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Labour: nationalise energy grid to meet low-carbon challenge

The UK’s largest opposition party has argued that public ownership of the UK’s gas and electricity would free up monies to better invest in low carbon heat; trade bodies warns against drastic ownership changes

The Labour Party would renationalise the UK’s energy networks in a bid to improve investment in infrastructure that will be required to support lower carbon homes.

A full switch to public ownership has been proposed by the party, should it come to power, to allow for more flexible infrastructure to deliver new forms of gas and electricity that are vital to heating and powering UK homes in a less carbon intensive manner.

Criticism has been raised over the proposals by energy supplier bodies, which have warned of the impact of such a drastic change of operation in the grid at a time where pressure is increasing on energy companies to implement revised approaches to fuel generation and supply.

However, MP Rebecca Long-Bailey, the shadow secretary of state for business, energy and industrial strategy, has argued that private ownership of gas networks has short changed the taxpayer on ensuring vital investment to allow the grid to carry hydrogen or lower carbon blends of gas.

Ms Long-Bailey cited estimates from Citizens Advice that predicted £7.5bn in “unjustified” combined profit for network companies over an eight year period.

She noted that the margins of profit were deemed unjustified due to regulator Ofgem overestimating business risks for investing in energy. Ms Long-Bailey said investment costs had also been inflated by energy companies.

She added, “Further, the Committee on Climate Change identified higher network costs as a key reason that UK businesses have faced higher electricity bills than European competitors.”

The Labour Party accepted in its proposals that there was a possibility to retain ownership and maintenance of the existing power infrastructure with the private companies already operating them, while a future government could take over the transmission network.

The party contended that nationalising both aspects of the grid would be a preferable option for reform, arguing that the greater compensation costs would be offset by revenue.

Labour’s proposal stated. “A publicly owned and run energy network would reinvest or pass on to customers the money currently paid out in dividends. It would also save on regulatory oversight costs required to detect and deter gaming in the current system.”

Industry response

The Energy and Utilities Alliance (EUA) trade association has responded to Labour’s proposals by warning against proposals nationalisation at a time of significant change for the gas grid in particular.

EUA head of external affairs Isaac Occhipinti called for the government to work alongside private sector companies to ensure a smooth transition to lower carbon gas that would be “consumer-focused”.

Mr Occhipinti noted that Labour’s proposals acknowledged the significant changes and investment required in the existing grid to support alternative approaches to energy, such as by adapting pipes for a possible switch to hydrogen.

He said, “Given the size of the challenge that lays ahead, the focus must solely be on how we deliver a decarbonised gas network; utilising the extensive and world-leading knowledge and expertise within the industry. There are already mechanisms in place for improving the network and its delivery, through RIIO and Ofgem.”

“Adding additional burden to the network such as a transfer of ownership and governance is a distraction that jeopardises decarbonisation and the UK’s ability to deliver on its carbon targets.”

Mr Occhipinti claimed that the EUA and network partners where already working on a range of transformation projects for the gas grid such as Hynet, H21, and the Freedom Project.

He added, “The industry is poised to deliver. Stability and government commitment is crucial to an affordable, secure, low carbon future.”

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