The UK’s New Government Opens the Door to Renewables Investment

As the UK turns red, it also blushes green.

On Friday, the UK threw out the ruling Conservative Party in favor of the left-wing Labour Party. One industry that will be looking to Britain with a dash more optimism than before: renewable energy. Labour has promised big shifts in the UK’s energy policy, but will it deliver?

A Labour of Love

One of the pillars of Labour’s election campaign was to make the UK a “clean energy superpower.” Three major policies emerged as part of that plan: establish a nationally owned energy company called GB Energy, set up a “National Wealth Fund” that includes provisions for green transition investment, and lift a de facto ban on onshore wind. Labour also said that while it will honor existing oil and gas exploration licenses, no new ones will be issued.

Labour’s green goals aren’t as ambitious as they once were. In February, it scrapped a commitment to spend £28 billion ($35.8 billion) per year on green investment. Its funding in GB Energy will now be capped at £8.3 billion ($10.6 billion) and the new National Wealth Fund — which isn’t entirely earmarked for green energy — is capped at £7.3 billion ($9.3 billion). Leo Mercer, a policy expert at the Grantham Research Institute on Climate Change and the Environment, said Labour will face some challenges:

• “They’ve set themselves incredibly tight fiscal constraints,” Mercer said, as Labour has promised not to raise taxes or radically increase public spending. 
• He added that the new bodies Labour is setting up may have overlapping remits, and crowd each other out competing for the same assets with public money — potentially crowding out private investment in the process.

In a 2020 analysis the UK’s independent Climate Change Committee (CCC) found that in order to meet its decarbonization goals, the UK needs to bring in £50 billion ($63.9 billion) in total investment, both private and public, per annum by 2030.

Changing of the Guard: Although the future for the Labour government involves some fiscal tightrope-walking, the outlook for the renewables sector is better than it was before, Mercer said. The past two years of Conservative politics have seen flip-flops on green policy that damaged investor confidence, Mercer said, and although Labour has also watered down how much money it’s willing to spend, it has a clearer party line on green energy. “[Investors] will be much more likely to make these investments because they know they’ve got the long-term policy certainty,” said Mercer.