Did share prices shudder as Andy Burnham unveiled Great British Grid (GBG) as a public sector challenger to the trio of private sector firms that own and operate the electricity grid? Not exactly. National Grid and SSE, the two listed in London, were down by about 0.5%, in line with the wider market.
That mild reaction looks correct. For all the talk of greater public control over the electricity grid, the prime minister is not threatening to nationalise anything or take control of any existing assets. As the detail of the energy department's announcement made clear: “Great British Grid will complement, rather than replace, the existing institutions responsible for Britain's energy system and the role of existing network operators remains unchanged.â€
Instead, GBG's main role will be to put together competing bids for future transmission projects. So, for example, rather than National Grid automatically getting the gig to build cables and pylons to bring offshore wind power from East Anglia to London, in future it could have to beat an offer from a consortium including GBG, probably in partnership with private sector construction firms and financiers.
That prospect, however, is unlikely to alarm incumbent boardrooms because, to put it mildly, GBG will not arrive with terrifying sums of state money to blow everybody out of the water. GBG, said Burnham, will be “a branch†of Great British Energy (GBE) and, initially at least, will have to access its funding pot.
That funding was £8.3bn for this parliament – and a chunk has already been raided to back small modular nuclear reactors. There is probably about £4bn left. If GBG gets half, we're talking about £2bn of capital. For context, the grid upgrade in the 2026-31 cycle adds up to an investment programme of about £70bn, with much more to follow in the 2030s.
Is GBG worth doing at all, then? Well, yes, it is. Adam Bell of consultants Stonehaven, and a former official in the energy department, identified the key point: “For the first time since the 1990s, the state will have perfect information about network costs that it can use to drive performance across privately held networks.â€
In other words, just having a state-backed horse in the race for new projects could yield benefits in a world in which a standard complaint is that the monopoly network companies have an advantage over the regulator, Ofgem, which sets financial returns, in terms of knowing more about real construction costs.
What gains could greater competition produce for consumers and businesses, who ultimately pay for these projects via their bills? Who knows, but even the odd billion or two is clearly worth having.
Note, though, that the concept of competitive tendering for transmission projects is not new. The so-called Cato (Competitively Appointed Transmission Owner) regime was established in an energy act in 2023 under the Tories. The only truly novel bit is that GBE, via its new “branchâ€, will join in.
As a re-set of GBE's priorities, that looks sensible. The upgrade of the electricity grid, at the lowest possible cost to consumers, is plainly of more national importance than the body's current day job of installing solar panels on the roofs of schools and hospitals, which is good for ministerial photoshoots but does not move the economic dial. The behind-schedule grid programme, and the logjam in connections, threatens heavy extra costs, as the National Audit Office has pointed out.
But Burnham and the energy secretary, Miatta Fahnbulleh, should note Bell's advice about what sort of outfit GBG should be: dynamic, unbound by public sector procurement rules, and not like part of the civil service. “If it is subject to the same suffocating procedures that render much of the state essentially useless, it will be nothing more than a boondoggle,†he says. Let's see.
Burnham's other grid announcement was also interesting: reforms to allow companies to build their connections to hook up to the grid, rather than waiting for the network companies to do so. Yes, that's sensible, and seems to have had results in Ireland. AI datacentres and industrial projects may happen slightly sooner. None of which, though, changes the big-picture criticism, repeated by industry and lobby groups endlessly, that energy infrastructure must get through the planning system faster.
The mistake is to file these initiatives under “public controlâ€. GBG may end up being a co-owner of a few projects but the vast majority of the grid will remain in the hands of the current triumvirate. And, on connections, the role of the state looks more like one of facilitator. That's worth doing but the “control†element will sit roughly where it does today – with the current regulatory setup.
