GB Energy: the perils of Government

In the run up to the General Election, the Labour Party went big on GB Energy, green power and a climate change revolution. We are now nearly 10% of the way through this Government’s term. Energy policy requires long-term strategic thinking; how is the Government measuring up?

Steve Wardlaw, November 2024

There are lots of trite cliches about the difference between governing and opposition. What is true is that any department’s plans are always derailed by ad hoc events. The strength of a Government is in how it manages to firefight and meet its long-term goals. Currently, in energy policy, the Government is in danger of not showing that strength.

Perhaps the first area we could show greater strength is the most important: communications.  All politics is narrative, but energy policy is incredibly complex, and we risk failing to get onto the front foot in this area by not crafting our message in an accessible way, without minimising the complexity of the policy area.  By strengthening energy policy comms, we should be focused on not just explaining the challenges and benefits of our energy policies, but making it real and understandable for voters. 

As part of this, we should also focus on becoming more adept at challenging poor journalism in relation to energy.  For example, this FT article.

The headline is certainly arresting: “GB Energy gets just £100mn over 2 years in Budget despite £8bn pledge”.  Arresting, but realistically nothing more than clickbait to gain attention.  £100m over two years is l likely the correct number. But we should explain why that is the case: an energy company looking to invest does not start spending 100s of millions of pounds immediately when looking at a deal. The greater part of investment  comes after the deal is signed and the parties have taken the final investment decision.  At the early stages, companies pay advisers and conduct studies.  DN: say a bit more now and the business cycle of energy deals/policies?  

There will be those who will attack the Government’s plans; whether  as advocates of a smaller state, or a less directed industrial strategy, or perhaps otherwise.  Yet the most noticeable thing throughout this article is the distinct absence of any rebuttal from the Government, on what is ultimately a deeply  misleading statement.  It was left to a former senior energy civil servant to give the correct pithy response: “It’s what you need to get officers, start hiring and start making commitments. If it was £2bn this year, I would question their ability to spend it in time.” So – for now – the Government is just about on track.

However, is the Government itself also underestimating the scale of the task?

As noted above, it takes time to hire the C suite, agree strategy, liaise with Government on all relevant strategic matters, but the clock still ticks. Senior voices in the sector are beginning to speak. A (flippant) summary of the emotional reaction from UK energy stakeholders in relation to current activity on GB Energy is this: the Government should already be concerned about GB Energy failing to deliver in this electoral cycle, and if they aren’t, then they are misunderstanding the degree of the problem. Government and its departmental bodies need to become less performative (“we have set up a company called GB Energy/held a summit”). We need to move beyond this and make it more relatable to the public (“in three years’ time GBE will have insulated [XX] homes a year, cutting bills by [XX]”). We have seen in the recent US elections that the voting public react to how they are directly affected, not macro-economic policies.

Looking from the outside, there are two processes that are in conflict. While the development of an energy project may take, with a good wind, five years (aka one electoral cycle), it will take GB Energy at least 18 months to have a suitable board that is tooled up with the corporate strategy. So, if the government waits for GB Energy to finish its set-up, which allows it then move to onto the development of energy projects, it will be out of time.

To give an example, how would this work with an established international energy company? The energy company will have core resources that it will lend to a particular project while that project tools up, so that by the time a project vehicle is established, the project has not been delayed because of the lack of a project vehicle.

Largely, the issue is the same here. The government therefore needs to use central resources while GB Energy is being established. Admittedly this is unusual, but then setting up a national champion and directing energy policy is also unusual. Given that, the government needs to be taking a more active role in filling that timing gap. Where concerns have been expressed, this is around what is appearing more and more like a government vacuum in that regard. And if we hark back to the FT article referred to above, then there is a need for specific comms on this so explain why it may look – to the untrained eye – why the Government is both setting up GB Energy and seeming to do GB Energy’s work itself.

Why is there a need for immediate action? Perhaps a practical example will help. An existing issue is the need – right now, if not before – to flesh out the high-level statements that Government is making. One of the remits of GB Energy is to encourage investments in novel technology, and create globally-leading sectors here in the UK. £8.5bn is not enough to invest in all novel sectors, so direction is needed. This would be an excellent area for the Department of Energy etc to be looking at now. It behoves the Department to look beyond wind and solar – the UK has the ability to be a world leader in carbon capture, hydrogen and small modular reactors. There are some easy wins here - for example hydrogen in some gas grids can already be blended up to 20%, but production costs are still too high, so a perfect example to explore whether government and private investment could allow a scale-up and concomitant cost reduction.

Then, once there is confidence that the Government has a handle on the execution detail, this needs to be related to real needs. We know now from the work that the Labour party did in the run up to their election victory, and also the fate of the Democrats earlier this month, that voters want to hear the direct benefits that all policies will have on them. Lastly, therefore, the Department of Energy Security and Net Zero needs to reposition its comms to recraft the messages from the slogans that got this government elected into more prosaic concrete benefits that consumers/voters will understand. This is more than soundbites – it is creating a mindset with the public that the understand the macro decisions being made. So, will GB Energy result in lower prices for the public, with the additional benefit of greener production? If so then this needs to be the government’s message, but also see above. If the government needs to make that promise as a political issue, which it likely does, then it needs to make sure that it can deliver on that promise, hence the need for the government to parallel run while GB Energy is being set up and populated.

There is an overall perceived situational conflict: the Government is not yet sure how much it can direct (or even tool the exact scope) of GB Energy, but that leaves a material time lag in the work that GB Energy should be doing once it is fully tooled. There will not be time for GB Energy to evolve and then decide its commercial and strategic details and hit first term goals.

The actions needed are simple, but they do involve more initial effort from the Government - and as stated above it feels that the Government is struggling with the day-to-day, and its messaging (again, neither unexpected, but visible improvement is needed). If I could post one thing in the Government’s suggestion box, it would be for the Government to set up a rapid delivery team, working in consultation with the Government and the chair of GB Energy. This informal rapid delivery team should help to develop policy, decide on angles for potential deals, produce reports on the strengths and weaknesses of each ‘green’ form of energy, and lay out options for quick wins, ready to head over their views and research to GB Energy’s C suite asap.

That body may also evolve to advise the Government on GB Energy’s ongoing progress – so not just delivery but continued delivery. Energy projects are hard and take time – and sometimes they don’t make it to close. The Government needs to inject its energy delivery team with a realistic view of the landscape, and a neutral, shadow delivery team will help move the needle.

Otherwise, from an outsider’s perspective, the needle isn’t moving at all.

September 2024.

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