Will GB Grid take back control?
This week saw Andy Burnham flesh out his vision for energy and water and how 'public control' will be exercised, including through the newly created GB Grid. The Utility Week team unpicks how this may translate into concrete policy and what the implications will be.
Will GB Grid take back control?
This week saw Andy Burnham flesh out his vision for energy and water and how “public control” will be exercised, including through the newly created GB Grid. The Utility Week team unpick what how this may translate into concrete policy and what the implications will be.
Before he had set foot on the stage at Labour’s annual conference in Liverpool, Andy Burham’s words were already being unpicked.
Key announcements, such as a promised new surge in social care spend and the implications for the pensions triple lock, had already been splashed across the preceding days’ papers. And on the morning of the speech (Tuesday 29 September) we were introduced to another big policy pivot, with the unveiling of Great British Grid (GBG). This was described rather vaguely as a new public body to invest in the electricity grid.
When the strains of All Together Now finally struck up to usher the prime minister on to stage, we were told that GBG would help to reform “a broken energy market so it better serves the public interest”. Burnham set out his aspiration (being careful not to make it a pledge) for these reforms to bring Britain’s energy prices in line with other European nations within 10 years.
They were also wrapped up in an ongoing narrative from his government of bringing energy and water “back under stronger public control”.
Hard details on the plans for GB Grid, a promised “national energy plan” and repealing the Thatcher-era limits on government stakes in water firms remain elusive. However, Utility Week has been gauging industry reaction to build a picture of where these reforms may ultimately lead.
What is GB Grid?
At the time of writing, there are more questions than answers around GBG, with sources increasingly sceptical as to how much depth there is to the government’s thinking. One suggested the same acronym could be applied to “Great British Gimmick”.
So far, all we have in terms of concrete detail is the press release issued by the Department for Energy Security and Net Zero (DESNZ) after Burnham’s speech, with Utility Week’s follow-up questions still unanswered. The release describes GBG as a “new publicly owned body within Great British Energy that will help accelerate the delivery of the electricity network infrastructure Britain needs”. While Burnham’s speech promised GBG would “challenge the private sector operators”, the release was more emollient, stressing it would work alongside the existing network operators.
But how exactly?
Initial reports suggested it would have a £4 billion share of GB Energy’s £8.3 billion budget for the Parliament to fund its own projects and for others to bid in to.
However, the official announcement from DESNZ did not include this figure. It merely stated: “The initial start-up costs for GBG will be covered by GBE's existing budgets. As grid delivery has a long development time, the long-term budget for this expanded remit will be considered as part of a future spending review.”
Sources at energy networks point out that even if GBG was allocated £4 billion to spend, it needs to be set in context of the £70 billion electricity transmission operators (TOs) have been allowed to invest over the current price control, from 2026 to 2031. One senior network figure says: “£4 billion won’t touch the sides in comparison to what private capital can deliver – and is delivering now.”
While the announcement is ambiguous as to whether GBG will be involved in just last-mile connections or full grid upgrades, it is understood to be the latter. The focus is expected to be solely on transmission upgrades in the first instance although sources at distribution networks admitted some nervousness that they may ultimately be in the crosshairs.
DESNZ also said it would “bring forward reforms to expand self-build connections”, claiming similar moves in Ireland had reduced connection times by up to 11 months. Network sources told Utility Week they did not recognise this figure.
Early press reports suggested GBG would allow developers to dip into its funding pot to help with these projects but this was another area that was absent from the official communication.
DESNZ was clear, however, that GBG’s role is not expected to “impact existing project commitments under the in-force and in-negotiation Ofgem licences”. It also stressed that it would not impinge on the roles currently performed by Ofgem or the National Energy System Operator.
So, what can we say for sure that GBG will actually do? It will invest as-yet-unallocated public funds into as-yet-unidentified electricity network infrastructure projects.
Networks veteran Roger Hey sums it up thus: “The only concrete policy is that a wider range of organisations, including GBG, will be able to bid to develop and deliver new network infrastructure, which is really an extension of competitive tendering with a new public bidder.
“I wonder where GB Grid will get their expertise from? Engineering experience is in very short supply across industry and there’s basically none in government. No network company is going to want it based anywhere near their home turf.”
Like Hey, most commentators interpreted the move as an extension of the Competitively Appointed Transmission Owner (CATO) framework, which NESO is currently taking forward. This remains at a conceptual stage but with the intention of organisations outside the incumbent TOs bidding to design, build and finance new transmission assets from scratch.
