Brian Wilson: Why energy nationalisation plan is a good idea

Is an energy system designed to facilitate privatisation capable of meeting new challenge of the switch to renewables? (Picture: Andrew Milligan/PA Wire)

Amidst the fog of Brexit, it was a relief to hear of a substantial policy initiative emerging this week, namely Labour’s strategy document Bringing Energy Home.

Its main thrust is that gas and electricity transmission and distribution systems should be brought back into public ownership while up to two million houses throughout the UK would be equipped with solar panels.

The immediate focus was not on the merits of these proposals (which are considerable) but on the level of compensation that might be paid to departing shareholders. Anything less than full market value (reflecting the gargantuan profitability of monopoly businesses) would be an affront to all we hold dear, or so we were told by an array of self-interested voices.

I doubt if that plea will carry much weight among the masses who are reasonably well aware that, from the outset, gas and electricity privatisations have been massive rip-offs – first of assets which had been funded by decades of public investment and then of consumers who have paid through the nose for the sector’s vast profitability.

However, the law and justice are not the same thing. Whatever scheme of compensation a hypothetical Labour government might come up with, it would be tested in the courts. Meanwhile, it is not worth wasting time on discussing the terms of compensation as opposed to the principle of what is proposed.

If, as we are told, the country and the world face a climate emergency and we really must do more to achieve a decarbonised energy mix, the question of whether public ownership is a good idea becomes easy to answer. Of course it is.

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The predictable barrage of negativity towards the word “renationalisation” encourages us to forget that in meeting any emergency it is the state that must step in. It is government which needs the power to determine a response, rather than be in the supplicant position of asking a whole range of players if they would mind adjusting their priorities, please.

Scotland’s energy history offers text-book examples of government’s critical role. Under public ownership, we became large-scale exporters of electricity. The hydro schemes of the 1940s and 50s would never have happened without political direction and enforcement. Even if a commercial operator had wanted to build them – unlikely – what would a regulator have made of them?

Equally, without the power of the public balance sheet, nuclear stations would not have been built at Hunterston or Torness. Whatever one thinks of nuclear power, it cannot be disputed that these mighty engines of the Scottish economy have given us half a century of secure supply and low-carbon electricity.

If the state does not control the pace of transition towards a radically changed pattern of generation, then it cannot secure the actions which an ‘emergency’ implies, particularly if they cut across commercial interests who run rings round regulators in general and Ofgem in particular. Independent reports suggest that Ofgem allowed the grid companies £7.5 billion excess profit over eight years by over-stating ‘risk’ and inflating investment costs.

A mass transition towards solar panels is unlikely to be driven by the current system. Yet it is a thoroughly good policy which would cut energy bills in social housing, create employment and contribute significantly to decarbonisation. It should be within the power of government, as much now as in the past, to drive that scale of vision.

In Scotland, there is a particular issue long overdue for addressing because of the way electricity was privatised at a time when nobody was talking about re-wiring the country for renewables. This left Hydro (now SSE) and Scottish Power (now Iberdrola) with overlapping interests in transmission, distribution and generation. I would prefer a National Energy Agency to determine what is good for the country, rather than for shareholders in these companies.

Whether or not Labour’s plan is implemented, it should spark serious consideration in all parties of whether a system created to facilitate privatisation is capable of meeting the new challenges. We should also be reminded of just how much we owe to past public ownership and vision.