GB Energy - what do we know?

The Scottish government promised a publicly-owned energy company in 2017

I’m not sure how closely Ed Miliband follows Scottish politics but he’d be wise to look at what happened to the SNP’s version of GB Energy.  In 2017, the then First Minister Nicola Sturgeon, promised to deliver, by 2021, a “publicly-owned, not-for-profit energy company” that would deliver cheap renewable energy to the Scottish consumer "as close to cost price as possible". That’s almost word for word the mission statement of GB Energy.

But “Nat Energy”, as it might have been called, never happened. Sturgeon blamed the pandemic when it was laid to rest in 2022. But it was never a viable proposition, as anyone who knew anything about the energy market could have told her.  Labour’s plans for a GB Energy, to “save consumers three hundred pounds”  is liable to go the same way.

The SNP had built its grand energy plan, as has Labour, on the back of the ever-falling cost of generating renewable electricity, thanks to Britain’s world-leading offshore wind turbine farms.  Why should the nasty energy companies get their sticky hands on this? said the SNP. It should be green energy for the people. A state-owned energy company could buy the stuff in and sell it at cost.

Except that’s not how the energy market works.

The cost of electricity is pegged to the wholesale price of gas, an counterintuitive energy market phenomenon, which only makes sense when you realise that the renewable energy revolution is not nearly as far advanced as its cheerleaders claim it is.

Yes, the price of generating a unit of power by wind has more than halved in the last decade. But the point is that the electricity grid cannot run on renewables alone and requires nuclear and more importantly gas-fired power stations, using largely imported gas, to keep the lights on when the wind doesn’t blow (or blows too much).

The Institute for Government has published an idiot’s guide to this apparently idiotic pricing of renewables here, and offers a possible alternative, which is evidently not on Ed Miliband’s radar. The price of electricity will continue to be linked to the cost of keeping the gas powered stations burning. This is great news for generators of renewable energy who’ve discreetly made a packet from getting gas prices for their wind energy. The Tory government tried to slap a windfall tax on renewable super-profits, which was fiercely resisted by environmental lobbyists.

But that’s actually side issue. The point is the UK’s continuing dependency on fossil fuels.  It is theoretically possible to imagine renewables having the capacity to deliver most electric by 2030 (Boris Johnson set the target at 95% back in 2021 after Cop 26). But that isn’t going to make electricity much cheaper to the consumer.

And there is another problem with Keir Starmer's promise of “clean power by 2030” and Ed Miliband’s claim that this will “increase energy security”.  Forget electricity - domestic heating is overwhelmingly gas-fired, and transport is largely reliant on petrol and diesel - especially since the stalling of sales of electric vehicles to non-fleet owners.

Around 78% of the energy used in the UK is fossil-fuel derived. With Labour’s ban on drilling in the North Sea, ever more of this will have to be imported from abroad - often in giant tankers from America where it has been produced by fracking, a process banned in the UK. This will make the UK less energy secure.

The SNP tried to force the pace of the energy transition by banning the sale of petrol and diesel cars by 2032 - eight years before the then UK target - and by scrapping one million gas central heating boilers in Scotland by 2030 at a cost of £33 billion.  Both policies had to be effectively scrapped as “unrealistic”, along with the Scottish government’s target of cutting greenhouse gas emissions by 75% by 2030.

As far as we can judge, Ed Miliband seems to be reviving  SNP-like targets for gas boiler scrappage and electric vehicles. Perhaps he’ll have more luck than Nicola Sturgeon.  But with the cost of installing heat pumps, including the insulation, running into five figures, that seems heroically optimistic.  The cost-of-living crisis is not going away anytime soon.

There is no doubt that the UK’s long-term future lies in renewable energy.  Scotland could be a green energy superpower, once the problems of storage and intermittency are resolved, and a new electiricy grid is installed. However, this is not going to happen in the next five years and a bit years.  Attempts to force the pace by dragooning consumers into buying cars and heat pumps they can’t afford is only going to undermine faith in Net Zero.

A combination of environmental authoritarianism and green boosterism led to the collapse of the Green-SNP coalition earlier this year.  The nationalists went on to lose 80% of its MPs in the general election.  Keir Starmer will have to keep a close eye on his hyper-active Net Zero Secretary if he doesn’t want to share the same fate.