National Gridlock: The UK’s Energy System is Broken – Will Labour’s Plans Fix It?

One of the centrepieces of Labour’s current policy platform is the aim of spending £28 billion a year on a ‘Green Prosperity Plan’ by the middle of the next Parliament, with much of this going to fund its nationalised energy company GB Energy. 

Although the plan has been watered down since it was announced – going from £28 billion of additional funding immediately to £20 billion of additional funding by the end of the next Parliament according to Institute for Fiscal Studies analysis – it still represents a significant change in policy from the Government, and a potentially significant boost for the UK’s energy infrastructure.

The Government has a target of decarbonising the electricity grid by 2035, meaning that 100% of the electricity we use will come from renewable sources. Fossil fuels still account for around 30% of the electricity flowing through the grid today, while over the past year, they have made up around 37% of our electricity, compared to 36% for renewables.

To reach 100% renewables, the UK needs to deploy a lot more renewable generation infrastructure; largely wind and solar. Here is where the problem lies – there are hundreds of renewable projects in development, but our existing electricity grid infrastructure is insufficient for them all to connect and to carry the power generated to where it needs to be used.

In July, the Local Government Association warned that there are more than 1,300 renewable energy projects with planning permission waiting to be built across England and Wales, with only 150 under construction, and the rest waiting in a queue to be given a connection to the electricity grid. Some new projects are being given grid connection dates after the 2035 target for decarbonising the grid.

National Grid Plc operates the Transmission network, which is the bulk movement of electricity from a generating site to a local substation. Distribution Network Operators (DNOs) then operate the local electrical wires taking this electricity from a substation to your home. 

Before 1990, both the generation and transmission activities in England and Wales were the responsibility of the Central Electricity Generating Board (CEGB). Upon privatisation, generation activities were broken up between a number of companies, while transmission became the remit of the privatised National Grid Plc, which now also owns parts of New York and New England’s energy grids. Major shareholders in the company include BlackRock, Vanguard and the Abu Dhabi Investment Authority.

In 2019, National Grid decided to offshore its management to holding companies in Luxembourg and Hong Kong in response to then Labour Leader Jeremy Corbyn’s plans to nationalise the electricity grid.

This has undoubtedly influenced the current Labour policy not to nationalise the infrastructure but instead to set up a nationalised energy company, GB Energy, which will be similar to state controlled companies like Vattenfall (Sweden) and Statkraft (Norway). Its remit will include the ability to invest in grid infrastructure where private funding is lacking.

Left to Crumble

So why hasn’t National Grid been investing enough in upgrading the grid infrastructure? There are two major reasons.

In the past, the energy grid needed to connect a small number of high-volume energy generation assets to the grid, like coal or gas fired power plants. Now, there are hundreds of smaller projects all seeking to connect in a much shorter period of time, stretching the resources of the company.

The other reason is privatisation. As a private company, National Grid seeks investor funding by promising a return on that investment, and so much of the profits it makes go back to investors, rather than being spent on upgrading the grid. The company made a profit of £4.6 billion in its last financial year.

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Unite general secretary Sharon Graham has said that the company’s financial report “demonstrates National Grid has gouged billions in profits but it’s not delivering on its climate targets. The monopoly’s failure to invest for a net zero future and the Government’s refusal to force the company to do so is more proof the UK’s energy sector is broken. It’s abundantly clear that profiteering is endemic across the energy sector and something needs to be done about it”.

The think tank Common Wealth reports that “the pace of investment in the grid has stagnated over the past decade and, according to analysis by Carbon Tracker, decreased since 2017 despite a quadrupling in the deployment of new solar and wind”.

This lack of investment is piling up costs for the taxpayer. The grid infrastructure we have is not sufficient to accommodate all the power being produced by offshore wind and solar at peak times. When the supply of power gets too high, the National Grid has to pay suppliers to stop producing power – this is called ‘curtailment’. 

According to Carbon Tracker, “Scotland has 10GW of wind farms but accounts for only 10% of GB electricity demand, so much of the power they generate is consumed in England. However, the grid can currently only transmit a maximum 6GW across the border, so on windy days this generation must be curtailed… and gas stations fired up”. 

The think tank says that curtailment of Scottish wind farms happened more than 200 times in 2022, adding £800 million to consumer electricity bills and increasing greenhouse gas emissions by 1.3 million tonnes. According to the Nuclear Industry Association, the cost of balancing Britain’s power grid hit £4.19 billion in 2022, adding an extra £150 to every household energy bill.

Small Sparks

One aspect of Labour’s green investment plans which may help in this respect is the support it is offering to community energy groups – small energy generation projects which often raise funds from the local community to put solar panels on the roofs of schools, churches or other buildings.

Labour’s policy roadmap – ‘5 Missions for a Better Britain’ – states that “GB Energy will make available up to £600 million in funding for local authorities and up to £400 million low-interest loans each year for communities,” in order to fund these projects.

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Creating more renewable energy capacity near to where the demand for electricity is could massively reduce the need to upgrade the transmission and distribution networks to accommodate lots of big new wind and solar farms. The group Community Energy London estimates that public buildings in the capital could host 1GW of rooftop solar power, reducing the need for large transmission cables to take power from Scotland’s wind farms down south.

If you read the Telegraph, Spectator or any other anti-net zero publication, you will encounter apocalyptic warnings that the UK will experience constant blackouts in future because our demand for electricity will exceed supply. It is remarkable what the UK has achieved in building renewable power over the last 10 years despite a lack of government support, and latest figures show we added 3GW of renewable capacity since last July.

Yet we need to go faster – and a major component of this is electricity grid upgrades. The privatised grid companies have shown that they cannot meet the challenge required of today’s economy with hundreds of new projects waiting for grid connections. 

Labour, still smarting from its 2019 General Election defeat, has backed away from nationalisation, opting instead for a government-funded energy infrastructure developer to subsidise the investment the private sector cannot or does not want to do.

It’s hard to judge at this point whether Labour’s plans – already watered down – will be enough to plug the gaps in our leaky energy system. On paper, they are undoubtedly better than what we have at the moment. But we may be waiting until January 2025 to find out if the pledges are worth the paper they’re written on.

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