UK passes Energy Act

 

Laws have been passed in the UK to help unlock £100bn of private investment in energy infrastructure, accelerate development of offshore wind and bring more competition to networks. The UK Energy Act 2023, which has received Royal Assent, will deliver a more efficient energy system in the long term, helping to keep costs low. Michael Holder discusses the new legislation in an article on the Business Green website.

 

Energy Act passes into law: Industry hails ‘welcome step’ towards net zero power system

Government hails law as ‘biggest piece of legislation in the UK’s history’, setting out a raft of reforms designed to build a greener, more secure energy system

The government’s flagship legislation to bolster Britain’s energy system in preparation for an increasingly decarbonised grid has officially passed into law, bringing into force a raft of measures and regulatory reforms designed to boost efficiency, enhance energy security, and support the net zero transition.

Described by the government as “the biggest piece of legislation in the UK’s history”, the Energy Act received Royal Assent yesterday, with Ministers predicting it would help deliver a more efficient, secure, and cheaper energy system that should save consumers up to £1bn off their bills by 2050.

The wide-ranging legislation covers the full breadth of the energy landscape, setting out fresh measures for the renewables, domestic fossil fuels, hydrogen, nuclear, heat pumps, heat networks, carbon capture and storage (CCS), and the energy efficiency sectors, as well as reforms to regulators Ofgem and the Competition and Markets Authority (CMA).

The legislation has been 18 months in the making since the government published its Energy Security Strategy in April last year, which set out increased targets for offshore wind, solar, nuclear, both blue and green hydrogen, and North Sea oil and gas, and smoothed the way for the first iteration of the Energy Bill to emerge before Christmas 2022.

Energy Security and Net Zero Secretary Claire Coutinho – who is slated to attend next month’s COP28 UN Climate Summit in Dubai, the government confirmed yesterday – said the Energy Act would “boost investment in clean energy technologies and support thousands of skills jobs across the country”.

“It lays the foundations for greater UK energy independence, making us more secure against tyrants like Putin, and helps us to power Britain from Britain,” she said. “The Act also supports our new approach to make sure that families don’t feel a disproportionate financial burden as we transition to net zero, and forms a central part of our efforts to keep people’s bills affordable in the long-term.”

Yesterday the government dismissed concerns raised recently by the Climate Change Committee that the UK risked losing its global leadership position on climate action due to sluggish policy progress and the recent rollback of a number of decarbonisation policies. It also declined to provide data on the impacts of these policy changes on the UK’s pathway to net zero, despite the CCC warning earlier this month that the moves would make it “harder” to achieve legally binding climate targets for the 2030s onwards.

The government said the new Energy Act formed part of its more “pragmatic, proportionate and realistic” approach to delivering the UK’s climate goals, as it reiterated the need to achieve net zero without imposing costs on consumers.

The legislation includes provisions for the establishment of a new public company – Great British Nuclear (GBN) – to oversee the government’s ambitious targets to ramp up nuclear capacity from today’s 6GW to 24GW by 2050. The government is planning to set out its roadmap for delivering on these ambitions later this autumn, it confirmed yesterday.

The Act also lays the foundations for establishing a new mandate for boiler manufacturers to produce a minimum proportion of heat pumps each year, following in a similar vein to the Zero Emissions Vehicle mandate for carmakers which aims to drive up electric vehicle (EV) production.

CCS is another major feature of the Act, with the legislation setting out provisions for a new regulatory framework, licensing regime, and revenue support mechanisms for the transport and storage of carbon dioxide captured from future industrial clusters. The government is aiming to have enough CCS capacity in place to capture and store up to 30 million tonnes of CO2 from industry by 2030.

The new law also makes the UK the first country worldwide to legislate for nuclear fusion regulation, it claimed. The new measures are designed to help boost investment in fusion developers, in bid to support the UK’s ambition of having a prototype fusion power plant in place by 2040.

