According to an analysis from the think tank Common Wealth, without significant public funding for renewable energy, the UK's shift toward sustainable power sources will be slower, more expensive, and fraught with insecurity. Investing publicly is highlighted as a more cost-effective alternative than relying on private financing for the energy transition.
Common Wealth's recent study reveals that Labour's revised proposal to channel £8.3bn into a new state-run energy enterprise, GB Energy, could net up to £1bn in interest savings across a five-year Parliamentary cycle.
This comes in the wake of Labour scaling back its ambitious £28bn yearly green infrastructure investment plan, citing fiscal constraints and elevated interest rates as barriers. Despite this, Labour leader Keir Starmer reaffirms the party's dedication to achieving a zero-emission power grid by 2030 and promises to outspend the current administration on eco-friendly initiatives.
Labour's latest green investment strategy, unveiled last week, earmarks £8.3bn for GB Energy. This venture aims to catalyse renewable energy projects in collaboration with the private sector and local communities, potentially saving £125m to £208m annually in interest costs compared to corporate-financed investments.
"With lower borrowing costs and no need to pay shareholders in perpetuity, direct investment through a publicly owned company could save customers tens of billions compared to private investment," said Chris Hayes, chief economist at Common Wealth and co-author of the study. "Recent difficulties hitting new renewable projects both in the UK and abroad are testament to the difficulty of relying on fragmented and profit-driven actors in a period of uncertainty. Instead, public ownership offers the flexibility to steer us through an increasingly turbulent period of transformation."
The necessity for substantial investment to facilitate this transition is undisputed, with estimates suggesting nearly $900bn is needed by 2050 for the UK's energy infrastructure, including power generation, grid modernisation, and innovative technologies.
Adhering to Labour's original £28bn annual green investment could have trimmed £400m to £700m off yearly interest expenses, underscoring the cost-efficiency of public funding over private borrowing for clean energy projects.
Consequently, Common Wealth recommends an extra £22bn in public investment for domestic renewable resources over the next legislative term, beyond the £8.3bn designated for GB Energy. This investment is crucial for expediting the energy transition and enhancing the UK's energy autonomy.
Past analyses, like one from the TUC, suggest investing £30bn to £40bn by 2030, which could establish a national energy company on par with France's EDF.
The report also underscores the prevalent public ownership of the UK's renewable assets, albeit by foreign governments rather than the UK itself, revealing that 44.2% of the nation's offshore wind capacity is controlled by state-owned entities from abroad, including the Malaysian government and the city of Munich, which own more UK offshore wind assets than all UK public entities combined.
Mathew Lawrence, director at Common Wealth, said the "true test" of Labour's ambition for GB Energy Centre is how the energy company is designed and scaled.
"The UK squandered the wealth of the last energy revolution by privatising the North Sea and cutting polluter taxes," he said. "But the renewables revolution could be our Norway moment - where we harness the resources of our island home to benefit us all for generations to come.
"An ambitious public renewables company like GB Energy on the scale of leading international equivalents would mean lower energy bills, good jobs in every part of the country, faster decarbonisation and energy independence for the UK - indeed, it is the cornerstone of any serious attempt to transition our economy."