Labour’s Landslide Victory: A New Chapter for Energy?

5th July 2024

Following Keir Starmer’s stunning election victory, the party’s energy policies are promising to bring significant changes to the UK’s energy landscape and economy. Labour’s agenda claims to aim for a transformation of the UK into a clean energy superpower, through a combination of investments, regulatory reforms, and support for innovation and job creation across the country. On Day 1 of the new Government what are their key planned interventions?

Great British Energy

At the core of the Labour plan is the intention to establish a publicly owned energy company ‘Great British Energy.’ They say this initiative will decentralise energy production and back the development of local power projects like wind, solar, and hydropower. They believe this move will boost local economies and create jobs across the UK. Angela Rayner, Deputy Leader, stated: “This new company will be pivotal in ensuring that the UK can produce its own clean energy and won’t be held hostage to the whims of global energy markets.” Labour has also stated that the goal is to “put together various different aspects of energy production and consumption under one umbrella.”

The aspiration is clear, but detail seems lacking on the exact structures and delivery mechanisms. A wide range of industry expert voices have also expressed strong scepticism as to whether the aspiration to decarbonise the grid by 2030 (rather than 2035) is achievable. Providing greater clarity on BGE’s exact remit and delivery model will be an early test for the Government.

Energy System Reform

To address the issues within the current energy market, Labour intends to introduce stricter regulations to protect consumers and ensure better service standards. Such as:

• Enhanced Price Caps: Tightening the existing price cap system to offer greater protection against price hikes.
• Transparency Requirements: Mandating energy companies to provide customers with clear, detailed billing and pricing information.
• Service Standards: Setting higher standards for customer service and response times for complaints and issues.
• Market Oversight: Increasing the powers of regulatory bodies like Ofgem to monitor and enforce fair practices within the energy market.
• Penalties for Non-Compliance: Introducing stricter penalties for energy companies that fail to comply with regulations or engage in unethical practices.
• Consumer Protections: Expanding protections for vulnerable consumers, ensuring they receive priority support and fair treatment.

The overall goal is to reduce standing charges on bills and enhance the accountability of energy companies through a stronger regulatory framework. Ed Miliband, the new Secretary of State for Climate Change and Net Zero has previously commented: “We are committed to making the energy market work for people, not just profits. By capping standing charges and improving the regulatory framework, we will protect consumers and encourage the growth of green energy.”

Grid Modernisation

Labour acknowledges that the outdated national grid is a significant barrier to the deployment of clean energy. They plan to work with industry partners to upgrade the grid infrastructure, facilitating the transition to renewable energy sources and the electrification of industries. This is also likely to be an early battleground for Labour’s pledge to simplify and speed up the planning regime; with local communities facing the prospect of new pylons or tunnelling work to deliver new interconnectors.

Warm Homes Plan

One of Labour’s cornerstone policies is the Warm Homes Plan, which involves a £6.6 billion investment to improve the energy efficiency of five million homes. This initiative includes grants and low-interest loans for insulation, solar panels, batteries, and low-carbon heating systems. The plan aims to reduce energy bills and cut carbon emissions while creating skilled jobs in the construction and energy sectors. Housing Associations are likely to be asked to be at the vanguard of delivering against this commitment.

What does it mean for UK Businesses?

Labour’s policies aim to make British businesses more competitive internationally by reducing electricity costs through the expansion of renewable energy and improvements to the grid. Lower energy costs would, in principle, particularly benefit energy-intensive industries, encouraging investment and growth within the UK.

However, it is still unclear as to whether the changes will be big enough and quick enough to mitigate the other global supply/demand balance and geo-political factors that set the market price of energy as an internationally traded commodity. We believe that prices are set to rise in the short term, fall in 2025/2026 but increase in the medium to long term versus current prices.

Labour’s National Wealth Fund will directly invest in UK ports, hydrogen production, and industrial clusters, supporting the decarbonisation of key sectors like automotive and steel. The introduction of a carbon border adjustment mechanism will further protect UK businesses from unfair competition by ensuring that imported goods meet British environmental standards. Labour’s policies will incentivise clean energy developers to invest in local manufacturing, particularly in coastal areas and traditional energy communities.

To conclude…

As stated in their ‘Labour Party Energy Plan’ the new Government believes that their policies “will enhance energy security and reduce costs for businesses, particularly in energy-intensive industries…helping businesses to plan and invest with confidence.” Ed Miliband and his team have a steep hill to climb and will need to work quickly to deliver against this aspiration if they are to show real progress by the time of the next election. The clock is already ticking towards 2029.