Labour is promising to slash planning restrictions to enable faster development of energy grid infrastructure, as well as more state involvement and a closer link to industrial policy. While most agree planning reform is long overdue, some companies caution that a new state-run focus needs to be careful not to undermine a highly competitive private sector currently suffering a supply side squeeze.

At its recent conference, the Labour Party made a number of announcements on energy policy, including plans to “rewire Britain” – a massive infrastructural overhaul in a bid to reach 100% clean electricity by 2030.

Labour said its approach would end grid connection delays of up to 15 years by “removing barriers” and loosening planning laws to facilitate grid expansion – releasing more than £200 billion worth of privately-funded projects now stuck in the queue. In doing so, it would also reduce curtailment fees of up to £62 million per day currently paid to switch off wind farms when the grid becomes overloaded.

In setting out its stall to steal a march on the energy infrastructure required for net zero, Labour’s plans appear to have been welcomed more warmly than Prime Minister Rishi Sunak’s bid for to “ease the transition”, in which he rolled back key decisions on housing, heating and transport.

John Ord, energy business director at engineering consultancy Stantec agreed that rewiring and upgrading the national grid infrastructure was one of the UK’s most urgent climate and economic challenges. “It’s reassuring to see Labour focus on grid expansion and energy resilience… Without a significant national upgrade of our power distribution network, the UK won’t be able to play its part in addressing the climate emergency or meet its long-term energy goals.”

Delvin Lane, managing director at eEnergy also welcomed Labour’s strategy for speeding up grid development, but expressed disappointment at the lack of help for businesses and omission of any mention of reducing waste and improving energy efficiency.

The connections issue is clearly an important one, not just in the UK, but is not a simple one to fix. It is a major issue in Japan, while in Germany public opposition has stymied transmission cables that could take wind power from the north to the south, forcing some construction underground at great expense. In the UK, upgrading and extending the onshore grid network may require as much as £240 billion ($294 billion) in investment by 2050, according to a government analysis last year reported by Bloomberg.

Andrew Dakers, CEO of West London Business said the problem was not restricted to the supply side, and that substantial investment was also required in the demand end of the grid network. “Food manufacturers in West London may need as much as a 7x increase in electricity supply as they transition from gas to electricity between now and 2030; and we also have housing schemes with planning consent for thousands of homes that can’t proceed due to a lack of supply available in three London boroughs: Ealing, Hounslow and Hillingdon,” he said. Two housing developers expressed similar concerns.

Zombie projects

James Basden, Founder Director at clean tech company Zenobē also welcomed theparty’s focus on grid connection delays, but said the process – as well as the planning laws – needed reform to get things moving.

“It’s time to unblock grid connections by removing unviable ‘zombie’ projects from the queue and allowing those projects that already have the necessary capital, planning and contracts to move ahead.” He said that while reforming the application process was important, it would still leave over 100GW of ‘zombie’ projects in the queue.

“Labour has an opportunity to develop a process which would speed up the delivery of new projects by introducing a cost or liability for ‘squatting’ on substation bays, limiting the number of future connections by entity, and introducing deadlines by which stalled projects are terminated,” he said.

Phil Thompson, CEO of Balance Power, agreed that many projects were not viable, but said that even if they were removed, the delays would still be substantial unless planning was made easier.

However, Mr Ord cautioned that it would be unwise to simply scrap existing planning rules. “Collaboration, balance and compromise should be viewed as central to success – policy-makers can’t just bulldoze their way through regional concerns. But we also can’t be held back by excessive consultation.”

More storage?

Mr Basden also noted the role that grid-scale battery storage could play in relieving pressure on the grid by storing renewable energy and balancing supply and demand. “In ‘rewiring Britain’, Labour should include support for energy storage infrastructure to support the build-out of renewable generation. The technology and investment are ready to deploy at speed, but require a flexible, modernised planning system to deliver.”

However, Mr Thompson of Balance said planning restrictions were not currently a major obstacle for its solar and battery storage as they carefully picked sites beforehand. “We have however seen how restrictive planning has been on onshore wind projects. Developers simply haven’t bothered with these as they are too risky and as a result our energy is less secure and more expensive,” and that grid upgrades often faced similar hurdles.

Harmony Energy’s 99 MW / 198 MWh Bumpers Battery Energy Storage System project in Buckinghamshire – now the joint largest in Europe.

Expanding capacity on existing infrastructure

Taco Engelaar, senior vice president at Neara, said that planning reform needed to be accompanied by making the most out of existing infrastructure. “Our existing infrastructure holds far more capacity for renewable energy than is currently being used… New technologies – including digital modelling, AI and machine learning”, could double the capacity available in some areas. “If we are to effectively accelerate Britain’s clean energy transition, commitments to new infrastructure must be matched with an equal dedication to enhancing and utilising what we already have.”