Other measures in the Energy Act aim to support the uptake of smart home appliances that open up opportunities for more flexible household energy use, accelerate the UK’s smart meter rollout, and boost consumer protections and frameworks for the widening range of clean energy technologies available on the market.

The fate of onshore wind – which faced a ‘de-facto’ ban since 2015 in England – still remains unclear, however, although the government has promised to tweak planning rules to try to make it easier for developers to secure planning approval.

The government said building a smarter, more flexible energy system would help reduce emissions while also cutting energy system costs by £10bn a year.

Emma Pinchbeck, chief executive of trade body Energy UK, described the Energy Act as a “welcome step” towards greater policy and regulatory certainty that should help the UK attract much-needed investment in decarbonising the electricity system.

“As the world shifts its focus towards net zero, the energy sector needs long-term certainty to remain internationally competitive and attract private investment,” she said. “The broad-ranging measures in this Act are part of a collaborative effort between government, industry, business and consumer groups to deliver a modern energy system fit for the changing needs of the 21st century energy market. More work remains to establish frameworks that these powers enable, but this Act will be the foundation upon which the new energy system will be built.”

Ofgem and FSO changes

Elsewhere, Ofgem’s remit has also been updated to ensure achieving the UK’s net zero target is one of its specific priorities, while a new independent body – dubbed the Future System Operator (FSO) – has been established through the Act to oversee the shift to a decarbonised, more energy secure power grid.

The FSO has been given responsibility for ensuring systems in the gas and electricity networks develop efficiently while keeping bills low for consumers, according to the Department for Energy Security and Net Zero (DESNZ).

Meanwhile, Ofgem has been made the official regulatory body for heat networks, in a move designed to provide improved consumer protection for households relying on shared low carbon heating systems over which householders often have less direct control.

It came as the regulator today approved plans to again operate a Demand Flexibility Service this winter, following the success of its inaugural scheme last year. The service is designed to reward the use of electricity outside peak hours, thereby reducing demand on the grid and resulting in lower emissions and system costs.

Jonathan Brearley, CEO at Ofgem, described the Energy Act as “the most significant energy legislation for a decade and a world-first in giving us a legal mandate targeting net zero”, adding that it would provide additional consumer protection against high bills driven by expensive fossil fuels.

“It gives Ofgem the powers to drive through the energy transition – unlocking investment, accelerating planning and building the infrastructure the economy needs,” he said. “This will give us security from volatile world gas markets and end our dependency on fossil fuels.”

Hydrogen certification scheme

The Energy Act also includes provisions for establishing business models for the production, transport, and storage of hydrogen, although details surrounding precisely how these business models will work in practice are yet to be finalised.

The move is designed to support the government’s target to deliver 10GW of ‘low carbon’ domestic hydrogen production capacity by 2030, of which it has said 5GW should be ‘green’ hydrogen produced using renewable energy.

It came as the government today confirmed plans to launch a new UK-wide low carbon hydrogen certification standard scheme in 2025 in a bid to tackle potentially misleading ‘greenwashing’ claims about the climate benefits of different forms and uses of the versatile fuel.

Hydrogen can be produced through several different processes, but only green or ‘pink’ hydrogen – the latter produced via nuclear energy – result in zero greenhouse gas emissions, while ‘blue’ hydrogen is produced from gas fired power stations fitted with CCS capability.

Initially voluntary for companies, the certification scheme is to be administered by the government’s Low Carbon Contracts Company – which also handles the Contracts for Difference clean energy auction scheme – and is designed to help boost confidence and investment in the UK’s emerging hydrogen sector, it said.

Claire Jackson, CEO of trade association Hydrogen UK, welcomed the raft of fresh energy legislation, which she said would help to “lay the foundations for the UK’s future hydrogen economy”.

“This firmly indicates to the global hydrogen economy and international investors that the UK is serious about its net zero future, and the role hydrogen can play in it,” she said.

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