Better Public Ownership for a Future-fit GB Energy

In 2024, researchers around the world found that the planet had surpassed the 1.5 degrees of warming that signatories to the 2015 Paris Agreement had aimed to prevent. Flooding, coastal erosion, wildfires, crop failures, and many more impacts have been felt by communities everywhere, with citizens left wondering what can and, more importantly, will be done to protect future and current generations from the worst harms of further global warming. The energy transition has long been understood as an essential component for tackling climate change. For decades, governments have been focusing on policy that leverages the private sector to invest, develop new infrastructure, and ultimately lead the way towards decarbonisation. Yet here we are, decades later; renewables are cheaper but fossil fuel usage is higher than ever before and renewable energy transitions are stagnating. All the while tariffs are becoming increasingly unaffordable whilst energy companies continue to make huge profits.

Why is this happening? At the Transnational Institute (TNI) our years of research into electricity policy has found that the common logic underpinning a lot of energy policy is flawed. The core strategy has been to try to make the market more favourable for private investment in renewables. This has largely meant underwriting private profits, with guaranteed fixed returns or public subsidies. This model pours public funds into private purses, and once the subsidies dry up, so does the investment. In the meantime, public capacity and skills have been drained. In fact, relying so heavily on the private sector has stalled the transition. As our ‘Green’ Multinationals report found, in some cases some of the largest so-called green energy companies are actively working against climate-friendly policy.

We need to speed up the transition to renewables whilst also ensuring energy tariffs remain affordable. So, what can be done? Nine out of ten countries leading the transition to renewables have a publicly owned renewable energy company that drives the process. And moreover, prices have shown to be 20-30% lower in systems with public ownership. As we argue in our recent report, Reclaiming Energy, we need system-wide public ownership. This means a state-coordinated energy system that is a mixture of state, community, and local authority ownership, to ensure accountability and democracy. This would mean local people can decide whether to spend profits from their local energy projects for improving homes or funding a nursery; and that state profits could go into upgrading energy infrastructure and keeping bills affordable.

 Public ownership is not a silver bullet; there are many cases where public companies do not act in ways to reduce climate change. Some of the fastest growing fossil fuel giants, such as Aramco in Saudi Arabia, are state-owned and play an active role in stalling international climate action. There are also cases where public systems have experienced some form of marketisation (or corporatisation), meaning that decisions are still made to benefit company or shareholder profits – as was the case in Austria during the recent energy crisis, where shareholders decided to increase tariffs significantly despite being a publicly owned system. This was fiercely contested by local groups and campaigns such as Attak Austria, yet so far few amendments have been made to the overall system.

‍Democratic decision making and accountability. The last example highlights the importance of energy systems being designed with benefit to local people as a core purpose. Projects such as one conducted by the Navajo Nation in the US are a great example. The Navajo Nation’s territories are in an area of great natural wealth including huge coal and uranium mines, but the extraction of these resources to generate energy for the rest of the country has been of little benefit to the communities who are impacted, with thousands of people left without access to affordable energy or connection to the energy grid. The Navajo Nation took matters into their own hands and developed a utility-scale solar project (i.e. large enough to feed energy back into the grid) which produces enough energy for over 30,000 homes, with additional funding attained to connect the remaining 14,000 homes to the grid. This initiative was developed to provide skills, training, and jobs in the local community, decisions were made democratically, and the infrastructure was designed to prioritise local needs. Of note is also the scale of this project, which can generate more local wealth for the community by reaching economies of scale.     

Another aspect of accountable energy systems is responding to the needs and desires of local people. In Costa Rica, where their mostly publicly owned energy system is famed for running on almost 100% renewable energy, nation-wide protests occurred in response to plans to build more dams to generate hydropower. The expansions would have imposed upon indigenous territories, created unnecessary environmental harm, and destroyed some agricultural workers’ crops. In response, the government scrapped these plans and enacted a plan – developed with a coalition group representing many different constituents – to diversify their energy mix with different types of renewable energy. This was back in 2015, and with climate change now impacting water supply and therefore hydropower, this strategy was incredibly future-facing. It should also be noted that Costa Rica’s energy system is composed of a state company, several municipal companies, and a few rural co-operatives. Originally established following a ‘public goods’ approach, all of these companies are coordinated by the state to ensure universal energy access. 

