Great British Energy and plans for a wind of change

As it campaigned during the general election, Labour was brimming with bold claims about how a state-owned power company could bolster the nation’s energy security and provide people with clean, cheap power. Great British Energy would help the UK to “take back control of our energy”, would provide “real energy security from foreign dictators” and would cut energy bills “for good”.

With the election won and Labour replacing the Conservatives in power, GB Energy duly sparked into life. Its launch in July sat alongside stretching targets set by the new government designed to help to decarbonise the power system by the end of the decade, with an ambition to double energy generated by onshore wind farms, to triple solar power and to quadruple offshore wind.

Already sceptics have raised their eyebrows, questioning whether and how the new entity can ever achieve its lofty ambitions.

The government is rushing through legislation to establish GB Energy, which will be based in Edinburgh, Aberdeen or Glasgow and will have taxpayer funding of £8.3 billion to invest until the next general election. It will be led by Jürgen Maier, the former chief executive of Siemens UK. The bill to establish it is set to be voted on by MPs this week, although exact parameters remain fuzzy. It is still unclear how its money will be apportioned and what technologies GB Energy will back.

According to its mission statement, its remit will be twofold, taking direct stakes in energy projects and acting as a developer of green assets, an approach similar to that taken by the state-owned British Business Bank in developing financial markets for small businesses.

“We aren’t talking about diminishing the role of the private sector but leveraging the state more effectively to crowd in finance and capital, de-risk projects and de-risk the development of renewables projects and network assets, so that investment can take place and projects can be developed more quickly,” said Lewis Heather, a director at Baringa, a consultancy that fed into Labour’s policy work on a state-backed energy company.

GB Energy was launched alongside a partnership with the Crown Estate, which manages the property and land portfolio of the monarch and whose work includes management of the seabed around British shores. There are no details of how much the new body will divert towards the partnership, but it has promised to attract about £60 billion in private capital.

The Crown Estate, which runs seabed lease auctions, already conducts some pre-development work, including assessing the physical condition of the seabed and the environmental impact of development of energy projects. The government is also legislating to give the Crown Estate the power to borrow money in an effort to speed up the pace and scale of offshore power development, potentially resulting in more frequent seabed leasing auction rounds.

The deal has promised to ensure that there is better co-ordination between the Crown Estate and various government departments, leasing enough land for development eventually to produce 30 gigawatts of energy, enough to power 20 million homes, as the government attempts to meet a target of 55GW of installed capacity by the end of the decade. The UK produces only 14.7GW through offshore wind at present, with another 80GW in the pipeline. Not all of that capacity will be developed.

The partnership is seeking to halve the amount of time it takes between the start of construction and a wind farm generating electricity, a process that can take ten years, excluding the preparatory work needed to finalise the seabed lease. However, that would still mean that some of the turbines brought forward under the project would not start contributing towards Britain’s generation capacity until after 2030.

Efforts to bring more projects to the stage where a lease is granted by the Crown Estate would have some positive effects, Tom Smout, a senior associate at Aurora Energy, said, but he added that “obviously, they won’t be felt for some time because these are the early stages of projects that won’t be developed at least until the next parliament, even with the acceleration of timelines”.

Others have identified delays in receiving planning permission and securing a grid connection as being bigger issues to solve. An analysis from Cornwall Insight, a consultancy, suggested that grid connection issues and supply chain shortages were factors that put Britain on course to miss its 2030 targets.

“If you talk to developers and ask them what the real blockers to developing projects are, it is supply chain, it is skills shortages and it is grids,” Nathan Bennett, of RenewableUK, a trade body, said.

Labour has said that it will bring forward planning reform and it has lifted the effective ban on onshore wind development in England and Wales. However, lengthy grid connection queues remain an issue, despite Ofgem promising to kick so-called “zombie” projects, the term for stalled or speculative schemes, out of the waiting line. A report by the Commons’ environmental audit committee this year found that there was more than twice the amount of energy generation in the queue than was needed to achieve the previous government’s 2035 net zero power target.

Another concern is that the establishment of GB Energy could be a distraction in reforming other parts of the process. “It’s more the departmental time of establishing GB Energy versus the trade-off of these other issues that we need to bring forward to address the barriers to the growth of renewables more generally,” Bennett said.

