On the 25th of July, the new Labour government published its Great British Energy founding statement, with a forward from Ed Miliband, Secretary of State for Energy Security and Net Zero (DESNZ). In it, he writes the following: “Great British Energy stems from a simple idea: that the British people should have a right to own and benefit from our natural resources.”
The new company will be owned by the British people. It is intended to stimulate enough new green electricity, primarily from wind and solar, to decarbonise the grid by 2030; put downward pressure on wholesale prices; increase national energy security; and create “thousands of good jobs”. Let’s hope the rhetoric doesn’t distract attention from the even greater need to decarbonise heat and transport.
Despite the efforts of the think tank Common Wealth to get government to change its mind, DESNZ has been clear that GB Energy will not have a retail arm. Instead, it will – like other big generators – sell its electricity to private supply companies, who in turn will sell it to end-users. Presumably, GB Energy will also be open to selling its output directly to corporates, something which has been an increasing trend in recent years.
Pricing
It is important that GB consumers are treated equitably, both in terms of electricity pricing and the way greenhouse gases are measured and attributed.
On the first of these points, there are grounds for optimism – at least, that the introduction of GB Energy will not introduce price distortions. It seems likely that it will operate within existing wholesale market arrangements. It will not set wholesale prices directly, though by increasing the amount of low marginal cost generation, its presence will put downward pressure on them. It will sell its output to suppliers at market rates; and suppliers should gain no price advantage from sourcing power specifically from GB Energy as opposed to sourcing it from other generators. So energy customers will not ‘win’ or ‘lose’ from GB Energy’s formation, simply on the basis of which private supply company they happen to be with.
Carbon emissions
With emissions, though, there is potentially a big problem. Under current arrangements, supply companies – and also corporates that contract directly with generators under power purchase agreements – take the credit when they source green power. That is to say, it’s assumed that their purchases in the wholesale market are zero-carbon. On the back of these bulk purchases, they offer their customers green tariffs.
This must not be allowed to happen in the case of GB Energy. It would amount to more greenwash, potentially depress the development of new low carbon generation in aggregate, discourage energy saving amongst ‘green’ end users, and go against the spirit of the new company.
Greenwash
Why greenwash? Because GB Energy is being created as a public company, a national enterprise underwritten by all taxpayers. Private supply companies, and corporates, that happen to contract in future with GB Energy, will not be adding to the total stock of renewable energy in so doing. GB Energy will have numerous routes to market; it will not be forced to rely on any particular offtaker(s) for selling its power. It is almost inevitable that GB Energy will sell more to some offtakers than to others, but there is no compelling logic that says the former (and their own customers) should take more of the emissions reduction credit.
If we allow this to happen, there will be unfortunate consequences. Companies will be able to make significant claims about progress on decarbonisation when all they’ve actually done has been to push their way to the front of a queue for a product – electricity from GB Energy – that’s going to sell anyway. By making it easier for these companies to meet green targets, without actually having to develop or significantly assist the development of new projects themselves, the role of GB Energy in boosting the total quantity of green electricity would be undermined.
Furthermore, the ‘green’ end-users of this electricity will argue that they can consume as much as they want on the spurious basis that it’s carbon free, leading to higher emissions overall than in a counterfactual world where everyone, ‘green’ and ‘brown’, makes efforts to reduce power consumption.
But given that the electricity will be from renewable sources, isn’t it inevitable that whoever buys it will be able to make this claim? How could it be otherwise?
Fortunately, there is a straightforward alternative, one which avoids greenwashing and discrimination, and is true to the spirit of GB Energy.
Using the government’s own data
Every year, the UK government publishes greenhouse gas conversion factors. The most recent set was jointly released in July 2024 by the DESNZ and DEFRA. For the year 2024, the published factor is 0.20705 kg CO2 equivalent for each kWh of electricity generated in the country. Subject to annual updating and correction of any errors, this factor can – and should – be attributed to each kWh of electricity on a generation basis (i.e. before transmission and distribution losses) that is sold by GB Energy to suppliers and corporates. Whenever a supplier or corporate is required to calculate the emissions associated with these future purchases, it should multiply this factor by the number of kWh purchased.
This alternative approach would mean that when one supplier nips in to buy renewable energy that will be generated anyway – so that the pollution from the chunk of our national electricity demand that’s being met using fossil fuels is unchanged by the action – other suppliers (and their customers) don’t see their emissions factors rising because they’ve effectively been saddled with all that fossil fuel. In fact, it is the only approach that could leave the emissions factors for everyone else unchanged.
Using national statistics would be in keeping with the creation of a national company. In future, generation from GB Energy will tend to reduce the national GHG conversion factor, because a greater share of the country’s electricity will be from renewable sources; this reduction will be fairly attributed to all consumers – who collectively own and underwrite the national company – not an unconvincingly determined subset of them.
Perhaps most importantly, this alternative approach would avoid the very considerable potential for extra greenwash – and the accompanying dilution of meaningful efforts to decarbonise – that will otherwise be created alongside GB Energy. The last thing that we need is to provide more opportunities for companies and individuals to make bogus claims that their consumption of energy has no impact on the planet.