Great British Energy's budget over the parliament
Great British Grid's rumoured budget
£0bn
Amount currently allocated for GBG to build new grid
Skin in the game
Energy minister Michael Shanks told Utility Week that the creation of Great British Grid means the government’s plans to upgrade the network will no longer be “beholden” to the private sector. Speaking before Burnham’s speech but amidst the initial reports, Shanks insisted the new public body would give the government “skin in the game”.
Citing problems like network delays and rising costs, he said: “All of those things are real challenges for us to deal with. The government is not a bystander in that and it's not someone else’s responsibility to fix these things.
“We see this [GB Grid] as first of all giving the government a lever in the most important thing we're doing at the moment in the energy space, upgrading the grids. Otherwise, I’m ultimately beholden to the transmission companies to build this.
“They are doing important work and they will continue to do important work but the government needs to have some skin in this as well. That's what GB Grid is going to do.”
Energy consumers minister Polly Billington, who revealed earlier in the conference that the government is planning to “take on” the networks, told Utility Week the current system of grid ownership and control is not working well enough to carry out the necessary upgrade of the network.
She said: “That requires a big change in thinking and having GB Grid established as part of Great British Energy will mean that those will be aligned.”
Official responses from TOs to the announcement followed the tone of Energy Networks Association chief executive Lawrence Slade, who insisted networks were “keen to work with government on any measures that will bring down energy costs for consumers, while maintaining the delivery of the infrastructure the country needs to meet its demands for clean, affordable and secure power, now and in the future”.
However, behind the scenes they remained sceptical, echoing Hey's view that potential competitors would face the same challenges in delivering grid upgrades, including supply chain capacity, equipment lead-times and planning hurdles. One says: “Government already holds all the levers to accelerate grid rollout. Introducing more competition just increases the bottleneck if you don’t pull any of those other levers.
“It’s essential this doesn’t end up doing the opposite of what is intended, and act as a drag on the momentum already created.”
Early briefings to the media had Burnham telling the conference in Liverpool that GB Grid would “increase competition to drive down costs and speed up delivery so businesses can connect faster and grow quicker”, adding: “This is what more public control can do.”
However, the final speech did not include this coda and many sources approached by Utility Week were unsure why networks were being drawn into Burnham’s wider narrative of public control. One says: “We are not in the same position as the water sector and it’s unhelpful that distinction isn’t being made clearer.”
They add: “Talking about public control speeding up connections is a difficult argument to make when that process is overseen by a body [the National Energy System Operator] that has been in public control for two years.”
Another source says: “It’s not as if Great British Energy has been a roaring success to date. For most of its lifetime it’s budget has been under threat, it’s never had a particularly clear mandate and apart from a few glossy videos in front of windfarms it doesn’t appear to have achieved much. So it’s not clear to me why it’s been seen as the model for accelerating grid buildout.”
However, Adam Bell, director of policy at Stonehaven, describes GBG as “the logical next thing to do for the public control agenda”. He says: “If you want to drive forward competition, and you want to drive forward the CATO regime, you do need to ensure that you are going to have actual competition. And having something that has very good capital costs as public buying will actually help drive competition. It might terrify people into staying out of the CATO bids in case they think they can't compete on cost.”
While expressing some concern about the tone of the announcement, most network sources say they do not ultimately expect GBG to have a material impact on the sector. One adds a cautious note that “If this is what public control means for energy ... honestly, it could be worse”.
‘Until you have competition, you don’t know what can be achieved’
Meanwhile, Octopus Energy chief executive Greg Jackson has warned the industry not to retreat into entrenched positions. He tells Utility Week: “Companies that are subject to competition often find in the long run they deliver better results. It's opening up their world in ways that perhaps they haven't always wanted but ultimately I think they’ll look back and see it’s done them good as well. Obviously, the job of the system is to serve consumers, not the companies within it. But done right, companies that perform well can do even better than they do in today's world.”
He adds: “Competition has clearly improved energy retail, despite rising bills. Customer satisfaction is at an all-time high since Ofgem started measuring it and competition has made every retailer more innovative and given them a reason to improve every aspect of what they do. That could happen for networks too.”
Asked whether competition alone could really overcome the barriers identified by transmission sources above, Jackson said: “When we started our company, I was told by the incumbents that no one cared about service, that you couldn't build a brand in energy and that the only business model was two-tier tease-and-squeeze pricing.
“All those things turned out to be wrong. But until you have competition, you don't realise what can be delivered.
