A true state energy supplier should bolster competition
This week, Keir Starmer outlined a simple vision for the future of the British energy industry: a publicly owned energy company.
It is a long way from the days of Tony Blair who moved the Labour party away from state ownership. The thorny question of state control has always been politically charged, but if delivered properly the idea – dubbed Great British Energy – could satisfy both sides. It could shore up our long-term resilience and encourage competition within the private sector with seed investment strategies, rather than quashing it. This is not a question of taking control over the current energy companies – instead it adds a new player to the market with an eye to strategic policy.
It might sound radical, but this is in fact commonplace throughout the world.
Across the Channel in France, public energy company EDF delivers energy to its citizens, and incidentally has the fourth-largest share of the UK’s electricity supply.
Practically, these state owned energy firms are often closely intertwined with the private sector, either through partnerships or investments.
Look at Norges Bank Investment Management. It is a wealth fund created primarily from Norway’s oil and gas resource revenues, and has a refreshingly forward-thinking approach to promoting sustainability both at home and abroad, pushing for sustainable and social outcomes in its investments.
We can copy that idea. For example, a tranche of the profits made by Great British Energy could be reinvested alongside private sector funders, into this country’s most promising scale-ups and clusters. This would spur innovation, and in turn bring jobs and bolster economic growth. It would nurture more competition in the energy sector, rather than subsuming it with an outdated idea of what a state-owned company should do.
And this investment is sorely needed. According to a recent report on the Oxford Cambridge Arc – an idea recently shelved by the government – laboratories covering an area the equivalent size of 20 palaces of Westminster should be built urgently if the Arc is to maintain its world-leading position as an innovation hub.
Additional labs along with other supply-side reforms could help to boost the economic output generated by Britain’s rival to Silicon Valley by £50bn over the next eight years, according to the report.
Now imagine this repeated across the country, with venture capital, private equity and other forms of private funding, collectively powering-up our own version of EDF.
Then equally imagine the ideas generated by these clusters and scale-up – ideas that will help us tackle some of the biggest challenges facing our society today, such as how we make our cities greener and more resilient.
These are real issues and concerns, which are affecting real people, right now. Such as with energy bills, which are on the rise. We are all asking ourselves how we use energy in our homes.
But the housing stock in the UK is probably the single oldest most obsolete stock of housing in Europe. In winter, our buildings are struggling to stay warm and in summer they similarly struggle to stay cold. Fundamentally, this means we use more energy to cool or heat our houses – a terrible waste.
When it comes to heating and cooling, we urgently need to invest in innovation around retrofitting of insulation materials and heat loss technologies. The government needs to get involved in making sure that there are the right kinds of incentives in place for end users.
An idea like Great British Energy could be the catalyst to help these cycles of innovation and investment take place, firing up Britain’s green growth engine.