Will GB Energy live up to the Labour Government's promises? 5 Questions Answered

The Labour Government made a big deal of its pitch to create a new energy company based in Scotland called GB Energy.

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.

It is to be funded by a new tax on oil and gas. There are claims that these additional tax hikes on an industry that is in desperate need of transitional investment to renewables will lead to a loss of jobs and investment in the Northeast. This together with latest reports that the energy secretary Ed Miliband has ordered an immediate ban on new oil and gas licenses, if proven true, will put an immense amount of pressure on the industry, guaranteeing job losses and significantly reduced investment. Furthermore, if Labour then betrays the Northeast and places the GBE HQ in an area that voted Labour instead, it will call into question Labour’s promise to put ‘country first, party second’. 

1 Where will GB Energy be based?

We don’t know yet. The Labour Party has said that GB Energy will be based in Scotland, but they have not announced where. There is a lot of expectation that it will be based in the Northeast 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.

Rachel Reeves has also confirmed plans to start a National Wealth Fund - and there are reports they want to fund this too with taxes on the oil and gas sector. 

Aberdeen was a hub of the oil and gas business, Scottish oil and Gas revenues underpinned the UK's struggling economy for decades and the Aberdeen area has benefited far less than other oil capitals have done. 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.

2  How much is the Labour government planning to invest in GBE?

Not enough. 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. 

Labour initially said it would spend £28 billion a year on the green transition - that has been scaled back to £5 billion. Yet it has retained very ambitious targets. It is still pledged to decarbonise the electricity sector by 2030 even though that was to be funded through the £28 billion. Antony Froggatt of Chatham House wrote: “Dropping the £28 billion funding commitment makes Net Zero harder to achieve and raises questions about the credibility of UK plans.”

3 Will GB energy tackle the major barriers to the UK moving to renewables?

No. The UK’s major issue with moving to cheaper renewable energy is the weakness of the UK’s privatised national grid, which is still largely configured around coal-fired power stations in the north of England that no longer exist. 

There are already lots of very powerful and cost-effective renewable projects in the pipeline. It can take a decade or more for a new energy generation project in Scotland to get connected. 

But there may be some scope to streamline planning - objections to pylons and interconnectors down south are making it harder to modernise the grid.  An interconnector to bring power from the North Sea onshore in Suffolk was a key election issue. Planning regulations are outside the scope of GB Energy but altering them may help. 

4 Will GB Energy lower energy bills for my home or business by 2030?

Not likely. It is hard to see how the model of investing in innovative technology will lower either household or business energy bills in the next few years for most people across the UK. 

There may be some room for a small number of communities to benefit from the ‘local power plan’. About a third of the funding for  GB Energy is already earmarked for encouraging more developments across the UK, like the ones already happening in some parts of Scotland. For example, a portion of the Fintry wind farm in Stirlingshire is owned by the community, so some of the wind farm’s profits come back to the local development fund. In 2023, this profit took the form of £1,000 grants for households to install energy-efficient upgrades.

5 Does GB Energy plan to invest in nuclear power?

Unfortunately, yes. GB Energy will probably swallow up Great British Nuclear which used to be called British Nuclear Fuels Ltd. It was resurrected by Rishi Sunak in 2023. As BNFL it was hit by a scandal over falsifying data.  Under its new name it is running a competition for so-called “small-scale” nuclear reactors with plans to award contracts to the winners. EDF is pitching to build two of these reactors at Sizewell - this time with all risk of cost overruns at the taxpayers’ expense as experienced with EDF elsewhere. 

Unlike renewables, the cost of nuclear power is rising. 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.

Conclusion 

GB Energy is not going to deliver the new UK government's election promises: 

1. It will not enable Scotland to fulfill its potential as a renewable energy powerhouse
2. It will do little or nothing to address the injustice that Scottish households and businesses pay the highest energy bills in Europe whilst Scotland is producing so much cheap renewable electricity. 

GB Energy is another example of the UK government trying to stamp a Union flag on Scottish resources and call them British. Another example of Scotland's energy potential and the good it could do Scotland being diluted by this broken union.