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The Guardian view on GB Energy: Labour’s big idea could be a great one for the planet | Editorial
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The Guardian view on GB Energy: Labour’s big idea could be a great one for the planet | Editorial

Sir Keir Starmer’s announcement earlier this month that he will be shrinking his green prosperity plan was disappointing. Last year was the hottest on record and, most likely, in the past 100,000 years. If there were ever a moment to go big on the climate, it is now. However, even in its diminished state, Labour’s plan represents progress compared with the government’s. That is the message contained in a report by the Common Wealth thinktank, which takes heart from Labour’s proposal for a publicly owned company, Great British Energy.

According to Common Wealth, this could potentially be the means to achieve Labour’s goal of clean power by 2030. They caution that the UK is not on track to meet its target for green energy production with its current method of decarbonizing the power system. The issue lies in the reliance on private profits and fragmented markets. However, the thinktank argues that this approach is slower, costlier, less reliable, and more carbon-intensive compared to a transition led by state coordination. By using funds from Labour’s £8.3bn investment in GB Energy, renewable energy projects could save up to £208m each year in interest payments alone, as opposed to relying on corporate loans.

While there are benefits to private provision, they are not significant in the energy sector. Markets are meant to effectively determine the supply of goods and services. However, due to climate goals, government officials had to take over control of a crucial part of the electricity grid in 2022. Competition is expected to drive down prices by promoting efficiency. However, electricity prices alone were responsible for 3.5-5.5% of inflation between March 2021 and May 2023.

GB Energy’s proposal offers the potential for a quicker, fairer, and more cost-effective shift towards green energy. This should be welcomed by Sir Keir and Rishi Sunak, who both adhere to restrictive fiscal policies. While Mr Sunak’s reversal on net zero targets last year brought attention to the climate crisis, the government’s overall strategy remains focused on a public and private investment of £280bn-£400bn by 2037 to decarbonize the power industry. This amounts to an annual spending of £21bn-£30bn, which is 50% to 100% higher than the current rate of investment in low-carbon energy sectors.

Common Wealth’s main point is that the current system, which depends on a deregulated wholesale electricity market, hinders the quick implementation of capital investments. Interestingly, public ownership already has a significant impact on the production of clean energy in Britain. However, it is foreign governments that are leading the way in developing, expanding, and promoting new technologies.

Labour’s goal of becoming a “clean energy superpower” can be achieved through the establishment of a national champion similar to France’s EDF. Currently, around 40% of offshore wind generation is controlled by foreign state-owned companies. Sir Keir’s plan is to increase the power generated by sea-based wind farms fourfold by 2030. This can be better accomplished through the establishment of GB Energy, which would allow for reinvestment of income to accelerate the transition towards energy independence, rather than distributing profits to foreign states or private investors. The UK has the potential to become a leader in wind energy, comparable to Saudi Arabia’s position in the oil industry. The decision facing a Labour government is whether to passively observe the privatization of our largest clean energy resource or secure its benefits in a more socially equitable manner. This should be an obvious choice for Sir Keir.

Source: theguardian.com