UK General Election 2024 - How do Labour and Conservative plans compare for net zero and the energy sector?

Net zero

• Both Labour and the Conservatives remain committed to achieving net zero by 2050, but their ideas on how to get there have increasingly diverged over the last 12 months. Neither party has floated substantial changes to the Climate Change Act 2008, despite a High Court ruling in May that the current Government’s climate strategy was not fit-for-purpose and therefore breaches the Act.¹

Net zero infrastructure

• The centrepiece of Labour’s energy strategy is the establishment of Great British Energy (GBE), a publicly owned company, which will manage and provide clean energy projects around the UK.
• Labour has clarified that although GBE will not be an energy retail company, it will generate electricity, as well as own, manage, and operate clean power projects alongside private firms.²
• Labour will capitalise GBP8.3 billion of public funds to support GBE over the next Parliament, with the aim of kick-starting a process of industrial renewal, securing supplies of low-carbon energy, as well as lowering energy bills, delivering jobs and reviving the economy in the loosely termed “Red Wall” constituencies.
• The plan is for GBE to directly generate 8GW of electricity within five years, which is expected to generate around 12% of peak demand by 2030. While this is good news for construction supply chains, much of the detail remains eagerly awaited by the private sector, particularly in terms of how proposed co-investment models with private sector entities will operate.
• In addition to GBE, Labour wants to pursue a more significant government role in directing and co-investing in net zero infrastructure through plans to:

• Merge the existing Infrastructure and Projects Authority and the National Infrastructure Commission to create the “National Infrastructure and Service Transformation Authority”, a new organisation “at the heart of government” whose functions will include stipulating “from the outset how projects are planned, designed and costed” (something that will complete the circle begun in the early 2000s when the split was first made);
• Use the proposed new British Infrastructure Council, already established in shadow form, to liaise with representatives from some of the biggest UK and global investment funds; and
• Utilise a new National Wealth Fund (although unspecific about how it will be funded) to provide net zero project funding (with specific references to battery manufacture, hydrogen and decarbonising steel production, amongst other infrastructure). Labour’s stated aim of crowding in private investment to triple the amount of public investment may be challenging.

Planning

• In contrast to Labour’s more elaborate initiatives, the Conservatives plan to simplify the planning system, making it easier and faster to build infrastructure projects. This includes reforms to previous EU legislation to speed up infrastructure planning systems, regularly updating National Policy Statements, and providing statutory consultees with clearer objectives to reduce delays. The Conservatives also aim to reduce project costs by allowing faster changes to consented projects.
• As part of its manifesto, Labour’s growth plans include a major reform of planning laws and developing a 10-year infrastructure strategy, based on regional needs. Commentators have noted that neither major parties’ manifestos mention PPPs, suggesting that both are looking at new alternative means of delivering infrastructure.³

Oil and gas

• Keir Starmer has emphasised that Labour is not planning to "turn the pipes off instantaneously” and that oil and gas will be part of the UK’s energy mix “for decades to come”.
• However, both parties have announced key differences.

• Labour has confirmed GBE will be funded by a “proper” time-limited windfall tax on oil and gas companies, using existing windfall taxes, but with an increased rate and some tax allowances closed.⁴ The extent to which this may affect overall investment by oil and gas companies and sector jobs is sure to be heavily debated. The Conservatives have stated windfall taxes will be kept until 2028-2029 unless prices fall back to “normal” earlier.
• Labour plans to reject any new North Sea licences, although it will not prevent drilling of the controversial Rosebank oil field, already approved by the Government. The Conservatives plan to continue to ensure annual licensing rounds for oil and gas production.

Transport/electric vehicles (EVs)

• Labour plans to shift the ban on the sale of new petrol and diesel cars back to 2030, compared with the current Government’s 2035. Both parties will retain the obligation on manufacturers to ensure 80% of UK car sales are electric by such time.
• To date, both parties have adopted a “wait and see” position on the imposition of tariffs specifically on Chinese EV imports, against the backdrop of the EC’s recent shock announcement that it would impose additional duties of up to 38.1% on EV imports from July 4 – a rate much higher than expected. The head of the UK Trade Remedies Authority has previously made it clear the body is ready to commence an investigation into Chinese EV manufacturing if Ministers or industry requests it, so this is likely to be a decision for the next Government.

