Ed Miliband’s return as Energy Secretary is a welcome one for all of us. The missed opportunities of the past 14 years have been tragic, but Miliband’s immediate action on onshore wind and the signal that the North Sea oil and gas industry is headed for a demise are signs of positive things to come.
But what about Great British Energy? It’s a useful election slogan, but what does it actually mean? It’s at the heart of how our domestic energy future is financed and owned. In the fossil fuel era, people got rich by accidentally owning land where oil, gas or coal was found.
Our energy future doesn’t have to be like this. Unlike fossil fuels, the fuels of the future are free: wind, solar, wave, and ocean power. But to tap into these energy sources, we need to build expensive infrastructure.
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In the future, we will own our own energy and profit from it, or we can use it cheaply if we choose. But how the investment in the transition is financed now will determine who owns the energy of the future. That’s why the buzz about Great British Energy is so important.
Labour has expressed support for community-owned energy systems in its manifesto, and I agree. Labour’s Local Power Plan to support this sector is very welcome. However, it is only £1 billion a year and it is not clear whether the projects must be 100% community-owned.
The funding attached is a drop in the ocean compared to the hundreds of billions of dollars Labor needs to achieve its goal of net-zero electricity production by 2030.
There are many ways to finance the energy transition, and we can ensure that it belongs to our people. We will not be left as energy slaves as we were in the fossil fuel era.
The most obvious one is borrowing money. The Green Party manifesto promised significant short-term borrowing to finance the energy transition. Governments can always borrow more cheaply than private companies, but the overwhelming advantage of government investment is that the energy infrastructure becomes ours.
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Such a strategy is neither reckless nor irresponsible, writes Martin Sanbu: The Financial Times“The Treasury can still borrow long-term at a real rate of 2%. If you know how Britain’s poor infrastructure is hampering productivity, it’s hard to believe that this country doesn’t have a shortage of investment projects with much higher returns. A truly responsible government would pursue such projects.”
OBR also supports this course of action. modelling On the financial risks of climate change, we conclude that investing early to avoid a climate crisis will reduce long-term debt and make the economy more resilient than delaying action.
