GB Energy is one of the new UK government’s flagship policies: a state-owned company to increase renewable energy generation. The government’s set to put £8.3bn into the company over the next five years and it hopes to mobilise a hefty £60bn of private capital on top of that.
GB Energy has £3.3bn to invest in small-scale energy projects in local communities, as well as £5bn for direct investments to help get larger projects up and running.
Yesterday, UK Prime Minister Keir Starmer announced that GB Energy will use the country’s surrounding seabed, owned by the Crown Estate — a public entity that manages a portfolio of land across the UK and helps fund the Royal Family — to build offshore wind farms that it hopes will power 20 million homes across the country.
The new company — which is headquartered in Scotland — will pay for things like scoping out the seabed and making sure there are connections to the grid, thereby allowing private developers to build thousands of new turbines.
Alongside offshore wind, GB Energy will also help boost technologies — such as nuclear, hydrogen, tidal energy technology and carbon capture and storage — by co-investing into projects alongside the private sector.
So what does GB Energy mean for the climate tech ecosystem?
The UK’s largest climate tech business is Octopus Energy: an energy company that has quickly risen to be the largest electricity provider in the country, which is also a significant developer of renewable energy tech.
Its founder and CEO, Greg Jackson, welcomed the announcement, saying it could lead to quicker grid connections for new developments.
“We’re particularly excited about the potential to speed up grid connections, which will allow us to build cheap green generation quickly,” he said.
Companies like Octopus are likely to be the ones that benefit most from GB Energy, says Sam Alvis, director of energy at Public First, a policy research agency. GB Energy will co-invest into projects themselves rather than companies, meaning later-stage businesses with a portfolio of energy projects are the ones that it’s likely to work with, Alvis says.
The public entity will invest alongside companies in much the same way that private companies partner with each other, he says. “That could be through taking minority equity stakes, it could be a different form of partnership,” he says — such as helping businesses in need of project planning or grid connection expertise.
Although GB Energy is state-owned, it’s an operationally independent business, which Alvis says means it won’t take on a huge amount of technology risk. “It needs to make a return and it needs to be financially sustainable,” he says — adding that the company is about helping to accelerate large infrastructure project development, rather than financing experimental ideas. It won’t, for example, invest in seed-stage climate tech.
Alvis also thinks that companies developing grid-scale battery projects for energy storage, or those working on technology to help the grid cope with the influx of renewable energy are likely to benefit.
“We won’t know exactly which sectors and stages of startups will benefit until we know more detail, but it should provide a boost for the software technologies that accompany hardware and enable them to scale,” says Hope Johnson, investor at Octopus Ventures. That could include startups that provide risk modelling, insurance and automated maintenance for hard-to-reach offshore technologies, she adds.
Charlie Mercer, deputy policy director at lobby group Startup Coalition, says that, although GB Energy will likely work with companies at the project development stage, it could also buoy up smaller startups involved in supplying these larger infrastructure projects.
“There’s no doubt that this should be a boon for startups involved in energy generation and the supply chain,” Mercer says.
He adds that he’d like to see GB Energy support earlier stage startup generating energy, as well as more established companies in the space.
“We’re hoping that GB Energy supports earlier stage generation tech that will be fundamental to Labour’s goals, like tidal,” he says.
Can GB Energy help keep the UK keep hold of its climate tech?
Some say this new company could play a part in keeping climate tech companies on UK soil.
Since the US’s Inflation Reduction Act (IRA) — a bill channelling $369bn into green technologies — was introduced in 2022, an increasing number of European founders have moved their operations to the US, lured by the promise of attractive tax credits. There have been similar, albeit smaller, financial support packages rolled out in countries like Germany.
“The UK was rapidly falling behind European and US competitors on government climate support,” says Tommy Stadlen, cofounder and partner at Giant Ventures, adding that government plans for GB Energy are a “welcome action”.
“Government policy and investment has definitely played a role in us backing American, French and Nordic climate companies,” Stadlen tells Sifted, pointing to the role of Bpifrance co-investing “significant capital” alongside private investors. “[They’ve] kept great French companies in France.”
“We’re really excited about the opportunity this represents for accelerating the growth of a whole bunch of startups in the energy sector,” says Startup Coalition’s Mercer.
“Against the backdrop of tight pursestrings, it looks wise to use the convening and catalysing power of the state to pool in private capital,” he says, adding that mobilising private financing will help hasten the transition forward.
Read the orginal article: https://sifted.eu/articles/gb-energy-climate-tech-policy/
