Will McMyn, a recently appointed Associate Director who leads our energy and environment team, considers different political approaches to energy. 

For more than a century, politicians have argued about how far the state should be involved in the way energy reaches homes and businesses.

In the UK, since the beginning of the twentieth century, the electricity and gas industries have lurched from being entirely private affairs to entirely nationalised ones, and then back again.

Free marketeers think that energy users are best served when the industry is made up of private companies competing against each other to win customers.  This competition, they argue, drives down prices, while pushing up standards of service and encouraging technological innovation. Politicians of this persuasion believe that, beyond setting minimum standards on things like safety, government should only intervene in the market where something is stopping competition from working properly.

At the other end of the political spectrum are those that believe the state has a far greater role to play – or even should own and operate the entire energy system. They argue that the networks of pipes and wires that bring us electricity and gas are natural monopolies unsuited to competition. And they believe that energy company profits should be recycled to keep prices down, rather than siphoned off to pay dividends for private shareholders.

These rival approaches to the energy industry are clearly visible in current UK politics.

Since the pro-market Conservatives took power in 2010 (initially in coalition with the Liberal Democrats) the number of domestic energy suppliers has risen from 12 to more than 60. 

Theresa May, to win over Tory MPs that are suspicious of government stepping into markets, has been careful to position her flagship energy price cap policy as a temporary, tightly focussed intervention to fix competition, rather than a sign of a more general willingness to intervene.

“The Conservative Party will always believe in free markets. And that’s precisely why it’s this party that should act to defend them… That’s why where markets are dysfunctional, we should be prepared to intervene.  Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by deliberately complex pricing structures, we must set the market right.” Theresa May - October 2016

By contrast, under Jeremy Corbyn’s leadership, the Labour party has become bolder and more explicit than it has been for many years about the idea of nationalising the energy industry. 

“It cannot be right… that profits extracted from vital public services are used to line the pockets of shareholders when they could and should be reinvested in those services or used to reduce consumer bills… Labour [has] pledged to bring energy, rail, water, and mail into public ownership … With the national grid in public hands we can put tackling climate change at the heart of our energy system… In public hands, under democratic control, workforces and their unions will be the managers of this change, not its casualties.” Jeremy Corbyn – February 2018

The Scottish National Party too sees a stronger role for the state in markets. It has plans for a Scottish National Investment Bank, state running of the West Coast ferries, state-owned highland airports, as well as a state-run energy supplier.

The latter is an idea that has already been brought to life at the level of local politics: Bristol Energy and Robin Hood Energy are owned by Bristol and Nottingham councils respectively.

Politics in the past two years has been wildly unpredictable, and we’ve all learned to be a little wary of polls, but it’s probably safe to say that a Corbyn government is “not unlikely”. Such an eventuality would have profound consequences for every part of the energy industry.

If you work in or around the energy industry and want to talk about how best to navigate the shifting political and policy landscape, please do get in touch at [email protected].