4 steps to make energy work for people and planet, not profit:
1) Introduce a new permanent windfall tax on oil and gas companies, at the same rate as Norway
Natural resources like oil and gas, wind, sun, hydropower belong to all of us if they belong to anyone.
Research by Common Wealth shows that oil and gas companies have handed out almost £200 billion to shareholders since 2010. £20 billion is needed to keep household energy bills at their current level while prices are high - Shell and BP's profits since 2010 would cover that amount more than seven times over! This year they are expected to make a further £40 billion in profits. For the last three years they've paid no corporation tax on their North Sea operations.
The UK has won nature’s lottery with oil and gas in North Sea, and huge potential for wind and hydropower around the coastline. But we’re squandering it. Oil and gas companies operating in Norway pay a corporation tax of 22% AND a special tax of 56%. In other words, there is a permanent windfall tax. For every £100 Norway collects in tax on barrels of oil in the North Sea, in the UK we collect only £8.
Norway first invested in developing its hydropower, so today 98% of the country’s energy is renewable. It then used its oil wealth to set up Statoil (now Equinor, 67% owned by the Norwegian state) and to create a sovereign wealth fund for the future worth $1.4 trillion. This means that in today’s energy crisis, it will pay 80% of people’s bills above a capped price.
The whole world - including Norway - needs to stop drilling and switch to renewable energy to tackle climate crisis. But while we're allowing private oil and gas companies to operate, we should be taxing them at the same level as Norway, and using this money to invest in the clean, green, affordable energy of the future.
2) Set up a new state-owned renewable energy company - Energy for Britain
The UK should set up a publicly owned company to lead the way on renewables and tackle climate crisis. This would reduce our dependence on fossil fuels like gas, and move us faster towards renewable power like wind and water.
A publicly owned renewable energy company would work locally, regionally and nationally to deliver a just transition. It would skill up workers, provide decent UK jobs and level up communities. Profits can be returned to the public purse here in the UK instead of flowing out of the country.
Other countries show us this is possible. The Norwegian state owns Statkraft, the largest renewables generator in Europe (which operates in the UK). Norway is considering setting up a state-owned hydrogen company. Meanwhile Denmark owns 50% of Ørsted (previously DONG Energy) which is the world’s largest developer of offshore wind power.
Around 50% of UK offshore wind is publicly owned right now, but only 0.07% of it is publicly owned by the UK. This is a huge missed opportunity, especially for a country with our geography.
3) Bring the privatised monopolies of energy transmission and distribution into public ownership, saving £3.7 billion a year
Once energy has been generated, it needs to be transmitted across the country. The UK is the only country in Europe that has fully privatised its transmission grid (apart from Portugal, which was forced to privatise its grid after the financial crisis).
National Grid is responsible for gas transmission across the UK mainland and electricity transmission in England. You don’t have any choice about this as a consumer - it’s a private monopoly. In 2021, National Grid shareholders received £1.4 billion in dividends - money that could have been reinvested back into the system.
A handful of privatised distribution companies also take the energy - gas and electricity - from the power stations to your home. Shareholders from around the world profit from these monopolies. For example, if you’re in the North East, your electricity is delivered to your home by Northern Powergrid. This company is owned by American conglomerate Berkshire Hathaway, which is owned by US billionaire Warren Buffett. If you’re in London, the South East or the East of England, your electricity is delivered to you by UK Power Networks. Last summer it paid its billionaire Hong Kong owner, Li Ka-shing, a £237 million dividend for the second year in a row.
If we brought our energy networks - transmission and distribution - into public ownership, we’d save £3.7 billion a year. This money could be used to bring down energy bills and/or to invest in renewable energy. The government would have to buy out the companies, but this investment would pay for itself in around seven years. It makes no sense to keep these private monopolies working for shareholders instead of the people of the UK.
4) Give people the option of a publicly owned energy supplier
Now is the perfect time to create a publicly owned supply company that people can rely on, working for the public not for shareholders. This company can make sure people aren’t ripped off, plan for fluctuations in global energy prices and invest in renewable energy. With energy prices expected to soar to up to £3,000 per year and leave 8.5 million households unable to heat their homes in the UK, this has never been more important.
This is already normal in other countries. In Germany, France and Italy most people already get their energy from a publicly owned company. Research shows that prices are 20-30% lower in systems with public ownership. In Germany two thirds of people have municipal owned electricity. In France two thirds of people get their energy from EDF, which is 80% state owned. The government has decided that EDF will take a hit to cushion households - so energy bills won’t rise by more than 4%.
In the UK, 40 energy supply companies have gone bust recently, affecting nearly 6 million customers. The market is in chaos. Right now the government is either just letting them collapse or stepping in to bail them out. For example, the government has loaned at least £1.7 billion of public money to keep failed company Bulb afloat (equivalent to more than £1000 per customer).
It’s hugely wasteful to spend public money rescuing private companies and getting nothing back. Creating a publicly owned energy supply company is an easy way for the government to provide a public option for people without having to buy out existing companies. If and when private companies fail, their customers will be transferred to the publicly owned provider.
The energy crisis has been caused by a number of different factors. Public ownership isn't a silver bullet - but it IS a vital tool that government could use to reduce people's energy bills now and plan for a greener future. It's time to run our energy system for people and planet, not profit.