to the 2030 target

The new government has set out its ambition to reach a decarbonised power system by 2030. But having enough clean power, both through a varied renewables fleet and abated gas power plants, will require the UK having in place robust supply chain networks and a skilled workforce that gets us there quickly.

The new government clearly wants to make a fast start on the clean energy transition, bringing forward new renewable infrastructure at scale and pace. However, developers are already struggling with the current scale of delivery, facing challenges accessing the supply chains and talent that they need. In recent years, job vacancies in green industries have been around 17 times higher than those in high carbon jobs.

As well as investing in the development of new renewable projects, GB Energy alongside other initiatives like the National Wealth Fund and Skills England (announced at the King’s Speech) must prioritise the development of vital supply chains – both domestically and abroad – as well as investment in the skills and workforce needs of our low carbon future. Unions and trade bodies will be looking for reassurance that government will help ensure that training and support is provided to deliver the jobs to energise GB Energy.

Conclusion

The establishment of GBE presents both opportunities and challenges for the UK’s energy sector and consumers. While the government’s ambition to accelerate the transition to clean energy is clear, the specifics of GBE’s role remain uncertain. The focus on complementing private sector investment, particularly in emerging technologies like carbon capture and hydrogen, could help de-risk these ventures and encourage further private funding. However, the initiative alone is unlikely to deliver significant consumer bill reductions without broader market reforms. Additionally, achieving the 2030 decarbonisation target will require a substantial investment in supply chains and skilled workforce development. The success of GBE will depend on effective collaboration between government, industry, and other stakeholders to address these critical issues.

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How does Labour deliver its Clean Energy Mission?

With commitments to establish a ‘publicly owned energy company’, rewire Britain’s electricity grid and expand renewable generation, the Labour Party’s 2024 manifesto outlines an ambitious plan to make the UK a “clean energy superpower”. Ahead of polling day, WA hosted leading figures from across the energy sector for a discussion on how a Labour government would look to achieve its goal of decarbonising the UK’s energy supply.

Contributors including Paul McNamee, Director of the Labour Climate and Environment Forum, Sue Ferns, Senior Deputy General Secretary of the trade union Prospect and Chris Hayes, Chief Economist at Common Wealth discussed how Labour can practically deliver its ‘clean energy mission’.

Here is what we learnt about the direction of energy policy under a possible Labour Government:

1. Quick decisions need to be made

The incoming Energy Secretary will face a packed inbox of ‘legacy’ issues carried over from the last government. Many major policy decisions need to be made by the end of the year, some this summer. These include the sixth allocation round of the contracts for difference (CfD) scheme, the future of Sizewell C, SMR funding and CCUS deployment.

Potential Energy Secretary Ed Miliband is expected to make clear, positive decisions in these areas to back the technologies required for the UK to achieve net zero. Labour and Miliband will look to portray these decisions as totemic, representing how the party is making the bold choices necessary to deliver their green prosperity plan.

Miliband, who will likely be one of the few new Secretaries of State with previous experience of Government, would also be able to use his prior learned experience and institutional knowledge to immediately drive forward Labour’s energy plans. This would be in contrast with other Secretaries of State who would need time to get to grips with the machinery of Government.

Planning reforms to get more renewable generation in development are also likely to be a priority across the first 100-days of a Labour administration. These reforms would entail regulatory overhaul as well as bolstering planning departments who have experienced a reduction in workforce and investment over the past 14 years.

2. Informed backbenchers with an interest in energy policy

The next parliament will perhaps be the most engaged and informed parliaments on energy policy that we have seen in recent years. Many Labour PPCs contesting swing seats including Melanie Onn (former MP for Great Grimsby and previously Deputy Chief Executive of trade body RenewableUK), Mary Creagh (ex-MP for Wakefield and sustainability advisor) and Polly Billington (founder of UK100) will be hoping to enter parliament directly from careers focused on energy and climate issues.

If the best-case scenarios for the Labour Party are correct and the Conservatives suffer what would effectively be a wipeout across the country, Labour PCCs contesting traditionally safe Conservative seats could find themselves on the Labour benches following July 4th. Two such candidates with energy backgrounds are Luke Murphy in Basingstoke and Ryan Jude in Tatton. Murphy is on leave from his post as Head of the Fair Transition Unit at the think tank IPPR while Jude is a Programme Director at the Green Finance Institute.

These MPs with a nuanced understanding of how the energy sector really works, of which there will be many, will be important in shaping policy and holding to account frontbench’s energy priorities.

There is a risk however, that if a Labour ‘supermajority’ transpires, the Labour benches could have ta higher share of inhabitants representing rural areas – in places like East Anglia – where residents are typically more sceptical on the issue of hosting energy infrastructure. This creates the possibility of rising tensions between the leadership’s ambition on energy, and backbench MPs who will be wanting to be seen to be representing their local interests.

3. Managing expectations around GB Energy

While there is clearly an optimism within Labour that the party’s energy policy package will get the UK well on the road to net zero by 2050, there are many areas in which important details and plans are missing. For instance, questions remain over the much-touted GB Energy and how it fits into the existing energy system and infrastructure.

Many voters have a misunderstanding about GB Energy’s role, not helped by the lack of detail early on its policy formation. Polling and focus groups suggest that some voters believe that it will be a consumer facing energy retail company, rather than an energy developer. This misunderstanding of a flagship policy could lead to trouble for Labour, and the energy industry as a whole, if voters do not feel any benefit by the next election. A Labour government will have an important job to do early in its first term to manage expectations, so that by the time of the next election it can show that GB Energy has delivered.

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