The creation of Great British Energy (GBE) was the second most popular policy in Labour’s last Manifesto. Since the election GBE’s focus and function has been a moveable feast.
The Government committed to capitalising GBE with £8.3bn during this Parliament, yet in the 2025 Spending Review allocated £2.6bn of that to a separate company Great British Energy-Nuclear. The GBE Strategic Plan set out its aims to 2030 and focus on GBE Local (supporting community ownership), onshore energy (solar, batteries, wind) and offshore energy (floating and fixed wind).
Last week, GBE’s journey took another turn, with the new Prime Minister announcing the launch of Great British Grid (GBG).
Two years since the election, therefore, we now have clarity on its main priorities (for now): owning electricity networks (£4bn), delivering new nuclear projects (£2.5bn), and supporting community energy (£1bn).
Why electricity networks and why now?
The UK’s transmission operators (TOs) are planning to invest £70bn between 2025- 3031, to maintain and upgrade the grid aligned to the Government’s ambitions. However, the National Audit Office’s Upgrading the electricity transmission network report warned that many of the key upgrades are at risk of not being delivered when needed, and that annual constraint costs could rise from £1.9bn to £7.8bn if grid upgrades are not accelerated.
Demand on transmission and distribution electricity networks is also increasing, leading to housing developments in London having to wait 15 years for a grid connection. The Prime Minister framed GBG as helping to address this capacity challenge, which he argues is inhibiting investment and holding Britain back:
“(GBG) will increase competition, drive down costs and speed up connections so businesses can expand and grow more quickly”
There is a clear need to rapidly scale up electricity networks capacity, there is an opportunity to deliver returns and long-term value (one of GBE’s key aims), and GBG aligns with the Prime Minister’s desire for stronger public control of key utility assets.
ITO be or not ITO be, that is…connections?
The £4bn question facing GBG is how it will invest in and deliver grid infrastructure.
GBG could focus on ‘last-mile connections’, connecting homes and businesses to the distribution network. Competition has already been successfully introduced at this level, with Independent Distribution Network Operators (IDNOs) now accounting for 80% of new home connections in England.
IDNOs have been successful in reducing local grid-connection bottlenecks and unlocking the economic benefits the Prime Ministers is seeking to secure. The IDNO market is competitive and mature, developed over twenty years. GBG therefore may favour therefore co-investing in projects or taking stakes in companies as it did with Virtu Energy (solar) and ITM Power (hydrogen).
A new area that GBG could explore is onshore transmission network ownership. The Competitively Appointed Transmission Owners (CATO) regime will introduce competition into transmission.
The National Energy System Operator (NESO) can submit potential transmission projects to Ofgem to consider putting out to tender through the CATO regime. A project will qualify if it passes four tests:
- Need – the project addresses a network need.
- Novelty – it is wholly new.
- Separability – it can be distinguished from the rest of the transmission system.
- Consumer benefit – a competitively tendered process will deliver value for money for consumers.
To date, NESO has only submitted one potential project WCN2 in 2024, a double circuit overhead line and substation link connecting South West Scotland and North West England. Ofgem turned down the tender request primarily due to ongoing uncertainties around connection reform and network need.
An additional route that GBG could consider is becoming an Independent Transmission Owner. This provides a ‘bottom-up’ approach to owning transmission networks, with customers identifying the need (rather than NESO) and seeking a connection, more akin to the IDNO process. However, this route is yet to be established and given the political timelines
Will competition deliver value for money?
GBG is not the precursor to nationalisation, it will compete against the private sector with the hope that increased competition will drive down costs and speed up connections. The Transmission Acceleration Action Plan, introduced by the Sunak Government, found that introducing competition into onshore transmission networks could save consumers up to £1bn by 2050.
However, former electricity network commissioner Nick Winser, has previously cautioned against introducing competition due to the pressing timescales and need to deliver transmission infrastructure. Keith Anderson, CEO of Scottish Power, told Utility Week that the only way new entrants would be able to deliver projects cheaper would be through taking on higher levels of debt than allowed by the incumbent TOs.
As a publicly owned electricity network company, the think tank Common Wealth argues, GBG has access to a lower cost of capital and could accept lower returns than its rivals. Although £4bn is small in the context of the scale of investment the UK’s electricity networks require, GBG’s impact could outsize its budget, through a new competitor in the market. The finalisation of the Strategic Spatial Energy Plan (SSEP) in 2027 will provide ample opportunity for GBG to consider when and how it will target investment.
Will GBG address the Great British Gridlock?
The Prime Minister has set out the success criteria for GBG: increased competition, faster connections and reduced costs. It is crucial however that GBG also crowds in private sector investment, supports (rather than stifle) innovation in electricity networks, and does not add uncertainty in an infrastructure area that demands pace.
The Party Conference announcement could mark the final twist in GBE’s journey and provides an opportunity for the private sector to demonstrate how it can work with and alongside GBG to connect the Burnham Government’s ambition to delivery.
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