Ed Miliband’s socialist energy plans will leave Britain in the dark.
A state-owned public sector body won’t address the real problems causing extortionate electricity prices
This week, the Government published new figures confirming what everyone knows: Britain is paying far too much for its energy. According to the data, UK companies pay the highest electricity prices in the developed world, four times those in the US. No wonder our firms – especially our manufacturing firms – struggle to compete.
Labour’s answer to this is (surprise, surprise) a state-owned energy company: GB Energy.
There are two ways of looking at this initiative. Either it is an Ed Miliband vanity project, in which eco-fanaticism has been substituted for economic nous. Or otherwise it’s a way for Keir Starmer to keep Miliband and his fellow travellers firmly inside the tent. It may even be both at once.
What is not remotely plausible, however, is the idea that GB Energy will help to improve the UK’s energy security or to bring down those energy bills (by £300 per household, according to Miliband’s pre-election prognostications).
The rationale behind the new company seems to be as follows. In order to decarbonise Britain, we need more investment in green energy infrastructure. But private industry is unwilling to invest. So we need to de-risk and crowd-in private sector cash by putting the taxpayer’s money where the government’s mouth is. That means the government itself taking equity stakes in energy projects. GB Energy will therefore be a hybrid company, both energy generator and investment vehicle.
But the thinking behind GB Energy is completely at odds with reality.
First, it is predicated on the idea that the state is the solution to Britain’s chronic underinvestment. Yet as a brilliant new essay by Sam Bowman, Ben Southwood and Samuel Hughes shows, weak investment is largely due to our sclerotic planning system. This makes it “almost impossible to build anything, anywhere”.
GB Energy and its projects are going to face the same barriers, unless we bring in planning reform. And if planning reform goes ahead, what is the need for GB Energy?
Second, the authors make a compelling case that the drive towards plugging renewables into the electricity grid is itself driving up costs. This is due to intermittency problems, and the costs of rewiring the grid to cope with more distributed energy generation. Once you factor in all the costs and constraints, renewables are “nowhere near commercially competitive”.
This may well change in the near future, as technology improves and costs come down. But under a liberalised system, you might expect to see a lot more investment flowing towards nuclear power too.
Already, however, it is apparent that on nuclear and other energy sources, Miliband is prioritising ideology over market reality. For example, if Labour genuinely cared about cheap and reliable energy, it wouldn’t be gleefully pummelling the North Sea oil and gas sector. The Energy Profits Levy (EPL) imposed by the Tories was already disastrous for investment. Labour have not only increased it but extended it.
Miliband has also ruled out granting new exploration licences, and seems more than happy for legal challenges against new developments, notably Rosebank, to succeed. It’s hardly a surprise, then, that Grangemouth refinery is closing down, shedding 200 jobs. But with the North Sea oil and gas sector supporting around 200,000 jobs, that could be just the start.
Labour activists are fond of talking of a “just energy transition”, with oil and gas workers moving into comparable green engineering jobs. But to paraphrase Adam Smith, people are not pieces to be moved around on a chessboard. Given the age profile of the offshore workforce, many will just take early retirement. Younger workers will move abroad. Jobs and money will leave.
For those in Aberdeen, it might be some consolation that GB Energy will be headquartered there. But swapping high-productivity, high-wage jobs for public sector pen-pushing seems like a pretty poor trade.
Of course, for Labour, economic sense probably doesn’t really come into it. On reflection, there is in fact a third possible explanation for GB Energy: it’s a piece of socialist nostalgia for the high tide of British collectivism – a throwback to when the commanding heights of the economy were nationalised, rationing was extended and Britons shivered through the 1947 winter fuel crisis.
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With Miliband intent on using GB Energy to decarbonise the grid by 2030 – a date energy experts regard as terrifyingly unrealistic – you’d be a fool to discount the possibility of another icy winter. DT.
