Do you remember the Green Investment Bank? Six years ago, the Conservative government’s renewable energy pipeline, including offshore wind farms, was sold to Australian vampire Macquarie’s infrastructure arm for £2.3bn.
As the July 4 election looms, we now have Keir Starmer’s second brand in the form of Great British Energy (GBE) – Labour’s £8bn plan to transition the UK to net zero emissions .
GB Energy, presented in Scotland, where its headquarters will be located, is presented as the British answer to the Swedish Vattenfall and the French EDF.
Good luck with that. It will be a fraction of the size of EDF, which will become fully publicly owned after it ran out of cash.
EDF is spending £34bn on the Hinkley super nuclear power station in Somerset alone. It is the largest construction project in Europe and will be a major step forward in Britain’s path towards baseload electricity supply and energy security. This is only possible thanks to Chinese financing and a pricing agreement that will eventually mean higher utility bills for consumers.
In deep waters: if Labor decides to suspend new auctions for offshore exploration, it will undermine energy security
The prospect of GB Energy one day catching up with EDF is a fantasy. As proposed, GBE will do some joint venture work in onshore wind, solar and tidal energy and may unlock cash from the private sector. It will be a useful complement to the investment being made by SSE, Centrica and others in offshore wind, nuclear power and carbon capture.
The Labor Party says it will not revoke existing oil and gas licences. However, if it decides to suspend new auctions for offshore exploration, it will undermine energy security.
Together with new taxes to be imposed on North Sea oil producers and the removal of tax breaks for exploration, it will hamper future investment. Scotland’s First Minister John Swinney describes the proposals as a “body blow” to jobs in his nation. The GB Energy headquarters will employ between 50 and 100 people. There will be no compensation for the thousands of dollars lost in engineering services in Aberdeen.
No one can afford to be complacent about climate change. However, the idea that fossil fuel industries are the devil incarnate is ridiculous. In the United States, big oil companies are redoubling their exploration efforts. This week Chevron spent £42bn on Hess, gaining control of new drilling rights in Guyana. Shell has warned that if the environment for big oil companies becomes inhospitable in Britain, they could move to the United States. Investment in fossil fuels is taking place despite Joe Biden spending up to £292bn to tackle climate change through the Inflation Reduction Act.
British climate zealots don’t seem to recognize that in an era of geopolitical fragmentation, the UK needs more energy security. The big inflation of 2022-23 was a direct consequence of Ukraine and dealt a blow to ordinary Brits.
Green activists engage in the equivalent of secondary picketing by harming innocent third parties. Both the Hay and Edinburgh book festivals, two highly regarded literary events, have been endangered by objections to sponsorship by asset manager Baillie Gifford. The Edinburgh-based firm controls £225bn of funds, including the venerable Scottish Mortgage Investment Trust.
Some of the world’s largest fund managers, including JP Morgan, State Street, Invesco and BlackRock, have withdrawn from the Climate Action 100+ investor group in recent days. They say that while they recognize the “complexities and nuances” of the green agenda, their priority must be providing certainty to investors.
Labour’s enthusiastic embrace of climate change is admirable. But we must not forget that the resources talked about are a fraction of the £24 billion a year once promised. Creating a new institution, when the Leeds-based Infrastructure Bank and the established British Business Bank could do much the same job, is a costly duplication of bureaucracy.
Green investing should not be a case of either/or. The North Sea (if not onshore fracking) is a valuable stepping stone towards the energy transition and the natural gas footprint could well be dramatically reduced through carbon capture.
BP, Shell and other oil majors are already among the UK’s biggest investors in the fight against climate change.
Kicking them and other North Sea drillers and engineers out of future fossil fuels in Britain should not be an option.
