Prime Minister Sir Keir Starmer has pledged to end the “pain and misery” Britons have experienced in the cost of living crisis, suggesting the publicly owned national energy company Great British Energy will be one such solution.
A new bill – the Great British Energy Bill – is to be introduced to Parliament on Thursday, setting out fresh details on the scheme and how it will do.
It was also announced that GB Energy will partner with the monarchy’s property firm to help speed up the building of offshore wind farms.
The Crown Estate owns the vast majority of Britain’s seabed, stretching up to 12 nautical miles from the mainland, and GB Energy will help develop future offshore wind projects, as part of its push to speed up the UK’s transition to renewable energy.
Sir Keir said GB Energy will help bring down bills “for good.”
But i has spoken to industry experts about the plan, and what they think it will mean for costs this year, and beyond.
What is Great British Energy?
Labour has pledged to bring in a green electricity system by 2030, which is five years ahead of the timeline promised by the Conservatives.
Its flagship project – Great British Energy (GBE) – is a publicly owned energy company that will invest in renewables in collaboration with the private sector.
To begin with, GBE will focus on newer technologies such as tidal power, and a £3bn local power plan that will invest in community energy projects.
The party says the local power plan could produce around 8GW of power by 2030 – equivalent to around 12 per cent of the UK’s projected peak energy demand.
But what Brits are keen to know is if these plans will lower the price they’re paying for gas and electricity.
Labour says its plans will cut bills
The Labour Party has claimed its energy plans will mean typical household energy bills will be slashed for good, previously saying it would help families save £300 per year.
This figure comes from a report by Ember, a think-tank, which looked at the savings from decarbonising the electricity grid at different speeds.
What the report found is that household energy bills would be lower in 2030 compared to 2023, but only if power sector targets are delivered, with even more money saved by more “ambitious and immediate action”.
Frankie Mayo, senior analyst at Ember, said: “A faster move towards clean power is the cheapest scenario for households. Electricity bills have fallen since the modelling was published, but this is likely temporary since the price cap is predicted to rise again by almost £200 in October.
“Energy prices are in flux because fossil gas prices are highly unreliable, and the only permanent protection against future price spikes is a rapid move away from reliance on gas imports.”
After enduring over tow years of sharp bill increases, prompted by Russia’s invasion of Ukraine and the subsequent increase in wholesale gas prices, Brits will be crossing their figures, hoping that Labour’s plans will in fact bring bills down.
Rival politicians have claimed Labour has dropped the £300 pledge recently.
Shadow energy secretary Claire Coutinho said: “Now that they’ve won the election they’ve tried to brush that figure under the carpet, showing us the truth that GB Energy is nothing but a gimmick that will end up costing families, not cutting bills.”
What do the experts think?
GBE will be funded by an £8.3bn windfall tax on the profits of oil and gas companies. The UK already has a windfall tax but the new Government plans to raise it from 75 per cent to 78 per cent.
This aspect has been welcomed by some in the industry, with Greg Jackson from Octopus Energy saying the UK’s reliance on fossil fuels add “thousands of pounds to bills”.
He continued: “We are pleased to see that Labour plan to fund a clean energy future by taxing the oil and gas giants.”
It’s a popular idea with the public too as a YouGov poll in February suggested that 66 per cent of people support a national energy company, while windfall taxes regularly poll approval ratings above 90 per cent.
However, Tony Jordan, senior partner at energy consultancy Auxilione, told i that GBE probably won’t directly affect household bills.
He said: “GBE is not going to be an energy company, as many appear to believe. It will not be a supplier to compete (or replace) the likes of British Gas for example as your domestic or commercial supplier.
“What GBE is, is an investment company helping to attract further investment into renewable projects. So alongside private investment, the UK government will also have a stake in such projects – in a bid to speed up delivery to get to more energy independence – although that’s only really true of electricity. It won’t directly impact bills but what it might be able to do is dilute some of the dependence on the wholesale market.”
But Mr Jordan said that unless the energy output from these renewable projects was sold to consumers or traders directly – via something known as a power purchase agreement – the most likely scenario was that it would be sold via the wholesale market, which would have a limited impact on bills.
The extra supply could bring down prices “in theory” and “achieve lower bills for all” according to Mr Jordan, but the risk is that the projects themselves are “expensive” and make future projects unattractive to investors, he said.
Others have agreed that the plans won’t significantly affect bills.
Scott Byrom, chief executive officer at the Energy Shop, told i: “We’ve been promised lower bills since I can remember, yet the cost of energy for UK consumers has only been moving in one direction. The energy mix of some of the largest energy suppliers in the UK is also already 100 per cent green, yet their prices aren’t cheaper as Labour is claiming will be the case through GB Energy.
“Being brutally honest, this is likely more about energy security and job creation to utilise the UK’s energy resources and create much-needed green jobs on our journey to increasing productivity and ‘net zero’ by 2030.”
But others suggested that the plans could “stabilise” energy prices after years of fluctuating costs, set by the Ofgem price cap on a quarterly basis.
Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, said: “Anyone who’s paid an energy bill over the last couple of years knows the cost of being reliant on gas, the price of which is volatile and set by international markets.
“The UK has spent more than £100bn on gas since the start of the crisis. The North Sea is running out of gas, so unless we start to use less of it – by building more renewables and moving away from gas boilers to electric heat pumps – we’ll just have to import more from abroad.
“Labour has said it wants to use Great British Energy to ensure that more renewables are built, through de-risking project finance. Given new renewable projects are agreed at a fixed price, these could increasingly act as a price stabilisation mechanism, protecting bill payers from the extremes we’ve seen in the past few years,” she said.
If it does lower my bills, when will this happen?
It could take a little while for bills to fall. Mark McAllister, the chairman of Ofgem, said that the costs of building out the electricity network to support the transition to renewables would offset immediate savings.
He told the Financial Times: “As we build in more and more renewables, we’re also building in the price, amortised over many years, of the networks as week.
“If we look at the forecasts for wholesale prices and then build on top of that the costs of the network going forward, I think we see something in our view that is relatively flat in the medium term.”