The Labour government and energy:
the first 100 days
Steve Wardlaw, July 2024
So there we are – an historic victory with a mandate for change. No more talking about “if” Labour forms the next government. After an aimless and direction-free tail end of the Tory administration, it is good to see a service-led administration with a plan of action.
However, we now hit the ‘translation issue’ – how to get from manifesto commitments into detailed policy. This applies across all policy areas, not just energy, with ministers now competing for finite resources. While there is scope here, as we can see from the new Chancellor, there needs to be an holistic view of public money, private money and other non-financial incentives.
Looking at the energy sector, there is a lot to do. However, a lot of it takes time. You can’t build a power station in 100 days. You can’t make the UK a powerhouse for green tech in 100 days.
What can you do in 100 days?
There are some easy wins, but mostly it is giving people confidence in direction. Those wins divide up into two groups – small but important, and then those that are the foundation blocks for bigger policies. (Given its scope and scale, I have not dealt with more general/generic planning issues here.)
Below are my thoughts on how to show leadership in the energy and resources sector:
Engage with Tata Steel and Port Talbot – showing early direction and strong commitment
This isn’t strictly energy, but there is a big element of energy jobs to it. The new government needs to show immediate leadership to stop the second blast furnace being shut. There will need to be a rescue package, similar to that offered by the Tories, but already this government have stated that job guarantees must be on the table. A small but significant change in emphasis will allow the business secretary Jonathan Reynolds to show that there was a better deal to be done – the change in emphasis being a move from just throwing money at a private company in the belief that it will always use that money better than a public body. A successful mix of both will show the energy sector – which needs the same but a magnitude bigger – that there is a public/private way forward.
Providing strategic certainty on GB Energy – leading accelerated development in the energy sector
We have some outlines – it will be based in Glasgow and will create an environment to encourage public/private partnerships. It will not be a generator per se. It has a website – HERE.
However, there is a lot more detail needed. What structure will it have (state owned entity? Private company majority owned by the Government but with strategic investors etc?)? That could be announced in the first 100 days. Members of the board of GBE could be announced (although the search for a chief executive and chairman will take longer).
Importantly, what will it actually do? It will be a co-investor in new projects? Then there is scope to reallocate part of the UK Infrastructure Bank to GBE straight away. It will scale up technologies? Then it should be able to start negotiating with university and tech hubs and publicise potential partnerships. Founding community energy partnerships? This is using existing technology so perhaps agreeing the standardised set of agreements for municipalities. Start with areas where the help is most needed – Blackpool, Southend, Clacton.
We have not yet seen details of the government’s Energy Independence Bill but details will be in the King’s Speech no doubt.
GB Nuclear – using its background to boost GB Energy
The government has stated that GB
Nuclear, the current government body charged with redeveloping the UK’s nuclear
sector, will be folded into GB Energy. Very sensible and that can be (as with
the UK Infrastructure Bank above) used to accelerate GB Energy’s investment in
the sector.
However, there are certain things that GB Nuclear got wrong, based on how the
previous government set its remit. (You can see my views on this HERE.)
Therefore there should be a change in its remit and a renegotiation of terms with
the private companies received GB Nuclear funding – nothing extreme, but just a
way for GB Energy to benefit from the commercial upside that its funding has
given the private sector.
AR6 (allocation round 6) offshore wind round – demonstrating long-term thinking to the sector
This is the next round of offshore wind generation in the UK, where the government sets a price for electricity generated and asks wind power companies to bid. For this round the budget has been set at £800m. While this is a big increase on AR5 (where no power companies bid – a famous government failure) there is a question over whether this bigger sum is yet still enough, given inflation and materials shortages. As prices increase, the government budget buys less capacity. Certainly the wind companies think that more needs to be on the table to make up for the missed capacity in AR5. We are now in the middle of the AR6 process. It may be too late for the Government to reopen this, but increasing early capacity now will make targets of 2030/2035/2050 easier to achieve.
Change planning to allow onshore wind at a rapid pace
This is cheaper than offshore wind, so would result in a saving in the decarbonisation costs as compared to the previous government. However, we must not lose our position as a global leader in offshore wind production. This will no doubt be set out in the King’s speech. UPDATE – this has already been done – 5 days in…
CCUS Clusters (Carbon Capture Utilisation and Storage ) – leading on innovative technology and the growth in good jobs; a model for future investment
The (previous) government announced last year the aim of two new CCUS Clusters by 2030, hopefully capturing 20-30 Megatonnes per annum of carbon dioxide. They are ‘clusters’ as they need to be based in industrial areas that have CO2 as a byproduct. However, the (previous) government was considering delaying this because of increased costs of this new technology. The sector is again worried that delays will create uncertainty and send negative investment signals to the private sector, exactly at the time when the (new) government has a stated aim of attracted £3 of private investment for each £1 of public money.
This is exactly the situation where a GB Energy could come in as a foundation investor, take some of the commercial and technology risk, on the understanding of the benefits to the UK of becoming a world leaders in CCUS technology – 145,000 jobs in the UK alone. Taking action on this, and confirming the CCUS Clusters selection process will go ahead, would be a decisive step in the first 100 days.
How the new government handles this will set the tone for the entire first term as to its ability to develop new technology in the UK, one of the three main pillars of GB Energy. Get it right and, as the new chancellor has said, a wave of private money will hit the UK.
Warm home targets – showing a depth of thinking about easy wins over headline mega-projects
The incoming government can also show maturity by announcing less eye-catching but still important initiatives. One such is the warm homes scheme. Although the prime minister has expressed concern about the overall cost here, the manifesto is clear about grants and low-interest loans.
There is significant political capital here, creating an immediate saving for some of the worst homes in the country – saving up to £500 per year. It would make sense at the same time to reintroduce the obligation on landlords to insulate homes that was dropped by Michael Gove.
The other upside is a reduction in consumption will reduce our energy purchasing needs, accelerating the end of our reliance on imported gas.
As the new prime minister has noted, there is a lot to do. If And by the time you read this, we may already be 5 days into the first 100. 95 and counting…
July 2024.
Cover: stock