“There's many ways to skin a cat and there might be one way of building out a network that is constrained but the beauty of competition is that it’ll find a way of achieving the end result. It isn't just about who can dig a trench most cheaply. It can be about who can be most creative in finding a solution that will accommodate more generation and more consumption with less infrastructure cost, fewer delays, more community acceptance. All of that is stuff that, if we have competitiveness closer to the ground, we may start discovering.”
With Great British Energy already extending its remit beyond generation into grid infrastructure, does this make it more likely it could extend into retail? When the public body was set up two years ago, it was made very clear this was not the plan, but is it something that concerns Jackson?
He admits the organisation is like “the swiss army knife of energy” but thinks there are enough warnings from the past to make government think again.
“Experience has been that the public sector have not had a happy experience as energy retailers. We have seen publicly owned retalers before and pretty much all of them – apart from London Power – which is managed by Octopus, went bust or exited the market, sometimes at high cost to the taxpayer. So I would be surprised if they went there.”
“Competition isn’t just about who can dig a trench most cheaply. It can be about who can be most creative in finding a solution that will accommodate more generation and more consumption with less infrastructure cost.”
Greg Jackson, chief executive, Octopus Energy
Burnham takes first bite out of Thatcher’s privatisation laws
After months of promises on water, Andy Burnham needed a solid policy to announce at this week’s Labour conference. To find one, he went back to the 1980s, and the laws that set privatisation in motion.
Margaret Thatcher’s “ideological ban” on public ownership would be repealed, the prime minister told delegates in Liverpool, in an emotive speech piled high with public sector reforms.
Details released later reveal the “ban” was in fact the Water (Target Investment Limit) Order, brought in the year after the Water Industry Act 1989, that put strict limits on the government owning shares in water companies.
Even in water, many were not familiar with the order, but removing a statutory instrument from the Act is a symbolic move nonetheless. As Burnham told delegates, undoing it is the start of a 10-year journey to a “very different water system”.
“This is a statement of intent by the government rather than something which is likely to make an actual difference at the moment,” says Nicholas Ostrowski, a barrister specialising in water and regulatory law.
As Ostrowski points out, the big question is whether it pushes the government any closer to placing Thames Water into a Special Administration Regime (SAR).
The SAR regime is separate from shareholder limits, and a change to the caps might not make the legal pathway easier. Nevertheless, Ostrowski’s opinion is it must be an indication that the government is looking into that option for Thames Water “very seriously”.
Others have seized on another part of Burnham’s speech, where he said the government will support private companies that serve the public interest, but that public ownership could be a consequence for those that do not.
This could mean the government is looking at a “much clearer stick” in the form of a beefed-up special administration process, according to a source close to the water regulator.
“This is a significant change in tone and substance from Starmer administration, which stressed the importance of new regulatory regime derisking investors and that change would be delivered by regulation alone.”
Nikhita Swarnkar, utilities analyst at investment research firm Capstone, points out that Burnham’s move to give mayors more power over water, also confirmed in his speech, is another break with the Starmer era. “That was in the Cunliffe Review, but not in the water white paper. So frankly, I think this is just a way for him to differentiate himself from the Starmer government."
Swarnkar adds that the cap lifting was “predominantly a warning signal", and that the omission of nationalisation from Burnham’s speech is a sign the government is not in a fiscal position to undertake major stakes in water companies.
The unveiling of GB Grid offers clues in itself to how far Burnham may go with state ownership in water, according to Chris Pickard, director at consultancy Economic Insight. “If the government is to increase its ownership stake in water, it is more likely to do so through incremental investment in new assets than by purchasing existing water companies,” says Pickard.
The PM’s speech gave a greater indication on the direction he plans to take in water, but ultimately Labour is still buying time. The reaction from both sides of the public ownership debate showed patience is wearing thin.
“This [lifting the caps] means absolutely nothing if he does not then bring water into public ownership,” said campaign group We Own It, adding that Burnham’s speech showed he was “doubling down on regulation” as a way of fixing the industry.
River Action, meanwhile, warned a 10-year plan could kick the can down the road. Erica Popplewell, the charity’s head of public affairs, says “neither future reform nor new legislation can be an excuse to leave Thames Water in limbo”.
As for the industry, trade body Water UK responded with a terse call to forge ahead with the work started under the Starmer government. "As [Jon] Cunliffe concluded, there is no evidence that nationalisation would improve water company performance”, the body said, adding the sector needs urgent reform and a timeline for carrying it out.
