Dither and delay over election promise to Scotland

One of the biggest pre-election promises of the new UK government was a new publicly-owned energy company to be based in Scotland. The first 100 days of the administration was billed as a time of pace-setting change. And yet 70 days in, even the location of the new headquarters is in dispute.

Earlier this week, BBC Scotland announced the HQ was to be Aberdeen - but that was then apparently denied by the Department of Energy Security and Net Zero, who said that no decision had yet been made and that this would be announced in due course. 

The Great British Energy Bill, whose long title ‘A Bill to make provision about Great British Energy.’ got its second reading in the Commons this week but it did little to actually push forward with concrete plans. 

Onlookers could be forgiven for asking what is going on? For a Government that had 14 years in opposition to plan its programme, this delay seems hard to fathom. The new Government was very quick off the mark when it came to withdrawing pensioners’ winter fuel allowance from all but the small fraction of pensioners on pension credit.  That was money that many were relying on to help keep their homes warm this winter and taking it away was not on the agenda when people went to the polls in July. 

The winter fuel allowance change is a policy that punishes Scottish pensioners unfairly - it is colder here and many don’t have access to the gas network. The irony that Scotland is a country which produces a lot of renewable energy and should be benefiting from lower tariffs will not be lost on many.

At the same time the big promise to Scotland of the headquarters of a new energy company that will be able to lower bills seems to be on pause. If the new headquarters is going to be in Aberdeen, why not announce it? And if they have genuinely not made their minds up, why the dither? 

Aberdeen is the obvious choice

For a Government that after 14 years in opposition to plan its programme, this delay seems hard to fathom. Aberdeen is the obvious choice as money is being drawn from the oil and gas businesses there to fund it. North Sea oil and gas operators will see a windfall tax rise, from 75% to 78%, which will raise £8.3bn in funding for GB Energy.

Reeves has also announced plans for a ‘National Wealth Fund’ based on more taxes from the oil and gas business. The fund will get just over £7 billion - tiny compared to the size of sovereign wealth funds that countries like Norway have. 

Aberdeen was a hub of the oil and gas business in its heyday. Scottish oil and gas revenues underpinned the UK's struggling economy for decades but the Aberdeen area has benefited far less than other oil capitals have done. It would be a shock if the area was passed over for the new headquarters. That is where a lot of the expertise and skills in the energy sector are based and the obvious place for GBE to be based - although it is difficult to see how the seed investment model will support the claimed thousands of jobs.

What will GB Energy actually do?

Labour promised GB Energy (GBE) will: cut energy bills, saving households £93bn; create hundreds of thousands of jobs; help decarbonise UK power by 2030; and deliver security by making the United Kingdom energy independent.

These targets are based on the model of a national power company like EDF, Électricité de France. But the funding model as well as statements by the Labour Party suggests that GBE won’t be that - it will be a seed-funding model for risky technologies. It is worthwhile as far as it goes. But if this is what the Labour Party is planning then it won’t be able to achieve targets that are based around an EDF-style model.

The TUC conducted analysis last year that reported founding a state-owned energy company like EDF would need around £61bn to £82bn of investment between 2025 and 2035 to scale up. Labour has only committed to an initial £8.3bn capitalisation of GB Energy throughout the first parliament. 

Money will likely be poured into unnecessary nuclear power

There is likely to be an announcement soon about Sizewell C - the nuclear power station developer - which is EDF in partnership with the UK government - is looking for another large chunk of money to continue with its plans. Much of that will go straight into the pockets of the French government. Hinkley Point C has been pushed back until 2029 as costs mount.  When completed, Hinkley Point C will be one of the most expensive power stations in the world. The fuel it generates will cost £90 per MWh. 

Scotland does not need or want nuclear power - the most costly form of energy even without pricing in the cost to future generations to look after spent fuel. The UK Government still spends £3 billion a year keeping Sellafield, formerly known as Windscale, safe. A renewable-based grid does not need a ‘base load’ - it needs localised pricing and flexibility. 

Conclusion

The new UK government made much of its promise to hit the ground running in terms of energy. The role of the new GB energy was supposed to be key. If it is really going to be run from a headquarters in Scotland and is going to bring jobs and investment then that will be welcome. But 70 days into the new regime, they seem to be still making their mind up about where to put it. Meanwhile there has been no delay in delivering an austerity-fueled cut to the winter fuel allowance that will unfairly hit Scotland’s pensioners.

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