GB Energy: How to turn manifesto promises into tangible results

Decarbonising the electricity system by 2030 is one of the government’s five missions, with the Labour manifesto packed with ambitious promises on energy and climate – including the launch of Great British Energy, a state-owned clean energy company. The Great British Energy Bill, introduced to parliament on 25 July, 2024, successfully passed the House of Commons with a majority of 250, as MPs voted 361 to 111 to approve it at the third reading. The bill is now undergoing review in the House of Lords. 

The Green Investment Bank (GIB) was a successful forerunner of GB Energy in green investment

Originally championed by the Liberal Democrats to accelerate green investment, the idea of a GIB won cross party support by the 2010 election before making it into the coalition agreement. ³⁹ Green Investment Bank: The History, www.e3g.org/publications/green-investment-bank-the-history/

Launching in 2012, GIB’s mission was clear: to address market failures in sectors like offshore wind, bioenergy, and waste by attracting private investment into environmentally sustainable projects.

The National Audit Office (NAO) praised the GIB for having a ‘clear rationale, mission and objectives’ backed by ‘sound oversight and governance arrangements’. This gave GIB the operational independence and flexibility it needed to hit the ground running, ⁴⁰ National Audit Office, The Green Investment Bank, December 2017, www.nao.org.uk/wp-content/uploads/2017/12/The-Green-Investment-Bank.pdf  with both the Department for Business, Energy and Industrial Strategy (BEIS) and the NAO concluding that it had largely been successful in scaling up the UK's green investment during its early years.

Although returns are not a straightforward measure of success, as the goal is to drive additional investment rather than simply replace private funding, the numbers tell a positive story: GIB invested £3.4 billion into green projects, attracting £8.6 billion of private capital – a healthy £2.50 of private investment for every £1 of public money. By 2017, its portfolio was expected to deliver a 10% return. An independent evaluation commissioned by BEIS also concluded that GIB was effectively addressing market gaps in offshore wind, waste and bioenergy.

GIB’s early success wasn’t enough to convince the Conservatives after 2015

Following the 2015 general election, the Conservative government opted not to continue the bank’s funding. The government cited concerns about affordability and argued that removing the constraints of public sector ownership would in fact boost private investment, and by 2017 GIB was sold off entirely, a sale that was possible in part because of its success.

However, critics argued that selling off a successful institution weakened the UK's ability to steer the green economy and left key sectors exposed to underinvestment. Ultimately, GIB’s fate highlights the political vulnerability of even effective institutions. What started as a promising driver of green investment was dismantled as government priorities shifted. 

The UK Infrastructure Bank initially struggled to be as effective as its predecessor

The UK Infrastructure Bank (UKIB) was launched in 2021 to drive private investment into tackling climate change and boosting regional growth, filling the gap left by European Investment Bank funding after Brexit. But the UKIB had a bumpier start than the GIB. Despite the leadership of former HSBC CEO John Flint, the bank initially struggled with recruitment and delivery, in part due to a rushed setup. ⁴¹ https://committees.parliament.uk/publications/33633/documents/183968/default/

Initially, the bank relied heavily on Treasury secondees and focused on low-risk deals approved by the Treasury, raising doubts about its independence and long-term purpose. Eighteen months in, the Public Accounts Committee noted that UKIB was ‘still in its early stages’, with only 16 permanent staff – far short of its target of 320 – supported by a number of Treasury secondees. ⁴² https://committees.parliament.uk/publications/33633/documents/183968/default/  By September 2023, staffing had risen to 175, with plans to hit full capacity by Spring 2024. ⁴³ https://committees.parliament.uk/publications/42022/documents/208939/default/  While new bodies can be established quickly, a lack of clear objectives, sufficient staff and governance arrangements can hamper progress initially, even with strong leadership at the helm.

Although there have been concerns about how additional UKIB’s investments have been, recent UKIB performance looks more promising, with more green investments being made. ⁴⁴ https://media.ukandeu.ac.uk/wp-content/uploads/2023/09/UKICE-THE-INVESTMENT-GAP.pdf ⁴⁵ https://infra-bank-prod.s3.eu-west-2.amazonaws.com/s3fs-public/download/UKIB-Annual-Report-and-Accounts-2022-23_0%20%281%29.pdf?VersionId=CLiUUS6y21n…  Before transitioning into the National Wealth Fund last month, it reported investments exceeding £3.8 billion which UKIB expected would mobilise nearly £11 billion in private capital – though again, this ratio is just one measure of success. ⁴⁶ https://ukandeu.ac.uk/the-uks-green-investment-gap/ ⁴⁷ https://www.ukib.org.uk/how-we-invest-principles-and-approach/impact-additionality-and-esrg ⁴⁸ https://www.ukib.org.uk/news/uk-infrastructure-bank-becomes-national-wealth-fund

It's unclear if GB Energy has a clear enough remit to deliver effectively

The government introduced the bill to establish GB Energy within its first 100 days, with the new publicly owned clean power company, based in Aberdeen, intended to play a role in all stages of clean energy projects from development to operation. This includes supporting industry, local authorities, and community groups through a range of mechanisms, like equity investments, loans, grants, insurance, and guarantees.> ⁵³ https://publications.parliament.uk/pa/bills/cbill/59-01/0005/en/240005en.pdf  These roles are new to government.

Juergen Maier, former CEO of Siemens UK, has been appointed as the first chair, a move widely seen as positive, given his experience in the industry. ⁵⁴ https://www.gov.uk/government/news/new-great-british-energy-partnership-launched-to-turbocharge-energy-independence ⁵⁵ https://assets.publishing.service.gov.uk/media/66a235daab418ab055592d27/great-british-energy-founding-statement.pdf  But the organisation’s precise remit and goals remain unclear. Mixed messages from senior Labour figures during the election campaign only added to the uncertainty, raising questions about GB Energy’s focus and goals.

Witnesses called during the committee stage argued that the broad provisions in the legislation will give GB Energy the flexibility needed to invest and adapt. However, they also suggested that its business plan, once published, should offer more concrete guidance. ⁵⁶ https://parliamentlive.tv/Event/Index/50e500a7-c82d-4742-9745-3d731f366373

Success will depend on getting the right people, governance and mandate in place

To avoid the problems that followed UKIB’s rushed creation, GB Energy will need a sharp focus, a well-defined mandate, and strong governance. This means addressing market gaps rather than duplicating efforts covered by the private sector, appointing the right people with relevant experience in the industry to perform new responsibilities for government, and carving out sufficient independence from the Department for Energy Security and Net Zero (DESNZ). 

The lessons from the past are clear, with GIB’s history showing that even swift success is no protection against changes in the political landscape. GB Energy needs clear goals and objectives to succeed. But to survive it needs cross-party consensus on its value in the institutional landscape.