Government launches GB Energy – can it cut bills and stimulate the economy?

The Government has launched a publicly owned clean energy company, Great British Energy, announcing its first major project today.

The government plans to lease land belonging to the royal family to build new wind farms on the seabed. It hopes the project will help power 20 million homes.

The wind farms will be built in partnership between Great British Energy and private companies. The Crown Estate, which owns the land on which the wind farms will be built, owns much of the UK’s seabed, extending out to 12 nautical miles from land.

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Starmer claims the plans will bring £60 billion of investment into the sector, as well as “permanently reducing energy bills”.

Stefan Boscia, writing for the news site Politico, points out that this initiative is not necessarily new, as the Crown Estate already leases land for wind farms. “The Crown Estate made £1.1 billion last year, a very large portion of which came from leasing offshore wind farms,” he says.

As Boscia points out, the key difference is that these projects will be carried out by a public company under a new government initiative.

Ed Miliband, Secretary of State for Energy Security and Net Zero, told BBC Breakfast it would take some time for households to start seeing an impact on their bills, but the project would help ensure long-term energy security. “We are moving as quickly as we can,” he added.

The government will introduce its Great British Energy Bill to the House of Commons today, after introducing it in the King’s Speech last week. As well as ensuring energy security, the government hopes that investing in clean energy will help boost the country’s economic growth.

What is GB Energy?

GB Energy is a publicly owned clean energy company launched by the government to deliver on a key manifesto promise. Labour has said it wants to transform the UK into a “clean energy superpower” and ensure energy security.

It comes after households suffered high energy bills in the wake of the pandemic and Russia’s invasion of Ukraine. The government said clean energy was part of the solution to prevent something like that from happening again.

GB Energy “will cut bills and provide energy security that will put oil tyrants like Putin on the street,” the Prime Minister’s Office said.

GB Energy will not supply electricity to households and businesses – rather, it is about accelerating investment and creating public ownership.

The government intends to invest £8.3bn of public money over the course of this parliament. It hopes this will be matched by £60bn of private investment – although there is no guarantee this will happen.

Will GB Energy reduce bills?

In theory, GB Energy will make the UK less dependent on fossil fuels and energy imports from other countries. The idea is that the country will be less susceptible to price shocks.

However, it is currently unclear whether the government will be able to secure the private investment it needs to help deliver its plans, and we do not know exactly how long it will be before households start to feel the impact on their bills.

Tom Edwards, senior modelling consultant at Cornwall Insight, suggested securing investment could be difficult. He told the BBC that the company “will need to have certainty of revenues so that investors can say, ‘Yes, I’ll put my money in’”.

He added that most of the capital in such projects is allocated for start-up, which means a lot of money has to be spent at the beginning.

In an interview with BBC Breakfast, Miliband said GB Energy would become profitable within the next five years.

When asked when bills would start to come down, he said: “In a few years, as we build new onshore wind farms, new solar farms, we’ll start to see an impact on bills, but there are a lot of things going on here. So our exposure to gas prices, which are set internationally, is something I have no control over.”

Will investing in clean energy have a positive impact on the economy?

As well as cutting bills, the government hopes investing in clean energy will boost the economy. It said its plans would “create jobs and build supply chains in every corner of the UK”.

The spillover effect of this could be felt more broadly. People will need specialized training to do these jobs—and more people in skilled jobs means more people with decent incomes to spend money and keep the economy going. At least that’s the theory.

The UK also has a problem with under-investment – something the government is trying to fix with a range of policies, from pension reforms to an overhaul of the planning system. Investing in clean energy infrastructure could help.

In its 2021 Net Zero Emissions Review, the Treasury found that the GDP multipliers for green investments in renewable energy could be between 2.2 and 2.5 times greater than those for fossil fuel energy.

However, he added that “the overall impact on productivity depends primarily on the extent to which new technologies require lower operating costs and increase productivity compared to existing technologies.”

Chancellor Rachel Reeves has declared economic growth a “national mission” and hopes the launch of GB Energy will bring the government one step closer to achieving that goal.

But for now, there are still many unknowns – one of which is whether the government will be able to raise the £60 billion of private investment needed to deliver its plans.