Who owns our future energy?

Ed Miliband’s return as Energy Secretary is something we can all welcome. The lost opportunity of the past 14 years is a tragedy, but Miliband’s immediate action on onshore wind and the steps he will take to sound the death-knell of North Sea oil and gas is a sign of positive things to come.

But what of Great British Energy? It’s a useful electoral slogan, but what will it mean in practice? This is key to how the future of our domestic energy is funded and owned. In the fossil fuel era people became randomly rich because they happened to own land where oil, gas or coal was discovered. 

Our energy future doesn’t need to be like this. Unlike fossil fuels, the fuels of the future are free – wind, sun, wave and marine power. But the harnessing of the energy sources requires the construction of costly infrastructure. 

Cheaply

In the future we could own our own energy and profit from it or have it available cheaply according to our choices. But the way the investment in the transition is funded right now will determine who owns the energy of the future. That’s why the small print around Great British Energy is so important.

In its manifesto, the Labour party expressed support for community-owned energy systems - and I agree. Labour’s Local Power Plan to support this sector is very welcome. But it is worth only £1 billion a year and it is not clear that projects will have to be 100 per cent community owned. 

The funding attached is a drop in the ocean compared to the tens of billions that will be required to achieve Labour’s objective of zero-carbon electricity by 2030.

There are a number of ways the energy transition could be financed that would ensure it belongs to we, the people, rather than our future leaving us as the energy slaves we have been in the fossil fuel era. 

The most obvious is to borrow money. The Green party’s manifesto committed to significant short-term borrowing to fund the energy transition. Governments can always borrow more cheaply than private companies but the overwhelming advantage of government investment is that the energy infrastructure will belong to us.

Stake

Such a strategy is neither reckless nor irresponsible. Martin Sanbu, writing in the Financial Times, said: "The Treasury can still borrow long-term at around a two per cent real annual rate. For anyone aware of how poor infrastructure holds back UK productivity, it beggars belief that the country should be lacking in investment projects with a far higher return than that. A genuinely responsible government would pursue them."

The OBR also support such a course of action. Their modelling on the fiscal risks from climate change conclude that early investment to avert climate crisis would lead to less long-term debt and a stronger economy than delaying action.

I fear Labour will not take this course and that Great British Energy will turn our energy future into a massive PFI scheme. By inviting private finance into the energy transition the government is guaranteeing that the finance will be more expensive - and also that we will be paying for the profits of private financiers. 

Why bother to label something as ‘Great British’ if you have really mortgaged your country’s energy future when you didn’t need to?

Even if Rachel Reeves, the Labour chancellor, holds Miliband back from public energy investment there are a number of other funding options that would ensure more of us hold a genuine stake in our energy future.

Dirty

One possibility is to create options for local authorities and other public-sector bodies to invest their reserves into green energy investments through special bond issues, underwritten by central government. 

This would give the political authorities that are closest to us ownership of our energy futures while also offering them an easy path to divest from fossil fuels.

The government could encourage a similar shift for pension investments by requiring non-bank financial institutions to remove fossil-fuel assets from their investment portfolios by 2030 and giving them tax breaks for shifting their investment strategy towards green energy. 

This would have the additional benefit of undercutting the fossil-fuel lobby’s argument that we have to keep investing in their dirty industry to make sure we have an income in old age.

Accumulation

In addition the government could support the development of Green ISAs, with preferential rates for those choosing investment products whose proceeds were ringfenced for Green investment.

As we move down this list we are reducing the share of the population who will profit from the energy transition, which is why full public investment, whether national or local, would always be my preference.

There was a time when Labour wanted public ownership of resources - and indeed of key sectors of the economy. 

At this crucial time when we’re moving into our green energy future they are making the choice about whether it belongs to us all or whether it is another source of profit and accumulation for the few. Let’s make sure they make the right choice.

This Author

Molly Scott Cato is formerly the Green MEP for South West England and Gibraltar and is a professor of economics. She has published on green economics, localism and anti-capitalism.