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UK Prime Minister Keir Starmer wants to speed up investment in clean energy to help “take the brakes off Britain”.
Wednesday’s King’s Speech confirmed a bill to set up a publicly-owned clean power company, plus planning reforms to avoid infrastructure such as grid upgrades from getting snarled up in disputes with local communities. Both should be good news for listed energy companies. But the benefits to investors will probably be more of a slow burn.
Indeed, shares in most electricity companies have done little since Starmer’s Labour party came to power, despite its strong commitment to an energy overhaul. Many key energy policies were well flagged before the general election. More importantly, renewables-focused stocks such as SSE are still weighed down by concerns over the higher costs faced by the sector.
The sharp drop in power prices this year hurt owners of assets such as gas-fired power plants and storage, which are more exposed to market prices. SSE’s shares have gone nowhere year-to-date. British Gas owner Centrica has fared better, in part because of hopes it will use some of its net cash pile, which stood at £2.7bn at the end of 2023, to buy back more shares — hardly a growth mindset.
Great British Energy, as the new publicly-owned clean energy company will be called, should help the sector in coming years. Full details are still to be released, but its relatively limited budget of £8.3bn over the five-year parliament points to a role as a co-investor in schemes rather than a serious rival to private investors.
That could have financing benefits for private developers: projects also involving GB Energy will probably be viewed as a safer bet by lenders, says Adam Bell of consultancy Stonehaven. However, the public-owned company will take time to set up.
Where the new British energy champion focuses its attention will be crucial for the sector. Offshore wind was mentioned in the King’s Speech. But industry executives would probably prefer it to help to de-risk emerging technologies such as floating wind turbines or clean hydrogen.
Planning delays have also long been a bugbear of energy investors. Communities in areas such as the east of England, where pylons and other grid infrastructure are needed to bring electricity onshore from wind farms, have delayed projects through court challenges. A streamlined process is, however, already assumed for many projects planned before 2030 by companies such as SSE, says Bernstein analyst Deepa Venkateswaran.
Rhetoric about “turbocharging” the UK economy is to be expected at events such as the King’s Speech. The reality for the power sector is that any improvements will still take some time.
nathalie.thomas@ft.com
