industry

State-owned electricity generation firm ‘could save Britons nearly £21bn a year’


A publicly owned electricity generation firm could save Britons nearly £21bn a year, according to new analysis that bolsters Labour’s case to launch a national energy company if the party gains power.

Thinktank Common Wealth has calculated that the cost of generating electricity to power homes and businesses could be reduced by £20.8bn or £252 per household a year under state ownership, according to a report seen by the Guardian.

The Labour leader, Keir Starmer, has committed to creating “a publicly owned national champion in clean energy” named Great British Energy.

Starmer is yet to lay out the exact structure of the mooted company, although he has said it would not involve nationalising existing assets, or become involved in the transmission or retail supply of energy.

Starmer instead hopes to create a state-backed entity that would invest in clean energy – wind, solar, tidal, nuclear and other emerging technologies – creating jobs and ensuring windfalls from the growth in low carbon power feed back to the government.

The Common Wealth report, which analysed scenarios for reforming the electricity market, said that a huge saving on electricity costs could be made by buying out assets such as wind, solar and biomass generators on older contracts and running them on a non-profit basis. Funding the measure could require a government bond issuance, or some form of compulsory purchase process.

Last year the government attempted to get companies operating low carbon generators, including nuclear power plants, on older contracts to switch to contracts for difference (CfD), allowing any outsized profits to flow back to taxpayers. However, the government later decided to tax eligible firms through the electricity generator levy instead.

The Common Wealth study concluded that a publicly owned low carbon energy generator would best deliver on Britain’s climate and economic goals, would eliminate windfall profits made by generators and would cut household bills.

MPs and campaigners have argued that Britain’s energy companies should be nationalised since the energy crisis, which has resulted in North Sea oil and gas producers and electricity generators making windfall profits, and a string of retail suppliers collapsing, costing taxpayers billions. Detractors of nationalisation in energy argue it can stifle innovation and expose taxpayers to huge financial risks.

Common Wealth pointed out that more than 40% of the UK’s offshore wind generation capacity was publicly owned by overseas national entities, meaning the benefits of high electricity prices linked to the war in Ukraine had flowed back to other governments.

The study found the publicly owned generator model would create more savings than other options, including a drive for voluntary CfDs; splitting the generation market between low carbon and fossil fuel sources and a “single buyer model” with nationalised retail suppliers.

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The Common Wealth director, Mathew Lawrence, said: “The energy system faces two acute challenges: the staggering profits being made by generators, and the need to rapidly decarbonise generation.

“A publicly owned generator can address both these pressing issues, rebuilding out energy system around the public interest. That is the fastest, fairest, most effective way to build a clean, secure, affordable power system.”

Starmer has cited the success of European energy firms with state backing including Sweden’s Vattenfall and Ørsted, which is part owned by the Danish state.

The authors of the Common Wealth report argued that Great British Energy could be a “powerful tool” in decarbonising Britain, but said ambition akin to the creation of the NHS was needed to make a serious difference.

“An approach to reform that does not go to the root of the upstream problems in our energy system, that does not build out at scale and instead remains a marginal actor in the transition, will be unable to deliver on its potential or, in the case of Great British Energy, its stated goals. In this context, timidity and incrementalism are the greatest risks, and ambition the safest path forward,” they wrote.



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