Power

Fossil fuels

• Labour plans to remove fossil fuels almost entirely from UK electricity generation by 2030, five years earlier than current Government plans, which will require replacing electricity from all gas-fired plants with equivalent low-carbon generation. The plan has been criticised as implausible by some, but it is not that far from the Conservatives’ aim of ensuring 95% low-carbon generation by 2030.
• Labour has stated it will not permit the new coal mine in Cumbria proposed by the Government in December 2022. The proposed mine, situated at the Woodhouse Colliery in Whitehaven, would be the UK’s first new coal mine in 30 years.

Wind and solar

There are many similarities between the two parties on renewables, but also some key distinctions.

• Labour’s target for offshore wind is 55GW by 2030, compared to the current Government’s well-established goal of 50GW, a target already under some strain due to lengthy planning periods and global supply-chain disruptions.
• The Conservatives want to increase the scope of offshore cabling for offshore wind farms, reducing the amount of onshore infrastructure. This may assist in the achievement of offshore wind targets, but the cost is likely to be significant. The Conservatives have also proposed paying bonuses to developers who use equipment manufactured in depressed areas of the UK.
• Despite the Conservatives historically appearing lukewarm about onshore wind (the Government loosened planning rules in 2023 but there remain few active projects and only one major project under construction in the UK), they still plan to more than double onshore wind capacity to 35GW by 2030, the same target as Labour. They wish to ensure “democratic consent” for onshore wind, striking a balance between energy security and the views of local communities. Further details are required on how this would play out in terms of planning consents.
• Both parties support a massive expansion of solar power, with the Conservatives aiming for 70GW by 2035 and Labour 50GW by 2030. Either target will require significant additional investment and planning changes.

Nuclear

• Both parties plan to complete the existing Hinkley Point C and Sizewell C EPR reactor projects (with Sizewell C yet to commence construction). Both are considering extending the lifetimes of operating plants, although this will require owner consent and potentially entail costs.
• Both parties back new nuclear, including Small Modular Reactors (SMRs) (which are not yet commercially operating in the UK), but details are lacking from either party on expected capacity or costs. However, the Conservatives promise to approve two new fleets of SMRs within the first one hundred days of the next Parliament.
• The current government has already indicated its plans to halve the time it takes for the approval of new nuclear reactors and announced plans for a new 1GW plant at Wylfa.

Hydrogen/carbon capture & storage (CCS)

• Labour plans to invest in hydrogen and CCS, with the same hydrogen target (10GW by 2030) as the Government, although it has not yet clarified whether this investment will involve building new assets, buying existing assets from private sector operators or co-investing in new projects.
• Labour plans to make use of existing North Sea infrastructure, as well as the existing offshore workforce’s skills, to support energy production and storage. This is in part to manage oil and gas companies’ gradual retreat from the North Sea without jeopardising jobs or wasting existing resources.

Other

• Labour promises to double the amount (to an additional £1.1bn a year) dedicated for the insulation of residential homes, improving their energy efficiency.

We will continue to monitor manifesto and policy developments in the lead-up to and following the election. In the meantime, please contact your usual A&O Shearman contact for further discussion or the named contacts on this bulletin.

Footnotes

1. https://www.judiciary.uk/wp-content/uploads/2024/05/Friends-of-the-Earth-v-Secretary-of-State-for-Energy-Security-and-Net-Zero-003.pdf
2. https://www.bbc.co.uk/news/articles/c9xxpypr8d0o
3. https://www.partnershipsbulletin.com/article/1877087/uk-election-manifestos-say-dont-say-infrastructure
4. https://www.bbc.co.uk/news/articles/cd11ze1k9r0o