Paul Willacy, managing director of waste-to-hydrogen firm Compact Syngas Solutions, said he welcomed Labour’s plans to rewire Britain’s energy network, but was concerned over the failure to mention infrastructure for a hydrogen-powered future.

“The Shadow Chancellor’s talk of extra investment in green hydrogen will be worthless if there isn’t the network in place to get the fuel to the people who need it,” he noted

From bills to tax

Labour also plans to reduce green subsidies – mostly for offshore wind and grid connections – which are paid by energy consumers and currently run at about £200 per household as a levy on bills. It would instead source part of the funding from general taxation – which it sees as reducing the burden on poorer consumers.

At least some of the state funds are likely to be funnelled through a new state run energy company, GB Energy, announced in 2022. Labour said it plans to cut £93bn from UK energy bills by 2030.

At the party conference this year, Labour said it would put GB Energy to work “in coordinating the transmission operators to launch a super-tender which will procure the grid supply chain that Britain needs”. New grid construction would be opened to competitive tendering, with GB Energy bidding “to build or co-build that new grid where necessary.”

Ross Melton, energy specialist at Instinctif Partners said that if implemented, “Labour’s GB Energy proposal would be the biggest shake-up of the UK energy sector in decades, reasserting state control and participation within the market.”

“With GB Energy absorbing some of the FSO’s role to forecast and commission new on and offshore energy network infrastructure through the proposed “super tender”, while injecting new competition into construction, operation and ownership of generation, network and storage assets; the proposal promises to put Keir Starmer’s vision of a state-directed free market into practice.”

“While it remains unclear how hybrid public-private partnerships will be governed, or whether this model will be capable of delivering strategic net zero infrastructure more quickly or efficiently than the private sector alone, it is clear that under a Labour government statism is back,” he added.

Mr Thompson agreed the GB Energy approach was a good one, but the result would depended on how it was handled.

“The devil is in the detail, but I think [GB Energy] is a great idea. If delivered the right way, it could have a real benefit.” He said Labour’s plans to open up new grid construction to competitive tendering, with GB Energy looking to bid into that competition to build or co-build that new grid where necessary should work, but it was all conditional on planning.

“A mega-tender has the potential to send a clearer demand side signal than presently appears to exist and help derisk the substantial investment now required.”

Labour’s plans for competitive tendering, with GB Energy looking to bid into that competition to build or co-build the new grid where necessary, “would appear to offer the advantage that riskier schemes would see greater public sector, GB Energy, involvement to reduce risk. However the suggestion that this alone ‘will ensure we are at the front of a global queue’ seems very optimistic. A ‘clear demand signal’ alone may not be sufficient to see ‘manufacturers to build up their supply chains here in Britain at a time of huge demand globally’”.

Mr Ord said he hoped that if GB Energy was realised, it would prompt an acceleration development. “We urgently need to speed up the consenting of nationally significant infrastructure and ensure any Government decision-making apparatus is sufficiently funded and prioritised.” He said a more holistic approach to the transmission and distribution network was also required to optimise energy use at a regional level.

Mr Lane of eEnergy cautioned that Labour must precisely define GB Energy’s role in the market. “It’s currently ambiguous whether GB Energy will be a competitor or the main entity in the market. GB Energy’s vision aligns with the UK’s need to mend its fragmented infrastructure.

“However, prompt clarity is essential to maintain confidence and prevent potential halts in energy investment,” he said.

Yet Mr Basden opined that while a mega-tender would secure the supply chain, the main issues remain in planning and permitting. “Of course, if we fixed planning and permitting, the supply chain and availability of transmission cable may become a problem, but this is not the main issue holding back the industry from delivering today.”

Cheaper capital and no dividends?

Recent analysis from think tank Common Wealth, suggests Labour ’s GB Energy plan would be cheaper than the privately run National Grid Energy Transmission, which it claims has paid dividends of £28bn since privatisation in 1990. Its book value was just £4.45 billion in March this year, they claim, so (in theory at least) the cost of taking it into public ownership would pay for itself within a decade if dividends were no longer paid.

Common Wealth’s researchers also said the new entity would be able to borrow at lower rates, cutting the cost of capital for grid connection projects. National Grid’s most recent ten-year bond issue had a yield – effectively an interest rate – of 6.388%, two percentage points higher than the 4.35% rate available on government gilts.

Over the last decade, National Grid spent £9.2 billion on interest payments – around 22% of its net capital expenditure.

Of course there are other risks that rise when moving activities into the public sector – such as competition for state funds and other possible complications. But in such a natural monopoly as the power grid, the advantages highlighted by Common Wealth are worth noting.

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