Energy and Net Zero: A comprehensive strategy for a sustainable future

This plan is underpinned by five key outcomes shaping the manifesto commitments: 

1. Set up Great British Energy to cut bills for good
2. Achieve energy independence
3. Create 650,000 new high-quality jobs
4. Ensure warmer homes to slash fuel poverty
5. Force water companies to clean up rivers 

The new Labour government will be mission-led, focusing on major initiatives to achieve Net Zero and broader energy policy commitments such as reducing fuel poverty and increasing energy independence. Central to this is the inception of Great British Energy, which will invest in Britain’s energy production. Green Finance initiatives will encourage larger corporations and businesses to contribute to the Labour energy policy agenda, with transition planning facilitating change at the corporate level, particularly in regulated industries and large public companies. 

Great British Energy and energy security

Opinion polling during the election campaign highlighted the cost-of-living crisis, exacerbated by unusually high inflation rates, as a primary concern. Data from the Office for National Statistics shows that electricity prices increased by 50% between May 2020 and May 2024. According to YouGov research published on 23 June 2024, 45% of Britons cited the cost-of-living crisis as a key issue in determining their vote. 

Labour’s 2024 Election Manifesto outlines its reform agenda for the utilities industry, aiming to manage and mitigate cost-of-living and energy security issues through several key proposals: 

• Creation of Great British Energy: This publicly owned company will invest in home-grown energy production, with £8.3 billion of funding over the next parliament (assumed to be five years) to deliver clean power, support capital-intensive projects, and create jobs.
  
  
• Reform of the UK energy system: Labour promises to introduce a tougher regulatory system to attract investment and reduce energy bills. This includes removing standing charges from utility bills and replacing the national transmission infrastructure.
  
  
• Improved energy security: Labour plans to reduce reliance on international energy supply through the Local Power Plan, enhancing local power generation to reduce pressure on the National Grid. Great British Energy will partner with local authorities and energy companies to install thousands of clean power projects. 

Funding the Green Prosperity Plan will include a windfall tax on energy companies combined with external borrowing, meeting Labour’s self-imposed fiscal rules. The Institute for Fiscal Studies has raised concerns about the long-term sustainability of this approach, highlighting the need for a robust long-term funding regime to handle future economic shocks. 

Net Zero system reform 

The drive to increase clean power and renewable energy involves incentivising the private sector to engage meaningfully with Great British Energy and the Local Power Plan. The historically low profitability in the renewable energy industry presents challenges, as increased private sector involvement may raise costs for the government and the public. Labour will need to consider extending and expanding the outgoing Conservative Government’s Contracts for Difference (CfD) scheme to incentivise investment. 

Transition planning within large, regulated corporations will be crucial for delivering Labour’s Net Zero policy commitments. Corporate transition plans will focus on adjusting corporate functions within regulated businesses to meet Net Zero targets. Labour’s foreign policy supports introducing a carbon border adjustment mechanism to prevent lower-quality goods from entering British markets, helping the UK meet its climate objectives. 

Green finance as an enabler for Net Zero 

The financial services and banking industry will play a significant role in achieving Net Zero. Labour proposes reversing the exception that allows the Bank of England to forgo climate change considerations in its mandates. UK-regulated financial institutions and FTSE 100 companies will be required to develop and implement transition plans aligning with the Paris Agreement’s 1.5°C temperature rise limitation goal. Investment in Net Zero will be guaranteed by closing loopholes in the windfall tax on energy companies, extending the Energy Profits Levy, and removing unjustifiably generous allowances. 

Electric vehicles 

Labour’s proposals for electric vehicles (EVs) include: 

• Accelerating the rollout of EV charging points. 

• Reinstating the phase-out date of 2030 for new internal combustion engine vehicles. 

• Standardizing battery condition information to support second-hand EV purchases. 

The accelerated rollout of EV charging points is vital for sustainable growth in the EV industry. Research indicates major hurdles ahead, with only 44% of car sales expected to be electric by 2030. Labour must detail plans for incentivising EV purchases and developing the necessary infrastructure. 

Labour’s Plan for the Automotive Sector (Driving a Growing Economy) details targets for reliable charging coverage across the UK, releasing and redirecting existing charge-point funding, and accelerating planning decisions for charging infrastructure. Investing in UK battery pack manufacturing will create jobs and incentivise EV production. 

Clean power by 2030 and energy efficiency 

Labour plans to introduce a new Energy Independence Act to establish its energy and climate policies framework, including forming a Clean Power Alliance of nations leading in climate action. The Act focuses on energy security and clean power, aiming to: 

• reduce energy costs 

• expedite the transition to sustainable energy sources 

• safeguard and improve clean energy supply chains. 

Labour commits to doubling onshore wind, tripling solar power, and quadrupling offshore wind capacity by 2030. Additional investments will be made in carbon capture and storage, hydrogen, and marine energy, with a focus on long-term energy storage. Labour supports nuclear power and plans to open new nuclear power stations and use Small Modular Reactors. The party also plans to maintain a strategic reserve of gas power stations to ensure energy supply security and protect the skilled workforce. 

Volatile foreign relations have increased heating costs and energy instability. Labour’s Warm Homes Plan will use grants and low-interest loans to support investments in better insulation, solar panels, batteries, and low-carbon heating. Supported by a £6.6 billion investment in the next parliament, the plan aims to upgrade five million homes and cut energy bills. Private sector partners will provide finance to accelerate home upgrades and low-carbon heating measures, and privately rented homes must meet minimum energy efficiency requirements. 

Net Zero conclusions

Labour’s comprehensive strategy for energy and Net Zero aims to transform Britain into a clean energy superpower, addressing energy security, fuel poverty, job creation, and environmental sustainability. With a focus on Great British Energy, regulatory reform, and extensive investment in renewable energy and energy efficiency, the new Government’s policies have the potential to significantly impact the UK’s energy landscape and drive towards Net Zero. However, successful implementation will require detailed planning, stakeholder engagement, and robust financial strategies to navigate the challenges ahead and achieve these ambitious goals.