‍Fair tariffs. Our research found that across the world, those who use the least energy tend to pay more than the biggest consumers. This is due to a variety of reasons including subsidies for industries and low incomes rendering the cost of energy a proportionally greater percentage of income. The way tariffs are set varies around the world, but in systems with many private actors, the costs will also ensure that a significant profit is returned to investors and those who own the infrastructure. Returning to Costa Rica, due to their rates being set by a public body and the majority of their energy system being publicly owned, they set their tariffs based on the infrastructure and maintenance costs. So, when everyone in the world recently experienced huge energy price hikes and the cost of living increasing, their energy costs actually went down. The same happened in France, where the majority of their electricity comes from state-owned EDF: whilst the rest of Europe's energy bills increased by about 10-15%, France capped their increase at 4%. 

Tariffs could also take into account energy usage. With ever increasing energy demand and all the resources (whether renewable or not) being finite, tariffs could be set according to the necessity of their use. For example, households and public services energy prices could be set below non-essential, highly-polluting industries.

Lastly, public ownership should ensure public benefit. The UK is a great case for understanding what happens when energy system profits are not reinvested into maintaining and upgrading infrastructure. Failures to upgrade the privately owned grid have resulted in solar and wind projects waiting up to ten years to connect to the grid and start contributing to the UK’s electricity supply. This detracts future investors and slows down the pace at which we can finally start to slow climate change through the energy transition. 

There are many great examples of collectivising the benefits from energy projects, with community-led projects such as Wolfhagen in Germany funding local kindergartens and bike schemes, and Plymouth Energy Community reinvesting into community initiatives that are voted upon by those near the solar farm, while many countries including Norway, Denmark, Iran, Mexico, and Trinidad and Tobago using revenue from their oil and gas companies to develop sovereign wealth funds. These funds invest in infrastructure and other projects for public benefit. Countries like Honduras have recently passed legislation to make energy a public good. This means everyone should be able to equally benefit from the shared resource of energy, and in practice means that the Honduras government is pushing companies to prioritise energy affordability and access, and where they are not willing to comply they are bringing the companies back into national ownership.

Energy is both essential to public life and an asset to any economy. Years of privatisation have meant that successive governments have struggled to commit to the long-term energy system planning necessary for the energy transition. It has been decades since a government has been bold enough to state the obvious benefits of public ownership – from the owning of infrastructure that makes coordination of a transition simpler, to the ability to reduce tariffs because they no longer include profits for the private actors running our energy systems. GB Energy could be an opportunity to rethink energy service provision in this country, to ensure that energy access is affordable and does not cost future generations a livable planet.

‍What we would like to see:

• Take inspiration from Honduras. Use policy to provide energy as a public good. Prioritise renewable energy and energy affordability.
• Use the drive for local (community and municipal) energy as part of building capacity in the public sector to bring about the transition. Support the creation of public-public partnerships (partnerships between public actors such as local authorities and community groups), as in Plymouth where the local authority gave a staff member to a local community group, Plymouth Energy Community, to support their work  to make homes more energy-efficient and bills cheaper through retrofitting. Our research found that the private sector only invests when their profits are underwritten by public funds. Thus, private investments tend to require more public funds than they bring in themselves – and they dry up as soon as public subsidies, and other financial support, shrink. So, instead of giving public money to private companies we should give it to local companies or renationalise existing ones.
• Bring fossil fuels (and other energy infrastructure and generation assets) back into public ownership to fund the transition. This should not mean paying for sunk costs (costs that have already been spent) as the record profits these companies have made in the past years already covers that. In lieu of this the government should push oil and gas companies in the North Sea to deliver a just transition in line with worker demands.

The energy transition has to happen to stop climate change, but the action so far has failed to deliver either a meaningful transition or affordable energy bills. It’s time to rethink our approaches. Public ownership is tried and tested. Under a nationalised system we created the national grid, and in the 1960s-70s transitioned the entire country's gas network and every single house's gas appliances in just ten years. That level of coordination is needed again.