Labour’s proposals challenge more than just network companies

The Labour Party attracted a lot of attention last week with its renationalisation plans for GB’s energy networks. Titled Bringing Energy Home, the policy document focuses the nationalisation debate squarely on National Grid and the Distribution Network Operators (DNOs), while also bringing focus on local energy and decarbonisation at all levels. Labour’s vision would see National Grid and the DNOs being replaced with publicly owned national, regional and municipal agencies, as well as the state taking ownership of the GB side of all interconnectors.

National Grid is to be replaced with a National Energy Agency (NEA) which would provide the overall strategy for the energy transition, guide “public, collective and private forms of energy ownership” and would build capacity. Below it would sit a new structure of regional, municipal and local state-backed bodies.

Labour argued that renationalisation is necessary because of the “the daunting challenges facing the energy system in the coming decades, and the central role of energy networks within it, society can no longer afford a model that puts the public at such a structural disadvantage”. That disadvantage is due to “excess profiteering at the expense of investment”, with regulators unable to keep in check “the profit maximising that is a structural consequence of granting private ownership over natural monopolies”.

The party also highlighted network costs representing one-quarter of energy bills and large “unjustified” network company profits. Labour said that these profits would be reinvested back into the networks. A system with “such limited democratic oversight, control and public participation is no longer tenable”, Labour argued, with its plan advancing a rationale for change based on value for money, equity, direction of investment and democratic accountability.

While the political focus has shifted to energy networks, other market participants will also be looking at these plans carefully. For example, the retail sector would need to think about a world where regional authorities “hold statutory responsibility for ensuring every household can access affordable energy”, and municipal authorities “will be able to engage in supply”. Regional and municipal authorities and local energy communities are all potential rivals to existing market participants, with state backing. Implicit in this, for example, is that there would be a continuing role for suppliers, with businesses and households still able to engage in a market of some kind. Businesses may notice little difference due to the continuation of disaggregated cost chains for networks and wholesale energy, albeit with the former under different ownership. Additionally, the need for decarbonisation ups the pressure to control energy usage, meaning that energy management and optimisation skills will remain in demand.

Even if they are never implemented, Labour’s plans challenge those who believe in the market to deliver decarbonisation, particularly with regards to equity, vulnerability and cost to the consumer.

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