Andy Burnham’s first address to the Labour party conference as prime minister is due to address Britain’s rising energy costs and sluggish economic growth with plans for a new government-backed body to invest in the electricity grid.
The proposals to set up GB Grid, first revealed by the Guardian, build on the party’s manifesto pledge to create Great British Energy, a state-owned company to invest in renewables, but with the tougher challenge of lowering bills and supercharging the economy.
“We have a cost crisis. We all know it,” Burnham is expected to say. “The price of energy is crippling for businesses, and British bill payers pay some of the highest energy costs in Europe.
“We have an energy system where prices are dictated in markets miles away, while families and businesses here shoulder the costs. Once again, the British public has lost control.”
Few would disagree with the diagnosis – but is direct government investment in grids the remedy Britain needs?
What is the grid plan?
Burnham says the government-owned GB Grid will work with the private sector and network companies to increase competition in the sector, drive down costs and speed up delivery.
This should help companies and businesses connect to the power grid sooner, and make energy costs cheaper for all consumers.
The creation of GB Grid is timely. In the coming years Great Britain plans to invest more in upgrading its power lines and electricity infrastructure than it has in the past three decades combined.
It also fits in with Burnham’s philosophy of increasing public control over utilities. “The essentials in life will be controlled by the people. They are ours: we rely on them, we pay for them, and we will have power over them. That is what public control can do,” he is due to say.
How will it work?
GB Grid has limited funds – at most about £4bn, or a fraction of the £70bn investment expected over the next five years – so its level of “control” is likely to be limited, too.
However, alongside the new quango, Burnham plans to expand the rights of developers and businesses to build their own infrastructure to connect projects to the grid.
GB Grid will be available to support and co-invest alongside companies, so they can vie for competitively tendered transmission projects with the established network companies to get work done cheaper and faster.
The idea was inspired by the approach taken in Ireland, where allowing fresh companies to compete with the incumbent networks has sped up connections by 11 months.
What has been the reaction?
Given the long history of delays linking projects to the electricity network, it remains to be seen whether Burnham’s plan can make a meaningful difference to the cost and pace of the grid overhaul, but the PM’s approach already has its supporters.
“The UK is one of the only countries to have fully privatised its grid,” said Mathew Lawrence, a director at Common Wealth, which campaigns for public ownership. “Our vision is a fully public grid, but today’s announcement can help rebuild state capacity in energy, learning by doing.”
Doug Parr, a policy director at Greenpeace, said the plan was “a welcome step to grapple with a problem that has plagued the green energy sector for years”.
Greg Jackson, the founder of Octopus and a member of the Cabinet Office board which advises the government, has been a vocal critic of the network industry, which is built around a series of regional monopoly network companies that undertake the grid upgrades in their local area.
In recent years other companies have been allowed to tender for work in competition with the regional monopolies – but Octopus has argued that more competition could speed up connections, improve innovation and reduce costs.
Not everyone is convinced by the proposals, however. One network industry source told the Guardian: “If they want to have more competition, that’s fine. But at the end of the day, we are all chasing the same supply chains and skilled contractors, and then we’re all using the same planning system. The pressures won’t be different if you use a different name.”
What has been holding up grid upgrades?
In recent years, Great Britain’s power networks have become inundated with applications for grid connections. These have come from prospective energy developers hoping to plug in new renewable energy projects and batteries to the grid, as well as those hoping to build new housing, factories and datacentres.
Queue times for a connection hit more than 15 years at one point, due in large part to a deluge of speculative project applications that were unlikely to move ahead. Despite a two-year programme by the government’s National Energy System Operator (Neso) and the industry regulator to remove these “zombie” projects from the queue in favour of “shovel-ready” schemes, there are still complaints over the speed of connection work.
This has raised concerns over whether the government’s target to double onshore wind, triple solar power and quadruple offshore wind might be derailed. It has prompted warnings that the UK economy might miss out on investment in new infrastructure if developers cannot be sure of a swift connection to the grid.
Is this pushing up energy bills?
In short: yes. After years of underinvestment, Great Britain’s ageing power grids are in need of a multibillion-pound overhaul to build new pylons and substations while rolling out thousands of miles of new power lines across the country.
The amount spent by network companies is controlled by the industry regulator for Great Britain, Ofgem, before the costs are recovered through our energy bills – and the sums are rising fast. Network companies are expected to spend between £70bn and £80bn between 2026 and 2030, and network investments of £89bn could be needed in the 2030s, according to Neso.
This means bill levies will rise, too. Power grid costs currently make up almost a quarter of household electricity bills – almost £210 on the average annual dual-fuel bill last year. Some analysts believe that could rise to £341 a year by 2030.
These costs should allow the UK to access more low-cost renewable energy and reduce the system’s reliance on gas, which should eventually lead to lower costs and falling bills.
Over the longer term this investment makes sense – not least because much of the upgrade work that would need to happen whether the UK government pursued ambitious green targets or not. However, in the near term, rising energy costs are piling pressure on households and slowing the economy.
Are private network companies to blame for rising costs and delays?
While there are many factors at play in the slow progress of the UK’s energy transition, the energy networks industry has come under fire for making healthy profits while millions struggle with the costs loaded on to bills.
The companies argue their activities are already tightly controlled by Ofgem, which approves all their spending and how it is collected from bills. It is also guided by the government-owned Neso, which has set out the roadmap for the government’s energy policies.
“If the government wants things to be different it is within their power to make changes,” the industry source added. “I don’t think spending £4bn in an industry already spending £70bn in the next few years will do much to change anything.”
Sam Richards, the chief executive of the pro-growth campaign group Britain Remade, accused Burnham of “setting up yet another quango” rather than “doing the serious work of bringing down bills” by reforming the market and the planning system.
“This is a sideshow,” he said. “Britain needs more competition and fewer barriers to new energy projects, not more government bureaucracy with a grand name.”