One area that GB Energy could assist with is helping to crowd-in private sector capital to earlier-stage technologies, such as carbon capture and storage, which involves the capturing and storing of carbon emitted under the sea, and hydrogen production, which has been touted as a replacement for natural gas.

“The reality is that, for a private sector, it’s very difficult for them to invest in capacity against the very uncertain, rapidly evolving policy space,” Smout said. “There’s a risk of stranding assets, there’s a risk of investments that go into projects that subsequently don’t go anywhere.” A state actor investing would be a show of good faith, he said.

GB Energy also needs to demonstrate its financial success. More mature assets, including offshore wind farms, could contribute more readily towards than earlier-stage generation or infrastructure assets. Ed Miliband, the energy secretary, has suggested that GB Energy will start making a profit in the next five years.

There is no shortage of private capital looking to invest in offshore wind. However, GB Energy could still direct capital towards earlier-stage technologies and gain exposure to offshore wind without directly investing capital, according to Heather. “That doesn’t mean they might not take stakes in some of the projects like offshore wind, but those stakes would be without cash injection in return for the development role that they’re playing with the Crown Estate.”

There are questions, too, about how much GB Energy’s limited budget can achieve. The government has yet to set out how the £8.3 billion in funding will be allocated. Cornwall Insight said that an extra £48 billion would have to be spent on new, clean power to hit the government’s goals, in addition to the £18 billion it is already predicted that upcoming energy projects will cost.

GB Energy is seeking to boost the level of clean and homegrown energy within the nation’s energy mix, reducing the reliance on gas, which soared in the wake of the Ukraine war and pushed millions of households into fuel poverty. Miliband has yet to say when bills, which remain hundreds of pounds above pre-energy crisis levels, might be brought down.

“It contributes to security, making us less dependent on imports, contributes to decarbonisation by removing fossil fuel from the energy mix and, obviously, it contributes to costs if gas is more expensive than other kinds of generation,” Smout said. Gas provided 32 per cent of the UK’s electricity mix last year.

There is a chance that by de-risking green energy projects, GB Energy will help to make subsidy auctions like the contracts-for-difference regime more competitive and the overall cost of clean energy even cheaper. “That means that those private sector developers will come in with a lower support payment that they need. And, in a competitive market, that’s what we would expect to see,” Heather said.

A spokeswoman for the Department for Energy Security and Net Zero said that “Great British Energy will be at the heart of the government’s mission to make Britain a clean energy superpower”. She added that its work would be complemented by “experts who will clear the way for energy projects, including through speeding up grid connections to bring clean power online”.

Focus turns to England’s dearth of turbines

Lifting a de facto ban on the construction of onshore wind farms in England was one of Labour’s first acts in office (Emma Powell writes). Of the 9,034 onshore turbines operating across the UK, capable of producing just over 15,000 megawatts, only 2,015 are in England, with a capacity just shy of 3,000MW.

An effective ban was introduced in 2015 by David Cameron, which meant that a single local objection could block onshore wind projects. Rishi Sunak had pledged to lift the effective ban, but ambiguity over the changes mean that very little has moved through the planning process since September last year, when the reforms were put forward by the previous government.

Since then, only eight onshore applications have been submitted to the planning system in England, five of which are single-turbine schemes and three are replacement projects, according to an analysis by RenewableUK, a trade body.

The changes under Labour mean that onshore wind developments will be treated the same as any other form of infrastructure project, dropping rules that had required local councils to draw up plans for the best turbine sites, which they often lacked resources for. A clause that required “community support” for projects also has been scrapped over concerns that it meant any local opposition could derail a scheme.

As with other types of renewable energy generation, delays in securing a grid connection will present a hurdle for Labour’s goal to double onshore wind capacity. There are also questions over the extent to which policy changes in England will make a difference when it is likely that, owing to weather conditions, Scotland and Wales will be responsible for more new onshore wind generation.

Doubling the country’s wind power need not mean doubling the number of turbines, according to RenewableUK, if older technology is replaced with newer turbine that are more efficient and powerful. “Repowering” also takes advantage of existing grid connections, so would need only planning permission, which would be easier to gain.